Making sense and animal spirits march 2011 sv

1 © BMI-BRSCU

TowardsMaking sense of the Building Industry:

Animal spirits and how human psychology drives the economy andwhy it matters for the building industry.

Dr. Llewellyn B. LewisMay 2011

THE STRATEGIC FORUM

A place of assembly for strategic conversations

THE STRATEGIC FORUMwww.strategicforum.co.za

BMI

Studium Ad Prosperandum

Voluntas in Conveniendum

BUILDING RESEARCHSTRATEGY CONSULTINGUNIT cc

Reg. No. 2002/105109/23

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http://www.strategicforum.co.za/

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ANIMAL SPIRITS AND CONFIDENCEwww.strategicforum.co.za

George A. Akerlof is the Daniel E. Koshland Sr. Distinguished Professor of Economics at the University of

California, Berkeley. He was awarded the 2001 Nobel Prize in Economics.

Robert Shiller is the best-selling Author of Irrational Exuberance and The Subprime Solution (both Princeton). He is the Arthur M. Okun

Professor of Economics at Yale University.


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Animal Spirits drive almost everything. Animal Spirits are more than just confidence as measured by confidence indicators.

Declining Animal Spirits are the principal reason for the recent severe economic crisis.

And despite the recent positive

economic indicators, we see no clear indication that these spirits are yet revived. (Akerlof and Shiller: 2009: vii)


We are facing the same problem today that we faced in the later years of the Great Depression – business today is inhibited by uncertainty about the future, about the tolerance of an angry public, about a disaffected labour force, and about what further government actions may be coming.

Animal Spirits are the forces that drives all of this, and to understand animal spirits we have to use methodologies outside of traditional economics, leading us to other social sciences.

Five psychological factors are of particular importance;

1. Confidence;2. Fairness;3. Corruption and bad faith;4. Money illusion; and5. Stories. (Akerlof and Shiller: 2009: ix)


4 © BMI-BRSCU

RES

PO

NS

Irra

tion

al

Rati

on

al

Non Economic EconomicMOTIVES

Conventional Economic Theory

Economic theory incorporating “Animal Spirits”.



How the Macro Economy behaves



5

How the Macro Economy behaves

• The current model fills only the top right hand box; it answers the question: How does the economy behave if people only have economic motives and if they respond to them rationally?

• But that leads immediately to three more questions, corresponding to the three blank boxes: How does the economy behave with non-economic motives and rational responses? With economic motives and irrational responses? With non-economic motives and irrational responses?

• Akerlof & Shiller believe that the answers to the most important questions regarding how the macro economy behaves and what we ought to do when it misbehaves lie largely (though not exclusively) within those three blank boxes)

• Their description of the economy fits the qualitative as well as the quantitative facts, better than a macro-economics that leaves out irrational behaviour and non-economic motives.

• Thus, they occasionally use statistics but for the most part, rely on history and on stories. (Akerlof & Shiller: 2009: 168)



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GFCFR521,6 BILLION(22% OF GDP)

BUILDING INV.R108,5* BILLION(20,8% OF GFCF)

CONSTR. INV.R174,9 BILLION(33,5% OF GDFI)

GDPR2663 BILLION

GOVERNMENT BUDGETR7399BILLION(30% OF GDP)

TRANSFER DUTYR8- R9 BILLION PA

FTHB SUBSIDIES(1,9% OF BUDGET = R13,8 BILLION)

(500 000 HOUSING UNITS)INVESTMENT IN AFFORDABLE HOUSING

(R1,4 TRILLION 2010-2020)

RESIDENTIAL AND NON RES BPP AND

BUILDINGS COMPLETED (BC)

PRIMARY AND SECONDARY PROPERTY MARKET

R195 BILLION PA MORTGAGE ADVANCES PA

R1000 BIO MORTGAGES O/S

LISTED PROPERTY SECTOR MARKET CAPITALISATION

> R100 BILLION

ANNUAL HOUSINGNEED

(POP. GROWTH ONLY)250 000

INTEGRATED HOUSING

EMPLOYMENTIN BUILDING & CONSTRUCTION

> 1 000 000 PEOPLE

* When the UNRECORDED Home Improvement and Affordable Housing is taken into account Building Investment = 30,5% of GFCF

PROPERTY OWNERSHIPENGINE FOR GROWTH

AND WEALTH CREATIONR3,8 TRILLION RES PROPERTY

R1,3 TRILLION NON RES PROPERTY

URBAN HOUSINGBACKLOG > 1,5 MILLION

UNITS IN 2010

GOVERNMENT INFRASTRUCTURE SPEND (R846 BILLION 2010-2020)

THE ROLE OF BUILDING, CONSTRUCTION AND PROPERTY IN THE ECONOMY: 2010www.strategicforum.co.za

“Public Investments or joint Private-Public Investments that yielded even moderate real returns (say 5% - 6%) would increase activity, cut unemployment, generate more tax returns and mean lower long-term debt.” (Joe Stiglitz: Freefall: 2010)


7 © BMI-BRSCU

BUILDING & CONSTRUCTION INVESTMENT

R334 221 MILLION BUILDING INVESTMENT

R159 277 MILLIONCONSTRUCTION INVESTMENT

R174 944 MILL

CONTRACTOR (50,8%)

R67 914 MIOCONTRACTOR (50,8%)

R67 914 MIO

SUBCONTRACTOR (49,2%)

R65 775 MIOSUBCONTRACTOR (49,2%)

R65 775 MIO

LABOUR (40%)

R133 688 MIO

LABOUR (40%)

R133 688 MIO

DIRECT TO USER (40%)

R80 213 MILLIONDIRECT TO USER (40%)

R80 213 MILLIONMATERIAL (60%)

R200 533 MIOMATERIAL (60%)

R200 533 MIO

INDIRECT VIA DISTRIBUTION (60%)

R120 320 MILLION

INDIRECT VIA DISTRIBUTION (60%)

R120 320 MILLION

LARGE IND BUILDERS MERCHANT (10%)

R20 053 MILLION

LARGE CHAIN BLDRS MERCHANT(25%)

R50 133 MILLION

LARGE CHAIN BLDRS MERCHANT(25%)

R50 133 MILLION

HYPERMARKET/SUPERMARKET(5%)

R10 027 MILLION

HYPERMARKET/SUPERMARKET(5%)

R10 027 MILLION

SPECIALIST SHOP(5%)

R10 027 MILLION

SPECIALIST SHOP(5%)

R10 027 MILLION

LOCAL HARDWARE STORE(15%)

R30 080 MILLION

LOCAL HARDWARE STORE(15%)

R30 080 MILLION

RESIDENTIAL INVESTMENT

R12 775 MILLION

NON RESIDENTIAL INVESTMENT

R64 488 MILLION

UNRECORDEDADDITIONS AND ALT’S INVEST**

R35 106 MILLION

* 2010 Prices** Residential and Non Residential

RESIDENTIAL INVESTMENT

R59 682 MILLION

CURRENT REALITY OF BUILDING & CONSTRUCTION: 2010*

CURRENT REALITY: BUILDING & CONSTR: 2010

8 © BMI-BRSCU

THE AGE OF THE UNTHINKABLEwww.strategicforum.co.za

If we had to think about the nature of our global financial markets all over again, how would we change what we did and did not do? (Ramo: 2009: 205)

If we had to think about the nature of our global financial markets all over again, how would we change what we did and did not do? (Ramo: 2009: 205)


9 © BMI-BRSCU

In the summer of 2007 William Browder’s habit of living on his toes, of looking for any sign that the landscape around him was about to avalanche away, drew his attention to a news item in the papers.

In New York an auction of debt from leveraged buy-out deals had failed to draw enough bidders and was shut down.

