civil engineering industry outlook safcec; july 2010

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’

2

3

4

5

6

7

8

9

10

11

12

13

14

98 99 00 01 02 03 04 05 06 07 08 09 10

%

CPIX

CPIX/CPI annual average Target range

CPI new

The ‘world came tumbling down’

40

50

60

70

80

90

100

110

120

86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Ifo World economic climate survey 1995=100

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!!

-8

-6

-4

-2

0

2

4

6

8

10

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

Gdp: Q-o-q % change (saar)

General Economic Optimism

100

105

110

115

120

125

130

2005 2006 2007 2008 2009 2010

Composite Leading Business Cycle IndicatorComposite Leading Business Cycle IndicatorIndex: 2000=100

(Apr)

Construction Confidence are “a’comin”

“Demography is Destiny”

Long Term: The “Think Tool”

Construction Works Investment & Capital Output Ratio

1.40

1.50

1.60

1.70

1.80

1.90

2.00

2.10

2.20

60 65 70 75 80 85 90 95 20 5 10 15 20 25

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0

2

4

6

8

10

12

14

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Wo

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In

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The “Long View”: Economic Infrastructure Investment

The Long View: Social Infrastructure

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 StadiaGFIPGautrainTransnet Pipeline Medupi /KusileKing ShakaDurban HarbourIngula

MiningTCTASANRAL roads (nT)Coal 3N1/N2Nuclear 1GFIP Phase 2SAPREF RefineryN2 Wild CoastSASOL Expansions

THANK YOUHenk Langenhovenhpl@safcec.org.za