Banking group Nedcor’s capital expenditure project listing for South Africa showed a 113% jump in announced capital projects (valued at more than R20-million) to R53,4-billion in 2002.
Nedcor (NED) has been compiling the register since 1993 with the help of Engineering News and it is considered the benchmark publication for capital projects in South Africa. It was even mentioned in President Thabo Mbeki’s 2001 State of the Nation address.
Nedcor tracks the announced value of capital projects and all values are recorded at current prices. The peak year in terms of value was 1995, the year after the April 1994 elections gave power to the African National Congress. This, to a certain extent, reflected pent-up demand and 159 projects with a value of 7R2,886 billion were announced in 1995. The peak year for the number of projects was 1996, as 218 projects worth R59,671-billion were announced.
Large projects in particular may be spread over many years and Nedcor said that the two largest capital expansion projects, namely that of Anglo American
Platinum at R20-billion and rail utility Spoornet’s R15-billion capital renewal programme had respective completion years of 2006 and 2015.
In 2002 there were only 76 projects announced compared with 83 in 2001.
This was because the number of small projects, that is those of a capital value
between R20-million and R49-million, saw an almost halving to 12 from 23 after the South African Reserve Bank (SARB) hiked interest rates by 400 basis points last year. The capital value of small projects plummeted to only R405-million, a record low, from R1,757-billion in 2001 and a peak of R2,666-billion in 1998.
The peak year for the number of small projects was 1998 at 81. Most of those were announced in the first half of the year, before the SARB raised interest rates so that prime shot up from 18,25% to 25,5%.
Large projects — that is with a value above R250-million — generally have a multi-year horizon and are not as dependent on financing as small projects. This meant that last year the number of announced large projects rose to 33 from 28 and the capital value surged to R49,088-billion from only R19,765 billion in 2001.
The number of medium projects slipped to 31 from 32, but the capital value rose to R3,916-billion from R3,541-billion.
The large number of projects underway is one of the reasons why South African cement volumes rose 10,5% y/y in January 2003 to 571 283 tons, data released by the Cement & Concrete Institute (CNCI) showed.
Last year domestic cement sales grew by 5,9% y/y to 8 512 323 tons after only 1,8% growth in 2001. Statistics South Africa has reported that real value added in the construction industry only rose by 1,8% y/y in the first nine months of 2002.
A substantial upwards revision is expected to this data when Statistics South Africa rebases the national accounts to a 2000 base instead of the current 1995 base in November 2004.
Currently the construction industry only accounts for 2,8% of gross domestic product (GDP), while in most other countries construction has a share normally in excess of 5% of GDP.
Revisions to GDP can sometimes be large as the construction data, for instance, showed. In the fourth quarter 2000, the first estimate had been a q/q seasonally adjusted annualised increase of 3,5%, which in November 2001 was changed to a growth rate of 10,1%, an almost trebling in the growth rate.
The total real value of building plans passed for the first 11 months of 2002 was up by 9,1% on the same period in 2001. The large increase in buildings plans passed, as well as government’s emphasis on infrastructure spending after years of neglect, means that the cement industry should continue to see 5% plus growth rates in volume in the years ahead. – I-Net Bridge