CONSTRUCTION MONITOR Supply & Demand Q1 218
CIDB CONSTRUCTION MONITOR SUPPLY AND DEMAND; APRIL 218 Revision 1
Acknowledgements: The support of Industry Insight in providing details of contracts awarded is gratefully acknowledged.
CIDB CONSTRUCTION MONITOR SUPPLY AND DEMAND; APRIL 218 1. Introduction 1 2. Gross Fixed Capital Formation 3 2.1 Overview 3 2.2 Forecast 9 3. Expenditure against Budget; Municipal and Provincial Government 11 3.1 Municipal Expenditure 11 3.2 Provincial Expenditure 12 4. Contracts Awarded; Public Sector 13 5. Maintenance Contracts Awarded; Public Sector 14 6. Supply: Registrations; Grades 2 to 9 15 7. Business Conditions; Public and Private Sectors 16 8. Constraints to Business Growth 18 Appendix 1: Municipal Expenditure for Selected Provinces 2 Appendix 2: Provincial Expenditure for Selected Provinces 22 Appendix 3: Provincial Public Sector Demand 24 Appendix 4: Maintenance Contracts Awarded; Public Sector: Provinces 25 Appendix 5: Provincial Contractor Registrations; Grades 2 to 9 26 Appendix 6: Business Confidence Index: Provincial Results 27
CIDB CONSTRUCTION MONITOR SUPPLY AND DEMAND; APRIL 218 1. Introduction The cidb Construction Monitor; Supply and Demand is part of a suite of four quarterly cidb Construction Monitor publications: Quarter 1: Supply & Demand; Quarter 2: Contractor Development; Quarter 3: Employment; and Quarter 4: Empowerment. The cidb Construction Monitor; Supply and Demand provides an overview of the structure of the construction industry, public sector infrastructure spend and business conditions in South Africa, and covers the Quarter 2 of 217 to Quarter 1 of 218. The Construction Monitor focuses on public sector supply and demand at national and provincial levels, and deals primarily with the General Building () and Civil Engineering () cidb Classes of Works. The background and key assumptions used in developing and in interpreting the cidb Construction Monitor are highlighted below: i) Contracts Awarded: Details of contracts awarded is obtained from the cidb itender Register of Projects supported by the Industry Insight Project Database. (The support of Industry Insight in providing this information is gratefully acknowledged.) However, it should be noted that the Industry Insight information for contracts awarded lags the Construction Monitor by one quarter. ii) iii) Expenditure Against Budget: Details of infrastructure expenditure against budget is obtained from National Treasury. At present, details presented here are only for municipalities and provinces, while national expenditure against budget will be included when available. Note that the fiscal year for municipal expenditure begins on 1 July, which corresponds to Quarter 3 of the calendar year. Similarly, the fiscal year for provinces expenditure begins on 1 April, which corresponds to Quarter 2 of the calendar year. Contractor Registrations: Contractor information is obtained from the cidb Register of Contractors, and considers: contractors registered in Grades 2 to 9; and General Building () and Civil Engineering () Class of Works. The data is then aggregated into the following categories: Grade 9 contractors; typically contractors that operate at a national and international level; Grades 7 and 8; typically contractors that operate at a regional / provincial level; Grades 5 and 6; typically contractors in transition from operating at a local to a regional / provincial level; and Grade 9 7 & 8 5 & 6 2 to 4 Characteristics national / international provincial / regional local / regional local Grades 2 to 4; typically established and developing contractors that operate at a local level. It should be noted that Grade 9 contractors in particular work across provinces, and do not therefore reflect the contracting capacity within a particular province. 1
iv) Business Conditions: The cidb Construction Monitor includes perceptions of the confidence in business conditions, insufficient demand for work, tendering competition and access to credit obtained from the cidb BER SME Business Confidence Survey 1, which measures business conditions at a national and at provincial level and in various contractor grades. 1 cidb (218). cidb SME Business Conditions Survey. Construction Industry Development Board, http://www.cidb.org.za/knowledge/publications/industry_reports 2
