Years of corruption at state-owned enterprises (SEOs) have resulted in a sustained decline in public sector spending, reducing the SA order book for construction group Wilson Bayly Holmes Ovcon (WBHO), says CEO Wolfgang Neff.
However, in the company's latest annual report, Neff was optimistic, saying there had been a noticeable improvement in tender activity in SA.
“Following the recent award of the retail component of the Oceans mixed-used development in KwaZulu-Natal, building order books in all of the coastal regions are looking healthy. After many years in the making, we will soon reach financial close on a multibillion-rand private-public partnership to design, construct and operate serviced accommodation for the department of agriculture, land reform and rural development. This project will provide a strong baseload of work for the building team in Gauteng over the next two years,” he said.
WBHO's civil engineering and roads and earthworks divisions, he said, are well positioned to capitalise on construction opportunities emanating from the gas projects in Mozambique, as well as any public infrastructure spending in response to Covid-19. “Similarly, WBHO Infrastructure in Australia, and both the Byrne Group and Russell-WBHO in the UK, stand to benefit from public infrastructure spending in their respective geographies.”
The company is the only remaining construction giant to have held on to most of its value after several of its former peers, such as Basil Read and Group Five, succumbed to the dearth of construction work and filed for business rescue in 2018 and 2019, respectively.
Neff has bemoaned the scarcity of public investments in SA. “The SA economy has been in the doldrums for some time. Years of corruption have ravaged the finances of many state-owned entities requiring numerous bailouts by the government,” Neff said. “This, in turn, has resulted in a sustained decline in public sector spending, which is evidenced in our local order book where the percentage of public sector projects has steadily fallen.”
The low-growth environment in SA has also affected private fixed investment, triggering a persistent trend towards fewer and smaller projects across all sectors.
“In the absence of bigger projects, it has been an ongoing focus within each operating division in SA to reduce running costs and optimise efficiencies in order to remain competitive, yet without compromising on the quality of projects upon which we have built our reputation,” Neff said. “At the same time, we’ve needed to retain the necessary skills and capacity to execute large-scale projects.”
WBHO chair Louwtjie Nel said 2020 was “one of the most challenging years ever faced by the group”, with the company experiencing problems on multiple fronts.
“The weak domestic environment has all but decimated the SA construction industry. While construction activity in Australia has been largely positive over recent years, this has sadly not reflected in our results. In the UK, both the Byrne Group and Russell-WBHO produced solid results for the year,” Nel said.
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