LUCIA MUTIKANI, Johannesburg | Thursday 10.40am
THE building industry, mired in the industry’s worst recession in decades, will suffer a 6% contraction and shed 30000 jobs this year, an industry official said on Wednesday.
Building Industries Federation of South Africa (Bifsa) executive director Ian Robinson said that harsh economic conditions and nervousness ahead of elections on June 2 are forcing investors to shelve projects.
”The industry is bleeding. Everybody is in bad shape. The bottom line is that interest rates are too high,” said Robinson. He said that at least 450 companies would be liquidated this year compared to 350 in 1998, and 30000 jobs lost versus 20000 last year, which was also a tough 12 months for the economy.
Major listed companies with a strong presence in the building industry have already reported weak financial results blamed on the downturn in the sector. Pretoria Portland Cement Ltd recently reported headline earnings per share before exceptional items for the half year to March 31 down to 221,5 cents from 229,9 in the comparable period of 1998.
Blaming high interest rates and a sluggish domestic economy for the drop, PPC warned that 1999 earnings would be below those achieved last year. ”It’s probably the worst we have seen for as long as I can remember. We have not seen a depression like this … in the last 30 years,” said Robinson.
He said that companies sourcing work outside of South Africa would weather the storm, but warned that domestic conditions would only improve in the second half of next year as the benefits of recent rate cuts filtered through.
Slow payment from government contracts, which make up a fifth of the industry’s R20 billion annual turnover, is also hitting company cash-flows, although at the moment, political uncertainty is inflicting a deeper toll. Robinson said that a number of projects are also being shelved as people fret over the country’s second all race elections and the intentions of the new government. — Reuters