The infrastructure dashboard ytd 2011 (PP Presentation)
 

The infrastructure dashboard ytd 2011 (PP Presentation)

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Subscribers to our Strategic Forum have regularly questioned the announced Infrastructure spend by Government of some R880 Billion over 3 years....

Subscribers to our Strategic Forum have regularly questioned the announced Infrastructure spend by Government of some R880 Billion over 3 years.
Typically the questions were:
Is it NEW money?
What is the definition of Construction?
Does it include both Building and Construction?
Does it include the other components of GFCF, ie Machinery and Equipment, Transport Equiopment and Transfer Costs?

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The infrastructure dashboard ytd 2011 (PP Presentation) The infrastructure dashboard ytd 2011 (PP Presentation) Presentation Transcript

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    Towards Making sense of the Building-, Construction- and Property-Industry: THE INFRASTRUCTURE DASHBOARD: YTD 2011 Dr. Llewellyn B. Lewis October 2011
    • THE STRATEGIC FORUM
    • A place of assembly
    • for strategic conversations
    THE STRATEGIC FORUM www.strategicforum.co.za
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    • Conditions for High Road Scenario
    • Investor Confidence :
    • High confidence;
    • Risk taking propensity
    • GDP growth > 6% pa;
    • CPI in 3-6% range;
    • Real Interest Rates < 5%;
    • Investment Climate:
    • Property a preferred investment;
    • FTHB Subsidies increased to 2,5-5% of Budget;
    • The non residential market grows in tandem with residential;
    • Home improvement and non residential refurbishment markets grow at > 10% pa;
    • Private Sector Investment as a percentage of Total Investment in Building 50-60%;
    • Property Delivery:
    • Building growth 2010-2020 at > 6,5% pa;
    • The R1,5 Trillion Affordable Housing programme successfully implemented;
    • Backlogs eliminated by 2020;
    • Construction growth 2108-2020 at > 7,5% pa;
    • The R846 Billion Government Infrastructure programme is successfully implemented
    “ Over the next three years government will spend R846 billion on public infrastructure. On transport, we will maintain and expand our road network. We will ensure that our rail network is reliable, competitive and better integrated with our sea ports. ” (President Jacob Zuma: State of the Nation Address: 2010) “ Economic Development Minister Ebrahim Patel put the total annual expenditure on infrastructure over the next four years at R250bn a year, translating into R1-trillion for the period — an 18% increase on the state’s previous infrastructure spending estimate of about R846bn for the three years to 2013. ” (Business Day: 16 February 2011)
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    • Summarised MBSA Summit Decisions
    • To investigate the establishment of a multi-representative Industry Forum that would meet 2 to 3 times per annum
    • To promote building as the Engine for Growth, nation building and wealth creation (through home ownership) by way of effective communication with leaders in all the economic sectors
    • To establish a Task Force to unpack the R846 billion infrastructure budgets and investment for all public sector work, including affordable housing ; to determine the impediments to the delivery thereof; to ensure a constant work flow and uphold quality standards, measured against annually assessed programmes, and to explore and prioritise the effective implementation of national infrastructure maintenance strategies.
    • The formation of an inclusive forum to analyse the 8 000 projects within the Department of Human Settlements.
    • To maximise employment opportunities by correct retro-fitting of existing buildings; maximise reduction of carbon emissions, and pursue green best practice approaches for engineering services in line with” green building”. (February 2011)
    Asking the right questions. Turning known unknowns into known knowns . First step towards developing a Vision for the Industry? Towards developing a Co-operative mindset and cross boundary networking for the Industry? STRATEGIC RESPONSE www.strategicforum.co.za
    • The purpose of the Infrastructure Dialogue on the IIMP was to acquaint stakeholders with the key findings of the 2011 IIMP study and the demand for and supply of inputs to the infrastructure sector.
    • The dialogue was attended by some 50 stakeholders from the public and private sectors. The following inputs were provided as part of the dialogue:
    • Keynote address – Infrastructure Inputs Monitoring Project: Dr Zavareh Rustomjee (IIMP)
    • Panelists Perspectives :
      • Mr Mahesh Fakir, The Presidency: DPME
      • Dr Llewellyn Lewis: BMI
    • Plenary discussion focusing on key issues Mr Richard Goode: DBSA (Facilitator)
    • Copies of the resource documents and agenda can be found on the Infrastructure Dialogues website www.infrastructuredialogues.co.za
    • SEE PRESENTATION BY DR RUSTOMJEE FOR BETTER UNDERSTANDING.
