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Studium Ad Prosperandum BUILDING BUILDINGRESEARCH RESEARCH STRATEGY STRATEGYCONSULTING CONSULTING UNIT UNITcc cc

••

BMI BMI

Reg. No. 2002/105109/23

Voluntas in Conveniendum

Our Vision Building and construction is an engine for growth and wealth creation and property is a preferred investment.

Our Mission Developing competitive Industry foresight and strategic leadership as a way of business life.

EXECUTIVE SUMMARY: SENSEMAKING UPDATE: *YTD 2018 (*APRIL)

All efficient companies routinely analyse and report their Orders, or Projects in the Pipeline (PIP’s) as a percentage of sales and use it as a useful measure of predicting the “health” of their Business.

MIN/MAX/AVE/YTD ACTUAL2018/FC2018-2020 OF BPP/BQ: 1993 - 2018 RES NON RES TOTAL m2 R*1000 m2 R*1000 m2 R*1000 PARAMETER 1,62 1,61 1,31 1,29 1,51 1,49 Actual 2017 1,58 1,69 1,64 1,75 1,59 1,70 Average 1993-2017 0,71

1,06

0,74

1,06

0,72

1,19

Minimum (2005)

1,88 1,80 1,64 0,22 1,09 -0,08 0,06

1,99 1,76 1,58 0,07 0,69 -0,24 1,61

2,34 1,69 1,68 0,05 0,95 -0,65 1,31

2,63 1,81 1,65 0,05 0,74 -0,82 1,29

1,92 1,77 1,65 0,18 1,05 -0,15 1,51

2,10 1,77 1,60 0,08 0,59 -0,33 1,49

Maximum (2009) YTD Actual 2018 * *YTD FC 2018 *YTD Act-Ave *YTD Act-Min *YTD Act-Max *YTD FC-Ave

In the search for such a measure in the Building © BMI-BRSCU * April 2018 Industry, BMI-BRSCU pioneered the Net Building in the Pipeline, NBIP™ = BPP-BC as a proxy for "Building Starts, or the Order book”, because the building of this remnant must be postponed, cancelled or COMMENCED, for delivery of Buildings in the Pipeline to be maintained.

2025

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

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2012

2011

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2009

2008

2007

2006

2005

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2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

Building Plans Passed (BPP)/Buildings Completed (BC)

Therefore, BMI-BRSCU 2,70 2,60 FORECAST ACTUAL 2,50 initiated the 2,40 Note that BPP/BC for Non Res fluctuates widely, 2,30 because of the impact of large projects in the period comprehensive analysis 2,20 1993 to 2006. From 2006 to 2017 the time series moved 2,10 closer together and this pattern is projected to continue of the reliable series for 2,00 to 2025. 1,90 1,80 BPP and BC, reported 1,70 1,60 by StatsSA from 1993 to 1,50 1,40 1,30 date, monthly, across all 1,20 1,10 the Sectors and 1,00 0,90 Segments of the 0,80 0,70 BPP/BC: Total Residential (R*1000) 0,60 Building Industry (by 0,50 BPP/BC: Total Non Residential: (R*1000) 0,40 number, m2 and value). 0,30 BPP/BC: Total Res + Non Res (R*1000) 0,20 0,10 This was then converted 0,00 to the potentially invaluable indicators of NBIP™, and BPP/BC with averages, maximum and minimum.

Ave…

BPP/BC: TOTAL RESIDENTIAL; TOTAL NON RESIDENTIAL; TOTAL RES + NON RES: 1993 - 2025 (R*1000) (Source: StatsSA, BMI-BRSCU Workings; Chart 1)

