'Civil engineering sector could cut 5 000-8 000 jobs'

Posted On Tuesday, 16 March 2004 02:00 Published by eProp Commercial Property News
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South Africa's civil engineering sector, hit by a slump in revenues as contracts fall, could shed thousands of jobs this year, a key industry official warned yesterday.

Brian BruceSouth Africa's civil engineering sector, hit by a slump in revenues as contracts fall, could shed thousands of jobs this year, a key industry official warned yesterday.

This is despite plans by the government to spend about R15-billion

($2,23-billion) on infrastructure projects over the next five years as part of a broader programme to reduce an unemployment rate estimated at between 30% and 40%.

"The expectation is that many of the larger companies will re-evaluate their current employment status and will shed jobs in the coming quarters," said Pierre Blaauw, an economist with the South African Federation of Civil Engineers (Safcec).

Safcec represents about 250 firms in the civil engineering sector and projects that between 5 000 and 8 000 jobs could be lost. The civil engineering sector employs about 500 000 people.

"Though promises of large infrastructure investment by the government over the next ten years are being made, the industry finds it difficult to gauge when this will impact on the current business climate," said Blaauw.

Engineering and construction firms have suffered a drop in earnings as rand strength and new laws prompted mining companies to delay the roll out of capital projects. The sector was last year expecting a boom on the back of mining expansion work.

Murray & Roberts, the country's biggest engineering group, reported a 20% fall in first half revenues, while construction firm Aveng saw its interim turnover drop 15%.

Mining companies have been delaying the commissioning of projects pending the outcome of black empowerment legislation in the mining industry, particularly the issue of mining royalties.

The government plans to introduce new royalties on the mining industry and has also passed legislation aimed at forcing companies in the white-dominated sector to give a greater role to South Africa's black majority.

The royalty scheme is still being discussed. Both it and the broader empowerment plans have raised investor concerns. Companies were also scaling down on cross border activities because of rand strength and late payment, Blaauw said.

Cross border contracts contribute an estimated 19% of the companies' turnover. The rand, which gained 28% against the dollar last year, has eroded the firms' foreign earnings.

Blaauw said the industry had experienced cancellations of several road projects and was worried about lack of timeframes for the major projects such as the construction of the multibillion rand underground rail link in the Gauteng province.

There are also concerns over delays in the construction of supportive infrastructure for the deep water harbour at Coega and French metals giant Pechiney's smelter, as well as the nuclear power station by state power utility Eskom.

"The nearing elections will lead to a further delay of between three and six months in delivery of larger projects, as there will most probably be changes in ministerial positions," said Blaauw.

Blaauw sees turnover in the sector declining by about 5,22% in real terms in the first three months of this year and sliding by 7,51% in the second quarter.

 

Last modified on Tuesday, 22 October 2013 22:18

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