To most of the investing world this looked simply like a small hiccup in an otherwise well functioning financial system. But Browder

recognised it for what it was: a sign that the world had run out of the ability to absorb new debt. It was the end of a Ponzi-like scheme and he knew, the start of an avalanche that might reach a historic, tragic scale.

Almost immediately he began stockpiling cash, reducing his exposure to stocks as much as he could, and moving his investor’s money into any safe haven he could find. (Ramo: 2009: 56,57)

DEVELOPING PRESCIENCEwww.strategicforum.co.za


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DEVELOPING PRESCIENCE

Errol Kruger saw the crash coming early. Back in July 2005, when our Banks were enjoying big profits, Kruger called up the CEO’s of the five major Institutions – ABSA, Nedbank, Standard Bank, FirstRand and Investec – and cautioned he will be “pulling the handbrake” on expansions and acquisitions. To him, the economy was showing early signs of overheating . . . And he warned that SA’s financial

institutions were at stage 7 of the banking cycle and not stage 4 as they thought.“I didn’t want to be a pessimist, But I told them I could see a crisis coming, and they should expect a tougher stance, and increased activities from my

office that are appropriate to stage 7 – activities which they might think are extremely bureaucratic.”

South Africa's quietly efficient registrar of banks, Errol Kruger, who has announced he will be retiring after eight years in the job, admits that he allows himself a wry smile when local bank executives congratulate themselves on avoiding the worst of the fallout from the global recession.

Despite projecting themselves as models of restraint and responsibility, the truth is that if they'd had their way they would have indulged in the same shenanigans that got their international counterparts into such trouble.

SA would have been in it up to the eyeballs. (Moneyweb, 23 April 2011)

11

Total Mortgage Loans and Readvances by application: 1979-2009 (Current Values) (Source: SARB, BMI-BRSCU Workings)

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

R M

illi

on

s (

Cu

rre

nt

Va

lue)

-80%-70%-60%-50%-40%-30%-20%-10%0%10%20%30%40%50%60%70%80%90%100%110%120%130%

Gol

d bo

om

SA

SO

L II

SA

SO

L III

Aus

terit

y pa

ckag

e

Rub

icon

spe

ech

Deb

t sta

ndst

ill

Eco

nom

ic r

ecov

ery

Man

dela

's r

elea

se

Dem

ocra

tic E

lect

ion

Tra

nsiti

on to

Dem

ocra

cy

Cur

renc

y co

llaps

e

Wor

ld T

rade

Cen

tre

BN

G H

ousi

ng P

rogr

amm

e

Sub

Prim

e C

risis

(N

CA

)

Defining Events

Y/Y

Per

cen

atag

e C

han

ge

R233 Billion taken out of the system

in two years!

© BMI-BRSCU

TOTAL MORTGAGE LOANS & RE-ADVANCES: 1979-2009

The deleveraging by the Banks and the loss of consumer spending power could only mean lost growth: mortgage repossessions, business failures, and personal bankruptcies . . .

12 © BMI-BRSCU

The crisis in the financial markets that I had anticipated arrived in force on August 9, 2007. It came from an area we hadn’t expected – housing – and the damage it caused was much deeper and much longer lasting than any of us could have imagined. (Paulson: 2010: 61)

Encouraging high rates of homeownership had long been a cornerstone of US domestic policy – for Democrats and Republicans alike. Homeownership it is commonly believed helps family’s build wealth, stabilizes neighbourhoods, creates jobs, and promotes growth. (Paulson: 2010: 64)

All bubbles involve speculation, excessive borrowing and risk taking, negligence, a lack of transparency, and outright fraud, but few bubbles ever burst as spectacularly as this one would(Paulson: 2010: 65)

THE PROPERTY MARKET AND COMPLEXITY

13 © BMI-BRSCU

(Source: Based on Roger Lewin. Complexity. Life at the edge of chaos: 1999)

Local Interaction, local knowledge

Emergent Global

Property market

Not imposed by any one guru or institution or government.

The result of the individual choices

of millions of people world-wide.


14 © BMI-BRSCU

(Source: Based on Roger Lewin. Complexity. Life at the edge of chaos: 1999)

Local Interaction, local knowledge

Emergent Global

Property market

Characteristics of WISE CROWDS:1. Diversity of opinion (each person has some private

information, even if it is just an eccentric interpretation of the known facts);

2. Independence (people’s opinions are not determined by the opinions of those around them);

3. Decentralisation (people are able to specialise and draw on local knowledge);

4. Aggregation (some mechanism exists for turning private judgements into a collective decision). (James Surowiecki: 2004)

Not imposed by any one guru or institution or government.

The result of the individual choices

of millions of people world-wide.


15 © BMI-BRSCU

Paradigm

Re-invention

Scop

e o

f ch

an

ge a

nd

tr

an

sfo

rmati

on

Critical mass of Investors(Whole community)

Single Investor (Part of community)

Paradigm

Pioneer

Early adopter

Paradigm shift

LateAdopter

Bandwagon Flocking

Herd behaviourImpact of Change and

transformation

All Countries(Whole World)

SingleCountry(Part of World)

THE LOCAL PROPERTY MARKET

LIMITS TO GROWTH

PARADIGMS CHALLENGEDALTERNATIVE INVESTMENTS

REINVENTION A Structural

Change? Self Organisation

Order for Free!Property a

preferred Investment!

REINVENTION A Structural

Change? Self Organisation

Order for Free!Property a

preferred Investment!

THE GLOBAL PROPERTY

ENVIRONMENT

DEMISE THE

PROPERTY BUBBLE?

THEEDGE OF CHAOS

CREATIVITYINNOVATION

The current and known world The future, unknown


Individual

BanksPublic

opinion

MinistryTreasury

IMFWorld Bank

ContagiousStories

16 © BMI-BRSCU

It appears that the limits to growth have been reached and the Industry is once again on the cusp of change and standing on the burning platform.

It is a time of discomfort with a real danger of strategic drift. It means gradual demise for the industry or quantum change back to its potential growth rate.

It is the time to challenge old mindsets, assumptions and established industry recipes and to expose paradigm blind spots. Only then can reinvention and the required growth be achieved.


17 © BMI-BRSCU

The Sub-Prime crisis is the name

for what is a historic turning point in our economy and culture. It is at its core, the result of a speculative bubble in the housing market that began to burst in the United States in 2006 and has now caused ruptures across many other countries in the form of financial failure and a global credit crunch. (Shiller, Robert J. 2008 : 1)

THE SUB PRIME CRISISwww.strategicforum.co.za


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According to John Maynard Keynes a Government stimulus package (like Infrastructure spending) results in a multiplier process as each round spends the MPC (Marginal Propensity to Consume). The effect can be calculted and =1/(1-MPC), the so-called Keynesian multiplier. If the MPC is, say 0,5, the Keynesian multiplier is 2. If the MPC is 0,8. the Keynesian multiplier is 5. But the multiplier theory also explains that a drop in expenditure could have greatly multiplied effects. If people (or Banks) overreacted in fear of, for example, a stock market crash (or a financial melt-down following the sub-prime crisis), then this would act just like a negative government stimulus. For each round of deleveraging by the Banks, there would be another round by Businesses, Individuals etc, resulting in a much larger decline in economic activity than would be attributable to the initial shock (see Akerlof and Shiller: Animal Spirits: How human psychology drives the economy, and why it matters for global capatalism 2009: 15).



19 © BMI-BRSCU

‘Subprime securitization’ was the latest greatest snake-oil story in a tradition of centuries and eventually blew up, imploding a global financial house of cards, triggering the biggest change in credit culture in a lifetime.

Locally, we thankfully weren’t directly in the line of fire, but our banks certainly drew similar conclusions and made similar changes, further encouraged by the National Credit Act of 2007 and the enhanced Basel 111 capital requirements.

