Rebuilding South Africa’s construction sector

The COVID-19 pandemic has dealt a severe blow to South Africa's construction sector, compounding the challenges of an already slowing economy. With construction firms like Group Five and Esor in business rescue and companies like WBHO warning of plummeting profits, the industry is facing a critical period of transition. Amidst this backdrop, the government's proposed stimulus package offers a ray of hope for the sector's recovery. Ian Woodley, Analyst at Old Mutual Equities, and Arthur Karas, Portfolio Manager at Old Mutual Investment Group Macro Solutions, shed light on the current landscape and the potential impact of the stimulus plan on the construction industry. Woodley emphasized the need for government spending to reignite the industry, highlighting the reduced capacity and the importance of public infrastructure projects. Karas echoed the sentiment, calling for investment from government entities like Sanral, Transnet, and the Airports Company to spur growth in the sector. While the private sector has traditionally supported the industry, the experts agree that government intervention is crucial at this juncture. The conversation also delved into the investment outlook for construction stocks. Woodley revealed that Old Mutual has significant holdings in construction companies like Wilson Bailey and Robbins, citing their solid financial standing and prudent debt management as reasons for confidence in their long-term potential. Despite the challenging environment, the analysts are optimistic about the sector's resilience and future prospects. Woodley and Karas concluded by discussing the recent offer for WBA Choalical's Australian business, emphasizing the importance of assessing the value and implications of such a move for the company's portfolio. As the construction sector navigates through turbulent waters, strategic decision-making and government support will be critical in charting a path towards recovery and sustainable growth.