The ratio BPP/BC for *YTD Actual 2018 varies from a low of 1,76 (Res R*1000) to a high of 1,81 (Non-Res R*1000). Note that all the ratios for YTD 2018 are below the Executive summary Sense-making Update for YTD 2018 (April) 1


maximums (achieved in 2009), generally above the average for the 25 years from 1993 – 2017, and well above the minimum (achieved in 2005). A high ratio can be because BPP exceeds BC and could be interpreted as the “health of the Industry”, either to depict “health” or could be an indication of sluggish Building Completions. Interpreting the ratio correctly requires scrutiny of the STATS. Our conclusion is that the ratio BPP/BC and Net Building in the Pipeline in both RES and NON-RES NBIP™ (see Chart) shows that the Residential and Non-Residential Buildings in the Pipeline (in m2) are exceeding the pace of construction. (With NonRes BPP/BC = 1,81 or BPP = 81%*BC, and with Res BPP/BC = 1,76 or BPP = 76%*BC), thus the pipeline is marginally “healthier” for NON-RESIDENTIAL BC than for RESIDENTIAL BC. This is indicative of the greater volatility in Non-Residential investment resulting from, inter alia, larger projects with longer planning cycles, greater sensitivity to risk because of lack of investor confidence and political uncertainty. The situation in the Residential Sector is substantially better. The challenge remains to understand the data and to develop the insight to interpret the numbers. As an attempt to do this consider the above chart depicting the ratio BPP/BC from 1993 – 2025. Note that BPP/BC for Non-Res fluctuates widely, because of the impact of large projects in the period 1993 to 2006. From 2006 to 2017 the time series moved closer together and can be interpreted as “reverting to the average” in each of the time series, i.e. BPP/BC FOR Total Residential, Total Non-Residential and Total Residential Plus Non-Residential. Accordingly, this pattern can be projected to 2025, with reasonable degree of confidence in the forecast.

Total Building: BC: 1993 - *YTD FC 2020: Net Building in the Pipeline (NBIP): by Month: m2 (* April ) (Source: Stats SA, BMI-BRSCU: BC Total RSA by Month and Type of Building: NBIP (BPP-BC): Chart 2948 (2)) 2 200 000 2 000 000

Total Building NBIP (BPP-BC) Total Building BC

1 800 000

Total Building BPP 12 per. Mov. Avg. (Total Building NBIP (BPP-BC))

NBIP = 57,14%*BC

12 per. Mov. Avg. (Total Building BC)

NBIP = 65,02%*BC

12 per. Mov. Avg. (Total Building BPP)

1 400 000

NBIP = 44.02%*BC NBIP = 59.43%*BC

1 200 000

NBIP = 81.33%*BC 1 000 000

NBIP = 65.98%*BC

800 000 600 000 400 000 200 000

These two periods (1993-2000 and 2011-2016) are very similar. Return to the New Normal?

Executive summary Sense-making Update for YTD 2018 (April) 2

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

0

1993

Square Metres

1 600 000


The next Chart shows the interaction between BPP, BC and NBIP™. It is evident that the outlook to 2020 for BC is flat, more of the same and slightly better. The value of these measures in the prediction field is that it allows the assessment of the so-called “health of the Industry”. BUILDING PLANS PASSED AND BUILDINGS COMPLETED: *YTD ACTUAL 2017 vs 2016 IT MUST BE EMPHASISED THAT BPP AND BC (PUBLISHED BY STATSSA) COMPRISES < 20% OF TOTAL INVESTMENT IN BUILDING. In fact, in 2017 it was 9,2 million m2 (18,3%) in a Total Investment in Building of 50,33 million m2. Nevertheless, it is an excellent short-term indicator of the trends in the Building Industry (published 6 weekly in arrears) but it must be interpreted in this context. The Purpose of the BPP and BC survey is that the monthly survey data are used in monitoring the state of economy and formulation of economic policy. Furthermore, the results are important inputs to estimate the gross domestic product (GDP) and to calculate the Composite Leading Business Cycle Indicator. The data are extensively used by the private sector. BUILDING PLANS PASSED: *YTD ACTUAL 2018 vs 2017 (* APRIL) The 2018 YTD Actual Residential BPP vs the same period in 2017 shows an INCREASE of + 3,72% in m2; and an INCREASE of + 8,05% in value. The 2018 YTD Actual Non-Residential BPP vs 2016 recorded an INCREASE of + 7,36% in m2; and an INCREASE of + 16,29% in value. Therefore the 2018 YTD Actual Total BPP vs 2017 shows an INCREASE of + 4,76% in m2 and an INCREASE of + 10,48% in value. PRIVATE SECTOR BUILDING PLANS PASSED: YTD ACTUAL 2018 VS 2017 (R*1000) (APRIL) Other + 743,27 % Flats & Townhouses + 0,61%

