Raubex’s interim performance improves following rightsizing efforts

Raubex’s interim performance improves following rightsizing efforts

11th November 2019

By: Tasneem Bulbulia
Creamer Media Reporter

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Infrastructure development and construction materials group Raubex is now in a better position to manage the lower volume of construction work available in the market and has maintained sufficient capacity to participate in an anticipated improvement in the sector, CEO Rudolf Fourie said on Monday.

Reporting on the group’s results for the six months ended August 31, Raubex on Monday highlighted the work undertaken during the 2019 financial year, ended February 28, to rightsize the business amid a constrained construction market.

Fourie noted that despite softer results reported by the materials division, the infrastructure division experienced strong growth during the first half of the 2020 financial year, mainly owing to work related to the division’s participation in the Renewable Energy Independent Power Producer Procurement Programme, where a number of contracts are currently in progress.

“We are encouraged by a substantial increase in tender activity that has been observed in recent months, which now needs to materialise into contract awards,” he added.

For the six months under review, Raubex’s revenue decreased by 1.9% year-on-year to R4.40-billion, while operating profit increased by 37% year-on-year to R216.3-million.

Headline earnings a share increased by 64.1% to 58.6c and earnings a share by 81% to 64.6c.

Cash generated from operations increased by 41.4% to R414.8-million.

Raubex’s capital expenditure decreased to R145-million from the R197.5-million spent in the first half of the prior financial year.

The order book increased to R9.08-billion from R8.41-billion in the first half of the prior financial year.

The group declared an interim dividend of 22c apiece.

Infrastructure Fund project pipeline stands at R700bn, DBSA report

Infrastructure Fund project pipeline stands at R700bn, DBSA report

 

Photo by Creamer Media’s Dylan Slat

6th November 2019

By: Terence Creamer
Creamer Media Editor

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Development Bank of Southern Africa (DBSA) CEO Patrick Dlamini reported on Wednesday that a project pipeline valued at more than R700-billion had already been identified by the new Infrastructure Fund, which is being created to raise a blend of public and private finance to help plug the country’s infrastructure holes.

The DBSA has been given responsibility for implementing the fund, which was unveiled by President Cyril Ramaphosa as part of government’s 2018 Economic Stimulus and Recovery Plan.

Speaking at the South Africa Investment Conference on Wednesday, Dlamini said that the pipeline was likely to breach the R1-trillion level in the coming years. However, he also stressed that projects were at various stages of development and that further work was required to progress many of them to bankability.

The role of the fund would be to act as a “catalyst” for crowding-in scarce private and public capital to address the country’s transport, water, information and communications technology and energy backlogs.

To achieve this the fund would draw lessons from the country’s successful renewable-energy procurement programme, through which about R200-billion of private electricity investment had been facilitated since 2011.

Denham Capital’s Jasandra Nyker, who oversaw the development of several utility-scale renewables projects, underlined the success of the programme, which had proved that that new power projects could be developed by the private sector in partnership with government.

She lamented the recent four-year delay to the programme, however, which had undermined the local supply chain and raised doubts about the government’s commitment to honouring agreements. That said, Nyker argued that the actual risks of investing in Africa and South Africa were lower than the perceived risks.

Finance Minister Tito Mboweni added his support for the blended-finance model, arguing that public–private partnerships would be required to ensure that much-needed infrastructure was built in a context of “tremendous pressure” on the country’s public finances.

Ramaphosa, meanwhile, described infrastructural investment as a critical driver of future growth and an economy that had been stuck in a low-growth trajectory for the past ten years.

“To generate the funding needed for our infrastructure build programme, we have set up an Infrastructure Fund, which is being incubated by the Development Bank of Southern Africa.

“With an initial investment from government of R100-billion over ten years, the fund will leverage investments from financial institutions, multilateral development banks, asset managers and commercial banks,” the President told investors and potential investors from over 20 countries.

