2012 will be toughest year for construction industry – GVK

According to the recently released FNB/BER Building Confidence Index for the first quarter of 2012, building confidence amongst building contractors, manufacturers of building materials and quantity surveyors has increased. The results suggest that the building sector has bottomed and is indeed recovering, albeit slowly.
Richard Williams, CEO of the Gordon Verhoef and Krause Group of Companies (GVK) warns that what transpires in Europe over the next few months will give a better idea of the direction in which the industry is heading. “Our most likely industry scenario is a gradual three year climb back to pre-recession levels of activity. However, this will be the toughest year for the industry.”

State funded projects are crucial

Williams says one of the biggest factors that could put the industry back on track and provide sustainability is the releasing of state funded projects. “We are optimistic about the government’s plans for infrastructure development and believe that it will have positive spin-offs for the industry as a whole. The big question, of course, is whether they will be able to deliver this in the timescale that they anticipate. Many of our colleagues in the industry are sceptical; however, government has shown a new determination to make this happen.

“We have reduced margins, looked at all opportunities to reduce costs, but have refused to enter into the realms of suicidal tender prices. Like most companies, we are now starting to pick up more work. It takes substantial cash resources to fund that increase in work GVK has been fortunate in that we have been very prudent with preserving cash and are able to fund the additional work that we are securing,” shares Williams.

Looking at opportunities in Africa

In order for GVK to ride out the recession, it explored new markets both in client type and geographical spread. “This is starting to bear fruit, both in terms of taking on work in industries in which we have not previously worked and also opportunities in Africa.” The new avenues that GVK have pursued during the downturn have facilitated a more rapid recovery for GVK. For instance, as a result of pursuing work in neighbouring countries, they have recently secured work on several projects including a substantial one in Namibia valued at R70 million.

GVK also used the downturn to sharpen skills in all aspects of the business and green building in particular. “With green building gaining momentum over the past four years we have sought to gain experience as green contractors.” To this end, one of the group’s companies was involved in a pilot project to introduce green building principles and methodologies in the eco-sensitive Kogelberg Biosphere Reserve.