The Civil Engineering Contractor October 2018 | Page 41

Africa’s people want addressed as a matter of priority (the percentage mentioned in the top-three issues): Jobs (37%); Health (32%); Education (24%); Roads (21%); Water supply (20%); Crime & Security (14%); Food (14%); Electricity (13%); Corruption (12%); and Housing (11%).” Land expropriation without compensation is not addressing any of these — quite the opposite, as it is driving away fixed direct investment (FDI), says Dr Botha. Nor are any acts of land expropriation imminent as there hasn’t been a single case of land expropriation in 11 years, even though the legislation is already in place for it to happen. “It is therefore a storm in a teacup, but one which is not good for the economy. It will automatically reduce the tax base and may even result in junk status for the economy.” The E&C sector is not doing as badly as is commonly thought, says Dr Botha, because there are some anomalies in statistics. “There has been progress in the building materials sector last year, as there was in the retail sector covering hardware, paint, glass, and so on.” While Q1 2018 is down, Dr Botha points out that this is an annual seasonal trend attributable to year- end holidays. He says there has also been a steady improvement in the number of building plans passed and buildings completed. He therefore predicts another seven golden years for the construction industry — similar to the one enjoyed before the Zuma years, if a couple of actions could be taken by government. One action is to address high real interest rates. He describes the high real prime rate (and consequently the interest rate we all pay) as “public enemy number one”. When Gill Marcus was head of the South African Reserve Bank, the real prime rate was consistently in the region of 3%, with a marginally negative real bank rate after inflation — as it is even today in most developed countries. “After the Marcus era, it doubled to close to 6%. In the past two years, the repo rate has dropped 0.5% while inflation has fallen 2.2% — so we are owed 1.7% at a time when the GDP growth trajectory is down.” He points out that although we managed to avoid junk status, rating agency Moody’s has warned the Reserve Bank that its interest rate policy is credit negative for the country’s banking sector. Another negative indicator is that South Africa’s 0.7% rate of inward FDI fell to its lowest ever during the past three years — even lower than that of the Venezuela failed economy. It has since recovered under Ramaphosa and will stabilise at a healthier 4.1% if he achieves 50% of his target of USD100-billion within five years. Dr Botha pointed out that Ramaphosa had already achieved 34% of that in a few months. One way to kickstart the economy would be to reduce the bank rate BUSINESS INTEL Leading economist Dr Roelof Botha gave the keynote presentation at The Concrete Conference 2018. to where it should be, and another would be to revitalise the RDP housing programme. Dr Botha explains that in the first eight years of the programme, three million homes were built, while the latest budget provides for less than 7 000 houses. “This is what the construction sector should be lobbying government for. The fundamentals of our economy are already into a new growth phase. To reinforce this trend, we need to get policy certainty and this primarily means getting the 2019 election behind us, because not much policy change happens in an election year. We therefore need to be patient for the next 9 to 12 months,” says Dr Botha. nn CEC October 2018 - 39