Additions & Alterations

+ 4,99% % Change in Value of Building Plans Passed between YTD 2018 and 2017 by Building Type

Dwellings > 80 m2 + 4,09%

Residential + 8,05%

Dwellings < 80 m2 + 18,50%

All Buildings + 10,48% Non Residential + 16,29%

Offices & Banking + 32,57%

Shopping + 20,69% Additions & Alterations

Industrial & Warehousing - 5,90%

+ 30,89% Other + 25,42%

Executive summary Sense-making Update for YTD 2018 (April) 3


PRIVATE SECTOR BUILDING PLANS PASSED: YTD FORECAST 2018 VS 2017 (R*1000) (APRIL) Other + 19,28% Flats & Townhouses - 6,91%

Additions & Alterations

+ 1,35% Dwellings > 80 m2 + 3,18%

% Change in Value of Building Plans Passed between YTD 2018 and 2017 by Building Type

Residential + 0,51%

Dwellings < 80 m2 + 6,55%

All Buildings + 0,82% Non Residential + 1,49%

Offices & Banking + 14,57%

Shopping - 13,90% Additions & Alterations

Industrial & Warehousing + 0,26%

+ 8,01 % Other + 6,75%

The 2018 YTD April Forecast Residential BPP vs the same period in 2017 shows a DECREASE of - 0,25% in m2; and an INCREASE of + 0,51% in value. The 2018 YTD April Forecast Non-Residential BPP vs 2017 shows an INCREASE of + 0,96% in m2; and of + 1,49% in value. Therefore the 2018 YTD April Forecast Total BPP vs 2017 shows an INCREASE of + 0,11% in m2 and an INCREASE of + 0,82% in value. BUILDINGS COMPLETED: *YTD ACTUAL 2018 vs 2017 (* APRIL) Buildings completed showed a DECLINING pattern IN CONTRAST to BPP, with both Residential and Non-Residential BC recording a decline, with NonResidential BC recording even worse decline.

PRIVATE SECTOR BUILDINGS COMPLETED: YTD ACTUAL 2018 VS 2017 (R*1000) (APRIL) Other - 84,21% Flats & Townhouses - 3,35%

Additions & Alterations

+ 16,54% % Change in Value of Building Plans Passed between YTD 2018 and 2017 by Building Type

Dwellings > 80 m2 - 3,65%

Residential - 11,18%

Dwellings < 80 m2 - 28,35%

All Buildings - 11,24% Non Residential - 11,38%

Offices & Banking - 28,83%

Shopping - 59,93% Additions & Alterations

Industrial & Warehousing + 6,81% The 2018 YTD + 44,53% Other Actual Residential + 10,76% BC (April) vs the same period in 2017 shows a DECREASE of - 14,09% in m2; and a DECREASE of – 11,18% in value. The 2018 YTD Actual Non-Residential BC (April) vs 2017 recorded a DECREASE of -6,37% in m2; and of – 11,38% in value. Therefore, the 2018 YTD Actual Total BC (April) vs 2017 shows a DECREASE of – 11,88% in m2 and of – 11,24% in value.

