Judging from the latest financial results from one of South Africa’s biggest roadbuilders, investment in SA roads has fallen off a cliff.
The 44-year old road construction group Raubex has seen work from South African National Roads Agency (Sanral) and provincial governments halve in the past year, as government curbs investment spending. Government has committed to reduce its spending by R85 billion in the next three years as its ballooning budget deficit unnerved global rating agencies. In its February budget, it cut the money available to Sanral.
But road infrastructure is already under severe strain, with 60% of South Africa’s 535,000 km road network that have potholes or are in need of maintenance, according to the South African Automobile Association.
Raubex said in its results for the year to end February, released on Monday morning, that there has been a “lack of tenders” by Sanral. Infrastructure orders from Sanral slumped by 47% to R962 million. Infrastructure work from provinces fell by almost 54% and from municipalities by 11%.
“It is imperative that South African state-owned companies, including Sanral, as well as provincial and municipal governments, start investing in the country's deteriorating infrastructure. This will not only alleviate the current pressure in the construction sector, which has experienced a number of business failures resulting in severe job losses during the year, but will also better position the country for future economic growth,” Raubex said in its results.
For the year, Raubex revenue fell by more than 5% to R8.54 billion. Construction contracts in progress decreased by 15.9% to R281 million.
It closed its water infrastructure unit because of the “slow” roll-out of government investment in water infrastructure.
"Looking ahead, more sustained government spending is required to revive the local construction industry and support the infrastructure required for future economic growth,” Raubex said.
Still, the group saw good growth in the affordable housing sector, and it is optimistic about work in renewable energy projects, after the government delayed the roll-out of its sustainable energy programme.