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Projects in Progress 2019 - Second Edition (PDF Report)

 
 

Bright Spots

Stripped of all emotion, the most recent outlook statements of South Africa’s surviving construction companies provide sobering snapshots of market conditions, which remain beyond trying.

“Local market conditions are likely to remain subdued over the short term,” construction group WBHO says in its most recent statement to shareholders, while Stefanutti Stocks describes the trading environment as “distressed”.

Murray & Roberts, which has already exited South Africa’s general construction market, says the sustainability of its power and water platform remains dependent on the level of investment in the South African economy, “which has been disappointing in recent years”.

Likewise, Aveng, which is in the process of selling Grinaker-LTA, says its 2019 results have been impacted on by sustained weakness in the construction market.

Things are even worse at Group Five and Basil Read, which are both in business rescue.

In such a context, each and every contract has become something of a precious commodity and this latest ‘Projects in Progress’ update attempts to offer a glimpse into some of the infrastructure, resources and industrial project activity still under way in South Africa and the region.

One of the few project-economy bright spots currently is renewable energy. Following an Eskom-induced hiatus of three years, government finally broke the procurement deadlock in April 2018 and signed contracts with 27 independent power producers (IPPs) for renewable-energy projects collectively valued at R56-billion.

Representing a combined capacity of 2 300 MW, the projects are now under construction and the electricity they produce will be introduced into the national grid over a five-year period.

The preferred projects selected following a competitive-bidding process in 2014 include 12 wind farms and 12 solar photovoltaic developments, as well as a concentrated solar power project, a mini-hydro project and a biomass project.

Given the declining performance of Eskom’s ageing coal fleet and the underperformance of the new units being introduced by the State-owned power utility at Medupi and Kusile, South Africa’s power balance is expected to remain tight for the foreseeable future.

For this reason, it will be important for government to initiate further IPP procurement bid windows as soon as the updated Integrated Resource Plan is approved, including a gas-to-power round.

That being the case, the private electricity project pipeline would emerge as a far more consistent feature of the domestic project economy. Similarly, as the cloud of policy uncertainty lifts from the resources sector, activity levels should increase.

If government finally gets its much vaunted Infrastructure Fund up and running, conditions could begin to improve materially for the many companies and employees who depend so heavily on investments in gross fixed capital formation.

Please note that this is a large file

Published on: 10 October 2019.

 
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