Construction is a highly cyclical sector with its performance dependent on economic booms and busts. Leading up to the 2010 Fifa World Cup, for example, the number of new JSE-listed companies in the construction sector dominated with firms such as Aveng, Murray & Roberts and PPC featuring in the JSE Top 40 Index.
Unfortunately, this was followed by an unprecedented number of large contractors liquidating, filing for business rescue or delisting.
Over the past decade, the country’s depressed economy combined with increased government debt and dampened investor confidence has led to low government and private sector infrastructure investments. However, with a renewed government focus on the sector, the investment case finally seems to be slowly turning around.
Between 2008 and 2018 the value of public-listed construction companies fell by over 60% because of the delisting or sale of companies to unlisted black-empowered entities.
A slowdown in economic growth resulted in declining investment in public sector infrastructure growth which had a knock-on effect on construction businesses. In the past five years, construction companies Group Five, Esor and Basil Read were placed in business rescue. Both Group Five and Esor subsequently delisted from the JSE in 2020, while the future of Basil Read remains uncertain.
More than 10% of the companies that have delisted from the JSE since 2018 hail from the construction and real estate development sectors. A side effect of this is the loss of invaluable skilled professionals to emigration or alternative industries.
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