State tender boost for contractors

Public-sector investment in road construction has returned to levels last seen before the 2010 World Cup after state-owned entities and government departments issued work worth billions of rand, according to construction group Raubex.

The lack of public investment was one of the factors that crippled the construction industry, leading to the downfall of some of the country’s big construction firms such as Group Five and Basil Read.

Raubex, the third-biggest construction group by market capitalisation, said road construction tenders, mainly from the SA National Roads Agency (Sanral), had improved prospects in construction.

Speaking at the release of the company’s results for the six months ended August 31, Raubex Group CEO Rudolf Fourie said there had been a substantial increase in tenders issued and that the current tender pipeline for the group's roads and earthworks business was worth R17bn. Raubex’s order book stands at R9bn.

“Sanral has published tenders to the value of R7bn. For two years there was nothing, and now R7bn. This is a start. They have said they are going to roll out about R40bn over the next five years. The Cape Town International Airport is also out for tenders. This is for the runway. We estimate that to be anywhere between R2.5bn and R3bn,” Fourie said.

The tender pipeline also included work worth R2.3bn from the KwaZulu-Natal transport department and R2bn from the Free State transport department.

“In total it is R17bn worth of work. To give you a feel, in the last two years, in a period like this, there was never more than R2bn worth of work. We hope to get part of that. This is a significant number and it is encouraging,” he said.

Sanral recently appointed Raubex to complete the construction of the N1 Musina ring road in Limpopo for R420m.

“We are encouraged by a substantial increase in tender activity that has been observed in recent months which now needs to materialise into contract awards,” Fourie said.

He said the work for which the company had tendered would take up to eight months to materialise and would not have an impact in the second half of the company’s financial year.

njobenis@businesslive.co.za