2. Gross Fixed Capital Formation 2.1 Overview The construction sector plays a significant role in terms of its contribution to capital formation, from 25 to 217, the construction sector s average contribution to gross fixed capital formation was 43%, this is in line with a number of studies which have confirmed that approximately half of the investment in gross fixed capital formation in developing countries is done by the construction sector. An analysis of Gross Fixed Capital Formation (GFCF) in current prices (i.e. not adjusted for inflation) for the year 217 is shown below, which includes investment by General Government, Public Corporations and the Private Sector on the following 2 : civil construction; non-residential buildings and residential buildings. The total GFCF spend in 217 amounted to around R436 billion, as follows: 25 2 192 148 Rand (Million) 15 1 116 49 127 6 5 Gross Fixed Capital Formation in Construction; 217 Rand (Million) A more detailed breakdown is given below: General Government Public Corporations Private Sector General Government Public Corporations Private Sector Total Construction 82 238 123 964 65 267 271 469 Non-Residential 32 613 3 38 43 675 79 326 Residential 1 639 58 83 26 84 93 Total 116 49 127 6 192 148 435 698 2 SARB (218). Quarterly Bulletin March 218. www.resbank.co.za 3
Year-on-year decrease in GFCF from 216 to 217 amounted to -2,1% real (down from,5% real growth in 216), and this is due to persistently weak business and investor confidence, policy uncertainty, fiscal constraints faced by government and challenges currently faced by SOE s (see Section 8). A breakdown of the decrease in GFCF is as follows: General Government: -5,5% real decrease from 216 to 217, declining further from -1,8% real decline from 215 to 216, which is a clear indication of government s current constrained resources. Public Corporations: -1,3% real decrease from 216 to 217; and Private sector: -,4% real decrease or contraction from 216 to 217. The decrease in investment by both the public and private sectors is clearly evident from the above. In real terms, the year-on-year decline in investment in total construction works of -2,1% comprised of civil construction and non-residential buildings which declined by -1,9% and -6.4% respectively, residential buildings increased by a marginal 1,5%. Currently, the percentage share of investment in total construction by Government (which includes general government and public corporations) is 56% and the percentage share of the private sector is 44%. Civil construction contributes the biggest share of the total construction investment (GFCF), amounting to 63% of total GFCF. Civil construction has shown phenomenal growth, with an average growth of around 11% from 25 to 217. The construction boom experienced in civil construction between the years 25 to 29 was largely attributable to the construction of the stadia for 21, Gauteng Freeway Improvement Programme (GFIP), Gautrain, ACSA infrastructure programme and the ESKOM build programme. During the year 211 and 213, the private sector experienced further peaks in investment in construction and this was due to the high cost of the capital equipment on the solar and wind projects (renewables energy projects). The public sector is the largest client of civil construction works, with a share of 76% of total investment in construction. At the end of 217, public sector contribution to construction works was as follows; 3% by general government and 46% by public corporations. Since 212, the contribution by public corporations to construction works has been weakening, it has declined from a share of 53% in 21 to 46% in 217. General Government which includes National, Provincial and Local Government mainly invests in social infrastructure, while Public Corporations invest in economic infrastructure. The figure below shows the yearon-year growth of civil construction. It also reflects the challenges and fiscal constraints experienced by general government and public corporations (State Owned Entities). 8% General Government Public Corporations Private Total Year-on-year percentage change (21) 6% 4% 2% % -2% -4% 25 26 27 28 29 21 211 212 213 214 215 216 Investment in Construction Works: Year-on-year percentage change 217 The private sector is the largest client of building investment, both residential and non-residential buildings, with a share of 98% and 55% respectively. Between the year 29 and 217, a contraction or a decrease in investment by the private sector has been observed in both residential and non-residential buildings. This has 4
