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Civil Engineering Industry Outlook SAFCEC; July 2010
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ECONOMIC CRISIS ????
• General Economic situation: where in the world are we?
• The “Long view” on Construction• The “Short view” on Construction• Structure or Cycle?• The Future?
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SA Economy ‘Overheated’
2
3
4
5
6
7
8
9
10
11
12
13
14
98 99 00 01 02 03 04 05 06 07 08 09 10
%
CPIX
CPIX/CPI annual average Target range
CPI new
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The ‘world came tumbling down’
40
50
60
70
80
90
100
110
120
86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Ifo World economic climate survey 1995=100
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Impact & consequences by Client
• Immediate impact: Liquidity constraints and decline in demand – Transnet: Re-scoping– Eskom – Nuclear delay, hydro delay, coal 3 wait
and see, Kusile delayed roll-out.– Private Sector development slowed down– Less income at various tiers of Government.
• Companies increase exposure to Public Sector Work.
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Election ‘Paralysis’
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Postponement of Tenders
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So we came down with the flu!!
-8
-6
-4
-2
0
2
4
6
8
10
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Gdp: Q-o-q % change (saar)
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General Economic Optimism
100
105
110
115
120
125
130
2005 2006 2007 2008 2009 2010
Composite Leading Business Cycle IndicatorComposite Leading Business Cycle IndicatorIndex: 2000=100
(Apr)
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Construction Confidence are “a’comin”
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“Demography is Destiny”
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Long Term: The “Think Tool”
Construction Works Investment & Capital Output Ratio
1.40
1.50
1.60
1.70
1.80
1.90
2.00
2.10
2.20
60 65 70 75 80 85 90 95 20 5 10 15 20 25
Ca
pit
al
Ou
tpu
t R
ati
o
0
2
4
6
8
10
12
14
CO
ns
tru
cti
on
Wo
rks
In
de
x
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The “Long View”: Economic Infrastructure Investment
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The Long View: Social Infrastructure
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WHAT DO WE KNOW?
• The economy is recovering• Current economic infrastructure is not sufficient to facilitate
6% growth; spending inevitable. • Water & Sanitation spending starting• Road infrastructure spending accelerating• Current power infrastructure will be reaching the end of its
efficient life cycle by 2020-2025.• Government is committed to infrastructure spending.• Institutional problems delay execution• First & Second Economic crisis – created uncertainty
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Short Term Outlook Pessimistic
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New Tenders: Opinions
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New Tenders: Numbers
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Contract Awards
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Turnover vs Long Term Trends
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Contract Awards: Structure or Cycle?
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Awards : Turnover relationship
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Civil Engineering Turnover
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Future: 2010 & 2011
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SUMMARY
• Pre-crisis order books unwinding• Short term decline due to spending delays
• 2009 – -10% • 2010 – -39%• 2011 – 1,2%
• Long-term: sector fundamentally well positioned
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Turnover vs Long Term Trends
2010 StadiaGFIPGautrainTransnet Pipeline Medupi /KusileKing ShakaDurban HarbourIngula
MiningTCTASANRAL roads (nT)Coal 3N1/N2Nuclear 1GFIP Phase 2SAPREF RefineryN2 Wild CoastSASOL Expansions
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THANK YOUHenk [email protected]