New Development Bank (NDB) VP and CFO Leslie Maasdorp stressed that the bank stood ready to support infrastructure projects in South Africa, but urged government to improve its long-term planning, which he said would help shore up the project pipeline needed for upscaled investment.

Established by the Brics bloc of Brazil, Russia, India, China and South Africa, the NDB had approved another $1.6-billion in infrastructure financing for South Africa for 2020 and was aiming to increase approvals to $2-billion in the coming months.

In 2019, the development finance institution pledged $2-billion to South African projects but by the end of October had already disbursed $2.2-billion.

Maintenance at centre of Sanral’s R40bn medium-term project pipeline

Maintenance at centre of Sanral’s R40bn medium-term project pipeline

 

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1st November 2019

By: Irma Venter
Creamer Media Senior Deputy Editor

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The South African National Roads Agency Limited (Sanral) will issue tenders for roughly R40-billion in new projects over the next three financial years.

These projects will focus on maintaining the current road network, as well as the construction of a number of new projects.

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“Sanral has a big focus on preventive maintenance, so there are a lot of maintenance projects included in that R40-billion,” says Sanral engineering executive Louw Kannemeyer.

“Our budget is allocated to around 915 projects, in total, over the next three years. Of that, roughly 300 projects are currently in the design and construction phase, with another 600 to be issued in some form or the other.”

Kannemeyer says it may take time for some projects to kick off, as they typically require a variety of regulatory approvals, with land acquisitions also potentially holding back starting dates.

N2, N3
One of the key development areas for Sanral over the next three financial years – the midterm expenditure framework – is the development of the N2/N3 in KwaZulu-Natal – more specifically, the N3 between Pietermaritzburg and Durban, and the N2 between the old Durban airport in the south and King Shaka International Airport in the north.

“Several projects are currently out on tender. Some of these projects are worth R2.5-billion, so we are talking about quite substantial capital expenditure (capex) projects,” says Kannemeyer.

The total of all the projects in the pipeline for these two highways in KwaZulu-Natal is about R15-billion.

Another focus is on the N2 Wild Coast toll road.

Seven greenfield construction packages, to the value of about R9-billion, and stretching over 100 km, will be launched in staggered fashion over the midterm, says Kannemeyer.

One of the megabridges for this project – Msikaba – is already under construction.

Construction work on the other – Mtentu – has stopped, owing to the winning bidder, the Aveng/Strabag joint venture, abandoning the project as a result of a dispute with Sanral.

Sanral has applied to National Treasury for permission to negotiate with the previously prequalified, but unsuccessful, bidders to complete the contract.

The agency has not yet received a response from the Treasury.

Negotiating with the five unsuccessful bidders will be the quickest way to get the construction process back on track, says Kannemeyer.

Should the Treasury not agree, Sanral will have to launch a new tender process.

“If this happens, Sanral would face a long tender period, because of the complexity of the project, as it would take quite some time for any new entrants to familiarise themselves with the conditions surrounding the project,” explains Kannemeyer.

“What many people don’t understand is the challenge the height of the structure presents – people will have to work on the centre piers of this bridge, which are nearly 220 m in the air.

“You cannot tender such a project in a short period of time.

“If we have to start the tender process from scratch, it could take between 12 and 15 months before we have a new contractor on site.”

Kannemeyer says the N2 Wild Coast freeway will be a toll road.

It was decided that the initial cost of construction would be paid through an allocation from the National Treasury, with the operations, maintenance and any future expansion costs to be recovered from toll.

“This means the freeway will be a traditional toll road with booms,” notes Kannemeyer.

“It is an agency toll road, and there is no concessionaire involved, as traffic volumes will not be high enough to attract the private sector.”

Sanral will soon start the intent-to-toll process.

“This is a public process, and through this process the placement of the toll plazas, as well as the tariffs, will be finalised.”