negatively impacted on the total buildings investment. In 28, the share of private sector investment for nonresidential buildings was 7%, by the end of 217 the share of investment had decreased substantially to 55%. The public sector had to counteract this decline in investment by the private sector. In the public sector, the main contributor to non-residential buildings is general government, with a share of 41%, public corporations have a marginal share of 4%. The private sector has also had marginal declines on its share of investment in residential buildings, in 21 the private sector s share of investment was 99.7%, by the end of 21 it was 98%. This is due to the policy uncertainty which has a negative impact on investor confidence. At the end of 217, residential buildings experienced a year-on-year growth of 1,5% while non-residential buildings experienced year-on-year contraction of -2%. The figures below shows that year-on-year percentage changes of residential and non-residential buildings focusing on the private sector s investment. 6% Private Total Year-on-year percentage change (21) 4% 2% % -2% -4% 24 25 27 28 29 21 211 212 213 214 215 216 217 Investment in Residential Buildings 6% General Government Private Total 4% 2% % -2% -4% 25 26 27 28 Year-on-year percentage change (21) 29 21 211 212 213 214 215 216 217 Investment in Non-Residential Buildings The following figure illustrates that civil construction works investment is at its highest value, but the rate of growth is lower than the preceding years, which reflects the constraints for both Government and the Private Sector. 5
25 Residential Non-Residential Construction / Civil 2 15 1 5 1995 1999 23 21 Rand (Million) 27 211 215 Gross Fixed Capital Formation in Construction; 21 Rand (Million) The construction sector accounts for around 4% of gross domestic product, its contribution is relatively small compared to other sectors of the economy such as Finance, Government, Trade and Manufacturing. In 217, the value added by the construction industry in South Africa s gross domestic product amounted to around R19 billion (real prices), with a year-on-year decrease of -,3% or declining by R339 million 3. Construction output/value added is a function of the level of investment in the sector. It fluctuates with the construction investment, construction output has been falling in line with residential, non-residential buildings and construction works investment. This can also be seen from the analysis below; according to the analysis the highest growth in construction output was around 16% in 27 and the highest decline was -.3% in 217. The construction industry has been on a downturn since 28. 3 StatsSA (218). Gross Domestic Product: Fourth Quarter 217. www.statssa.gov.za 6
6% GFCF CVA Year-on-year percentage change (21) 4% 2% % -2% -4% 25 26 27 28 29 21 211 212 213 214 215 216 217 A provincial overview of the construction industry shows that construction output/value added is driven by the following provinces; Eastern Cape, Gauteng, KwaZulu Natal and Western Cape. Construction activity is concentrated in the urban provinces. In 216 these four provinces collectively accounted for around 79% of construction output. Their share of construction value added is shown below. Mpumalanga 6% Limpopo 6% Western Cape 19% Eastern Cape 8% Gauteng 35% Northern Cape 2% Free State 3% North West 4% KwaZulu-Natal 17% The dominance of Gauteng, KwaZulu Natal, Western Cape and Eastern Cape in construction spend by province is shown below. 7
Construction Spend by Province - % (216Q1-216Q4) (Estimates: Industry Insight Database) Province Building Civil Total Gauteng 41% 11% 27% KwaZulu-Natal 19% 19% 19% Western Cape 21% 15% 18% Eastern Cape 8% 19% 13% Limpopo 4% 13% 8% North West 2% 1% 6% Mpumalanga 3% 7% 5% Free State 2% 4% 3% Northern Cape 2% 2% 2% Total 1% 1% 1% Construction Spend by Province - % (217Q1-217Q4) Estimates: Industry Insight Database Province Building Civil Total Gauteng 36% 15% 27% KwaZulu-Natal 19% 19% 19% Western Cape 15% 14% 15% Eastern Cape 13% 15% 14% Limpopo 6% 15% 1% North West 2% 8% 5% Mpumalanga 3% 7% 5% Free State 4% 4% 4% Northern Cape 1% 3% 2% Total 1% 1% 1% Total public sector spend or awards for the year 217 amounted to around 65% of total spend. Civil projects accounted for 66% whilst building projects accounted for 33% of total public sector spend. The high investment by government in construction or civil projects can be clearly seen from the table and investment map below which reflects that in all provinces there were more projects awarded in civil than in building works in the year 217. Public Sector Construction Spend by Province - % (217Q1-217Q4) Estimates: Industry Insight Database Province Building Civil KwaZulu-Natal 41% 59% Eastern Cape 42% 57% Western Cape 26% 69% Gauteng 31% 69% Limpopo 24% 76% North West 26% 71% Mpumalanga 35% 65% Free State 32% 68% Northern Cape 24% 76% Total 33% 66% 8
