EXECUTIVE SUMMARY
The consensus view is that the South African economy shrunk by 2% during 2009 compared to 2008. The broad causes of the contraction in the real domestic economy can be ascribed to tighter monetary policy to cope with rising inflation and high imports, the international liquidity crisis, the slowdown in government decision making, and general institutional decay. The outlook for growth internationally is shrouded in uncertainty about the strength of the recovery which replaced fears about the recession. Domestically there are strong signs that the recovery has started and growth of 2,3% (2010) and 3,5% (2011) is expected.
Although fixed investment in ‘construction works’ (+44%) and total construction (+23%) grew dramatically, four important occurrences combined to change the impact on civil engineering substantially; firstly the share of civil engineering in construction works declined from a high of nearly 80% in 1997 to an estimated low of just under 30% in 2009. Secondly, several projects larger than R20 million were cancelled or ‘decelerated/postponed/re-scoped’ to future dates, and thirdly the slowdown in smaller contracts was much more profound than initially thought. Fourthly, institutional decay is fast becoming a massive drag on delivery. Only some improvement can be expected by 2011.
The confidence indexamongst contractors reflects the very pessimistic mood in the industry and declined 48,5% during 2009, compared to 2008. This is the lowest it has been since the end of 2003. The cumulative number of tendersduring 2009 declined by nearly 18% compared to 2008. The second half of 2009 was 24% lower than the first half. What makes the situation worse is that not only did the number of tenders decline but very few were larger than R150 million. This is reflected in the value of contracts awarded dropping by nearly 50% (2009 compared to 2008)! It reflects to some degree the base effect of the large awards (+/- R 18 bill) during 2008, BUT if the latter is taken out of the equation the value of awards still drops by nearly 40%. This indicates a massive and abrupt slowdown in general activity. Annual employment started to show signs of contraction (-1%; 2009 on 2008), but not as severely as the estimated turnover declines, mainly due to the hopes that the situation will change and/or reluctance to let go of the high cost investment companies made in staff over recent years. It is feared that this situation cannot last for long before retrenchments accelerate.
Estimated civil engineeringturnoverdeclined by 11% in real terms during 2009 and is expected to decline further by nearly 25% in 2010. The story of the last decade in civil engineering can be summed up as follows; double digit growth from 2000 to 2008, double digit decline from 2009 to 2010 and the real possibility of yet another massive increase in demand for construction services starting in 2011, resulting in volatility in prices, employment etc. again.