Tolling will only start once the 100 km of road from the border at the Wild Coast Sun, down to the south, where the road joins up with the R61, has been completed.

Moloto Road, N1
Other work to be tendered over the three-year midterm expenditure framework includes the Moloto Corridor project and work on the N1 in the Free State.

There are major capex projects on the N1 north of Bloemfontein, says Kannemeyer.

There are three provinces involved in the Moloto Corridor project: Limpopo, Mpumalanga and Gauteng.

The roads on the corridor in Mpumalanga and Limpopo have already been transferred to Sanral’s jurisdiction. However, the Gauteng portion, which makes up the bulk of the road, has not yet been signed over.

“We are still trying to finalise the paperwork between Sanral and the province,” says Kannemeyer.

The total accumulated contracts on this project will amount to about R2.5-billion.

Maintenance, Toll Roads
About 130 three-year routine maintenance contracts are being retendered this year, notes Kannemeyer.

“These involve fixing potholes, repairing accident damage, litter collection and grass cutting, for example.”

Sanral’s toll portfolio will also see some upgrades.

The New Development Bank has approved a R7-billion loan, guaranteed by the South African government, to Sanral for its Toll Roads Strengthening and Improvement Programme.

This funding is linked to existing toll roads, and not the building of any new toll roads, or expanding Gauteng’s e-toll road network, says Kannemeyer.

“We are talking existing, conventional boomed toll roads.

“The loan relates to capacity increases. In a number of instances, we aim to double the road capacity by building new lanes, as some of our toll roads have reached capacity.”

This will be the case with the N3 between Pietermaritzburg and Durban, as well the N2 North Coast road, where capacity increases are required, explains Kannemeyer.

“We are also adding lanes to the N1 in the vicinity of Winburg, which is currently a single carriageway.”

Kannemeyer says Sanral is awaiting approval from the Minister of Finance to take up the loan.

While the Gauteng e-toll network will not see any expansion, the network surface has, however, almost reached the end of its design life.

“We need to look after this asset, so this network will receive new asphalt overlays over a staggered period,” explains Kannemeyer.

“This will be done at night, so the impact will be minimal.”

The combined value of this work will be about R850-million.

On retaining e-tolls – or not – there is no answer yet from the newest government grouping investigating its future, says Kannemeyer.

Cape Town Congestion
While the e-toll network may have brought some relief to commuters in Gauteng, Capetonians are facing rapidly increasing congestion.

However, with South Africans shunning e-tolls as a road-building solution, Sanral is forced to approach this problem in a piecemeal fashion, as budget allows, notes Kannemeyer.

“We are busy with the final design to tackle congestion around Cape Town.

“We are looking at lane additions to the N1 and N2, as well constructing a new greenfield part of the N2 through Somerset-West.”

This may, however, take some time.
“Our budget allocation from the National Treasury is 50% less than what we require,” says Kannemeyer.

“It may take up to three years to see any activity on the ground in Cape Town.”

De Beer’s Pass and the N3
The Van Reenen’s Pass has always, to a large degree, determined the capacity of the N3 between Gauteng and Durban.

More than 30 years ago, a second pass, the De Beer’s Pass, was planned as an additional, direct link from Ladysmith to Warden. This process came to a standstill for various reasons.

The plan was, however, again presented, and accepted, as part of the current 30-year concession agreement with the N3 Toll Concession (N3TC) group.

“We are currently engaging with the Presidential Infrastructure Coordinating Commission (PICC) and the relevant stakeholders on the future of the N3,” says Kannemeyer.

“The question is whether we are staying on the existing corridor, or adding the De Beer’s corridor?”

The options are to expand Van Reenen’s Pass, although this is likely to be the more expensive option, owing to the difficult terrain the road traverses.

Building De Beer’s Pass will shave 15 km off the route between Gauteng and Durban, and it will allow trucks to continue travelling at 80 km/h. On an economic artery like the N3, it will, most likely, cut the travelling time for trucks by an hour – which is quite significant, says Kannemeyer.