    Infrastructure Inputs Monitoring Project (IIMP) 28 September 2011 THE DBSA INFRASTRUCTURE DIALOGUES www.infrastructuredialogues.co.za
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    GFCF R521,6 BILLION (22% OF GDP) BUILDING INV. R108,5* BILLION (20,8% OF GFCF) CONSTR. INV. R174,9 BILLION (33,5% OF GDFI) GDP R2663 BILLION GOVERNMENT BUDGET R798,9 BILLION (30% OF GDP) TRANSFER DUTY R8- R9 BILLION PA FTHB SUBSIDIES (1,9% OF BUDGET = R13,8 BILLION) (500 000 HOUSING UNITS) INVESTMENT IN AFFORDABLE HOUSING (R1,4 TRILLION 2010-2020) RESIDENTIAL AND NON RES BPP AND BUILDINGS COMPLETED (BC) PRIMARY AND SECONDARY PROPERTY MARKET R267 BILLION PA MORTGAGE ADVANCES PA R1000 BIO MORTGAGES O/S LISTED PROPERTY SECTOR MARKET CAPITALISATION > R100 BILLION ANNUAL HOUSING NEED (POP. GROWTH ONLY) 250 000 INTEGRATED HOUSING EMPLOYMENT IN BUILDING & CONSTRUCTION > 1 000 000 PEOPLE * When the UNRECORDED Home Improvement and Affordable Housing is taken into account Building Investment = 30,5% of GFCF PROPERTY OWNERSHIP ENGINE FOR GROWTH AND WEALTH CREATION R4,8 TRILLION RES PROPERTY R1,7 TRILLION NON RES PROPERTY (Land included) URBAN HOUSING BACKLOG > 2,3 MILLION UNITS IN 2010 GOVERNMENT INFRASTRUCTURE SPEND (R846 BILLION 2010-2020)
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    GFCF R521,6 BILLION (22% OF GDP) BUILDING INV. R108,5* BILLION (20,8% OF GFCF) CONSTR. INV. R174,9 BILLION (33,5% OF GDFI) GDP R2663 BILLION GOVERNMENT BUDGET R798,9 BILLION (30% OF GDP) TRANSFER DUTY R8- R9 BILLION PA FTHB SUBSIDIES (1,9% OF BUDGET = R13,8 BILLION) (500 000 HOUSING UNITS) INVESTMENT IN AFFORDABLE HOUSING (R1,4 TRILLION 2010-2020) RESIDENTIAL AND NON RES BPP AND BUILDINGS COMPLETED (BC) PRIMARY AND SECONDARY PROPERTY MARKET R267 BILLION PA MORTGAGE ADVANCES PA R1000 BIO MORTGAGES O/S LISTED PROPERTY SECTOR MARKET CAPITALISATION > R100 BILLION ANNUAL HOUSING NEED (POP. GROWTH ONLY) 250 000 INTEGRATED HOUSING EMPLOYMENT IN BUILDING & CONSTRUCTION > 1 000 000 PEOPLE * When the UNRECORDED Home Improvement and Affordable Housing is taken into account Building Investment = 30,5% of GFCF PROPERTY OWNERSHIP ENGINE FOR GROWTH AND WEALTH CREATION R4,8 TRILLION RES PROPERTY R1,7 TRILLION NON RES PROPERTY (Land included) URBAN HOUSING BACKLOG > 1,5 MILLION UNITS IN 2010 GOVERNMENT INFRASTRUCTURE SPEND (R846 BILLION 2010-2020) It is estimated that for every R1 spent on infrastructure, R1.40 is added to a country’s gross domestic product. PPP’s are the ideal vehicle for funding the gaps in infrastructure in Africa. (Deloittes research, May 2011) “ Unless the Housing Market recovers, the Economy will not recover.” (Warren Buffet, CNN, 4 October 2011)
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    GFCF BY TYPE OF ASSET: 1993 – 2010: R MIO www.strategicforum.co.za
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    GFCF BY TYPE OF ASSET: 1993 – 2010: R MIO www.strategicforum.co.za
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    RESIDENTIAL INVESTMENT R59 418 MILLION CURRENT REALITY OF BUILDING & CONSTRUCTION: 2010* BUILDING & CONSTRUCTION INVESTMENT R334 068 MILLION BUILDING INVESTMENT R159 123 MILLION CONSTRUCTION INVESTMENT R174 944 MILL CONTRACTOR (50,8%) R67 882 MIO SUBCONTRACTOR (49,2%) R65 744 MIO LABOUR (40%) R133 627 MIO DIRECT TO USER (40%) R80 176 MILLION MATERIAL (60%) R200 441 MIO INDIRECT VIA DISTRIBUTION (60%) R120 264 MILLION LARGE IND BUILDERS MERCHANT (10%) R20 044 MILLION LARGE CHAIN BLDRS MERCHANT (25%) R50 110 MILLION HYPERMARKET/SUPERMARKET (5%) R10 022 MILLION SPECIALIST SHOP (5%) R10 022 MILLION LOCAL HARDWARE STORE (15%) R30 066 MILLION RESIDENTIAL INVESTMENT R12 775 MILLION NON RESIDENTIAL INVESTMENT R60 206 MILLION UNRECORDED ADDITIONS AND ALT’S INVEST** R39 500 MILLION * 2010 Prices ** Residential and Non Residential