Executive summary Sense-making Update for YTD 2018 (April) 4


The 2018 YTD Forecast PRIVATE SECTOR BC: YTD FORECAST 2018 VS 2017 (R*1000) (* APRIL) Other (April) Residential BC - 71,18% Flats & Townhouses Additions & vs the same period in + 0,23% Alterations + 9,83% 2017 shows a Dwellings > 80 m2 DECREASE of – 1,16% % Change in Value of Buildings + 7,98% Completed between YTD FC in m2; and an 2018 and 2017 by Building Type Residential Dwellings < 80 m2 INCREASE of + 2,25% + 5,32% + 2,25% in value. All Buildings The 2018 YTD Forecast - 6,13% (April) Non-Residential Non Offices & Banking Residential - 19,25% BC vs 2017 records a - 20,63% DECREASE of – Shopping - 65,18% 21,33% in m2; and a Additions & DECREASE of – Alterations Industrial & Warehousing + 29,81% + 0,08% 20,63% in value. Other Therefore the 2018 - 5,81% YTD Forecast (April) Total BC vs 2017 shows a DECREASE of – 8,10% in m2 and of – 6,13% in value. PROGNOSIS, SHORT AND LONG -TERM OUTLOOK The next Chart shows the short-term one-year outlook for various parameters (Res and Non-Res BPP, BC in m2 and value), Local Building Lumber Sales in m3 and Domestic Cement Sales in Tonnes. It is evidently a mixed bag of parameters when comparing the YTD CUM ACTUAL YTD CUM FORECAST YTD Actual Y/Y change with the YTD Forecast by Dec 2017. However, the general convergence of the trend lines is around the zero line, with the notable exception of Non Residential BPP and BC, suggesting lagging completions, thus confirming the greater volatility of Non-Residential BC. The large gap between Non-Res BPP (black line) and BC (red line) is evident from the Chart. Cumulative YTD BPP and BC, Domestic Cement Sales and Local Building Lumber Sales: % Change by Sector: January - Dec 2018

(Source: StatsSA; BMI-BRSCU Workings: Perc Change Trend BPP & BC,Chart 558)

15% 10% 5% 0%

Percentage

-5%

-10% -15% -20% -25%

Note large Gap between Non Res BPP and BC Suggests lag in completions.

-30% -35%

Total Res BC Cum YTD % Change (m2) Total Non Res BC Cum YTD % Change (m2) Total BC Cum YTD % Change (m2) Total Res BPP Cum YTD % Change (m2) Total Non-Res BPP Cum YTD % Change (m2) Total BPP Cum YTD % Change (m2)

Jan-18 0,02% -34,07% -11,79% 6,77% -21,30% -3,18%

Total Building Lumber Sales Cum YTD % Change 3,33% (m3) Domestic Cement Sales Cum YTD % Change (tonnes)

Feb-18 0,73% 10,64% 3,44% 7,12% 4,05% 6,12% 2,71%

Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 -13,13% -14,09% -11,94% -11,66% -7,99% -5,64% -4,04% -1,57% -0,30% -1,16% -18,48% -6,37% -8,35% -20,16% -19,33% -16,97% -21,38% -23,04% -24,88% -21,33% -14,82% -11,88% -10,88% -14,39% -11,69% -9,30% -9,91% -9,06% -9,07% -8,10% 2,75% 3,72% 2,27% 0,56% -0,03% 1,06% 1,16% 0,53% 1,15% -0,25% 4,12% 7,36% 12,60% 11,99% 6,93% 1,67% 4,95% 6,90% 2,71% 0,96% 3,16% 4,76% 5,13% 3,71% 1,94% 1,24% 2,25% 2,35% 1,61% 0,11% 0,05%

4,08%

6,58%

7,52%

7,61%

6,18%

5,37%

4,02%

3,19%

2,35%

-1,50% -1,50% -1,50% -1,50% -1,50% -1,50% -1,50% -1,50% -1,50% -1,50% -1,50% -1,50%

When scrutinising the data further for BC per Province it shows SEVEN provinces reported year-on-year increases in the value of buildings completed during January to April 2018. The largest contributions were recorded by Western Cape (contributing 3,82 percentage points or R652,16 million), EC (contributing 0,88 percentage points or R134,21 million) FS (contributing 0,51 percentage points or R77,97 million) and Mpumalanga (contributing 0,50 percentage points or R79,57 million).

