Download SAFCEC Strategic planning / re

Civil Engineering Industry Outlook
SAFCEC; July 2010
ECONOMIC CRISIS ????
• General Economic situation: where in
the world are we?
• The “Long view” on Construction
• The “Short view” on Construction
• Structure or Cycle?
• The Future?
SA Economy ‘Overheated’
14
%
13
12
CPIX
11
10
CPI new
9
8
7
6
5
CPIX/CPI annual average
4
Target range
3
2
98
99
00
01
02
03
04
05
06
07
08
09
10
The ‘world came tumbling down’
120
Ifo World economic climate survey 1995=100
110
100
90
80
70
60
50
40
86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Impact & consequences by Client
• Immediate impact: Liquidity constraints and
decline in demand
– Transnet: Re-scoping
– Eskom – Nuclear delay, hydro delay, coal 3 wait
and see, Kusile delayed roll-out.
– Private Sector development slowed down
– Less income at various tiers of Government.
• Companies increase exposure to Public Sector
Work.
Election ‘Paralysis’
Postponement of Tenders
So we came down with the flu!!
Gdp: Q-o-q % change (saar)
10
8
6
4
2
0
-2
-4
-6
-8
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
General Economic Optimism
Composite Leading Business Cycle Indicator
Index: 2000=100
130
(Apr)
125
120
115
110
105
100
2005
2006
2007
2008
2009
2010
Construction Confidence are “a’comin”
COMPARISON TOTAL VEHICLE SALES & TOTAL REAL RESIDENTIAL
PLANS PASSED INDEX 1970 = 100
350
300
INDEX 1970 = 100
250
200
150
100
50
0
|70|71|72|73|74|75|76|77|78|79|80|81|82|83|84|85|86|87|88|89|90|91|92|93|94|95|96|97|98|99|20|01|02|03|04|05|06|07|08|09|10|
Source: NAAMSA; Stats SA; SARB; MFA DATABASE
TOTAL VEHICLE SALES
TOTAL REAL RESIDENTIAL BPP
“Demography is Destiny”
GDP Per Capita
5.00%
-13%
4.00%
+30%
3.00%
2.00%
1.00%
0.00%
-1.00%
-2.00%
-3.00%
-4.00%
-5.00%
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Long Term: The “Think Tool”
Construction Works Investment & Capital Output Ratio
2.20
14
2.10
Capital Output Ratio
2.00
10
1.90
8
1.80
6
1.70
4
1.60
2
1.50
1.40
0
60
65
70
75
80
85
90
95
20
5
10
15
20
25
COnstruction Works Index
12
The “Long View”: Economic Infrastructure Investment
Economic Stock/GDP & Economic Growth
1.00
10.%
Growth without Investment
0.95
8.%
0.90
6.%
0.85
Ratio
4.%
0.80
2.%
0.75
0.%
0.70
-2.%
0.65
0.60
-4.%
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
GDP Growth
Ratio
The Long View: Social Infrastructure
130
125
120
115
110
105
100
1994
1995
1996
1997
1998
1999
2000
Social I. Stock Index
2001
2002
Population Index
2003
2004
2005
2006
2007
WHAT DO WE KNOW?
• The economy is recovering
• Current economic infrastructure is not sufficient to facilitate
6% growth; spending inevitable.
• Water & Sanitation spending starting
• Road infrastructure spending accelerating
• Current power infrastructure will be reaching the end of its
efficient life cycle by 2020-2025.
• Government is committed to infrastructure spending.
• Institutional problems delay execution
• First & Second Economic crisis – created uncertainty
Short Term Outlook Pessimistic
New Tenders: Opinions
New Tenders: Numbers
Contract Awards
Turnover vs Long Term Trends
Contract Awards: Structure or Cycle?
Awards : Turnover relationship
Civil Engineering Turnover
Future: 2010 & 2011
SUMMARY
• Pre-crisis order books unwinding
• Short term decline due to spending delays
• 2009 – -10%
• 2010 – -39%
• 2011 – 1,2%
• Long-term: sector fundamentally well
positioned
Turnover vs Long Term Trends
2010 Stadia
GFIP
Gautrain
Transnet Pipeline
Medupi /Kusile
King Shaka
Durban Harbour
Ingula
Mining
TCTA
SANRAL roads (nT)
Coal 3
N1/N2
Nuclear 1
GFIP Phase 2
SAPREF Refinery
N2 Wild Coast
SASOL Expansions
THANK YOU
Henk Langenhoven
[email protected]