The cash-strapped construction and electrical industries say the interest rates hike has dealt them a blow at the close of 2018, with both industries and their workforce remaining under "enormous" pressure.
The added burden of the hike, they say, creates pressure on contractors as another tough year approaches.
This week South African Reserve Bank Governor, Lesetja Kgantago, confirmed that the repo rate would increase by 25 basis points to 6,75% and the bank lending rate increasing to 10,25%.
The looming builders’ holiday period which is already a pressure point for the two industries, is exacerbated by the hike, says Indawo managing director, Geoffrey Jäck.
“It’s always a difficult time for the construction industry as the year draws to a close. With the annual shutdown, cashflow is stretched to the limit as production halts for a four-week period. Increased interest rates at this time put the industry on the back foot with an added financial burden at the beginning of 2019.”
This year has been a difficult challenge for both industries and early predictions are that 2019 will be much the same.
With the repo rate rising, the industries move into 2019 with some difficult choices - the most important relating to the sustainability of its workforce. While both industries fell short of saying this could relate into job losses, the pressure is certainly on the construction industry in maintaining its place as one of the country’s key employment providers.
A rise in the interest rate will “attack this reputation and will certainly put enormous pressure on construction companies to keep their employees working”.
The electrical industry has itself been in the spotlight in recent years for its reliance on scarce resources and is well aware of the need to reduce consumption.
However, according to electrical and sports lighting contractor, Maritz Electrical, the increase in the repo rate places enormous pressure on the industry already facing challenges with the increase in fuel prices and inflation that is on the rise.
Maritz Electrical’s, Kurt Maritz, says the industry is aligned to the construction industry and with the annual shutdown at the end of the year, the added burden that increased interest rates put on the industry creates pressure on contractors as another tough year approaches.
With advances in technology reducing pressure on the electricity grid, much of this advantage will be lost as interest rates rise, he believes. The hike in the repo rate to 6,75% and the bank’s lending rate to 10,25%, much of the saving offered from the installation of energy efficient lighting installations will now be lost in interest charges.
“At a time when confidence was building, the hike in interest rates puts a dampener on the successes achieved and adds to the industry’s economic burden and pushes the industry back a bit as the new year appears to show much of the same pressure felt in 2018,” says Maritz.