The recently released First National Bank/Bureau for Economic Research Building Confidence Index 2016 Q1, showed that more than 60% of respondents are dissatisfied with prevailing business conditions ̶ the lowest confidence since the beginning of 2013. Respondents include architects, quantity surveyors, main contractors, subcontractors (plumbers, electricians, carpenters and shop fitters), manufacturers of building materials (cement, bricks and glass) and retailers of building material and hardware.
Despite members of the Master Builders Association of the Western Cape (MBAWC), being fairly satisfied with the current business conditions, there is a degree of trepidation and uncertainty going forward. This is due particularly to the recent increase in the interest rates, coupled to the repeal of the old black economic empowerment (BEE) construction sector codes announced in a Government Gazette notice issued by the Department of Trade and Industry regarding the construction sector codes for BEE. The old BEE codes for the sector have been discarded with immediate effect, without any transition period, which has significant implications for businesses in the built-environment.
The MBAWC is a registered trade association for employers in the building industry with a membership comprising builders, building subcontractors, building merchants and manufacturers of building products,
According to the Index, “The robust growth in residential building seen in 2015H1 (first half of 2015) seems to have come to an abrupt stop, while non-residential building remained weak”. Allen Bodill, executive director of the MBAWC says, “The members of our Association who are active in the residential market appear to have a reasonable current order book, but competition is fierce and margins remain under pressure.”
He continues, “In the non-residential local arena, our region has a number of large projects currently under construction, as well as some significant projects in the pipeline, such as the new West Coast shopping mall. The extensions to the Cape Town International Convention Centre, the development of the silo district project at the V & A Waterfront, the construction of a new distribution centre for Shoprite and the building of a new hotel development at the top of Strand Street, are some of the projects that have created a steady stream of work for some of our larger members.”
“Whilst some of the larger projects referred to above will keep some of the major contractors busy up until the end of 2016 ̶ and even beyond into 2017 ̶ the likelihood of further interest rate increases in 2016 is likely to impact some of the new, smaller developments ̶ particularly in the residential market for new builds as well as alterations and additions,” shares Bodill. “Consumers will come under increasing pressure to service existing household debts, coupled to the ever-rising costs of living, as witnessed by the recent hike in the costs of electricity. In addition, the pending local government elections may also contribute to some new works being delayed, whilst investors wait for more political certainty in our region.”
He believes that certain macro-economic considerations, such as the possibility of a downgrade of South Africa’s credit rating, will affect the confidence levels of all sectors of the economy and will impact the local building industry.
“It remains to be seen whether our region can grow significantly under the difficult economic circumstances which prevail. Growth will translate into job creation and, hopefully, lead to a more buoyant local construction industry,” concludes Bodill.