These changes have hit our property market and the building industry like a ten-ton truck going into a brick wall, throwing up hurdles for demand while contributing to a backing up of supply, with asset prices adjusting downwards, creating a severe case of indigestion probably taking at least five or more years to digest (with two already in the bag). (Dr Cees Bruggemans, Chief Economist FNB, ).



20

Total gross new mortgage loans and re-advances by Month: Jan 1993 - Dec 2010(Source: SARB: KBP 2127M, BMI-BRSCU Workings)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

1993

/01

1993

/07

1994

/01

1994

/07

1995

/01

1995

/07

1996

/01

1996

/07

1997

/01

1997

/07

1998

/01

1998

/07

1999

/01

1999

/07

2000

/01

2000

/07

2001

/01

2001

/07

2002

/01

2002

/07

2003

/01

2003

/07

2004

/01

2004

/07

2005

/01

2005

/07

2006

/01

2006

/07

2007

/01

2007

/07

2008

/01

2008

/07

2009

/01

2009

/07

2010

/'01

2010

/'07

R M

illi

on

s (

Cu

rre

nt

Va

lue)

Total gross new mortgage loans and re-advances 12 per. Mov. Avg. (Total gross new mortgage loans and re-advances )

© BMI-BRSCU

NEW MORTGAGE LOANS & RE-ADVANCES: TOTALwww.strategicforum.co.za


21 © BMI-BRSCU

MORTGAGE INTEREST RATE LOWEST IN 3 DECADESwww.strategicforum.co.za

Mortgage interest rate(Source: ABSA HPI, Q4 2010)

8

9

10

11

12

13

14

15

16

17

00 01 02 03 04 05 06 07 08 09 10

%


22

Nominal house price growth(80m²-400m², ≤R3,1 million)

(Source: ABSA HPI, Q4 2010)

-5

0

5

10

15

20

25

30

35

40

00 01 02 03 04 05 06 07 08 09 10

Small

Medium

Large

© BMI-BRSCU

NOMINAL HOUSE PRICE GROWTH www.strategicforum.co.za


23

Growth in residential land values(New housing)


-10

-5

0

5

10

15

20

25

30

35

40

45

00 01 02 03 04 05 06 07 08 09 10

Nominal

Real

© BMI-BRSCU

RESIDENTIAL LAND VALUES GROWTH www.strategicforum.co.za


24

Affordability of housing(Source: ABSA HPI, Q4 2010)

90

100

110

120

130

140

150

160

170

00 01 02 03 04 05 06 07 08 09 10

Repayment/ HHDI

House pr ice / HHDI

Index: 2000= 100

© BMI-BRSCU

AFFORDABILITY OF HOUSINGwww.strategicforum.co.za

HHDI = Household Disposable Income

Affordability gradually

improving . . .


25

100 000

300 000

500 000

700 000

900 000

1100 000

1300 000

1500 000

1700 000

00 01 02 03 04 05 06 07 08 09 10-4

0

4

8

12

16

20

24

28

32

36

% diff erence Existing New

Rand %

Average price of new and existing houses (Nominal, 80m²-400m², ≤R3,1 million)

(Source: ABSA HPI; Q4 2010)

© BMI-BRSCU

PRICE DIFFERENCE OF NEW AND EXISTING HOUSES WIDENINGwww.strategicforum.co.za

A massive 34%

differential !


26

Low HighPOWER

INTER

ES

T (

STA

KE)

UN

AFEC

TED

S

TA

KEH

OLD

ER

SLow

Hig

h

PLAYERSDemand creatorsFuture orientedProactiveInnovativeEntrepreneurialRisk Takers

RESERVESDemand RespondersCurrent orientationReactiveResponsiveService orientedRisk Managers

ONLOOKERSDemand observersPast orientationPassiveRisk Avoiders

REFEREESDemand FacilitatorsCurrent orientationReactiveResponsiveMediatingGatekeepersRisk Averse

BYSTANDERS ACTORSBuilding Industry Stakeholder Analysis

STAKEHOLDER ANALYSISwww.strategicforum.co.za


27

Low HighPOWER

LEV

EL O

F I

NTER

ES

T (

STA

KE)

UN

AFEC

TED

STA

KEH

OLD

ER

SLow

Hig

h

PLAYERSCommittedIn the Know

RESERVESInvolvedKeep Informed

CROWDInterestedMinimal Effort

REFEREESConcernedKeep Satisfied

BYSTANDERS ACTORSBuilding Industry Stakeholder Analysis



28


© BMI-BRSCU

INTER

ES

T (

STA

KE)

UN

AFEC

TED

STA

KEH

OLD

ER

SLow

Hig

h

BYSTANDERS ACTORS

Low HighPOWER

PLAYERSProperty Entrepreneurs, developers, Public Sector,FINANCIAL INSTITUTIONS(Mortgage Origination, Approval, Advances, Repossessions, Auctions)

RESERVESArchitects, Specifiers,Manufacturers, Distributors,Contractors,FINANCIAL INSTITUTIONSDeposits, Repayments, Insurance) CROWDLabour, Unions,Consumer bodies,FINANCIAL INSTITUTIONS(Property Values, Property reports (HPI), Statistics)

REFEREESGovt Prov-, Local-Authorities, CIDB, NHBRC, SABS, Agrement Board, MBA’S, SARB, State Tender Board,FINANCIAL INSTITUTIONS (Valuations, LTV ratios, Mortgage Rate, term, Affordability)

Building Industry Stakeholder AnalysisFinancial Institutions have INORDINATE Power and Interest. They play in all the quadrants of the Stakeholder Matrix and are SIMULTANEOUSLY PLAYERS, RESERVES, REFEREES and CROWD.They make the rules of the game and influence every facet of it.

Lanice Steward, MD of Anne Porter Knight Frank, says it is time that the regular bank reviews gave a more balanced picture of South African residential property."These bank surveys are widely consulted and

referred to and are highly influential. Where, it seems to me, they fall down is that they tend to reflect only the price moves on homes for which their bank has issued mortgage bonds.” (Business Day, 8 Feb 2011)


29 © BMI-BRSCU


INTER

ES

T (

STA

KE)

UN

AFEC

TED

STA

KEH

OLD

ER

SLow

Hig

h

BYSTANDERS ACTORS

Low HighPOWER

PLAYERSProperty Entrepreneurs, developers, Public Sector,FINANCIAL INSTITUTIONS(Mortgage Origination, Approval, Advances, Repossessions, Auctions)

RESERVESArchitects, Specifiers,Manufacturers, Distributors,Contractors,FINANCIAL INSTITUTIONSDeposits, Repayments, Insurance) CROWDLabour, Unions,Consumer bodies,FINANCIAL INSTITUTIONS(Property Values, Property reports (HPI), Statistics)

REFEREESGovt Prov-, Local-Authorities, CIDB, NHBRC, SABS, Agrement Board, MBA’S, SARB, State Tender Board,FINANCIAL INSTITUTIONS (Valuations, LTV ratios, Mortgage Rate, term, Affordability)

Building Industry Stakeholder Analysis

COMPETING WITH THEIR CUSTOMERS – AND THE BUILDING INDUSTRY?


30 © BMI-BRSCU


We understand that homes are expensive these days. That’s why FNB offers you Bank repossessed properties at hugely discounted prices. All prices are negotiable. FNB Homeloans also offers loans up to 100% and there are no transfer duties payable.

The properties are predominantly situated in what could be described as Middleclass areas. These areas are predominantly areas with an average property price of R300 000 – R650 000.


