SA's real value added in construction lags

Posted On Monday, 29 August 2005 02:00 Published by eProp Commercial Property News
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South Africa's real value added in construction, as reported by Statistics SA, continues to lag other building indicators.

Trevor ManuelSouth Africa's real value added in construction, as reported by Statistics South Africa, continues to lag other building indicators, such as the real value of buildings completed or the volume of cement sold.

In the first half of 2005, the real value of buildings completed increased by 34.4% year-on-year (y/y), the volume of cement sales rose by 10.3% y/y to 5,496,523 tons, yet the real value added only managed a 7.3% y/y gain.

The last time the increase in real value added in construction was similar to the volume in cement sales was in 2002, when real value added growth was 5.8% and cement volumes increased by 5.9%. Since then real value added has lagged other building indicators.

In 2003, value added rose by 5.2%, cement volumes increased by 7.0% and the real value of buildings completed went up by 6.8%.

Last year, value added rose by 6.3%, cement volumes surged by 17.4% and the real value of buildings completed went up by a massive 24.9%.

As construction has high linkage effects with the rest of the economy, economists are very concerned about the increasing divergence between what volume measures and their own eyes see when they drive around, and what Statistics South Africa reports is going on in the construction sector.

These concerns were echoed by Finance Minister Trevor Manuel in February 2004 already, at his pre-Budget briefing to the media. He then called for a "construction summit" to address the data problems, as he believed that the construction sector was creating more jobs than was being reported.

He was also worried about possible capacity constraints in terms of skills and materials, as boosting fixed investment is a key government growth strategy, but a date for the construction summit is yet to be announced.

Building plans passed are now running at a monthly six billion rand, so construction is a very important sub-sector, especially as it provides employment for low-skilled workers such as painters.

In the February 2005 Budget Review, the government highlighted the linkage effects when it said: "New residential developments resulted in a rise for new retail outlets and office space for financial and other business services."

Major retail group Edgars Consolidated Stores (Edcon, ECO) for instance, reported a 25% y/y sales growth in the quarter ended July 2 2005, yet in the second quarter 2005, Statistics South Africa said nominal gross domestic product only grew by 9.1% y/y.

 

Last modified on Friday, 18 October 2013 17:40

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