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    TOTAL INVESTMENT IN BUILDING & CONSTRUCTION BY SECTOR: 2010
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    TOTAL INVESTMENT IN BUILDING & CONSTRUCTION BY SEGMENT: 2009, 2010, 2011,2020 (R MILLIONS)
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    The deleveraging by the Banks and the loss of consumer spending power could only mean lost growth: mortgage repossessions, business failures, and personal bankruptcies . . . TOTAL MORTGAGE LOANS & RE-ADVANCES: 1979-2010 www.strategicforum.co.za
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    GFCF RESIDENTIAL BUILDING: Q1 1993-Q2 2011 www.strategicforum.co.za
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    GFCF NON RESIDENTIAL BUILDING: Q1 1993-Q2 2011 www.strategicforum.co.za
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    GFCF TOTAL BUILDING: Q1 1993-Q2 2011 www.strategicforum.co.za
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    BPP & BC TOTAL BUILDING: 1993-2011 www.strategicforum.co.za
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    CUM Y/Y % CHANGE BPP & BC TOTAL BUILDING: 1993-2011 www.strategicforum.co.za Total BC turned at about – 20% and will move to positive growth by third to fourth quarter 2011 . . . Total BPP has turned at - 30% and breached zero in early 2011 . . .
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    NET BUILDING IN THE PIPELINE TOTAL BUILDING: 1993-2011 www.strategicforum.co.za Total BC Trend-break occurred in mid 2006. Recovery is on the way.
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    THE ROLE OF AFFORDABLE HOUSING IN BUILDING: 2011-2020 www.strategicforum.co.za If 3,64 Million houses could be built in next 10 years and Backlog will be reduced to I million by 2020. The target remains the eradication of all slums, or informal settlements, by 2014. For this to happen, some 500 000 new units a year must become available, according to the Department of Housing’s Strategic Plan.
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    *) Subsidy and stand included because affordability is determined in this way. Investment in Sustainable Integrated Housing Developments: www.strategicforum.co.za If the 4,03 million houses can be built in the next 10 years this will result in investment of R877 Billion (land excluded) and R241 Billion in Non Residential Building. And . . . Create 245 000 additional jobs in the process.
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    THE ROLE OF AFFORDABLE HOUSING IN BUILDING: 2011-2020 www.strategicforum.co.za The Department of Human Settlements was unable to address the burden of the housing backlog on its own, Sexwale said at the launch of the “Each One Settle One” campaign at the JSE yesterday. The campaign aims to mobilise various stakeholders, including the top 200 JSE-listed companies, to assist the department in providing decent shelter to more than 2 million households living in squatter camps, as well as in informal settlements. Sexwale said the number of informal settlements in the country had grown from 800 when he was Gauteng premier to 2 500 today. The housing backlog under his watch had increased from 2.1 million houses when he became minister to 2.3 million, despite his department building 200 000 houses a year. Sexwale attributed this situation to the increasing number of households and the decrease in the size of households, admitting that the government had got itself into “a very tight situation since 1994” by providing free houses for the poor. “ It was not the best thing to do. We can’t provide free housing forever but we have got to do that because we can’t turn our backs against the poor. It’s not their fault they are in that situation,” Sexwale said. BUT . . . has the story changed?
