Road to ruin: Why Sanral is driving constructors batty
Agency has decisively cut spending, flying in the face of its own commitment to the National Development Plan
Hands up who wants to shake Sanral out of its torpor? As SA’s roads crumble around its users, Sanral has decisively cut spending, compounding the woes faced by the desperate construction sector.
In its own annual performance plan of 2018/19, Sanral states: “One of the essential requirements to drive the NDP (National Development Plan) vision is the development of a strong network of economic infrastructure, of which transport infrastructure is among the most crucial.”And yet an update from leading road builders Raubex indicates the exact opposite. Lower spending by Sanral is now hurting both Raubex and its subsidiaries – and is likely to force the company to retrench and downsize. In a country starving for jobs and growth, it seems ludicrous to point out that this should not be happening.
Raubex, meanwhile, has been among the hardiest of SA’s construction stocks, managing both its workflow and its cash, and has continued to pay shareholders dividends throughout the most straitened of times.
At what point, however, does that resilience wither? The company is now warning of an earnings drop of at least 20% for the period ended August. While it has managed to pick up work in affordable housing and renewable energy, where, thankfully, the government appears to be getting its act together, its principal roads business is faltering. Sanral and the government need to get their act together, and fast.