Acknowledgements Estimated value of public sector construction projects awarded; 217 (Building versus Civil split) According to the Industry Insight investment map 4 (which represents a large sample of projects) year-on-year nominal decline in total construction awards from 216 to 217 amounted to -17%, nominal decline in building awards was -16% while nominal decline in civil awards was -18%. The following provinces experienced increases, Free State (22%) and Limpopo (7%), while the following provinces experienced substantial decreases; Western Cape (-32%), North West (-26%), Gauteng (-19%) and KwaZulu Natal (-17%). It should be noted that three of the provinces that experienced major declines in awards are the provinces that account for a major share in construction activity, hence the decline in construction output. The table below shows the year-on-year breakdown in awards for provinces. Year-on-year increases in total construction awards (216 to 217) Estimates: Industry Insight Database Province Building Civil Total Eastern Cape 38% -35% -1% Free State 98% -15% 22% Gauteng -27% 17% -19% KwaZulu-Natal -15% -19% -17% Limpopo 47% -5% 7% Mpumalanga -6% -25% -18% North West 6% -36% -26% Northern Cape -45% 51% -1% Western Cape -4% -23% -32% Total -16% -18% -17% 2.2 Forecast The growth in civil construction has in part fuelled the growth in the number of cidb registered contractors, and any future growth or contraction in construction investment is therefore clearly of importance to the sustainability of the industry. 4 Industry Insight (218). Investment Map Monitor. www.industryinsight.co.za 9
The forecast investment in GFCF in 21 Rands by Industry Insight 5 is shown in the following table. The forecast by Industry Insight takes into account the following key considerations, negative and positive: Positive: expected global economic recovery and commodity pick up which will stimulate key industries; more optimism about current political situation; a moderate uptick in private investment expected in 218; rand strength and expected moderate pressure on inflation. Negative: rising interest rates in advanced economies; fiscal constraints in government which will lead to a falloff or budget cuts in infrastructure spending; challenges experienced by SOE s; ratings agencies. The resulting forecast suggests a contraction in total construction works in 218 as a result of a forecasted contraction of -3% in construction works which is due to a fall in public infrastructure spending as well as SOE s inability to effectively spend their budget allocations. GFCF; Rand (Billion) 21 213 214 215 216 217f 218f 219f Construction-Total 276,684 288,659 33,354 34,9 297,75 292,279 297,771 % change 4,3% 5,1%,5% -2,6% -1,6% 1,9% Building 14,822 17,447 11,573 17,156 12,891 13,92 16,21 % change 2,5% 2,9% -3,1% -4,% 1,% 2,% Residential-Building 51,114 52,526 57,56 55,685 53,736 54,273 55,63 % change 2,8% 8,6% -2,4% -3,5% 1,% 2,5% Non-residential Building 53,78 54,921 53,517 51,471 49,155 49,646 5,391 % change 2,3% -2,6% -3,8% -4,5% 1,% 1,5% Construction Works 171,862 181,212 192,781 197,744 194,185 188,359 191,75 % change 5,4% 6,4% 2,6% -1,8% -3,% 2,% Acknowledgements: 5 Budget Review 218, Infrastructure Allocations and the Impact on Construction. Industry Insight Focus Forum, 14 March 218 1
3. Expenditure against Budget; Municipal and Provincial Government 3.1 Municipal Expenditure An analysis of municipal capital expenditure for South Africa is shown below and given in in Appendix 1 for selected provinces 6 : the phased linear budget, actual expenditure and variance (in Rm) for all municipalities; and variance against budget for the most recent four quarters, for metro, local and district municipalities. Municipal; Expenditure; 2161 to 2174 Budget, Actual & Variance (Rm) 8 7 6 5 4 3 2 1-1 -2-3 2161 Variance Budget Actual 2162 2163 2164 2171 2172 2173 2174 Variance against Budget (Rm) yyyyqq 2171 2172 2173 2174 Metro -11,148-5,854-6,335-9,862 District Municipality -2,144-2,89-1,31-1,79 Local Municipality -6,653-6,294-2,88-4,322 Total -19,945-14,957-1,246-15,893 From an analysis of the municipal expenditure for the whole of South Africa: as at Quarter 2 of the 217/18 municipal financial year (217Q4 of the calendar year), the total municipal capital expenditure amounted to around R2,5 billion or 56% of the phased budget representing an underspend against linear phased budget of around R16 billion; at a more detailed level, as at Quarter 2 of the 217/18 municipal financial year (217Q4 of the calendar year), 5% of the capital phased budget had been spent by Metros, while District and Local Municipalities spent 64% of the phased budget; and the underspending for Metros amounted to around R1 billion. Note that at the end of the 216/17 municipal financial year, the total underspending of Municipalities increased from around R13 billion (215/16) to around R16 billion, this reflects the capacity constraints in the infrastructure delivery process that are experienced in Local Municipalities. Furthermore, from Appendix 1, for the provinces shown, as at Quarter 2 of the 217/18 municipal financial year (217Q4 of the calendar year), overall municipal capital expenditure for Eastern Cape and KwaZulu Natal was above 6% of the phased budget (65% and 61% respectively), while for Western Cape and Gauteng spending was below 6% of the phased budget (51% and 46% respectively). 6 National Treasury (218). Local Government Revenue and Expenditure: Second Quarter Local Government Section 71 Report. mfma.treasury.gov.za 11
3.2 Provincial Expenditure An analysis of provincial capital expenditure for South Africa is shown below and given in Appendix 2 for selected provinces 7 : the phased linear budget, actual expenditure and variance (in Rm) for all provinces; and variance against budget for the most recent four quarters, for the departments of Education, Health and Public Works, Roads and Transport. Provincial; Expenditure; 2161 to 2174 Budget, Actual & Variance (Rm) Variance Budget Actual 5 4 3 2 1-1 2161 2162 2163 2164 2171 2172 2173 2174 Variance against Budget (Rm) yyyyqq 2171 2172 2173 2174 Education -786-536 -716 233 Health -65-767 -1,13-7 Works, Roads & Transp -6-845 -1,451 632 Total -1,397-2,148-3,297 164 From an analysis of the provincial expenditure for the whole of South Africa: expenditure for Quarter 3 of 217/18 provincial financial year (217Q4 of the calendar year) is at 1% of the phased budget or R34 billion; and at a more detailed level, as at Quarter 3 of the 217/18 provincial financial year (217Q4 of the calendar year), total actual expenditure for Health amounted to 9%, whilst Education and Public Works, Roads and Transport spent over 1% of the phased budget. Furthermore, from Appendix 2, for the provinces shown, as at Quarter 3 of the 217/18 provincial financial year (217Q4 of the calendar year), overall provincial capital expenditure for Eastern Cape and KwaZulu Natal was above 1% of the phased budget (16% and 11% respectively), Gauteng and Western Cape spent below 95% of the phased budget (83% and 92% respectively). (Data for other provinces can be provided on request]. Note that at the end of the 216/17 provincial financial year, the total underspending of provincial departments was R1.4billion. 7 National Treasury (218). Section 32 Provincial Financial Publication (In-year management, monitoring and reporting). www.treasury.gov.za 12
4. Contracts Awarded; Public Sector (Note that the information provided by Industry Insight for contracts awarded is lagged by one quarter.) Estimates of the distribution of public sector contracts awarded for South Africa as a whole in the four quarters 217Q1 to 217Q4 in Grades 2 to 9 is shown in the adjacent figure with around 87% of public sector awards by value being in tender Grades 7 to 9 in General Building () and 82% in Civil Engineering (). Demand; Public Sector Awards (% Distribution by Value); 2171 to 2174 Grade % Distribution % 2% 4% 6% 8% 1% 9 34% 7 & 8 53% 9 5 & 6 9% 2 to 4 4% Total 1% 7 & 8 9 43% 5 & 6 7 & 8 39% 5 & 6 14% 2 to 4 2 to 4 4% Total 1% Of interest to note is that less than 5% of public sector contracts are typically issued in tender Grades 2 to 4 in both and at. It should be noted however that the largest proportion of the contracts awarded in Grades 7 to 9 are subcontracted down to sub-contractors typically in Grades 2 to 6. Similar trends are also obtained for the distribution of public sector contract awards for the selected provinces shown in Appendix 3. (Data for other provinces can be provided on request.) Acknowledgements: 13