“This option will have a positive impact on logistics costs.

“It is important to understand that traffic on the N3 is linked directly to what happens to the economy.

“In terms of the forecast we have, the N3 will reach poor levels of service in 2022 or 2023, so we need to start the process urgently if one considers the time it takes to complete environmental impact studies and land acquisitions.”

Kannemeyer says Sanral has been instructed to do a detailed cost assessment and comparison for the two alignments, with both documents submitted to the Department of Transport for discussion at the PICC.

It is likely that N3TC would have to carry the cost of building the selected alignment – with Sanral to supply the land – as it was incorporated under the current concession agreement.

“But construction is dependent on the decision-makers,” says Kannemeyer. “When the decision is made, it will dictate where there is sufficient time remaining on the concession to implement the expansion.”

Challenging Market
Sanral is seeing a lot more smaller construction players entering the market, says Kannemeyer.

“And, because of challenging market conditions in South Africa, there is substantial interest in Sanral projects.

“We see a significant oversupply of construction capability in the industry at the moment. We expect some fierce competition for the projects we’ll release over the next three years.”

While it does mean that Sanral can do more with the same budget, there is also some risk associated with this situation.

“Companies are really coming in at rock-bottom prices, which means that these companies face business rescue if anything happens on site. As soon as they start running late, they run into cash flow problems,” says Kannemeyer.

For contracts of R50-million and less, the criteria to win a Sanral tender are 80% related to price and 20% to a company’s empowerment score.

For contracts above R50-million, they are 90% related to price and 10% to empowerment score.

In most instances, companies tendering for work are empowered at level 1 or 2, which means it comes down mostly to price.

‘Local’ Demands
With reports of a ‘construction mafia’ – local groupings intimidating construction companies for a share of the work – doing the rounds, Kannemeyer says Sanral does not necessarily view these groupings as ‘mafia’.

“There are legitimate demands being made based on National Treasury prescripts about what is local.

“But there is a significant misinterpre- tation of what is ‘local’. “Some people interpret the Treasury prescripts [as saying] that 30% of the contract must go to the local community, and then you find people demanding 30% of the work, or 30% of the project in cash,” says Kannemeyer.

“However, ‘local’ in this context means ‘South Africa’ – not the surrounding community.”

The National Treasury’s 30% prescript is also often linked to a Construction Industry Development Board (CIDB) recommendation that 30% of work must go to local communities – which, in this case, refers to the local community or local municipality.

“When people read this, they think it is one and the same thing,” notes Kannemeyer.

“There is no uniformity in the prescripts and the way they are communicated and interpreted, which is causing a lot of the challenges we currently have.

“There is virtually no single project where we are not confronted with these 30% demands.”

Kannemeyer says Sanral is currently enaging the CIDB and the National Treasury on clarifying their positions.

 

SA Road Federation calls for a coordinated national effort to address road crash crisis

SOUTH AFRICAN ROAD FEDERATION 

MEDIA RELEASE 

 

The equivalent of 30 jumbo jets crash in South Africa every year 

  • SA Road Federation calls for a coordinated national effort to address road crash crisis

 

Date: President of the South African Road Federation (SARF), Saied Solomons, has called for a nation-building programme that underscores road behaviour and which is coordinated to reach into the heart of every enforcement area across South Africa. “All road stakeholders need to collaborate and accountability needs to be upheld at every level – from road users to officials and right through the reporting lines in road and traffic authorities,” he said. Solomons was speaking at the Federation’s Transport Month event held in Pretoria last week.

 

“Statistics are not lacking when it comes to the carnage on our roads – the figures translate to over 30 jumbo jet crashes across our country every year. We have initiatives that run at national, regional and local government level to address the scourge of road crashes. However, they are not sufficiently integrated, and we are not moving closer to reaching any of our road safety targets, many of which are aligned to international targets as set out in the Sustainable Development Goals.

