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CONSTRUCTION WORLD
JUNE
2015
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MARKETPLACE
As the largest supplier of mate-
rials for construction projects,
the readymix concrete industry is
seeing increasingly more invest-
ment in the market in anticipation of more
buoyant and profitable times in future.
Large cement suppliers have already made
acquisitions of some of the major readymix
companies and talks are apparently afoot
for more acquisitions and mergers at the top
end of the market.
The reasons for the shift in optimism are
based on a number of positive factors that
are seeping into the market in the form of
a rising number of plans being passed and
far easier access to mortgage bonds. In addi-
tion, the allure of Government’s R800-bil-
lion infrastructure investment plan for the
period up to 2020 and its promise to build
1,5 million RDP houses by the same period
(at a cost of over R30-billion per annum), is
proving to be a big incentive for investment
in the building materials industry.
Investment returning
According to a recent report compiled by BMI
on behalf of the Southern Africa Readymix
Association (Sarma) and the closely allied
Aggregate and Sand Producers Association
of Southern Africa (Aspasa), tough market
conditions since the worldwide recession
has led to under utilisation of manufacturers
capacity. In addition it has stifled investment
in the construction and related industries
and led to some stagnation of the readymix
concrete industry.
South Africa’s slow recovery has also
led to the large construction companies
sourcing up to 60% of their revenue abroad.
The viability of transporting heavy building
materials over long distances is poor and as
a result the lack of investment from these
firms has dampened growth to an extent.
Positive growth signs and returning
investment is however bringing back a more
positive sentiment to the market. Simul-
taneously, the increasing demand is also
leading to a large number of new operators
establishing themselves in the sector which
is effectively absorbing any real growth that
the established players would have other-
wise enjoyed.
Trending upwards
Commenting on the report, Nico Pienaar,
who sits on the boards of both Sarma and
Aspasa, said that signs of renewed growth
are positive, but are expected to be slow
and measured, at least for the next two
years. Some negative factors including
electricity shortages and low demand glob-
ally for commodities may slow growth and
have a negative effect on business senti-
ments locally.
growth beyond 2020
PREDICTING
A slow and steady recovery in the construction industry is
being predicted over the next five years with gradually
returning business confidence driving new investments
in the industry and its key suppliers.
However, he said, positives outweigh the
negatives and stability in interest rates
and rising house prices all tend towards
supporting growth. Residential building
plans passed are particularly encouraging
especially in the affordable housing market,
while retail centre construction is also
growing at a good rate.
“One of the positive outcomes of the
recent recession is the trend for businesses
to return to quality and specification of
quality produced materials.
“In our industry there is increased co-
operation between professional bodies who
are working towards the specification of only
accredited building materials to be used on
site to avoid failures and possible disaster in
the event of structures collapsing.
Member benefit
“Companies can no longer afford the risk of
buying unregulated products and as a result
we are seeing a number of large consulting
engineering firms, contractors, municipal-
ities and industry bodies writing-in clauses
specifying only accredited materials to be
used on their sites. This is obviously posi-
tive for Aspasa and Sarma members who
should win-back lost ground as a result of
start-up operators undercutting prices etc,”
concluded Pienaar.
ABOVE:
Readymix concrete allows for some
innovative building techniques to be
used to meet Government’s promise to
build 1,5 million houses by 2020.