5. Maintenance Contracts Awarded; Public Sector (Note that the information provided by Industry Insight for contracts awarded is lagged by one quarter.) Estimates of the distribution of public sector maintenance contracts awarded by value (including refurbishment, renovations, etc.) in South Africa as a percentage of the total contracts awarded in the Grades 2 to 9 is shown in the figure below. Maintenance; Public Sector Awards (% of Value per Grade); 2171 to 2174 Grade % Distribution % 2% 4% 6% 8% 1% 9 7% 7 & 8 15% 9 5 & 6 36% 2 to 4 36% Total 15% 7 & 8 9 26% 5 & 6 7 & 8 28% 5 & 6 16% 2 to 4 15% 2 to 4 Total 11% maintenance contracts in Grades 7 to 9 in General Building () amount to an average of 7% and Civil Engineering () in Grades 7 to 9 amount to an average of 18% of the total expenditure for 217Q1 to 217Q4; and the percentage of maintenance contracts in Grades 2 to 6 the average is around 18% in General Building (), but only around 8% in Civil Engineering () for 217Q1 to 217Q4. Estimates of the distribution of public sector maintenance contract awards for selected provinces are shown in Appendix 4. (Data for other provinces can be provided on request.) Acknowledgements: 14
6. Supply: Registrations; Grades 2 to 9 Details of the distribution of the total number of registrations in Grades 2 to 9 in General Building () and Civil Engineering () for South Africa are shown in the following figure. Supply; Registrations per Grade (% Grades 2 to 9); 2181 Grade Number Black (%) % 2% 4% 6% 8% 1% 9 56 1% 7 & 8 69 1% 9 5 & 6 1393 21% 2 to 4 4576 68% Total 6715 1% 7 & 8 9 96 1% 5 & 6 7 & 8 853 12% 5 & 6 162 23% 2 to 4 4541 64% 2 to 4 Total 792 1% Overall, it is seen that the number of registrations in Grades 2 to 4 accounts for around 64% to 68% of the total registrations in Grades 2 to 9, whereas the number of registrations in Grades 7 to 9 accounts for around 1% to 12% of the total number of registrations. The growth in registrations over the past three years is shown in the following figure. Details of registrations for selected provinces is given in Appendix 5, while details for other provinces can be provided on request. 15
7. Business Conditions; Public and Private Sectors (Note that the information provided here is a summary of the cidb / BER SME Business Confidence Survey, available on the cidb web.) Business Confidence All 3 & 4 5 & 6 7 & 8 7 All 3 & 4 5 & 6 7 & 8 7 6 6 5 5 4 4 3 3 2 2 1 1 2161 2171 2181 2161 2171 2181 General Building: During the first quarter of 218, business confidence for general builders was unchanged at 36 index points. However, business conditions were more favourable, in line with better activity and profitability. Constraints to business operations were largely unchanged. Nevertheless, the indicator rating insufficient demand for new building work as a constraint to business operations remained elevated, which bodes ill for building activity in the near term. Results across the three grades showed a fall in confidence among the Grades 3 & 4 (supported by weakness in underlying indicators). For Grades 5 & 6 and Grades 7 & 8, improved sentiment came mostly on the back of better activity growth. It should be noted that, irrespective of the movements in sentiment for all three grades, confidence levels remained below their long-term averages. Amongst the big four provinces, confidence for Western Cape building contractors remained above 5 index points, while the opposite was true for the others. In sum, an improvement in underlying indicators was seen for all four provinces, except in KwaZulu-Natal. Discouragingly, building confidence in the Eastern Cape, KwaZulu-Natal and Gauteng is oscillating around the poor level of 3 index points. Civil Contractors: Civil contractor confidence was barely changed in 218Q1. The cidb index edged up by 1 index point to 36. Some positive movements in construction activity helped alleviate some pressure off profitability. Both activity and profitability were lifted from exceptionally low levels seen in the previous quarter. Grades 5 & 6 civil contractor confidence was mostly stable at 41 index points. This was reflective of persistent pressure on profitability in spite of some improvement in activity. For Grades 3 & 4 the slight pick-up in sentiment was barely supported by underlying indicators. On the other hand, higher confidence for Grades 7 & 8 came on the back of improved activity and profitability. The overall provincial picture