When the SA economy eventually turns, allowing the government to revive its long-stalled infrastructure programme, which contractors and engineers will still be around to do the work?
The industry-wide drought that has persisted since the 2010 Fifa World Cup has wiped out deep pools of institutional knowledge and expertise.
Former industry stalwarts Group Five, Basil Read and Esor are on their knees — they are fighting for survival via business rescue processes. Others, including Erbacon, have already been consigned to the history books.
Those that are left are hardly a picture of health. Stefanutti Stocks has a market capitalisation of just R129.8m, while Aveng’s share price is now just 2c, from almost R50 a decade ago. Murray & Roberts and WBHO have weathered the storm better, but that is thanks largely to offshore operations. In WBHO’s case, Australia accounts for 54% of the contractor’s order book, and the UK 19%.
In addition to the vastly reduced capacity in the local industry, WBHO said last week skilled staff are emigrating from SA at a faster pace than before. If the SA government manages to repair its finances and get the infrastructure build off the ground, it may find there are few domestic contractors left who are able to tackle large, complex projects.
The least it can do in the interim, as it grapples with its hefty debt burden, is ensure that existing projects do not get derailed by local communities.
Stefanutti Stocks chair Kevin Eborall wrote in the company’s annual report that the construction industry has seen “a sharp and widespread increase in the unlawful and often violent activities of local community groups”.
This has brought many construction projects to a halt. The government should take decisive action to curb illegal actions and protect construction firms as best it can.
Hyprop looks to regain its crown
Hyprop Investments, which until a few years ago was one of the darlings of the listed property sector, is making headway in regaining that crown.
The company’s share price has been under attack for a couple of years because of a weak economy, a cash-strapped consumer at its blue-chip shopping centres and credit downgrades from ratings agencies which have questioned its debt structures.
Hyprop’s share price has fallen about 11.69% in the year to date, 29% on a one-year basis and 38% on a two-year basis. But a new executive team has responded to criticism and CEO Morné Wilken has acted quickly to address concerns since he took the helm at the beginning of the year.
Previous management had been hesitant to sell assets but Wilken, CFO Brett Till and chief investment officer Wilhelm Nauta have been the opposite.
They said early in 2019 that they wanted to exit the rest of Africa, having struggled to get malls on the continent to perform and to get money out of countries. Hyprop had co-invested in malls in Zambia, Ghana and Nigeria, with listed owner of Mall of Africa, Attacq, and developer, Atterbury, through a company called AttAfrica.
While African exposure may seem attractive on paper as property funds look to invest in markets with young populations and growing middle classes, Hyprop has had to throw in the towel. Vacancies are high across the African centres that AttAfrica owns and cash flows are uneven given how long it takes to expropriate funds.
Wilken now also wants Hyprop to sell local assets to bring down its debt levels. The company owns the likes of Clearwater Mall, Mall of Rosebank, Canal Walk and Hyde Park Corner, so buyers should be excited that some of the highest-quality malls in SA could be coming onto the market for the first time in decades.
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