31 © BMI-BRSCU


ABSA strategy in Repossession market powered by www.MyRoof.co.za


http://www.myroof.co.za/

32 © BMI-BRSCU


Standard Bank strategy in Repossession market.


http://googleads.g.doubleclick.net/aclk?sa=l&ai=BTnBeqGCTTfGqDMmGkgX85rjKAr7a3d8B7uL0wBjYl-7AKNDLaRABGAEglpX5AjgAUJu_6YT-_____wFgx9X_jYQmoAGMhofwA7IBE3JlYWxlc3RhdGV3ZWIuY28uemG6AQozMDB4MjUwX2FzyAEC2gFgaHR0cDovL3JlYWxlc3RhdGV3ZWIuY28uemEvcmVhbGVzdGF0ZXdlYi92aWV3L3JlYWxlc3RhdGV3ZWIvZW4vcGFnZTMxMD9vaWQ9ODAxNDAmc249RGV0YWlsJnBpZD0x4AEEgAIBqQIwje6FuJ-DPqgDAcgDFegDqQPoAx3oA44J9QMAAADE&num=1&sig=AGiWqtx2apyqLzCa7GUs6b77YXjfY6TC4Q&client=ca-pub-4969704311020562&adurl=http://www.myroof.co.za/prestige&nm=6

33 © BMI-BRSCU


NEDBANK strategy in Repossession market.


34 © BMI-BRSCU

How can we create the conditions that gives us the leverage to influence our environment?There is a compelling

need for wide collaboration to address common problems.

STRATEGIC RESPONSEwww.strategicforum.co.za

There can be no return to high levels of employment and growth without finding a way of harnessing finance’s creative energies to allocate resources and risk so effectively that it spurs and speeds economic growth.

We must never forget that credit, and the need for securitisation too, is at the heart of a modern financial system. (Gordon Brown: 2010: 109)


35

BPP & BC Total Residential: 1993-2011 by month: R*1000 (Current Values) (Feb)(Source: StatsSA; BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: TOTAL RES BC&BPP R)

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

5,500,00019

93

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

R*1

00

0 (C

urr

en

t V

alu

es

)

BC TOTAL RESIDENTIAL: R*1000 BPP TOTAL RESIDENTIAL: R*1000

12 per. Mov. Avg. (BC TOTAL RESIDENTIAL: R*1000) 12 per. Mov. Avg. (BPP TOTAL RESIDENTIAL: R*1000)

© BMI-BRSCU

TREND IN RESIDENTIAL ACTIVITY: BPP AND BC: 1993-2011 (FEB)www.strategicforum.co.za

The response of Residential BPP to the NCA was immediate and severe and followed later by BC . . .


36

BPP & BC Total Non Residential: 1993-2011 by month: R*1000 (Current Values) (Feb)(Source: StatsSA; BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: TOTAL NR BC&BPP R)

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

R*1

00

0 (C

urr

en

t V

alu

es

)

BC TOTAL NON RESIDENTIAL: R*1000 BPP TOTAL NON RESIDENTIAL: R*1000

12 per. Mov. Avg. (BC TOTAL NON RESIDENTIAL: R*1000) 12 per. Mov. Avg. (BPP TOTAL NON RESIDENTIAL: R*1000)

© BMI-BRSCU

TREND IN NON RES ACTIVITY: BPP AND BC: 1993-2011 (FEB)www.strategicforum.co.za


37

BPP & BC Total Building: 1993-2011 by month: R*1000 (Current Values) (Feb)(Source: StatsSA; BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: TOTAL BLDNG BC&BPP

R)

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

5,500,000

6,000,000

6,500,000

7,000,000

7,500,000

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

R*1

00

0 (C

urr

en

t V

alu

es

)

BC TOTAL BUILDING: R*1000 BPP TOTAL BUILDING: R*1000

12 per. Mov. Avg. (BC TOTAL BUILDING: R*1000) 12 per. Mov. Avg. (BPP TOTAL BUILDING: R*1000)

© BMI-BRSCU

TREND IN TOTAL ACTIVITY: BPP AND BC: 1993-2011 (FEB)www.strategicforum.co.za


38

Cum Y/Y % Change: BPP & BC: Total Residential (Incl A&A): 1993-2011: R*1000 (Current Values) (Feb)

(Source: StatsSA; BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: % CUM BC BY SEGM & MNTH: Chart 8(2))

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

% CUM BC BY SEGM& MNTH % CUM BPP BY SEGM& MNTH

12 per. Mov. Avg. (% CUM BC BY SEGM& MNTH) 12 per. Mov. Avg. (% CUM BPP BY SEGM& MNTH)

© BMI-BRSCU

CUM YTD % CHANGE: RESIDENTIAL: JAN 1994-FEB 2011www.strategicforum.co.za

Res BPP has turned at about -35% in early 2010 and is growing quite strongly . . .

Res BC turned at about -21% in early 2011 and will grow STEADILY . . .


39

Cum Y/Y % Change: BPP & BC: Total Non Residential (Incl A&A): 1993-2011: R*1000 (Current Values)(Feb)

(Source: StatsSA; BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: % CUM BC BY SEGM & MNTH: Chart 14(2))

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011



© BMI-BRSCU

CUM YTD % CHANGE: NON RESIDENTIAL: JAN 1994-FEB 2011www.strategicforum.co.za

Non Res BPP TURNED SUDDENLY BECAUSE OF IMPACT OF TWO LARGE SHOPPING CENTRES. . .

Non Res BC follows BPP down but may turn sooner than expected . .


40

Cum Y/Y % Ch: BPP and BC: Total Building (Incl A&A): 1993-2011: R*1000 (Current Values) (Feb) (Source: StatsSA; BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: % CUM BC BY SEGM & MNTH: Chart 15(2))

-50%-45%-40%-35%-30%-25%-20%-15%-10%-5%0%5%

10%15%20%25%30%35%40%45%50%55%60%

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011



© BMI-BRSCU

CUM YTD % CHANGE: TOTAL: JAN 1994-FEB 2011www.strategicforum.co.za

Total BPP has turned at - 30% and will breach zero by first quarter 2011 . .

Total BC turned at about – 21% and move to positive growth by third quarter 2011 . . .


41

Total Res: 1993-2011: BC, Net Building in the Pipeline (NBIP): by month: 1993-2010: R*1000 (Current Values) (Feb)

(Source: StatsSA, BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: NBIP (BPP-BC): Chart 17)

-500,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Total Residential NBIP Total Residential BC 12 per. Mov. Avg. (Total Residential NBIP) 12 per. Mov. Avg. (Total Residential BC)

© BMI-BRSCU

NET BUILDING ACTIVITY IN THE PIPELINE: 1993-2011 (FEB)www.strategicforum.co.za

Residential BC Trend-break occurred in early 2006.Early sign of Change?

Recovery is STRONGLY on the way. But the road back could be long …


42

Total Non Residential: 1993-2011: BC, Net Building in the Pipeline (NBIP): by Month: R*1000 (Current Values) (Feb)

(Source: StatsSA, BMI-BRSCU: BC Total RSA by Month and Type of Building1993-2008: NBIP (BPP-BC): Chart 22(3))

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

2,200,000

2,400,000

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

NBIP Total Non Residential BC Total Non Residential

12 per. Mov. Avg. (NBIP Total Non Residential) 12 per. Mov. Avg. (BC Total Non Residential)

© BMI-BRSCU


Non Residential BC Trend-break occurred been 2007 and 2008.

Recovery has STRENGTHENED…


43

Total Building: BC: 1993-2011: Net Building in the Pipeline (NBIP): by Month: R*1000 (Current Values) (Feb)


-1,000,000

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

Total Building NBIP (BPP-BC) Total Building BC

12 per. Mov. Avg. (Total Building NBIP (BPP-BC)) 12 per. Mov. Avg. (Total Building BC)

© BMI-BRSCU


Total BC Trend-break occurred in mid 2006.

