Two construction companies, a designer and a contractor with major footholds in South Africa, take somewhat different views of the country’s market prospects in these tougher economic times.
U.K.-based Mott MacDonald Group, London, accelerated its upward trajectory in South Africa last month by announcing its acquisition of the Johannesburg-based power-sector designer Merz and McLellan Pty. Ltd. The 45-person firm, with offices in South Africa and Botswana, has been a player in the region’s energy market since 1910 and now will boost Mott MacDonald’s power-generation and transmission business, says group Chairman Peter Wickens. Merz McLellan Managing Director Richard Frantz is now a divisional director in the U.K. firm’s South African power business.
Mott MacDonald had been working in South Africa for many years on an offshore basis until it set up an office there in 2006. Its toehold was a share in a large contract to do program management for transportation infrastructure projects, within the government’s multibillion-dollar investment plan.
After a period of “massive growth,” Mott MacDonald now has about 300 people in South Africa, which accounts for more than 60% of its total business in Africa, says Howard Bate, local managing director and regional director in Africa. Mott MacDonald has three offices in South Africa and six others around the continent. The firm designed the cable-supported roof of the 43,500-seat Mbombela stadium in Nelspruit, South Africa, the site of the World Cup soccer tournament in June.
Picking up work earlier in the cycle, Mott MacDonald seems bullish about the country’s prospects. Bate forecasts substantial regional growth over the next few years. Demand for power is growing, and new entrants to the generating market are emerging, including those in renewable energy, he says. Transportation is also a growth sector, especially rail, although Bate notes plans for highway and airport expansion.
By contrast, South African contractor Murray & Roberts Construction Pty. Ltd., Elandsfonstein, forecasts a gloomy year ahead. The private sector is generating “very little” work, the company reports, and because of local market factors, Murray & Roberts had a 9% drop in sales in the last six months of 2009, compared to the same period a year earlier. Operating profit was down 17%.
Completion of much work linked to the World Cup competition has helped slow the market for contractors, according to a Murray & Roberts official. After recording sales growth of nearly 300% in the last five years and faster-rising profits, the company is “cautious” about the year ahead, he adds. Investment continues in the transportation and power sectors, but the company reports delays in new contract awards and getting paid for existing work.
The most optimistic note struck by Murray & Roberts CEO Brian Bruce is that “demand in South Africa will in due course follow the strong recovery already evident in our international markets.”