 

“The National Road Safety Strategy launched in 2017 remains a document that pays lip service to changing the behaviour and attitude of road users by 2030. Nearly four years into this plan, lawless still rules our roads and not the law. It is not guiding or driving implementation of the strategy across the road system,” said Solomons.

 

Solomons believes that pockets of excellent work are taking place around road safety, but he says organisations and authorities are working in silos which diminishes the impact of their programmes.

 

“In 21st Century SA, technology can be far better used to help plan, implement, manage and monitor road safety efforts at local, regional and national levels.

 

“The Road Accident Fund remains largely a reactive mechanism funded by road users at the fuel tanks and then handed out after the carnage. This levy should rather be proactively promoting and deepening enforcement to influence driver behaviour.

 

“Driver behaviour must be addressed through positive incentives for drivers as opposed only penalties, while officials need to be properly rewarded for their hard work in enforcing the law on our roads.”

 

According to the World Health Organisation, road traffic injuries are estimated to be the eighth leading cause of death globally. “The issue is not unique to South Africa,” said Solomons, “But our statistics are. In SA, the cost of crashes amounts to 3.5% of GDP whereas in the United Kingdom, road crashes make up 1.7% of GDP and in the United States 1.8%.”

 

Four focus areas – drink driving, speed, seat belts and child restraints

 

The SA Road Federation is part of the Global Road Safety Partnership which has highlighted four key road safety initiatives that developing countries should concentrate on, namely, drink driving, speed, seat belts and child restraints

 

Solomons said, “If we could address these four issues across all three tiers of government, we will be taking a big step forward in reducing fatalities on our roads.”

 

The Global Road Safety Partnership has shown that a 5% reduction in speed reduces crashes by 30% and says setting and enforcing speed limits is one of the most effective measures in reducing road crashes. It reports that drivers with a blood alcohol concentration of between 0.02 and 0.05 grams/decilitre have at least a three times greater risk of dying in a crash. It also reveals that wearing a seatbelt reduces the risk of a fatality amoung drivers and front-seat occupants by 45-50% while use of correctly fitted child restraints appropriate for a child’s size and weight significantly reduces death or injury.

 

“As part of this Partnership, we advocate widespread, consistent and highly visible law enforcement to send a clear message to drivers that speeding will not be tolerated. Similarly, we advocate widespread random breath testing as frequently as possible and especially around bars and restaurants. Effective enforcement of seat belt laws must take place and correctly fitted and appropriate child restraints in vehicles is a non-negotiable: parents or guardians who are non-compliant must be penalised,” said Solomons.

 

Solomons added that 38% of fatalities on our roads are pedestrians, who are vulnerable road users. “To reduce pedestrian fatalities, we need to address driver behaviour, educate pedestrians, and also make sure that there are ample pedestrian walking areas, including bridges for people to move more easily, quickly and safely between work and home.”

 

MEC for Roads and Transport in Gauteng, Jacob Mamabolo, delivered the keynote address at the SA Road Federation event, when he unpacked the role of transport in Gauteng’s economy. Mamabolo called on SA Road Federation to be the voice of roads in the country, a challenge which Solomons welcomed.

 

“Our work focuses on training and capacity development of road sector stakeholders, promoting road safety and ensuring our roads are adequately and fairly funded. I have no doubt that in the coming year, the SA Road Federation will rise to the challenge that the Premiere has charged us with. This has, however, been a sombre end to 2019’s Transport Month,” concluded Solomons.

 

ENDS

 

The South African Road Federation is a not-for-profit organisation dedicated to the promotion of the road sector in South Africa. It focuses on road funding and road safety as well as training and capacity development to benefit all road stakeholders.