for civil contractors was rather morose, especially in light of the reversed gain in confidence in the Western Cape. While there were some slight improvements in sentiment for the other three provinces during 218Q1, Western Cape confidence plunged to its worst level since 213Q2. In all, confidence levels for all four provinces rested below 4-index points during the survey quarter. This should not be surprising, however, given that key underlying indicators are well below their long-term averages. Confidence for both the building and civil engineering sectors was largely unchanged at the depressed level of 36 index points each during 218Q1. From a grades perspective, confidence levels are oscillating around 4 index points in both sectors, reflecting broad-based strain. The picture is hardly more encouraging at the provincial level. General builders in the Western Cape seem to be the only ones who remain upbeat, with 16
confidence above 5 points. For the rest of the provinces in both building and civil, confidence levels are mostly in the 3 s. Business Confidence for selected provinces is shown in Appendix 6. (Data for other provinces can be provided on request.) 17
8. Constraints to Business Growth (Note that the information provided here is a summary of the cidb / BER SME Business Confidence Survey, available on the cidb web.) Constraints to business growth (net balance) are given below for General Building () and Civil Engineering () for contractor Grades 3 & 4, 5 & 6 and 7 & 8. i) Lack of access to work is the highest constraint to business growth across all grades, at a net balance of around 7%. It has increased to around 85% for Grades 7 & 8 contractors. This is not positive for activity in the near term. ii) Shortage of skilled labour is the second highest constraint, but less of a constraint for Grades 7 & 8 contractors. iii) Inadequate access to credit is the lowest of the three constraints to business growth, but for contractor Grades 3 & 4 are at a similar level to shortages of skilled labour. Of significance is that inadequate access to credit is increasing as a constraint to business growth in Grades 3 & 4. For Grades 7 & 8, inadequate access to credit does not appear to be a significant constraint. Business Constraints; Grades 3 & 4 Constraints to Growth 1 9 8 7 6 5 4 3 2 1 Insufficient Demand for Work Shortage of Skilled Labour Inadequate Access to Credit Constraints to Growth 1 9 8 7 6 5 4 3 2 1 Insufficient Demand for Work Shortage of Skilled Labour Inadequate Access to Credit 215Q2 216Q2 217Q2 215Q2 216Q2 217Q2 Business Constraints; Grades 5 & 6 Constraints to Growth 1 9 8 7 6 5 4 3 2 1 Insufficient Demand for Work Shortage of Skilled Labour Inadequate Access to Credit 215Q2 216Q2 217Q2 Constraints to Growth 1 9 8 7 6 5 4 3 2 1 Insufficient Demand for Work Shortage of Skilled Labour Inadequate Access to Credit 215Q2 216Q2 217Q2 18
Business Constraints; Grades 7 & 8 Constraints to Growth 1 9 8 7 6 5 4 3 2 1 Insufficient Demand for Work Shortage of Skilled Labour Inadequate Access to Credit 215Q2 216Q2 217Q2 Constraints to Growth 1 9 8 7 6 5 4 3 2 1 Insufficient Demand for Work Shortage of Skilled Labour Inadequate Access to Credit 215Q2 216Q2 217Q2 19
Appendix 1: Municipal Expenditure for Selected Provinces Municipal; Expenditure; 2161 to 2174 Budget, Actual & Variance (Rm) 1 8 6 4 2-2 -4 2161 Variance Budget Actual 2162 2163 2164 2171 2172 2173 2174 Variance against Budget (Rm) yyyyqq 2171 2172 2173 2174 Metro -935-595 -453-619 District Municipality -585-784 -174-569 Local Municipality -671-78 -26-372 Total -2,192-2,88-887 -1,56 Eastern Cape Municipal; Expenditure; 2161 to 2174 Budget, Actual & Variance (Rm) 25 2 15 1 5-5 -1 2161 Variance Budget Actual 2162 2163 2164 2171 2172 2173 2174 Variance against Budget (Rm) yyyyqq 2171 2172 2173 2174 Metro -7,87-4,83-3,812-5,32 District Municipality -8-14 12 9 Local Municipality -464-333 -181-218 Total -7,56-5,176-3,981-5,529 Gauteng 2
Municipal; Expenditure; 2161 to 2174 Budget, Actual & Variance (Rm) 16 14 12 1 8 6 4 2-2 -4 2161 Variance Budget Actual 2162 2163 2164 2171 2172 2173 2174 Variance against Budget (Rm) yyyyqq 2171 2172 2173 2174 Metro -1,32-627 -943-1,66 District Municipality -41-566 -348-43 Local Municipality -1,167-1,7-549 -783 Total -2,888-2,199-1,84-2,819 Kwa-Zulu Natal Municipal; Expenditure; 2161 to 2174 Budget, Actual & Variance (Rm) 12 1 8 6 4 2-2 -4 2161 Variance Budget Actual 2162 2163 2164 2171 2172 2173 2174 Variance against Budget (Rm) yyyyqq 2171 2172 2173 2174 Metro -1,375-86 -965-2,13 District Municipality -14-5 -9-14 Local Municipality -1,171-892 -461-866 Total -2,561-1,72-1,436-3,9 Western Cape 21
