Advice and Opinion

Remedial construction sector sighs relief with stable rate decision

The South African Reserve Bank today announced that the repo rate will remain at 6,75%, which provides somewhat relief to heavily indebted South African consumers and, especially, some good news for the remedial construction industry in that the rate has not started an upward trend.

Managing director of painting, waterproofing and construction company, Indawo, Geoffrey Jäck, says that it is not only the lack of rain that has slowed remedial construction, but also the high indebtedness of consumers, who have not been able to keep up with special levies for maintenance.

Corporates too have been reluctant to proceed with building maintenance as the slowdown of the economy has had an impact on spending. The result is building maintenance projects being put on hold. This may have a negative impact on the structural integrity of buildings as the longer repairs are ignored, the greater the damage may be later.

The choice to keep interest rate at current levels reinforces the need to drive economic recovery and not increase the weight of debt on a struggling consumer. This will keep some confidence in business and may lead to them deciding to improve the values of their buildings, given the rate has not been increased.

Jäck says that the construction industry, as a major supplier of jobs in the country, plays a major role in the socio-economic upliftment of South Africans. Employment is key to the recovery of our economy and this stability further allows employers to take bolder steps in keeping their work forces employed.

The country is still suffering from weak economic growth and a Rand exchange rate under pressure and, while inflation is creeping up slightly, this remains within the Reserve Bank’s target range. Inflation outlook appears to be favourable still for the medium-term offering the construction industry some stability for their budgeting and planning.

Jäck concludes that the static rate seems to indicate that there is some support the Reserve Bank is giving industry and may allow business to return the favour by keeping South Africans working; the ultimate objective of both business and government.