Recovery is GRADUAL…


44 © BMI-BRSCU

% DIFFERENCE IN CUM Y/Y BPP : ACTUAL 2010 VS 2009: DECwww.strategicforum.co.za


45

% Difference in Cumulative Y/Y BPP: Actual 2011 vs 2010 by Segment: Feb 2011(Source: StatsSA, BMI-BRSCU Workings)

-90%

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

110%

No

m2

R'0

00 No

m2

R'0

00 No

m2

R'0

00 m2

R'0

00

R'0

00 m2

R'0

00 m2

R'0

00 m2

R'0

00 m2

R'0

00

R'0

00 m2

R'0

00 m2

R'0

00

R'0

00

R'0

00

< 80m2 > 80m2 Flats andTownhouses

Other Total Office andBanking

Shopping Ind&WH Other Total A&ADwellings

A&AOther

A&ATot

Tot

© BMI-BRSCU

% DIFFERENCE IN CUM Y/Y BPP : ACTUAL 2011 VS 2010: FEBwww.strategicforum.co.za


46

% Difference in Cumulative Y/Y BC: Actual 2010 vs 2009 by Segment: Dec 2010(Source: StatsSA, BMI-BRSCU Workings)

-45%

-40%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

No

m2

R'0

00 No

m2

R'0

00 No

m2

R'0

00 m2

R'0

00

R'0

00 m2

R'0

00 m2

R'0

00 m2

R'0

00 m2

R'0

00

R'0

00 m2

R'0

00 m2

R'0

00

R'0

00

R'0

00

Dwellings <80m2

Dwellings >80m2

Flats and TH Other Total Office &Banking


A&AOther

A&ATotal

Total

© BMI-BRSCU

% DIFFERENCE IN CUM Y/Y BC : ACTUAL 2010 VS 2009: DECwww.strategicforum.co.za


47

% Difference in Cumulative Y/Y BC: Actual 2011 vs 2010 by Segment: Feb 2011(Source: StatsSA, BMI-BRSCU Workings)

-45%

5%

55%

105%

155%

205%

255%

305%

355%

405%

455%

505%

No

m2

R'0

00 No

m2

R'0

00 No

m2

R'0

00 m2

R'0

00

R'0

00 m2

R'0

00 m2

R'0

00 m2

R'0

00 m2

R'0

00

R'0

00 m2

R'0

00 m2

R'0

00

R'0

00

R'0

00

Dwellings <80m2

Dwellings >80m2

Flats and TH Other Total Office &Banking


A&AOther

A&ATotal

Total

© BMI-BRSCU

% DIFFERENCE IN CUM Y/Y BC : ACTUAL 2011 VS 2010: FEBwww.strategicforum.co.za


48

Building cost of new houses(80m²-400m², ≤R3,1 million)


4

6

8

10

12

14

16

18

20

22

00 01 02 03 04 05 06 07 08 09 10

© BMI-BRSCU

BUILDING COST OF NEW HOUSES DECLININGwww.strategicforum.co.za


49 © BMI-BRSCU

BUILDING MATERIAL COSTS INREASINGwww.strategicforum.co.za

Production Price Index (PPI) by type of Material: Jan 2011 (January 2000 = 100)(Source: StatsSA; BMI-BRSCU Workings)

100110120130140150160170180190200210220230240250260270280290300310

SA Pine

, kiln

drie

d

Paints

Bricks

- Sto

ck

Bricks

- Fac

e

Cemen

t buil

ding

block

s

Sand

Aggre

gate

d cr

ushe

d sto

ne (a

s fro

m 2

/86)

Ordina

ry a

nd e

xtend

ed ce

men

t

Natur

al sto

ne, c

ut a

nd sa

wn

Glass,

for b

uildin

g ind

ustry

(as f

rom

1/9

3)

Gypsu

m b

oard

Drop

in ce

iling

tiles-

gyps

um

Drop

in ce

iling

tiles-

mas

onite

Flush

door

s

Draina

ge

Plumbin

g

Ceram

ic & e

ncau

stic w

all &

floor

tiles

& m

osaic

s

Wov

en N

eedle

Pun

ch C

arpe

ting

Ceiling

mat

erial

s

Partiti

oning

mat

erial

s

Sheet

, galv

anize

d

Cemen

t (Ret

ail)

Concr

ete

roof

tiles

Fibre

cem

ent r

oof s

heet

s

Coate

d pr

ofile

d GM

S shee

ting

Vinyl fl

oor t

iles

Vinyl s

heet

ing

Was

h an

d ba

sin

WC p

ans a

nd b

idets

Coppe

r pipe

s

Glass f

or th

e bu

ilding

indu

stry -

cut t

o siz

e

Buildin

g Boa

rds

Buildin

g an

d Con

struc

tion

Buildin

g In

dustr

ies

Civil E

ngine

ering CPI

Ind

ex (

2000

= 1

00)

CPI Price doubling since January 2000

SA Pine Pine

Cement Pine


50

PRODUCTION PRICE INDEX (PPI) OF SELECTED BUILDING MATERIALS: JANUARY 2002- JAN 2011(Source: StatsSA; BMI-BRSCU Workings)

90100110120130140150160170180190200210220230240250260270280290300310320

Janu

ary

Feb

ruar

Mar

chA

pril

May

June

July

Aug

ust

Sep

tem

Oct

ober

Nov

emD

ecem

Janu

ary

Feb

ruar

Mar

chA

pril

May

June

July

Aug

ust

Sep

tem

Oct

ober

Nov

emD

ecem

Janu

ary

Feb

ruar

Mar

chA

pril

May

June

July

Aug

ust

Sep

tem

Oct

ober

Nov

emD

ecem

Janu

ary

Feb

ruar

Mar

chA

pril

May

June

July

Aug

ust

Sep

tem

Oct

ober

Nov

emD

ecem

Janu

ary

Feb

ruar

Mar

chA

pril

May

June

July

Aug

ust

Sep

tem

Oct

ober

Nov

emD

ecem

Janu

ary

Feb

ruar

Mar

chA

pril

May

June

July

Aug

ust

Sep

tem

Oct

ober

Nov

emD

ecem

Janu

ary

Feb

ruar

Mar

chA

pril

May

June

July

Aug

ust

Sep

tem

Oct

ober

Nov

emD

ecem

Janu

ary

Feb

ruar

Mar

chA

pril

May

June

July

Aug

ust

Sep

tem

Oct

ober

Nov

emD

ecem

Janu

ary

Feb

ruar

Mar

chA

pril

May

June

July

Aug

ust

Sep

tem

Oct

ober

Nov

emD

ecem

Janu

ary

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Bricks - Stock Bricks - Face Cement building blocks Aggregated crushed stone (as from 2/86) Cement (Retail) Sand Building construction : Building industries SA Pine, kiln dried Ordinary and extended cement CPI

CPI

Ordinary and Extended Cement

January 2000 = 100

SA Pine Kiln Dried

© BMI-BRSCU

BUILDING MATERIAL COSTS INREASINGwww.strategicforum.co.za


51

GFCF RESIDENTIAL BUILDING: Q1 1993-Q4 2010: CURRENT VALUESCUMULATIVE YTD Q ON Q (PREVIOUS YEAR) % CHANGE

(Source: SARB; BMI-BRSCU Workings)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1993

/01

1993

/02

1993

/03

1993

/04

1994

/01

1994

/02

1994

/03

1994

/04

1995

/01

1995

/02

1995

/03

1995

/04

1996

/01

1996

/02

1996

/03

1996

/04

1997

/01

1997

/02

1997

/03

1997

/04

1998

/01

1998

/02

1998

/03

1998

/04

1999

/01

1999

/02

1999

/03

1999

/04

2000

/01

2000

/02

2000

/03

2000

/04

2001

/01

2001

/02

2001

/03

2001

/04

2002

/01

2002

/02

2002

/03

2002

/04

2003

/01

2003

/02

2003

/03

2003

/04

2004

/01

2004

/02

2004

/03

2004

/04

2005

/01

2005

/02

2005

/03

2005

/04

2006

/01

2006

/02

2006

/03

2006

/04

2007

/01

2007

/02

2007

/03

2007

/04

2008

/01

2008

/02

2008

/03

2008

/04

2009

/01

2009

/02

2009

/03

2009

/04

2010

/'01

2010

/'02

2010

/'03

2010

/'04

R M

ILL

ION

S (

CU

RR

EN

T V

AL

UE

S)