 

For media interviews, photographs and queries please contact:

The South African Road Federation media office

Alexandra van Essche

ave@worldonline.co.za

+27 (0)82 321 1167

 

Group Five sells African construction businesses

Group Five sells African construction businesses

21st October 2019

By: Marleny Arnoldi
Creamer Media Online Writer

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The business rescue practitioners (BRPs) of embattled construction company Group Five on Monday announced the successful sale of the Group Five Projects business to the Teichmann Group.

The transaction includes various of Group Five’s African construction businesses, which are market leaders in the structural, mechanical, electrical, instrumentation and piping construction industries throughout Africa.

The transaction includes all assets, including the construction plant and equipment in these locations.

An existing construction project at a mine in Zambia will still be completed by Group Five, as will a project in South Africa.

“The new entity will be branded as T3 Projects. The team’s record in Africa has ensured the effective and efficient delivery of construction projects in the mining and industrial sectors across the continent, which will complement the Teichmann Group’s existing product offering,” Group Five said in a statement.

Group Five’s BRPs in May announced that they would start with a series of disposals to reduce financial liabilities as part of the company’s business rescue proceedings.

The group filed for business rescue in mid-March.

Govt finalising economic growth strategy to stimulate economy

Govt finalising economic growth strategy to stimulate economy

 

30th September 2019

By: Thabi Madiba
Creamer Media Researcher and Writer

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President Cyril Ramaphosa on Monday addressed the nation in his first weekly newsletter and revealed that government would be finalising a clear economic growth strategy for the country in the next few weeks.

He said several parts of the strategy were already in place and it would draw on public contributions made to the discussion paper recently released by National Treasury.

He revealed that a clear strategy to place State-owned enterprise Eskom on a sustainable path of recovery was also being finalised.

Meanwhile, on the first Monday of every month, Ramaphosa will meet with Deputy President David Mabuza and leaders of the business, labour and community sectors to review the implementation measures taken at last year’s Jobs Summit.
The President went on to relay concerns from South Africans about the state of the economy and high rates of unemployment.

“These concerns are real. This year, the economy will record growth that is lower than expected (and much lower than what we need). Government finances are stretched about as far as they can go, and several industries are looking at retrenching workers,” Ramaphosa highlighted.

While implementing change took time, he said it was important to effect change while overthrowing State capture, corruption and malfeasance.

He said changes being made at State-owned enterprises and State bodies, such as the National Prosecuting Authority, the South African Revenue Service and the State Security Agency, had shown that government was committed to tackling corruption and ending State capture.

“Despite the difficulties, South Africans from all walks of life are still moved by the spirit of Thuma Mina to become involved in fixing our country. They want to change the narrative of doubt to a narrative of opportunity not through clever spin, but through action. South Africans are ready to rise to the challenge,” Ramaphosa said.

He also went on to highlight the headway government had made in attracting more investment, and finalising the Mining Charter, the broadband spectrum and changes to the country’s visa policy.

Government has also committed to financial support to black farmers, the revitalisation of industrial parks in townships, as well as a Township Economy Fund.

“All this work is taking place at a time when government’s finances are under great strain, and there is very little room to increase spending or borrowing. This means that we need to spend our limited resources more smartly, get rid of wastage and shift more resources to infrastructure investment,” Ramaphosa stressed

SA lost 30 000 construction jobs over the past year.

SA lost 30 000 construction jobs over the past year.

26th September 2019

By: News24Wire

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New numbers released by Statistics SA show a bloodbath in construction jobs over the past months, while the mining sector is steadily employing more people – for now.

The Quarterly Employment Statistics survey for the second quarter of the year showed that almost 10.2-million people were employed in the second quarter, 2 000 fewer than in the first quarter of the year – but 141 000 more than a year ago.

In the past quarter to end-June alone, 16 000 jobs were lost in the construction sector – there are now 30 000 fewer workers in the construction industry than a year ago. But community services (including civil servants, health workers as well as part-time workers for the elections this year) and the mining industry reported increases of 44 000 and 3 000 jobs respectively over the past quarter.

