Advice and Opinion

Rate remains unchanged to the relief of remedial construction industry

SA Reserve Bank (Sarb) governor Lesetja Kganyago’s announcement, on Thursday, 19 May 2016, indicated that the construction industry remains resilient with a slight upward push in infrastructure development, especially with a quarterly increase in the value of building plans passed, with a noted increase in the non-residential market.

Painting, waterproofing and construction company Indawo’s chairman, Peter Jäck, has expressed relief at the announcement that the repo rate will remain unchanged at 7% and the prime lending rate at 10,5%. “With the rand taking a beating recently on the back of global growth concerns,” he says, “and local anxieties of a downgrade in the South African risk status on top of unprecedented political tension, it is not surprising that low business confidence in the construction industry dominates daily discussions. The remedial construction industry, despite this, remains remarkably resilient as building owners understand the need to invest in maintenance.”

Home and building owners alike, will be relieved at the announcement that they will not be forking out additional bond repayments, or be feeling the pressure of increases in prices for construction projects. The pause in an announcement of an increase in the interest rate will provide further relief to building owners wishing to conduct maintenance.

Jäck concludes, “While the remedial construction industry continues to be a key provider of employment, interest rates play a major role in costing models. Any increase has vast implications that impact sustainable job creation. The announcement to keep the rate at 7% is a positive indication that the South African Reserve Bank is committed to protecting our economy.”