The value of civil tenders awarded in the second quarter of this year was disappointing despite the government’s massive infrastructure expenditure plan to revive the economy post the Covid-19 pandemic.
However, construction market intelligence firm Industry Insight said the pipeline of civil projects continues to grow.
SA Forum of Civil Engineering Contractors (Safcec) CEO Webster Mfebe also stressed that the Covid-19 lockdowns will have had an impact on the value of tenders issued and awarded, particularly with the economy moving in and out of the various lockdown levels.
Mfebe added that there has been a marked improvement in road project tenders issued in the past six months.
“I foresee that in the third quarter leading into the fourth quarter, road project tenders awarded will rise markedly due to the fact that there are four big projects of over R2 billion each – and some of them over R4 billion – that are in the final stages of adjudication by Sanral [SA National Roads Agency],” he said.
Mfebe said the civil sector is “in a devastating drought” in terms of projects but “is expecting the rain to fall” in terms of tender awards.
Sanral ‘streamlines procurement’
He added that Safcec has been assured by Sanral that there will be improved tender project awards going forward because the agency has streamlined its procurement processes.
Elsie Snyman, the chief economist at Industry Insight, said tender values slowed in the second quarter but overall remained higher in the first six months of 2021 than in the same period last year.
Snyman said the nominal rand value of civil projects awarded fell by 6.8% quarter-on-quarter in the second quarter and by 14% year-on-year in the first six months of 2021.
She said Mpumalanga recorded the highest value of awards in rand terms, where it has grown by 50% year-on-year between January and June 2021 compared to the same period last year.
However, Snyman said awards are equally weak in Gauteng and KwaZulu-Natal, where the value of awards fell by around 58% year-on-year.
But Snyman said both these provinces have an encouraging pipeline in terms of tenders that have been issued so far this year although awards unfortunately remain poor.
Snyman added that civil tender values slowed to the lowest level since the third quarter of 2020 but remain well above conditions in the same quarter of 2020 during the peak of the first lockdown when construction activity came to a near halt.
Civil tender values increased by 168% year-on-year in the second quarter following the 41.8% year-on-year increase in the first quarter of 2021.
Overall, the value of civil tenders issued were 84.7% year-on-year higher in the first six months of 2021 compared to the same period in 2020.
Snyman said civil tender values in the six month period this year are also looking better compared to the pre-Covid-19 first six months of 2019, with values 33% higher.
She said this suggests that conditions have in fact showed a real improvement, although not at the pace as suggested compared to 2020.
Industry Insight highlighted that fewer Grade 9 projects, the largest projects, were put out to tender in the second quarter of 2021 compared to the previous two quarters but remain higher than the same “dismal Covid-battered period last year”.
It said overall tender activity in terms of larger Construction Industry Development Board (CIDB) Grade 9 projects moderated by 32% quarter-on-quarter to around 19 projects in the second quarter from 28 projects in the first quarter.
The majority of these projects are in Gauteng, followed by KwaZulu-Natal and the Western Cape.
Water and road projects
Snyman said the estimated value of water and road projects put out to tender played a supportive role in the first six months and increased by 26% quarter-on-quarter and by 152% year-on-year.
She said the value of road projects put out to tender were at the highest level since the fourth quarter of 2019, with various larger road projects out to tender.
These included mainly projects in Gauteng and the Western Cape related to primary roads and in the Eastern Cape to motorways.
The tender values of water projects in the second quarter were related mainly to smaller value pipeline projects in the Eastern Cape and KwaZulu-Natal while the higher Grade 9 projects out to tender included largely water reticulation projects in the Free State, water works treatment and a pumping station in Gauteng.
Mfebe is guardedly optimistic about the future of the civil construction industry because of pending tender awards by Sanral but agrees the industry will be unable to survive on road building projects alone.
He said Safcec continues to inquire about projects by other state-owned entities and government departments, including water projects.
But Mfebe said public sector civil projects “are encumbered by bureaucratic processes within government”.
“We keep on making the point that projects must come to market quicker and must be adjudicated and awarded on time,” he said.
“Indeed, if the infrastructure-led recovery plan announced by the president [Cyril Ramaphosa] is to succeed, some kind of speed needs to be applied in terms of those projects coming to market, adjudicated upon and awarded.”
Mfebe said it is “a no-brainer” that the infrastructure-led economic recovery is given impetus by the speedy awarding of public sector tenders, which will also boost the manufacturing, wholesale and retail sectors of the economy.
Turning to private sector civil projects, Mfebe said it is important that regulatory requirements, such permitting and licensing processing, is streamlined and expedited.
Mfebe said this will allow these projects “to see the light of the day” and not be “locked in elaborate and cumbersome processes where some investors even decide to ‘can’ projects because they cannot get permission or a licence for this or that”.