Appendix 2: Provincial Expenditure for Selected Provinces Provincial; Expenditure; 2161 to 2174 Budget, Actual & Variance (Rm) Variance Budget Actual 6 5 4 3 2 1-1 2161 2162 2163 2164 2171 2172 2173 2174 Variance against Budget (Rm) yyyyqq 2171 2172 2173 2174 Education -86-27 -27 112 Health -17-192 -166 14 Works, Roads & Transp 125-1 143 Total -193-274 -194 269 Eastern Cape Provincial; Expenditure; 2161 to 2174 Budget, Actual & Variance (Rm) Variance Budget Actual 8 7 6 5 4 3 2 1-1 -2 2161 2162 2163 2164 2171 2172 2173 2174 Variance against Budget (Rm) yyyyqq 2171 2172 2173 2174 Education -159-135 -488-225 Health -95-152 -533-59 Works, Roads & Transp -128-266 24 Total -255-415 -1,287-791 Gauteng 22
Provincial; Expenditure; 2161 to 2174 Budget, Actual & Variance (Rm) Variance Budget Actual 12 1 8 6 4 2-2 2161 2162 2163 2164 2171 2172 2173 2174 Variance against Budget (Rm) yyyyqq 2171 2172 2173 2174 Education 36 93 28 126 Health -95-68 -26-7 Works, Roads & Transp 7-112 735 Total -59 32-11 854 Kwa-Zulu Natal Provincial; Expenditure; 2161 to 2174 Budget, Actual & Variance (Rm) Variance Budget Actual 7 6 5 4 3 2 1-1 -2 2161 2162 2163 2164 2171 2172 2173 2174 Variance against Budget (Rm) yyyyqq 2171 2172 2173 2174 Education -9-15 -211-56 Health 1-3 -114-17 Works, Roads & Transp -132-333 -28 Total 1-311 -659-371 Western Cape 23
Appendix 3: Provincial Public Sector Demand Demand; Public Sector Awards (% Distribution by Value); 2171 to 2174 Grade % Distribution % 2% 4% 6% 8% 1% 9 2% 7 & 8 66% 9 5 & 6 1% 2 to 4 4% 7 & 8 Total 1% 9 46% 5 & 6 7 & 8 39% 5 & 6 13% 2 to 4 2 to 4 3% Total 1% Eastern Cape Demand; Public Sector Awards (% Distribution by Value); 2171 to 2174 Grade % Distribution % 2% 4% 6% 8% 1% 9 39% 7 & 8 52% 9 5 & 6 7% 2 to 4 3% 7 & 8 Total 1% 9 42% 5 & 6 7 & 8 37% 5 & 6 14% 2 to 4 2 to 4 7% Total 1% Kwa-Zulu Natal Demand; Public Sector Awards (% Distribution by Value); 2171 to 2174 Grade % Distribution % 2% 4% 6% 8% 1% 9 38% 7 & 8 51% 9 5 & 6 9% 2 to 4 2% 7 & 8 Total 1% 9 43% 5 & 6 7 & 8 46% 5 & 6 9% 2 to 4 2 to 4 1% Total 1% Gauteng Demand; Public Sector Awards (% Distribution by Value); 2171 to 2174 Grade % Distribution % 2% 4% 6% 8% 1% 9 27% 7 & 8 55% 9 5 & 6 14% 2 to 4 4% 7 & 8 Total 1% 9 38% 5 & 6 7 & 8 46% 5 & 6 12% 2 to 4 2 to 4 4% Total 1% Western Cape 24
Appendix 4: Maintenance Contracts Awarded; Public Sector: Provinces Maintenance; Public Sector Awards (% of Value per Grade); 2171 to 2174 Grade % Distribution % 2% 4% 6% 8% 1% 9 % 7 & 8 21% 9 5 & 6 31% 2 to 4 42% Total 19% 7 & 8 9 15% 5 & 6 7 & 8 4% 5 & 6 13% 2 to 4 22% 2 to 4 Total 7% Eastern Cape Maintenance; Public Sector Awards (% of Value per Grade); 2171 to 2174 Grade % Distribution % 2% 4% 6% 8% 1% 9 11% 7 & 8 5% 9 5 & 6 21% 2 to 4 37% Total 9% 7 & 8 9 8% 5 & 6 7 & 8 11% 5 & 6 4% 2 to 4 12% 2 to 4 Total 4% Kwa-Zulu Natal Maintenance; Public Sector Awards (% of Value per Grade); 2171 to 2174 Grade % Distribution % 2% 4% 6% 8% 1% 9 % 7 & 8 16% 9 5 & 6 46% 2 to 4 42% Total 13% 7 & 8 9 52% 5 & 6 7 & 8 28% 5 & 6 31% 2 to 4 32% 2 to 4 Total 22% Gauteng Maintenance; Public Sector Awards (% of Value per Grade); 2171 to 2174 Grade % Distribution % 2% 4% 6% 8% 1% 9 44% 7 & 8 3% 9 5 & 6 18% 2 to 4 24% Total 31% 7 & 8 9 17% 5 & 6 7 & 8 4% 5 & 6 14% 2 to 4 22% 2 to 4 Total 7% Western Cape 25
Appendix 5: Provincial Contractor Registrations; Grades 2 to 9 Eastern Cape Gauteng Kwa-Zulu Natal Western Cape 26
Appendix 6: Business Confidence Index: Provincial Results 1 9 8 7 6 5 4 3 2 1 1 9 8 7 6 5 4 3 2 1 2161 2171 2181 2161 2171 2181 Eastern Cape Gauteng 1 9 8 7 6 5 4 3 2 1 1 9 8 7 6 5 4 3 2 1 2161 2171 2181 2161 2171 2181 KwaZulu-Natal Western Cape 27
Notes 28
Gauteng Provincial Office Pretoria cidbgp@cidb.org.za Western Cape Provincial Office Cape Town cidbwc@cidb.org.za Eastern Cape Provincial Office Bisho cidbec@cidb.org.za Northern Cape Provincial Office Kimberley cidbnc@cidb.org.za Free State Provincial Office Bloemfontein cidbfs@cidb.org.za KwaZulu-Natal Provincial Office Durban cidbkzn@cidb.org.za Limpopo Provincial Office Polokwane cidblimpopo@cidb.org.za Mpumalanga Provincial Office Nelspruit (Mbombela) cidbmpumalanga@cidb.org.za North West Provincial Office Mahikeng cidbnw@cidb.org.za cidb contact number: 86 1 2432 Anonymous Fraud Line: 8 11 24 32 email: cidb@cidb.org.za www.cidb.org.za