Remaining Resilient During Turbulent Times

Remaining Resilient During Turbulent Times

Master Builders Association North (MBA North) re-elected its current office bearers for a second term at its Annual General Meeting held in Midrand in February: Musa Shangase – President; Wayne Albertyn – Vice President; Sello Mokawane – Second Vice President and Mandla Danisa – Treasurer. Jason Wilmot was retained as Immediate Past President.

The AGM was well attended by members, past office bearers and industry guests. MBA North Executive Director Mohau Mphomela acknowledged and welcomed Past Presidents and Honorary Life Members: Geoff Irons, Nico Maas, Neil Duncan, and Peter Buchel – as well as Past Presidents Hennie Bester, Manie Bosch and Peter Rϋde – and extended a special welcome to Webster Mfebe, Chief Executive Officer of the South African Forum of Civil Engineering Contractors (SAFCEC) and Herman Enoch, Marketing Manager of the Federated Employers Mutual (FEM).

MBA North Executive Director Mohau Mphomela

Honorary Treasurer of MBA North, Mandla Danisa detailed the Association’s financial statement which reflected a positive situation in all, with special reference to the continued

success of reducing the need for drawdowns from investment, resulting in a favourable financial situation. He also gave special thanks to FEM for their grants of R2.6 and R2.8 million, for which MBA North is very grateful.

We have come through a year filled with challenges, both from our Association (MBA North), the Construction Industry and lack of economic growth in our country,” said Musa Shangase in his Presidential Address.

The MBA North AGM was well attended by members, past office bearers and industry guests

He noted that the Association had met its strategic goals for the period, namely to continue to build a team that will become a coherent group with well-developed goals; to reduce drawdowns to ensure that the MBA north is financially sustainable and to increase service delivery to the members.

I am proud to say that the Association is on the correct path and is really coming out of its shell and is starting to engage more on industry matters important to its members and take the lead on matters affecting its members,” continued Shangase.

Musa Shangase, President, MBA North

On the construction industry front, demand for new construction work remained a constraint and activity growth is likely to remain under pressure in the near future. From CIDB grades perspective, confidence fell to historic lows of 25 and 15 for Grades 5 and 6, and Grades 7 and 8, respectively.

The Construction Industry Development Boards (CIDB’s) small and medium-sized enterprise (SME) business conditions survey has shown that civil contractor confidence fell by six index points to a historic low of 27 during the third quarter. Weakness in all the underlying indicators, especially construction activity, contributed to the drop in confidence.

Meanwhile, general building confidence has been trending downwards since early 2017. During the third quarter, business confidence shed three index points to 30.

On the Macro Economy, Shangase referred to the recent medium-term budget policy statement by Finance minister Tito Mboweni in his first major policy statement since returning to the cabinet, in which he halved the Treasury’s growth forecast and predicted a slower and later normalisation of the country’s debt profile, sparking a sell-off in the rand and causing bond markets to worry about the reaction of ratings agencies.

MBA North office bearers 2019: Back row: Executive Director – Mohau Mphomela; Jason Wilmot – Immediate Past President – Mandla Danisa – Treasurer.Seated: Sello Mokawane – Second Vice President; Musa Shangase – President; Wayne Albertyn – Vice President.

The budget in a nutshell

  • Economic growth revised downwards from 1.5% to 0.7% for 2018.

  • Consolidated budget deficit for 2018-2019 revised to 4% of GDP (from 3.6 %)

  • After rising to 4.2%GDP in 2019-20, it is expected to stabilise at 4% in outer years.

  • Gross debt to stabilise at 59.6% of GDP in 2023-24(February budget projection was 56.2% of GDP in 2021-22).

  • Tax revenue for 2018-19 projected to fall R27.4 billion short of February estimate due to VAT refund backlog, underestimation of refund and slower corporate income tax collections.

  • Expenditure ceiling to be maintained and set to grow at 1.5% in 2021-22.

The construction sector contributed negatively to the GDP with -2.7% in the third quarter of 2018, a trend that has prevailed since 2013 when the industry was in the headlines for all wrong reasons.