Parts of the mining industry have benefited from stronger resource prices, particularly platinum and gold. But job cuts are looming: Sibanye-Stillwater, the biggest SA gold producer and the largest platinum miner in the world, may retrench almost 6 000 workers, while steel producer ArcelorMittal SA is also planning 2 000 retrenchments.

Mining employment 

The manufacturing industry saw a sharp 15 000 drop in jobs in the past quarter compared to the first quarter of the year. It employed 1 000 fewer people in June 2019 compared with June 2018.

Manufacturing employment

The QES collects information on businesses registered for VAT with an annual turnover greater than R300 000, as well as government employers

Multibillion-rand capex boost in pipeline for OR Tambo airport

Multibillion-rand capex boost in pipeline for OR Tambo airport

 

17th September 2019

By: Irma Venter
Creamer Media Senior Deputy Editor

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Work on the engineering and construction of remote apron stands at the OR Tambo International Airport (ORTIA) should start this year, with the R2.4-billion project scheduled for completion in 2022, says Airports Company South Africa (ACSA) acting CFO Lindani Mukhudwani.

The remote apron stands will be built next to the current air traffic control complex.

Mukhudwani says the remote apron stands will be built at a distance from the terminal building, and will accommodate long-stay and cargo aircraft.

Other capital expenditure (capex) projects in and around South Africa’s biggest airport include R887-million to be spent in the 2020 financial year on developing the so-called western precinct.

The 8.5 ha, 180 000 m2 precinct is a mixed-use facility which will include offices, retail space and a hotel.

The first phase, which will include ACSA’s new head office (which will be relocating from Bedfordview), will be completed at the end of the 2020 calendar year, says Mukhudwani.

The entire precinct project is valued at R4.6-billion, and will be developed as a multiyear project.

Another capex project at ORTIA is the development of the Midfield cargo development phase one, which has a budget of R2.2-billion.

Development of this project, which will include warehousing and cargo-holding facilities, is, however, only set for 2023 to 2026, says Mukhudwani.

“Once fully developed it will be able to accommodate two-million tons of cargo.”

Mukhudwani says ACSA has a capex budget of R10-billion over the next three years, with around R4.6-billion to flow from borrowings and the remainder to be funded in-house

Construction activity to improve in the latter part of this year – Botha

Construction activity to improve in the latter part of this year – Botha

 

18th September 2019

By: Creamer Media Reporter

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Economist Dr Roelof Botha, who compiles the Afrimat Construction Index (ACI) on behalf of construction materials and industrial minerals supplier Afrimat, has expressed confidence that construction activity in South Africa will improve during the second half of this year and gain momentum in 2020.

“The gradual implementation of the new growth plan published by the National Treasury places emphasis on creating new infrastructure and targeting sectors with high growth and employment creation potential, which could consolidate the latest modest recovery of construction sector activity and lead to a new sustained growth path,” Botha commented on Tuesday in a release outlining the performance of the ACI, a composite index of the level of activity within the building and construction sectors, during the second quarter.

The ACI had mirrored the performance of economic activity in the second quarter of the year, increasing by 3.1% quarter-on-quarter.

Compared with the first quarter, the best performing indicators included in the ACI were the values of buildings completed, labour remuneration and the volume of building materials produced.

Only two indicators recorded declines, which was in line with the traditional recovery of construction activity during the second quarter of each year.

Botha said it was encouraging to note that the four-quarter average of the ACI had stabilised at a level 13.8% higher than during the first quarter of 2011 – the base period for the ACI.

“This growth nearly matches that of the total South African economy, with real value added in the non-agricultural sectors having increased by 14% since the first quarter of 2011. It indicates too, that while the construction sector is still under severe pressure, it is not yet on its knees, as the level of activity has increased at almost the same pace as overall economic activity.”