-20%

-10%

0%

10%

20%

30%

40%

50%

Dem

ocra

tic E

lect

ion

Tra

nsiti

on to

Dem

ocra

cy

Cur

renc

y C

olla

pse

Wor

ld T

rade

Cen

tre

BN

G H

ousi

ng P

rogr

amm

e

Defining Events

CU

M Q

/Q (

PR

EV

IOU

S Y

EA

R)

% C

HA

NG

E

2010 VS 2009 = - 3,58%

CUM Q4 2009 VS 2008 = R45 649 BIO VS R47 754 BIO = - 4,4%ON TOP OF GROWTH OF + 10,62% IN 2008 VS 2007

© BMI-BRSCU

GFCF RESIDENTIAL BUILDING: Q1 1993 – Q4 2010: R MIOwww.strategicforum.co.za


52

GFCF NON RESIDENTIAL BUILDING: Q1 1993-Q4 2010: CURRENT VALUESCUMULATIVE YTD Q TO Q (PREVIOUS YEAR) PERCENTAGE CHANGE


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1993

/01

1993

/02

1993

/03

1993

/04

1994

/01

1994

/02

1994

/03

1994

/04

1995

/01

1995

/02

1995

/03

1995

/04

1996

/01

1996

/02

1996

/03

1996

/04

1997

/01

1997

/02

1997

/03

1997

/04

1998

/01

1998

/02

1998

/03

1998

/04

1999

/01

1999

/02

1999

/03

1999

/04

2000

/01

2000

/02

2000

/03

2000

/04

2001

/01

2001

/02

2001

/03

2001

/04

2002

/01

2002

/02

2002

/03

2002

/04

2003

/01

2003

/02

2003

/03

2003

/04

2004

/01

2004

/02

2004

/03

2004

/04

2005

/01

2005

/02

2005

/03

2005

/04

2006

/01

2006

/02

2006

/03

2006

/04

2007

/01

2007

/02

2007

/03

2007

/04

2008

/01

2008

/02

2008

/03

2008

/04

2009

/01

2009

/02

2009

/03

2009

/04

2010

/'01

2010

/'02

2010

/'03

2010

/'04

R M

ILL

ION

S (

CU

RR

EN

T V

AL

UE

S)

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Dem

ocra

tic E

lect

ion

Tra

nsiti

on to

Dem

ocra

cy

Cur

renc

y C

olla

pse

Wor

ld T

rade

Cen

tre

BN

G H

ousi

ng P

rogr

amm

e

Defining Events

CU

M Y

TD

Q/Q

% C

HA

NG

E

YTD Q4 2010 VS Q4 2009 = + 5,93%

2009 VS 2008 = R60 880 BIO VS R57 160 Bio = + 6,51%ON TOP OF GROWTH OF + 31,93% IN 2008 VS 2007

© BMI-BRSCU

GFCF NON RESIDENTIAL BUILDING: Q1 1993 – Q4 2010: R MIOwww.strategicforum.co.za


53

GFCF TOTAL BUILDING BY QUARTER: Q1 1993-Q4 2010: CURRENT VALUESCUMULATIVE YTD Q TO Q (PREVIOUS YEAR) PERCENTAGE CHANGE


0

5,000

10,000

15,000

20,000

25,000

30,000

1993

/01

1993

/02

1993

/03

1993

/04

1994

/01

1994

/02

1994

/03

1994

/04

1995

/01

1995

/02

1995

/03

1995

/04

1996

/01

1996

/02

1996

/03

1996

/04

1997

/01

1997

/02

1997

/03

1997

/04

1998

/01

1998

/02

1998

/03

1998

/04

1999

/01

1999

/02

1999

/03

1999

/04

2000

/01

2000

/02

2000

/03

2000

/04

2001

/01

2001

/02

2001

/03

2001

/04

2002

/01

2002

/02

2002

/03

2002

/04

2003

/01

2003

/02

2003

/03

2003

/04

2004

/01

2004

/02

2004

/03

2004

/04

2005

/01

2005

/02

2005

/03

2005

/04

2006

/01

2006

/02

2006

/03

2006

/04

2007

/01

2007

/02

2007

/03

2007

/04

2008

/01

2008

/02

2008

/03

2008

/04

2009

/01

2009

/02

2009

/03

2009

/04

2010

/'01

2010

/'02

2010

/'03

2010

/'04

R M

ILL

ION

S (

CU

RR

EN

T V

AL

UE

S)

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

Dem

ocra

tic E

lect

ion

Tra

nsiti

on to

Dem

ocra

cy

Cur

renc

y C

olla

pse

Wor

ld T

rade

Cen

tre

BN

G H

ousi

ng P

rogr

amm

e

Defining Events

CU

M Q

/Q (

PR

EV

IOU

S Y

EA

R)

% C

HA

NG

E

CUM YTD Q4 2010 VS 2009 = + 1,85%

2009 VS 2008 = R106 529 BIO VS R104 914 BIO = + 1,54%ON TOP OF GROWTH OF + 21,3% IN 2008 VS 2007

© BMI-BRSCU

GFCF TOTAL BUILDING: Q1 1993 – Q4 2010: R MIOwww.strategicforum.co.za


54

GFCF CONSTRUCTION WORKS Q1 1993-Q4 2010: CURRENT VALUESCUMULATIVE Q ON Q (PREVIOUS YEAR) PERCENTAGE CHANGE(Source: SARB; BMI-BRSCU Workings)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

1993

/01

1993

/02

1993

/03

1993

/04

1994

/01

1994

/02

1994

/03

1994

/04

1995

/01

1995

/02

1995

/03

1995

/04

1996

/01

1996

/02

1996

/03

1996

/04

1997

/01

1997

/02

1997

/03

1997

/04

1998

/01

1998

/02

1998

/03

1998

/04

1999

/01

1999

/02

1999

/03

1999

/04

2000

/01

2000

/02

2000

/03

2000

/04

2001

/01

2001

/02

2001

/03

2001

/04

2002

/01

2002

/02

2002

/03

2002

/04

2003

/01

2003

/02

2003

/03

2003

/04

2004

/01

2004

/02

2004

/03

2004

/04

2005

/01

2005

/02

2005

/03

2005

/04

2006

/01

2006

/02

2006

/03

2006

/04

2007

/01

2007

/02

2007

/03

2007

/04

2008

/01

2008

/02

2008

/03

2008

/04

2009

/01

2009

/02

2009

/03

2009

/04

2010

/'01

2010

/'02

2010

/'03

2010

/'04

R M

ILL

ION

S (

CU

RR

EN

T V

AL

UE

S)

-10%

0%

10%

20%

30%

40%

50%

60%

70%

Gau

trai

n

Soc

cer

Wor

ld C

up

Esk

om

Infr

astr

uctu

re

Soc

cer

Wor

ld C

up

Defining Events

CU

M Q

/Q (

PR

EV

IOU

S Y

EA

R)

% C

HA

NG

E

Gross fixed capital formation: Construction works - Total (Investment) Cum Q on Q (Previous Year) % Change

CUM (Q4) 2010 VS (Q4) 2009 = + 5,08%

2009 VS 2008 = R166,48 BIO VS R124,78 BIO = + 33,42%ON TOP OF GROWTH OF + 46% IN 2008 VS 2007

© BMI-BRSCU

GFCF CONSTRUCTION: Q1 1993 – Q4 2010: R MIOwww.strategicforum.co.za


55 © BMI-BRSCU

Available on Amazon.comTHE GREAT RESET

www.strategicforum.co.za

“This economic crisis doesn’t represent the cycle, it represents a reset. It’s an emotional, raw, social, economic reset.” (General Electric CEO Jeffrey Immelt)“People who understand that, will prosper; those who don’t will be left behind.”