Executive summary Sense-making Update for YTD 2018 (April) 5


Buildings reported as completed to larger municipalities aggregated to provincial level: January to April 2018 versus January to April 2017

Estimates at current prices

January to April 2017

January to April 2018

R*1000

R*1000

Difference in value Contribution (% points) to % contribution to % change between the % change in the value of between January to the total value of January to Nov buildings completed between Dec 2017 and January buildings 2017 and January to Dec 2018 January to April 2017 and completed during to Dec 2018 January to April 2018 April 2018 R*1000

5 656 226

6 308 389

33,11%

11,53%

3,82%

652 163

Eastern Cape

531 878

666 083

3,50%

25,23%

0,88%

134 205

Northern Cape

96 314

118 471

0,62%

23,00%

0,14%

22 157

325 135

403 104

2,12%

23,98%

0,51%

77 969

3 270 246 545 350 10 374 761

2 071 695 888 758 7 791 224

10,87% 4,67% 40,90%

-36,65% 62,97% -24,90%

-3,99% 2,94% -10,18%

-1 198 551 343 408 -2 583 537

Mpumalanga

426 457

506 022

2,66%

18,66%

0,50%

79 565

Limpopo

237 346

297 740

1,56%

25,45%

0,40%

60 394

Total

21 463 713

19 051 486

100,00%

-11,24%

-4,99%

-2 412 227

Check

21 463 713

19 051 486

Western Cape

Free State KwaZulu-Natal North West Gauteng

1/ 2016 and 2017 figures should be regarded as preliminary because of possible backlogs and incomplete reporting by municipalities. 2/ The contribution (percentage points) is calculated by multiplying the percentage change of each province between January to Nov 2016 and January to Nov 2017 by the percentage contribution of the corresponding province to the total value of buildings completed during January to Nov 2016, divided by 100.

THE BMI BUILDING & CONSTRUCTION and RETAIL SALES & INDEX: 2002 â&#x20AC;&#x201C; 2025 These indices provide a historic, current and future index of building and construction activity and Retail Trade Sales. It is essentially based on our Investment table from 2002 to 2020 at constant 2016 values. The index is calculated from 28 contributing indicators, with 2008 (the onset of the financial crisis), set at 100. Both Public and Private Investments are included, thus allowing for comparison of the contributions by Public and Private Sector. The following Charts display the trends in the Indices. BMI Index of Total Investment in Building:

BMI Index of Total Investment in Construction:

INDEX (2008 = 100):2002 - 2020; Total Investment in Bldng: Constant 2016

INDEX (2008 = 100):2002 - 2020; Total Investment in Constr: Constant 2016

230 000

127764 90283

76138

71205

63350

140 000

Private Sector

Public Sector

2025

49564

TOTAL INVESTMENT IN BUILDING: CONSTANT 2016 VALUE

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

91 87 88 86 86 86 87 86 86 50 54 96 103 110 113 44 46 42 40 38 101 94 94 93 30 30 31 32 35 36 89 23 29 33 35 43 61 18 16 21 21 11 4 5 5 6 6 8

95 000

50 000

5 000

TOTAL INV IN BLDNG & CONSTR: CONSTANT 2016 VALUE

268660

255867

247215

241185

236456

232961

231090

225782

269468 226075

262703

246968

234162

213690

211505

220263

204025

185552

275 000

185 000

2003

200 190 180 170 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0

2002

TOTAL INV IN BLDNG & CONSTR: Index (2008 = 100)

2025

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

Public Sector

410 000 390 000 370 000 350 000 330 000 310 000 290 000 270 000 250 000 230 000 210 000 190 000 170 000 150 000 130 000 110 000 90 000 70 000 50 000

TOTAL INV IN BLDNG & CONSTR: CONSTANT 2016 VALUE

398030

378508

360921

345634

331915

304431

293118

286684

278697

251427

238251

244142

230571

294029

290186

249400

199102

Private Sector

2009

20

80 56 54 75 54 34 68 53 31 65 67 65 47 49 51 34 34 61 60 34 46 58 33 32 55 55 54 56 50 53 50 52 52 31 46 48 45 23 32 37 30 29