  • Sexwale warned that if there was a second recession in the country it would introduce social instability. “ The protests of our people are beginning to get violent every day. It’s worrying. The police are shooting every day. Let’s work together to try and stem the tide.” Sexwale said housing was not just a social expenditure item but an economic dynamo because it contributed massively to economic growth. “ It stimulates the whole financial system and when it doesn’t happen, the world starts burning and we just don’t know where it ends.” He said it was easy for firms to hide behind corporate social investment but it would “not keep this problem at bay”. A social investment desk had been created in the department to manage the activities of the campaign and projects on a project-by-project basis. Khanyisile Kweyama, the executive head of human resources at Anglo American Platinum, said it embraced the campaign and was contributing R1.4 billion towards facilitating the building of 20 000 houses for its employees over the next 10 years. Leon van Schalkwyk, the group executive of strategic finance at Impala Platinum, said it had a proven track record in community-based housing solutions through its extensive home ownership programme in the North West to uplift its employees, which had resulted in the construction of more than 1 500 freestanding units over a three-year period. (Business Report, 30 September, 2011)
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    THE ROLE OF AFFORDABLE HOUSING IN BUILDING: 2011-2020 www.strategicforum.co.za
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    GFCF CONSTRUCTION: Q1 1993-Q2 2011 (JUNE) www.strategicforum.co.za
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    GFCF BY TYPE OF ASSET: 1993 – 2010: R MIO www.strategicforum.co.za
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    GFCF BY TYPE OF ASSET: 1993 – 2009: R MIO www.strategicforum.co.za
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    GFCF BY TYPE OF ASSET: 1993 – 2009: R MIO www.strategicforum.co.za CONSTRUCTION, RESIDENTIAL & NON RESIDENTIAL = 54%
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    TOTAL MORTGAGE LOANS & RE-ADVANCES: 1979-2020 www.strategicforum.co.za
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    MORTGAGE LOANS ON CONSTRUCTION OF BUILDINGS: 1979-2020 www.strategicforum.co.za
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    R313 Billion decline in only 3 years! Under the High Road it could take a decade to get back to the 2006 level!
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    The difference between “high road” and “lower middle road” could be R139 Billion and 300 000 jobs over the 10 years to 2020.
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    CONSTRUCTION CAPITAL PROJECTS IN THE PIPELINE: 1993-2010 www.strategicforum.co.za
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    CONSTRUCTION CAPITAL PROJECTS IN THE PIPELINE: 1993-2010 www.strategicforum.co.za
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    CONSTRUCTION CAPITAL PROJECTS IN THE PIPELINE: 1993-2015 www.strategicforum.co.za
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    TOTAL INVESTMENT IN CONSTRUCTION BY SEGMENT: 2002-2020 www.strategicforum.co.za
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    TOTAL INVESTMENT IN BUILDING & CONSTRUCTION BY SEGMENT: 2011-2020
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    • Conditions for High Road Scenario
    • Investor Confidence :
    • High confidence;
    • Risk taking propensity
    • GDP growth > 6% pa;
    • CPI in 3-6% range;
    • Real Interest Rates < 5%;
    • Investment Climate:
    • Property a preferred investment;
    • FTHB Subsidies increased to 2,5-5% of Budget;
    • The non residential market grows in tandem with residential;
    • Home improvement and non residential refurbishment markets grow at > 10% pa;
    • Private Sector Investment as a percentage of Total Investment in Building 50-60%;
    • Property Delivery:
    • Building growth 2010-2020 at > 6,5% pa;
    • The R1,5 Trillion Affordable Housing programme successfully implemented;
    • Backlogs eliminated by 2020;
    • Construction growth 2108-2020 at > 7,5% pa;
    • The R846 Billion Government Infrastructure programme is successfully implemented
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    • Conditions for High Road Scenario
    • Investor Confidence :
    • High confidence;
    • Risk taking propensity
    • GDP growth > 6% pa;
    • CPI in 3-6% range;
    • Real Interest Rates < 5%;
    • Investment Climate:
    • Property a preferred investment;
    • FTHB Subsidies increased to 2,5-5% of Budget;
    • The non residential market grows in tandem with residential;
    • Home improvement and non residential refurbishment markets grow at > 10% pa;
    • Private Sector Investment as a percentage of Total Investment in Building 50-60%;
    • Property Delivery:
    • Building growth 2010-2020 at > 6,5% pa;
    • The R1,5 Trillion Affordable Housing programme successfully implemented;
    • Backlogs eliminated by 2020;
    • Construction growth 2108-2020 at > 7,5% pa;
    • The R846 Billion Government Infrastructure programme is successfully implemented
    “ This is the ideal time to borrow and invest heavily in public infrastructure that has been badly neglected over the past 30 years . . . Not only to roads and bridges but also to airports and air traffic control systems, urban transit, high-speed rail, schools and university facilities, national laboratories, national parks, smart electric grids, broadband networks, green generating plants and health information networks. This forward looking approach is best defined not as deficit spending fuelling consumption but as an investment for the future with fiscal consolidation achieved in a way that supports jobs and growth” (Gordon Brown: 148: 2010)
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    Towards Building, the Engine for growth and wealth creation Dr. Llewellyn B. Lewis October 2011
    • THE STRATEGIC FORUM
    • A place of assembly
    • for strategic conversations
    THE STRATEGIC FORUM www.strategicforum.co.za