South Africa Infrastructure Report Q1 2011
The contrast between the third and fourth quarters of 2010 could not be starker for South Africa’s construction industry. A flurry of construction activity in the run up to the 2010 FIFA World Cup in June- July has unravelled leaving a dearth of contracts, a bloated budget and a construction industry that is haemorrhaging jobs. Developments since the games show that BMI's core view on South Africa's infrastructure sector is playing out. We stipulated that there would be a rapid unwinding of public contracts for major infrastructure projects. BMI accordingly expects South Africa’s construction industry to grow by a modest 2.45% to ZAR89.1bn (US$12.2bn) in 2010.
Recent key developments include:
A major source of revenues for the construction companies in South Africa has been public infrastructure operators such as Eskom and Transet. Therefore, BMI considers difficulties encountered by Eksom as it attempted to raise financing for its ZAR385bn (US$50bn) capex plan, to be a crucial threat to the potential growth of orders for the domestic construction sector. Upside to this threat is provided by President Zuma's announcement on October 23 2010 that the government is planning power sector investments of up to ZAR800bn (US$115bn). The announcement was vague, therefore it remains unclear if this is part of the ZAR846bn long-term infrastructure plan for the country, or a new pledge altogether.
It emerged in October 2010 that Sanral is to award ZAR8bn (US$1.2bn) less in contracts in FY10/11 and FY11/12: it will award contracts totalling just ZAR10bn (US$1.4bn). The reduced expenditure is due to the high cost of the Gauteng Freeway Improvement Project which is due for completion in Q211. Sanral expects to embark on its next project by 2012. The most important is likely to be the upgrade, expansion and operation of the N1/N2 Winelands toll road near Sandhills and the Bot river in the Western Cape, South Africa.
The country has registered a growing ambition to capitalise on renewable energy in recent months – specifically wind power. The World Bank's Clean Technology Fund was planning to invest US$85mn in renewable energy and co-generation projects in South Africa. If Suzlon Energy's plans to install 800MW of wind capacity in South Africa go ahead, then the country will go from being a non-entity in the wind power space to a major growth market in Africa, in league with Morocco and Egypt.
However, the Master Builders Association of Africa (MBSA) considers the state of the infrastructure sector to be dire. The MBSA has arranged a crisis summit for early-2011 and called on those in the industry to isolate bottlenecks which are leading to construction job losses. These job losses are expected to continue into 2011."
Recent key developments include:
A major source of revenues for the construction companies in South Africa has been public infrastructure operators such as Eskom and Transet. Therefore, BMI considers difficulties encountered by Eksom as it attempted to raise financing for its ZAR385bn (US$50bn) capex plan, to be a crucial threat to the potential growth of orders for the domestic construction sector. Upside to this threat is provided by President Zuma's announcement on October 23 2010 that the government is planning power sector investments of up to ZAR800bn (US$115bn). The announcement was vague, therefore it remains unclear if this is part of the ZAR846bn long-term infrastructure plan for the country, or a new pledge altogether.
It emerged in October 2010 that Sanral is to award ZAR8bn (US$1.2bn) less in contracts in FY10/11 and FY11/12: it will award contracts totalling just ZAR10bn (US$1.4bn). The reduced expenditure is due to the high cost of the Gauteng Freeway Improvement Project which is due for completion in Q211. Sanral expects to embark on its next project by 2012. The most important is likely to be the upgrade, expansion and operation of the N1/N2 Winelands toll road near Sandhills and the Bot river in the Western Cape, South Africa.
The country has registered a growing ambition to capitalise on renewable energy in recent months – specifically wind power. The World Bank's Clean Technology Fund was planning to invest US$85mn in renewable energy and co-generation projects in South Africa. If Suzlon Energy's plans to install 800MW of wind capacity in South Africa go ahead, then the country will go from being a non-entity in the wind power space to a major growth market in Africa, in league with Morocco and Egypt.
However, the Master Builders Association of Africa (MBSA) considers the state of the infrastructure sector to be dire. The MBSA has arranged a crisis summit for early-2011 and called on those in the industry to isolate bottlenecks which are leading to construction job losses. These job losses are expected to continue into 2011."
Contents
Executive SummarySWOT Analysis
South Africa Infrastructure Industry SWOT
South Africa Infrastructure Project Finance SWOT
South Africa Economic SWOT
South Africa Political SWOT
Market Overview
South Africa
Industry Forecast Scenario
Table: South Africa Construction And Infrastructure Industry Data
Table: South Africa Construction And Infrastructure Industry Data
Construction And Infrastructure Forecast Scenario
Transport Infrastructure
Table: South Africa Transport Infrastructure Industry Data
Table: South Africa Transport Infrastructure Industry Data
Transport Infrastructure Forecast Scenario
Transport Infrastructure Overview
Table: Length Of Road Infrastructure Network In South Africa
Major Projects – New And Ongoing Projects
Airports
Ports
Roads
Railways
Major Projects Table – Transport
Table: Major Infrastructure Projects – Transport
Energy And Utilities Infrastructure
Table: South Africa Energy and Utilities Infrastructure Industry Data
Table: South Africa Energy and Utilities Infrastructure Industry Data
Energy And Utilities Infrastructure Forecast Scenario
Energy And Utilities Infrastructure Overview
Major Projects – New And Ongoing Projects
Power Plants And Transmission Grids
Pipelines
Water
Major Projects Table – Energy And Utilities
Table: Major Infrastructure Projects – Energy & Utilities
Residential/Non- Residential Construction and Social Infrastructure
Residential/Non-Residential Construction Forecast Scenario
Residential/Non-Residential Construction and Social Infrastructure Overview
Major Projects – New and Ongoing Projects
Social Infrastructure
Construction
Industrial
Business Environment
South Africa Business Environment
Rewards
Risks
Regional Overview
Africa Infrastructure Business Environment Ratings
Table: Regional Infrastructure Business Environment Ratings
Project Finance Ratings
South Africa Project Finance Ratings
Design And Construction
Commissioning And Operating
Overall Project Finance Rating
Regional Overview
Project Finance Ratings: Outlook For Africa
Table: Africa Overall Project Finance Rating
Table: Design And Construction Ratings
Table: Commissioning And Operating Ratings
Macroeconomic Outlook
Table: South Africa – Economic Activity
Political Outlook
Domestic Politics
Long-Term Political Outlook
Company Monitor
Eskom
Transnet
Murray & Roberts Group (M&R)
Global Overview
Table: BMI's Core Views For Global Infrastructure
Methodology
Industry Forecasts
Construction Industry
Data Methodology
Construction
Capital Investment
Construction Sector Employment
Infrastructure Business Environment Rating
Table: Infrastructure Business Environment Indicators
Project Finance Ratings
Table: Design And Construction Phase
Table: Commissioning And Operating Phase – Commercial Construction
Table: Commissioning And Operating Phase – Energy And Utilities
Table: Commissioning And Operating Phase – Transport
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