Building sector puzzled by R100bn hole'

Posted On Thursday, 19 February 2004 02:00 Published by eProp Commercial Property News
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Construction companies concerned about the absence of a mention of promised infrastructure in the budget

Thabo MbekiTHERE is a R100bn gaping hole in the national budget, some construction companies believe, raising questions as to whether there is substance to President Thabo Mbeki's promise of a massive spending programme to upgrade SA's ailing infrastructure.

Carl Grim, CE of SA's largest construction firm Aveng, said there was "absolutely no reference" to Mbeki's R100bn infrastructure upgrade programme announced last year. The initiative forms a cornerstone of the ANC's election campaign. "It makes one a little sceptical of the president's remarks," said Grim.

Barloworld CE Tony Phillips echoed these concerns. "We need clarity on this, on how this spending will be scheduled," he said.

The construction industry, which is facing hard times as big capital projects slow down, is not jumping for joy over the budget.

"It is business as usual on a solid, ongoing and progressive basis," said Grim.

The most encouraging sign in the budget for most companies is government's objective of expanding its fixed investment from 16% of gross domestic product to 25% over the next 10 years.

Pierre Blaauw, an official of the South African Federation of Civil Engineering Contractors, said this would elevate SA into the league of the best developing countries. "It shows government's cognisance of the importance of increasing fixed investment," he said. "And if this happens, it will place huge demands on the sector to invest in resources, particularly skills."

However, Blaauw said the budget contained no details of how the increased level of spending would be achieved.

Grim said it was a positive development but appeared to be a broad aspiration. "It doesn't seem to be supported by the numbers in the budget."

Another positive development was government's announcement yesterday that it had appointed a task team to undertake a national transport and logistics infrastructure study aimed at improving SA's struggling port and rail facilities, among other things.

"We hope this will highlight the very high cost of our ailing transport abilities," said Blaauw. "We will never reach 4% to 6% growth in gross domestic product if we don't invest aggressively in economic infrastructure."

An additional R15bn allocated to an expanded public works programme over the next five years was widely welcomed, although these involved mainly small and medium-sized projects.

Philips welcomed the announcement that government intends creating a million extra jobs within five years. "If it can be done, that will be fantastic,"he said. "If you don't have a job and can't support your family you may be a potential criminal, and the creation of extra jobs would be unbelievably positive for the South Africa economy."

Government's commitment to increasing investment in infrastructure was encouraging, but Blaauw said the key was still in improving project delivery. "It would be fantastic if government could release what is in its coffers already not to mention additional allocations," he said.

Concor CEO John Willmott said he would not be surprised if new projects were announced over the next year or two.

He said the development of the Coega port, the redevelopment of the Durban port and a large road tender in the Eastern Cape were examples of infrastructure projects already coming to fruition.

Trade union Solidarity said it was encouraged by the modest increase in funds earmarked for the expansion of physical infrastructure, but a great deal more would have to be done.

The Cape Town Regional Chamber of Commerce and Industry said increased spending on infrastructure, especially in the transport sector, would "go some way to alleviate concerns about the rail system and ports that have become of increasing importance to the country now that the export of manufactured products is increasing".



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