2008

30

57

35

2007

40

value: (Source: SARB, StatsSA; Treasury, BMI BRSCU Workings, Chart 4 (3))

35 34

34

2006

50

55

2005

60

2004

70

2003

80

150695

90

179382

100

223842

110

257458

120

272942

130

266364

140

317533

150

2002

TOTAL INV IN BLDNG & CONSTR: Index (2008 = 100)

value: (Source: SARB, StatsSA; Treasury, BMI BRSCU Workings, Chart 4)

TOTAL INVESTMENT IN CONSTRUCTION: CONSTANT 2016 VALUE

Total Investment in Building deteriorated from an Index of 100 in 2008 to 79 in 2014, a decline of 21%. It then increased to 99 by 2017. It is forecast to increase to 109 by 2020, 9% above the index of 100 in 2008 and to 137 by 2025. Total Investment in Construction improved from an Index of 100 in 2008 to 145 in 2016, an increase of 45%. It declined to 122 in 2017 and is expected to remain at this level in 2018 and then to increase steadily to 126 by 2020 and to 145 by 2025.

Executive summary Sense-making Update for YTD 2018 (April) 6


109

108

104

101

99

128

123

118

114

146

150

155

2025

103

142

2024

93

138

2023

91

137

2022

92

134

2021

88

131

2020

81

130

2019

82

2016

100 40

2015

60

2018

80

2017

82

87 79

86

84

92

96

101

100 100

109

Investment in Building

20

2014

2013

2012

2011

0

2010

2025

2024

0

Paint & Hardware Sales

120

2009

GFCF INDEX (2008 = 100)

100 000

140

2008

Public Sector

GDP INDEX (2008 = 100)

2023

2022

2021

2020

2019

2018

2017

2016

2015

Private Sector

200 000

160

INDEX (2008 = 100) Retail Trade Sales vs Investment in Building: 2008 - FC 2020

666690

634375

608135

586819

568371

550494

535521

518901

548165

500954

485589

463089

455647

477539 2014

2013

2012

2011

2010

58

300 000

BMI INDEX (2008 = 100) RETAIL TRADE SALES VS INVESTMENT IN BUILDING: 2008 - FC 2025 (Source: StatsSA; BMI-BRSCU Workings, Chart 8) TOTAL INV IN BLDNG & CONSTR: CONSTANT 2016 VALUE

270308

514292 60

2009

10

2008

20

70

67 70 66 65 66 66 61 57 62 63 65 53 57 56 57 60 64 73 45 50 48 48 37 45 46 44 42 42 39 44 40 41 43 34 39 32 36 23 31 29 25 20 19

2007

30

500 000 400 000

56

2006

40

700 000 600 000

68

2005

50

2004

60

2003

70

200259

80

242732

90

299980

100

347741

110

400706

120

470389

130

475738

140

512759

150

2002

TOTAL INV IN BLDNG & CONSTR: Index (2008 = 100)

BMI Index of Total Investment in Building & Construction: INDEX (2008 = 100):2002 - 2020; Total Investment in Bldng & Constr:, GDP Const 2016 value: (Source: SARB, StatsSA; Treasury, BMI BRSCU Workings, Chart 4(2))

TOTAL INV IN BUILDING & CONSTR

Total Investment in Building & Construction improved from an Index of 100 in 2008 to 116 in 2016, an increase of 16%. It decreased to 107 in 2017 and is expected to increase to 116 by 2020 and on to 140 by 2025. Total Investment in Retail Trade Sales declined sharply from 100 in 2008 to 82 in 2009, thereafter remaining steady with gradual growth to 130 in 2017, an increase of 30%. It is expected to increase to 131 in 2018 and then 137 by 2020 and to 155 by 2025. From the foregoing analysis, it is evident that the major cause of the decline in building activity (particularly Residential) can be ascribed to the 2008 financial crisis, exacerbated in South Africa by the simultaneous introduction of the NCA â&#x20AC;&#x201C; and consequent drying up of Mortgage Advances. Recovery has commenced and the improvement is gradual but promising. The next table shows a more detailed forecast of BPP and BC in m2 and Value. The link between GDP, Total GFCF, Res and Non-Res GFCF, is clear in the Table. LONGTERM FORECAST SUMMARY: GDP AND GFCF: 2015 - 2025 CONSTANT 2016 VALUE Year

