Fast Market Research recommends "South Africa Infrastructure Report Q2 2013" from Business Monitor International, now available
Boston, MA -- (SBWIRE) -- 07/03/2013 -- World Cup excesses, heavy bureaucracy and continuing political wrangles have weighed heavy on South Africa's previous glories. Last quarter we highlighted factors indicating a tentative change and that view is now playing out. 2012 real growth data came in as expected on 2.5%, lending credence to our longer term outlook. However, much is left to be done to lift South Africa's struggling and debt-ridden construction sector out of its quagmire. Despite a slow return to positive territory, with a real construction industry growth of 2.9% forecast for 2013, the risks are still plentiful: policy uncertainty, cumbersome bureaucracy, intense credit rating pressure and violent clashes in relation to several strikes at mines across the country.
Though South Africa's construction industry appears to be bottoming out and is now seeing a slow return to growth, it is important to note that South Africa is still lagging behind many of its neighbours; who are all registering a strong average growth of 6% for the same time period.
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Following the 2010 World Cup government finances were pushed to the limit in order to complete projects on time. Hence, a drawback in funding and subsequent activity was noticed almost immediately after the tournament. Real growth decelerated from 7.8% year-on-year (y-o-y) in 2009 to 0.9% y-o-y in 2010, and continued to weigh heavily on domestic construction companies in 2011, which resulted in falling share prices. That said, growth levels are unlikely to ever return to those seen before the World Cup, as they were driven by an artificial stimulus and a front-loading of the project pipeline.
However, with economic growth now ticking up, we are seeing a gradual improvement within the wider South African construction sector. This has also been underscored by the measured improvements seen in the performances of numerous South African construction companies. Hence, our medium-term outlook for the country's construction sector is one of cautious and modest growth, with a forecasted average annual growth of 3.8% between 2013 and 2022.
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