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The results of Consulting Engineers South Africa's (CESA) Bi-annual Economic and Capacity Survey have been released, indicating some improvement. The survey, covering the period January to June 2017, found that while the net satisfaction rate rose to 96.3%, confidence levels among larger firms fell to below 50% for 2018, based on their outlook for business conditions in the next 12 months.

Chris Campbell“Expectations for the last six months of 2017 are still relatively positive, but levels of optimism are waning for next year, particularly among larger and medium size firms. This is owing to issues pertaining to the political landscape amid revelations of state capture and allegations of corruption in key government entities. Our member firms mostly depend on these key client bodies being functional and in continuous pursuit of competent and professional consulting engineering services for infrastructure development to sustain their business operations and maintain a steady workforce of professional practitioners,” says CESA CEO Chris Campbell.

The survey found that unrealistic tendering fees remain a concern for members, while the extended time it takes in which to finalise a proposal is affecting profitability in the industry. The quality of technical personnel is argued by some firms to have deteriorated, putting greater risk on the built environment sector.

The skills shortage is regarded as one the most significant institutional challenges faced by the private and public sectors. Fraud and corruption is affecting the ethos of our society, with a lot of talk and little action accompanying the growing evidence of corruption, the survey states.

“CESA is aware that members are under pressure from contractors and corrupt officials to certify payment for work not completed. This is regarded as an extremely serious matter by CESA and as such the organisation will be relentless in holding those in power accountable. Service delivery, especially at municipal level remains a critical burning issue. The consulting engineering industry is threatened by incapacitated local and provincial governments,” it says.

The research found that fee earnings in the first six months of 2017 increased by 5% compared to the last six months of 2016, which was relatively unchanged compared to the same period in 2016. Larger firms reported an increase of 5%, while earnings for medium size firms ended flat, and smaller and micro firms reported an increase of 14%. Fee income rose to R26.6-billion, annualized, at current prices as at June 2017. Earnings are expected to remain flat in the second half of 2017, although larger firms expect a marginal increase of 1.3%. Medium size firms are less optimistic, expecting a drop of 8%.

However, payment remains a serious issue, having a broad based effect on firms operating in the industry. After having shown some improvement in the December 2016 survey, the percentage of fees outstanding for longer than 90 days as a percentage of total estimated income (including late payments) deteriorated to an average of 23.8% in the first six months of 2017. Foreign clients contributed 56% to total fees outstanding for a period longer than 90 days. It is estimated that around R6.3-Billion in earnings is currently outstanding after the 90 day period.

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