Fitch: Slow recovery for South African construction

Fitch Ratings said it believes that the South African construction sector is only expected to significantly improve from 2012 onwards, as the recovery continues to lag a sustained recovery in the broader economy on the back of continued deferral of government infrastructure spending.

This delayed recovery is expected to add pressure to the already thinly-stretched credit profiles of domestic construction companies in 2011, Fitch said.

Fitch said it previously expected significant infrastructure spending by the South African government of more than ZAR800 billion over the next three to five years to relieve the revenue pressure for a number of the larger construction companies in 2011, including Murray and Roberts Holdings Ltd. and Aveng Ltd., which has A(zaf) and F1(zaf) ratings with a stable outlook.

The slower-than-expected domestic recovery and continued weak demand conditions will place pressure on the credit profiles of domestic construction companies in the short to medium-term, the agency said.

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