CONSTRUCTION group Basil Read is unfazed by volatile overseas markets, saying on Friday it would embark on a global expansion strategy to mitigate some of the risks that SA posed for the construction sector.
This was also part of its growth plans to become a global player alongside local giants such as Murray & Roberts and Group Five.
CEO Marius Heyns said the company was particularly considering the Middle East and Europe, which are among some of the regions that had so far been the worst affected by the credit crisis.
“The rationale behind developing Basil Read’s global strategy is to lessen the risk inherent in geographic concentration,” Heyns said.
“We have been working on a global expansion strategy for two years now to spread the risk outside SA and not put our eggs in one basket. We are trying to cover our risks by not being a very big company in one geographic location.”
He said despite the South African government’s commitment to continue spending more on infrastructure, the credit crisis had meant that there was a risk that it might have problems funding some of the projects in future.
“We are already seeing that the government is finding it difficult to fund certain projects. It is clear that the government’s balance sheet will come under pressure and there will be problems, as at any business entity, which will put a strain on its borrowing capabilities. It does not matter who will be in government after April 22, the challenges will still be the same.
“While we remain optimistic about the pipeline of work in the South African market, we acknowledge that uncertainty is inherent in any economy. To mitigate the risk of a possible future drop-off in local work and to position ourselves to ensure that we are well placed to take advantage of the global economic recovery when it comes, the group is considering opportunities in other countries.”
The company, which turned over R3,5bn in the year to December, has set itself the ambitious target of becoming a R10bn turnover company by 2013 — and global expansion is part of the strategy to achieve that goal.
Heyns said Basil Read, which has until recently had most of its projects in SA, was targeting the Middle East, Australia and Europe.
These are the some of the areas that have been hardest hit by the global credit crisis and where firms such as Murray & Roberts and Group Five have had project cancellations or suspensions as clients felt the effect of the credit crunch. Both have confirmed project write-downs worth billions, mainly in the Middle East.
“We believe that in the next 18 months or so there will be an upturn in investments in these regions, and we expect that by then SA's upturn will start to slow down.
“That is why we have to start to look globally,” he said.
Heyns said in the Middle East in particular, the company was eyeing public sector civil infrastructure projects in Qatar and Abu Dhabi.
He expected public sector investments there to be R60bn R100bn over the next few years.
“The region is not all doom and gloom as it is painted to be.”