GDP Value R Billion

GDP Y/Y % Growth

GFCF Total Value R Billion

GFCF Y/Y % Growth

GFCF/GDP %

LONGTERM FORECAST SUMMARY: GFCF RES, NON RES AND CONST: 2015 - 2025 CONSTANT 2016 VALUE

Year

GFCF Res GFCF RES GFCF Non GFCF NON Value Y/Y % Res Value RES Y/Y % R Billion Growth R Billion Growth

GFCF TOTAL BUILDING R Billion

GFCF TOTAL GFCF Constr CONSTR BLDNG Y/Y Total Value R Y/Y % % Growth Billion Growth

GFCF Bldng + TOTAL BLDNG + Constr Total CONSTR Y/Y % Value R Growth Billion

*2015

R 4 327

-3,59%

R 884

2,33%

20,43%

*2015

R 80,21

8,62%

R 79,35

0,69%

R 160

4,53%

R 247,73

6,38%

R 407,29

5,65%

***2016 ***2017 ***2018 ***2019 **2020 **2021 **2022 **2023 **2024 **2025

R 4 339 R 4 369 R 4 417 R 4 484 R 4 551 R 4 423 R 4 495 R 4 575 R 4 669 R 4 772

0,30% 0,70% 1,10% 1,50% 1,50% -2,80% 1,62% 1,77% 2,05% 2,21%

R 849 R 844 R 848 R 874 R 904 R 885 R 922 R 949 R 980 R 1 026

-3,93% -0,60% 0,50% 3,00% 3,50% -2,18% 4,16% 3,01% 3,28% 4,65%

19,57% 19,32% 19,21% 19,49% 19,87% 20,00% 20,50% 20,75% 21,00% 21,50%

*2016 *2017 *2018 **2019 **2020 **2021 **2022 **2023 **2024 **2025

R 78,28 R 76,25 R 76,45 R 78,57 R 81,14 R 84,59 R 88,62 R 93,28 R 98,93 R 105,37

-2,40% -2,60% 0,27% 2,77% 3,27% 4,26% 4,76% 5,26% 6,06% 6,51%

R 77,30 R 76,66 R 76,88 R 79,01 R 81,59 R 85,08 R 89,13 R 93,83 R 99,51 R 105,99

-2,59% -0,82% 0,28% 2,77% 3,27% 4,27% 4,77% 5,27% 6,06% 6,51%

R 156 R 153 R 153 R 158 R 163 R 170 R 178 R 187 R 198 R 211

-2,49% -1,71% 0,28% 2,77% 3,27% 4,27% 4,76% 5,26% 6,06% 6,51%

R 254,11 R 226,18 R 226,63 R 232,73 R 240,16 R 236,46 R 241,18 R 247,21 R 255,87 R 268,66

2,57% -10,99% 0,20% 2,69% 3,19% -1,54% 2,00% 2,50% 3,50% 5,00%

R 409,69 R 379,09 R 379,97 R 390,31 R 402,89 R 406,13 R 418,94 R 434,32 R 454,32 R 480,03

0,59% -7,47% 0,23% 2,72% 3,22% 0,80% 3,15% 3,67% 4,60% 5,66%

* Growth 2015 - 2018 by Treasury ** Growth 2019-2020 by BMI-BRSCU *** Growth 2016 -2019 by Treasury Budget Feb 2017