He added that the declining trend in the ACI’s four-quarter average value that lasted for seven successive quarters had been halted, and that a new growth phase may have commenced on the back of interest rate relief, albeit marginal.

He also pointed out that the ACI could receive a boost from the implementation of the National Treasury’s proposed new growth plan.

The National Treasury in late August published the proposed plan, titled ‘Economic transformation, inclusive growth, and competitiveness: Towards an Economic Strategy for South Africa’ and called for the public’s comment on the proposed plan by September 15.

“The plan, which has been welcomed by the private sector at large, seeks to start removing obstacles to higher economic growth and job creation and to incentivise activity in labour-intensive sectors. Construction remains the most labour-intensive sector of the South African economy and stands to gain from pragmatic and focused growth policies, such as resuscitating the Reconstruction and Development Programme housing scheme,” said Botha.

He further noted that it was evident that government intended to rectify the declining ratio of infrastructure spending to consumption spending by the public sector. “The expansion of infrastructure in South Africa has become critically important, a fact that has been acknowledged by President Cyril Ramaphosa and Finance Minister Tito Mboweni. The construction sector stands to gain from the new-found emphasis on raising the country’s economic growth rate.”

Botha pointed out that capital formation and gross domestic product (GDP) were highly correlated, especially in emerging markets. “The construction industry at large has a pivotal role to play in the quest for job creation on a significant scale.”

Looking ahead to the second half of the year, he said it was encouraging that the South African National Roads Agency Limited (Sanral) was expecting “an imminent resurgence” of road construction projects. “According to Sanral, road construction tenders to the value of more than R40-billion will come to the market over the next two to three years.”

Other encouraging news that emanated from the second-quarter GDP data was the surge in real gross capital formation, which had increased by a “staggering” 18% quarter-on-quarter, following a declining trend that had lasted for several years.

However, two lingering concerns were the decline in the value of building plans passed and the downward trend in the volume of building materials produced.

Despite a marginal improvement in the second quarter, the latter indicator is hovering at levels that are 25% lower than two years ago. “One explanation may be the entry of informal sector agents that fall outside the scope of official statistical surveys,” noted Botha.

Afrimat CEO Andries van Heerden, meanwhile, commented that it was pleasing to see the ACI recover but cautioned that, while government recognised that the economy had to be “jump-started”, Afrimat did not expect “wholesale recovery within the sector taking place for some time yet”.

New Development Bank approves R7-billion toll road loan to Sanral

New Development Bank approves R7-billion toll road loan to Sanral

 

16th September 2019

By: Irma Venter
Creamer Media Senior Deputy Editor

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The New Development Bank (NDB) has approved a R7-billion loan, guaranteed by the South African government, to the South African National Roads Agency Limited (Sanral).

The NDB was established by Brazil, Russia, India, China and South Africa to mobilise resources for infrastructure and sustainable development projects in their own, as well as other developing countries.

The R7-billion in funding for Sanral is allocated to what the NDB terms ‘the South African National Toll Roads Strengthening and Improvement Programme’.

The NDB says the roads project is designed to improve key national roads in South Africa with the objective of reducing transportation costs in the country.

The scope of the project includes rehabilitation of the pavement for the existing toll sections of national roads, construction of additional lanes to widen such roads, and rehabilitation of related infrastructure, such as bridges and intersections.

Sanral communications GM Vusi Mona warns, however, that even though the NDB has given the green light to the R7-billion loan, “approval is still pending from the Minister of Transport, with the concurrence of the Minister of Finance”.

He says the purpose of the NDB loan would be to unlock some of the toll capital expenditure projects that have been held in abeyance owing to the impasse around electronic tolling in Gauteng.

The proposed projects are all on existing toll routes requiring expansion or upgrades.

“Should the Minister of Transport, with the Minister of Finance approve the loan, it must be noted that the loan will be done in local currency – a first for the NDB,” says Mona.

“The loan will carry a government guarantee with very competitive rates and a loan tenure of 15 years