Capital Equipment News March 2018

EDITOR'S COMMENT

HAVE WE TURNED THE CORNER?

A part from the towering bins, buck- ets and booms – which are always my greatest shot of adrenaline at capital equipment exhibitions – bauma CONEXPO AFRICA 2018 provided the ideal platform to engage with as many players in the African equipment supply sector as possible, to learn about the status of the market at large. Despite the lower visitor turnout – with 14 167 of the expected 20 000 attending – the trade fair reflected a sense of renewed optimism and highlighted the opportunities in the industry, despite

recent economic challenges. Speaking at the official opening of the show, Petra Kaiser, senior director of International Exhibitions & Events at the Association of Equipment Manufacturers (AEM), highlighted that sub-Saharan Africa is just coming out of a challenging business cycle, but the mood is getting better across the region. Kaiser noted that US construction equipment suppliers had seen a 20% growth in sales into Africa in the first three quarters of 2017, compared with the same period in 2016, a key indicator that the region’s economy had turned the corner. She was also encouraged by the prospects of growth this year, noting that reports project that the sub-Saharan African construction equipment market will grow to a total value of US$88,6- billion this year, a figure expected to increase to US$95-1-billion next year. I have always maintained that the state of the supply chain is always an accurate measure of of the health of the larger sector it supports. In construction, yellow metal equipment sales are a true reflection of what is happening on the ground. For example, depressed machinery sales obviously mean that infrastructure spending is down, while a vibrant equipment industry indicates that construction has picked up. Following a tough period between 2014 and 2016, the World Bank notes that economic growth in sub-Saharan Africa is recovering, supported by modestly rising commodity prices, strengthening external demand and ending drought conditions in a number of countries. Growth in the region is forecast to pick up from 2,6% in 2017 to 3,2% in 2018. Contrary to the general sentiment that construction activity is slowing down in the region, Deloitte notes that investment in infrastructure development remains resilient, based on Africa’s understanding that infrastructure serves to foster competition, innovation and productivity.

According to Deloitte, a total of 286 construction projects valued at US$50- million and above had broken ground by 1 June 2016 across Africa. These have a collective value of US$324-billion. With 85 projects, southern Africa – which includes Angola, Botswana, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, South Africa, Swaziland, Zambia and Zimbabwe – has 29,7% of all projects in Africa. With a total of US$93,4-billion, the projects represent 28,9% in value of all projects on the continent. South Africa remains the powerhouse of the region, accounting for 48,2% of the projects in southern Africa, followed by Angola with 12,9%, and Mozambique and Zambia with 10,6% each. The uptick in construction and mining activity in South Africa is already starting to translate into increased business activity for the supply chain. Recent figures released by the Construction and Mining Equipment Suppliers’ Association (CONMESA) show that 5 614 new units were sold during 2017, representing a substantial 18,3% increase compared with 2016. The 2017 market rebound brought to an end a three-year downward cycle, during which the market shrunk from 7 250 units in 2013 to 4 747 in 2016. The figures for the four quarters of 2017 averaged approximately 1 400 units per quarter, which is a notable improvement over the 1 180 units per quarter averaged in 2016. Having spoken to several exhibitors at bauma CONEXPO AFRICA, I am optimistic that the positive mood will continue into 2018. There is general consensus that we have already reached the bottom end of the downward cycle in 2016, and things can only get better from now onwards. Machine deals clinched during the show, as you will see in several articles in this edition of Capital Equipment News , may be a reflection that equipment owners are ready to invest in new assets again.

Munesu Shoko – Editor

capnews@crown.co.za

@CapEquipNews

CAPITAL EQUIPMENT NEWS MARCH 2018 2