In the final section of our Sense-making update we connect the dots and show that our forecast for BPP and BC is linked to GDP, Total GFCF, GFCF RES, NonRes and Construction. The big numbers are forecast by the Reserve Bank and BPP and BC is only one component which contribute to the GDP and GFCF. However, as shown earlier, we recommend that the focus should be directed to the bigger picture of aggregated trends in GFCF Res, Non-Res and Construction. This provides evidence that the impact was most severe on Executive summary Sense-making Update for YTD 2018 (April) 7


Residential Investment with inevitable ripple effect on Non-Res, with Construction of course dependent on different forces. Nonetheless we have illustrated that the Total Building and Construction Industry has bottomed out and gradual growth has commenced. Current Reality (4,57) indicates that the South African Building Industry is between the Lower Middle (Soyuz) and the Upper Middle Road (Apollo) scenarios.

MAKING SENSE OF THE FUTURE OF THE BUILDING INDUSTRY CURRENT REALITY vs Strategic Forum SCENARIOS (Dec 2016) (Source: BMI-BRSCU; Chart 17 )

INVESTOR CONFIDENCE Role of Consumer 7,00 Player influences (Primary Stakeholders) Role of Key Capabilities Subject influences (Secondary Stakeholders) 6,14 Referee influences (Tertiary Stakeholders) 5,29 Role of Financial Institutions Onlooker influences (Other Stakeholders) 4,43 Role of Critical Resources

3,57

Role of Service Providers

Neighbourhood influences

2,71 Role of the Building Sector

Safety and Security influences

1,86 1,00

Role of the Private Sector

Promotional influences

Role of the Public Sector

Market influences

PROPERTY DELIVERY

INVESTMENT CLIMATE

Confidence related

Cost related

Lifestyle related

Policy related

Activity related Finance related

Value related Market related

CURRE NT REALITY (4,57)

Higher Middle Road Apollo Scenario (4,86)

High Road Columbus Scenario (5,72)

Low Road Challenger Scenario (3,14)

Lower Middle Road Soyuz Scenario (4,00)

The radar graph shows the Current Reality juxtaposed on the idealised scenarios. Scrutiny indicates the performance of the various measurements as opposed to the current reality (4,57). It indicates that the Building Industry is between the Lower Middle Road (Soyuz 4,00) and

the Upper Middle Road (Apollo 4,86) scenarios. Moreover, the building and Construction Industry is large at some R500 Billion annually, it has critical mass, it has momentum and it has a future.

INVESTMENT IN BUILDING: 1997-2017 R MILLION (CONSTAT 2016 VALUES)

STRATEGIC FORUM SCENARIOS FOR THE BUILDING INDUSTRY: 2018 - 2025; CHART 19 (CONSTANT 2016 VALUE) 350 000 Investment in Total Building : 1997 - 2016 Higher Middle Road Apollo Scenario

300 000

High Road Columbus Scenario Lower Middle Road Soyuz Scenario Low Road Challenger Scenario

250 000

200 000

Accordingly - Our Vision is that Building is an Engine for MOST LIKELY SCENARIO PATHWAY Between Lower Middle and Upper Middle Roads growth and wealth creation and (June 2018) Property is a preferred investment. This is the narrative that we promote to the entire industry. If the Industry doesnâ&#x20AC;&#x2122;t promote and show confidence in its future, then no-one will and the future may be captured by competing companies and industries. 150 000

100 000

50 000

2025

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

0

Dr Llewellyn B. Lewis, Principal Consultant, BMI Building Research Strategy Consulting Unit. www.strategicforum.co.za, June 2018

Executive summary Sense-making Update for YTD 2018 (April) 8

Executive Summary: Sensemaking Update YTD 2018 (April)  

The Executive Summary provides added explanatory narrative of the expanded PP presentation on the Sense-making Update for YTD 2018 (April)....

Executive Summary: Sensemaking Update YTD 2018 (April)  

The Executive Summary provides added explanatory narrative of the expanded PP presentation on the Sense-making Update for YTD 2018 (April)....