56 © BMI-BRSCU

The bubble was so big in the 1920s, that after it popped during the Great Depression, it would take 22 years for non-residential construction investment to regain its precrash peak and 24 years for real spending on residential construction to recover to its pre-crisis highs.

THE GREAT RESET IN AMERICAwww.strategicforum.co.za


57 © BMI-BRSCU

THE GREAT RESET IN THE UK

“The World has never been faced with such a complex global economic challenge – such fast financial

reversals, such great banking threats, and such pronounced economic instabilities – as it faced in 2008.” (Gordon Brown: 3: 2010)

“We tend to think of the sweep of destiny as stretching across many months and years – as if each minute leads inevitably to the next, before culminating in one of those decisive moments we call history.

But sometimes the defining moments of history appear suddenly and without warning.” (Gordon Brown: 3: 2010)

58 © BMI-BRSCU


In July 2008 Treasury Secretary Hank Paulson was having to negotiate with

Congress for support for Fannie Mae and Freddie Mac (which together owned or guaranteed $5 Trillion worth of homeloans).

In Britain’s housing market the Council of Mortgage Lenders announced on

July 18 that lending had declined by 32% from June 2007.

These figures made my blood run cold. I knew what they

meant: people and business stuck without credit and possibly a bad recession (Gordon Brown: 35: 2010)

In South Africa the decline from 2007-2008 was 33% followed by a decline of 29% in 2009!

Total Morgages Advanced: 2000-2009(Source: SARB; BMI-BRSCU Workings)

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

R M

illi

on

s (

Cu

rre

nt

Va

lue

s)

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

Y/Y

Pe

rcen

tag

e C

ha

ng

e

Total Mortgages Advanced 80,492 105,724 123,007 152,612 232,235 335,348 422,942 441,410 294,512 208,488

Y/Y Percentage Change 45.16% 31.35% 16.35% 24.07% 52.17% 44.40% 26.12% 4.37% -33.28% -29.21%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

59 © BMI-BRSCU


The removal of credit was happening very suddenly, and I realised I had not been thinking out of the box enough. I had expected to push and nudge the system back to order, but it was not happening. (Gordon Brown: 35: 2010)

The information I had been looking at in the past weeks (October 2008) was as

stark as it was serious:

we were facing a situation that risked becoming worse than 1929.

No one trusted anyone in the banking system, and people

were predicting not a recession but a depression.

People were panicking, asking which would be the next bank to collapse. The financial system was looking over an abyss. (Gordon Brown: 59: 2010)

. . . The years 1929-32 are known forever as the Great Depression and the years 2008-9 will be known as the Great Recession. (Gordon Brown: 129: 2010)

60 © BMI-BRSCU

THE GREAT RESET FOR SOUTH AFRICAwww.strategicforum.co.za

Jean-Marie Talbot, the president of Master Builders South Africa (MBSA), which represents more than 4000 contractors, predicts further job losses in the industry next year because of the unusually difficult trading conditions.

He said the building industry was facing a multi-faceted problem caused by several factors, with the credit crunch, municipal infrastructural blockages that reduced the number of developments taking place and a lack of skills in various municipalities all playing a crucial role.

MBSA believes the situation is so serious it has decided to convene an urgent building industry crisis summit early next year to address the crisis.

“Without pre-empting the outcome… it is clear that the government – as a major supplier of work and with its stated capital expenditure budgets – will have to be engaged as a matter of urgency.

“The departments of human settlements, public works, finance and labour are key partners in the process. We are constantly reminded about extensive capital budgets, but now we need action,” he said.

?


61 © BMI-BRSCU

THE GREAT RESET FOR SOUTH AFRICAwww.strategicforum.co.za

The recovery will be gradual The Building Industry can Change fundamentally New consumption patterns will be less centred around houses and

cars Home ownership under threat Rental preferred to ownership Housing Units will be smaller But could favour rental and new forms of living, eg Townhouses and

High Rise Flats, walkable neighbourhoods More job mobility requiring flexibility Transition to the Knowledge Economy – could affect Industrial and

Warehousing developments People working at home and desk sharing – affecting Office

development Infrastructure Investment crucial in new forms of public transport, Traffic congestion and gridlock forcing new working and living models A radically altered and much denser economic landscape organized

around megaregions New types of inner cities with people walking to work Spatial fix involves Integrated, Sustainable developments where

people live work and play


62

The STRATEGIC FORUM ScenariosFOR THE BUILDING INDUSTRY: 2010-2020

© BMI-BRSCU

Investment ClimateInvestment Climate

BOUYANT GROWTH> 5 % PA

GDFI > 25 % OF GDP

SUBSIDIES3 - 5 % OF BUDGET

AVERAGE GROWTH 2 - 5 % PA

GDFI 20 - 25 %OF GDP


LOW GROWTH0 - 2 % PA

GDFI 15 - 20 %OF GDP


NEGATIVE GROWTH< 0 % PA

GDFI < 15 %OF GDP

SUBSIDIES< 1 % OF BUDGET

NO

CO

NF

IDE

NC

E

L

OW

A

VE

RA

GE

HIG

H C

ON

FID

EN

CE

Ris

k A

vo

ida

nc

e

Ris

k A

ve

rsio

n

Ris

k T

ole

ran

ce

R

isk

Ta

kin

g

PROPERTY A POOR INVESTMENT / AVERAGE / GOOD / A PREFERRED INVESTMENTParadigm Regression Paradigm Paralysis Paradigm Shift Paradigm Reinvention

HIGH ROAD COLUMBUS SCENARIO

Property a PREFERRED InvestmentHome Ownership PREFERRED

BUOYANT GROWTHBacklogs eliminated by 2015

UPPER MIDDLE ROAD APOLLO SCENARIO

Property a GOOD InvestmentHome Ownership DESIRED

AVERAGE GROWTH Erosion of Backlogs

LOWER MIDDLE ROAD SOYUZ SCENARIO

Property an AVERAGE InvestmentHome Ownership QUESTIONED

LOW GROWTHKeeping pace with Population

LOW ROAD CHALLENGER SCENARIO

Property a POOR InvestmentHome Ownership AVOIDED

NEGATIVE GROWTHIncreasing BACKLOGS

Inve

sto

r C

on

fid

ence

Inve

sto

r C

on

fid

ence

Trends in the Building Industry are inextricably responsive to, and influenced by INVESTMENT

CLIMATE, INVESTOR CONFIDENCE and PROPERTY DELIVERY.

Trends in the Building Industry are inextricably responsive to, and influenced by INVESTMENT

CLIMATE, INVESTOR CONFIDENCE and PROPERTY DELIVERY.

Property

delivery

Property

delivery

THE STRATEGIC FORUM SCENARIOSwww.strategicforum.co.za


63

The MFA CLIBI has moved sideways for four quarters, still reflecting widespread pessimism in the South African building industry … this is the first time that it has moved sideways for more than two quarters, an unprecedented occurrence … a recovery-in-waiting?

MFA COMPOSITE LEADING INDICATOR (CLIBI)FOR THE SOUTH AFRICAN BUILDING INDUSTRY

0

10

20

30

40

50

60

70

80

90

100

| 71 | 74 | 77 | 80 | 83 | 86 | 89 | 92 | 95 | 98 | 01 | 04 | 07 | 10 | 13

Source: FNB / BER; SARB; MFA DATABASE

PE

SS

IMIS

M <

50

> O

PT

IMIS

M

OPTIMISM

PESSIMISM


?


64 © BMI-BRSCU


A confident prediction is one that projects the future to be rosy; an unconfident prediction projects the future as bleak.