Shangase concluded by saying: “Trust is knowing that when a team member does push you, they are doing it because they care about team”

Dr Andrew Dittberner, Chief Investment Officer, Old Mutual

Guest speaker for the event was Dr Andrew Dittberner, Chief Investment Officer, Old Mutual, entitled Remaining Resilient During Turbulent Times. This dynamic presentation on an all too familiar topic had the audience riveted to their seats.

His array of powerful slides included a “Smartie Box” of investments; a “Wall of Worry” and a reveal of “Who has the Money”.

The future is uncertain – but brighter”

Who then does government turn to for investment – seeing their coffers are empty?” said Dr Dittberner. “To the South African Corporate sector – which is quietly sitting on large stockpiles of investment funds, and is essentially the primary future investors for our economy.”

Building confidence slightly more positive

Building confidence slightly more positive

Caption: David Metelerkamp, senior economist, Industry Insight

Marginal growth in the building sector is anticipated to continue as this is not driven by the public sector, but by the private sector. Yet infrastructure spending seems to be stabilising, but the construction sector remains in dire straits as the demise of the big contractor continues.

This is the view of Industry Insight senior economist David Metelerkamp who, in his address to delegates at the AfriSam 2019 National Budget Breakfast in Sandton id February following Finance Minister Tito Mboweni’s first budget speech, painted a sombre picture for most segments of the construction sector.

The event was well attended by a diverse audience of more than 200 people from the construction sector.

Metelerkamp noted that water infrastructure would see an 8% increase in public spending, but investment in power facilities was only slightly raised due to the Medupi and Kusile projects approaching completion. The renewable energy sector would bring some relief to contractors, as its role in power generation could grow as these technologies showed evidence of reducing the cost of generating electricity.

The building industry looked better than civils, he said, especially the residential segment. This was mainly in demand for flats and townhouses, where square metres completed grew considerably in 2018. Demand for ‘luxury homes’ was down. The future held promise for large mixed-use developments, of which over 30 were on the table, said Metelerkamp. Ten of these were expected to launch in this financial year, and 14 more in 2020/21. He noted that the shopping centre ‘boom’ was over and that an oversupply now existed.

Economist Dr Azar Jammine

Economist Dr Azar Jammine noted that Mboweni’s has raised hopes for a “major recovery” in the South African economy, but he warned it was unlikely to happen before 2021. “Planned government investment in infrastructure, for instance, is expected to rise only 4%, spelling a continued slump for civil engineering,” said Dr Jammine.

He said one of the key drivers of recovery would be restoring the tax-collecting capacity of the South African Revenue Services, which had fallen about R40 billion short of target in the last financial year. He also hoped that government expenditure would be made more effective if the challenges at the State Owned Enterprises (SOEs) were addressed and the more-than-34% of the tax revenue being spent on the civil service was reduced significantly.

Referring to the oversupply in the cement sector, AfriSam sales and marketing executive Richard Tomes, said AfriSam was now in a better position to cope with current market conditions after a period of right-sizing its business.

Political analyst, Aubrey Matshiqi

Closing off the speaker line-up, the colourfully eloquent political analyst, Aubrey Matshiqi, said despite the right words in Minister Mboweni’s budget address, certain ratings agencies had lost confidence in the ANC government’s ability to implement its stated plans. Matshiqi argued that “only limited change” would be achieved by this year’s election, and there was a “paucity of thought leadership” among the country’s leaders.

Tomes added that despite the impact of the lack of infrastructure spend on the construction sector, he remains confident that some level of stability will return to the industry once the 2019 national elections have taken place and the newly elected government will have been mandated with a new 5-year term to address issues around policy uncertainty and fix the state-owned entities.

Tomes concluded by saying that in order to strengthen the construction industry and the country, we must all the heed the president’s call of ‘Thuma Mina’ made during his inaugural state of the nation address – a call for all South Africans to ‘lend a hand’ and be of service to the nation.