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PPC zooms in on low-cost homes
Johannesburg - Construction materials supplier Pretoria Portland Cement Company (PPC) says that even though the residential and formal house-building sectors have slowed, low-cost housing could be a part of its future.
"Low-cost housing could be the single largest area of demand going forward," said PPC CEO John Gomersall at a company presentation on Tuesday.
Gomersall said that over the last few years, PPC didn't seem to get above the 250 000 units a year level, "and that ain't going to eliminate the three million backlog by 2014".
According to Gomersall, gross fixed capital formation (GFCF) data for the last 15 or 20 years - a measure of SA's spending on investment - show that infrastructure is "still edging up".
Heavyweight construction firm Murray & Roberts says in its latest report that since 2002, GFCF has grown steadily relative to the country's growth, surpassing the critical 20% barrier in 2006 for the first time in 20 years en route to a government-set minimum target of 25% of GDP by 2014.
"There is every reason to believe this growth will continue into the 2020s," it said.
But Gomersall said the latest forecasts by some of SA's leading bank economists are predicting that the minimum target will be reached ahead of 2014 - and as early as 2010.
"So there isn't talk of infrastructure grinding to a halt. Government's political will has been reinforced by the medium-term budget statement which says there will be R600bn infrastructure spend over the next three years," he said.
The current economic climate did have a further impact on the formal residential sector, said Gomersall, adding that despite this, PPC has seen statistics showing that housing construction started to slow at the end of 2006.
"The formal residential slowdown hasn't been waiting for Lehman Brothers to collapse," he said.
If the residential sector still has to fall as much as some believe, "we wouldn't have seen a decline of only 1.6% in regional cement demand this financial year", he said.
"There were a lot of prophets of doom who were predicting a major collapse earlier in the year, who didn't necessarily agree with our view that infrastructure demand would offset the decline of formal residential construction," he said.
"Low-cost housing could be the single largest area of demand going forward," said PPC CEO John Gomersall at a company presentation on Tuesday."
Mr. Gomersall, why did you not see this as an opportunity and a stable market when i requested a meeting 2 years ago? Is it purely that there is no more consumption in the upmarket segment? The official figure for the financial year 2005/06 was only 121,000 units, not 250,000. www.moladi.com