But if we look up confidence in the dictionary, we see that it is more than a prediction. The dictionary says that it means “trust” or “full belief”.

The word comes from the Latin “fido”, meaning “I trust”.

The confidence crisis that we are in at the moment is also called a “credit crisis”. The word “credit” derives from the Latin “credo”, meaning “I believe”. (Akerlof and Shiller: 2009: 12)

If this is what we mean by confidence, then we see immediately why, if it varies over time, it should play a major role in the business cycle. Why?

In good times, people trust. They make decisions spontaneously. They know instinctively that they will be successful. They suspend their suspicions.

Asset values will be high and perhaps also increasing. As long as people remain trusting, their impulsiveness will not be evident.

But then, when the confidence disappears, the tide goes out. The nakedness of their decisions stand revealed.

When people are confident, they go out and buy; when they are unconfident they withdraw, and they sell.

Economic history is full of such cycles of confidence followed by withdrawal (Akerlof and Shiller: 2009: 12,13)


65 © BMI-BRSCU


The theory of animal spirits provides an answer to a conundrum:

1. Why did most of us utterly fail to foresee the current economic crisis?2. How can we understand this crisis, when it seems to have come out of the blue with no cause?3. Why have the measures to forestall it falling short, while the economic authorities publically express surprise at their ineffectiveness?

We need to answer these questions if we are to feel any confidence in economic policy in the (future). (Akerlof and Shiller: 2009: 167)

The real problem is the conventional wisdom that underlies so much of current economic theory. So many members of the macro economics and finance profession have gone so far in the direction of rational expectations and efficient markets, that they fail to consider the most important dynamics underlying economic crises. Failing to incorporate animal spirits into the model, can blind us to the real sources of trouble. (Akerlof & Shiller : 2009 : 167)

What has happened in the current financial crisis, corresponds to what causes most of our economic ups and downs: over-confidence followed by under-confidence. The story in this case was that the price of housing had never declined (that is only a story, and it is actually untrue) and therefore, that it would just continue to go up and up. There was nothing to lose. This is the story of our time; it is the story of the business cycle that began in 2001. (Akerlof & Shiller, 2009 : 170)


66 © BMI-BRSCU


For some reason in the late 1990s and early 2000s, the idea that homes and apartments were spectacular investments, gained a stronghold on the public imagination in the United States and many other countries as well.

Not only did prices escalate, but there was palpable excitement about real estate investments; one could see the animal spirits in action everywhere.

It was the biggest home price boom in U.S. history. It extended over nearly a decade, beginning in the late 1990s.

Prices nearly doubled before the bust began in 2006. While it lasted, this spectacular boom mirrored in other countries as well, helped drive the entire world economy and its stock markets.

In its wake, it has left the biggest real estate crisis since the 1930s. The so-called sub-prime crisis, as well as a global financial crisis, the full dimensions of which still have to be grasped. (Akerlof and Shiller: 2009: 149)


67 © BMI-BRSCU


JOHANNESBURG - The Consumer Protection Act which comes into effect on April 1 2011, has raised several concerns, among them the lack of protection for landlords who feel the new legislation will offer them little recourse in the way of defaulting tenants.

The Act provides ample protection to investors and homeowners in their dealings with unscrupulous estate agents. However, some landlords feel the legislation leaves them in the lurch.

Abandon all hope in property. (?)

That is a rather brutal summary of the outlook for residential, commercial and industrial property described by First National's property guru John Loos and veteran property analyst Erwin Rode (pictured) at a symposium in Johannesburg. (David Carte writing on Moneyweb, 30 March 2011)

Who will build Rental housing?


70 © BMI-BRSCU


Conditions for High Road ScenarioInvestor Confidence:• High confidence;• Risk taking propensity • GDP growth > 6% pa;• CPI in 3-6% range;• Real Interest Rates < 5%;Investment Climate: • Property a preferred investment;• FTHB Subsidies increased to 2,5-5% of Budget;• The non residential market grows in tandem with residential; • Home improvement and non residential refurbishment markets grow at > 10% pa;• Private Sector Investment as a percentage of Total Investment in Building 50-

60%;Property Delivery:• Building growth 2010-2020 at > 6,5% pa;• The R1,5 Trillion Affordable Housing programme successfully

implemented;• Backlogs eliminated by 2020;• Construction growth 2108-2020 at > 7,5% pa;• The R846 Billion Government Infrastructure programme is successfully

implemented

“ This is the ideal time to borrow and invest heavily in public infrastructure that has been badly neglected over the past 30 years . . . Not only to roads and bridges but also to airports and air traffic control systems, urban transit, high-speed rail, schools and university facilities, national laboratories, national parks, smart electric grids, broadband networks, green generating plants and health information networks.

This forward looking approach is best defined not as deficit spending fuelling consumption but as an investment for the future with fiscal consolidation achieved in a way that supports jobs and growth” (Gordon Brown: 148: 2010)


71 © BMI-BRSCU


Conditions for High Road ScenarioInvestor Confidence:• High confidence;• Risk taking propensity • GDP growth > 6% pa;• CPI in 3-6% range;• Real Interest Rates < 5%;Investment Climate: • Property a preferred investment;• FTHB Subsidies increased to 2,5-5% of Budget;• The non residential market grows in tandem with residential; • Home improvement and non residential refurbishment markets grow at > 10% pa;• Private Sector Investment as a percentage of Total Investment in Building 50-

60%;Property Delivery:• Building growth 2010-2020 at > 6,5% pa;• The R1,5 Trillion Affordable Housing programme successfully

implemented;• Backlogs eliminated by 2020;• Construction growth 2108-2020 at > 7,5% pa;• The R846 Billion Government Infrastructure programme is successfully

implemented

“Over the next three years government will spend R846 billion on public infrastructure.On transport, we will maintain and expand our road network.We will ensure that our rail network is reliable, competitive and better integrated with our sea ports.” (President Jacob Zuma: State of the Nation Address: 2010)

“Economic Development Minister Ebrahim Patel put the total annual expenditure on infrastructure over the next four years at R250bn a year, translating into R1-trillion for the period — an 18% increase on the state’s previous infrastructure spending estimate of about R846bn for the three years to 2013.” (Business Day: 16 February 2011)


72 © BMI-BRSCU

Stage 1Hubris bornOf success

Stage 2Undisciplined

Pursuit of More

Stage 3Denial of Risk

and Peril

Stage 4Grasping for

Salvation

Stage 5Recovery and

Renewal

WELL FOUNDED HOPE

?

What will it take?

(Source: Based on Collins: How the Mighty Fall: 2009)

LOOKING TO THE FUTURE

What can we do to restore growth when one part of the Industry wants to save (and not spend) and the other wants to stop spending (and save)?

73

Total Building: BC: 1993-2011: Net Building in the Pipeline (NBIP): by Month: R*1000 (Current Values) (Feb)


-1,000,000

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

Total Building NBIP (BPP-BC) Total Building BC

12 per. Mov. Avg. (Total Building NBIP (BPP-BC)) 12 per. Mov. Avg. (Total Building BC)

© BMI-BRSCU

Can the Building Industry TRANSFORM and

REINVENT itself – can it recover?

LOOKING TO THE FUTUREwww.strategicforum.co.za


74

Total gross new mortgage loans and re-advances by Month: Jan 1993 - Dec 2010(Source: SARB: KBP 2127M, BMI-BRSCU Workings)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

1993

/01

1993

/07

1994

/01

1994

/07

1995

/01

1995

/07

1996

/01

1996

/07

1997

/01

1997

/07

1998

/01

1998

/07

1999

/01

1999

/07

2000

/01

2000

/07

2001

/01

2001

/07

2002

/01

2002

/07

2003

/01

2003

/07

2004

/01

2004

/07

2005

/01

2005

/07

2006

/01

2006

/07

2007

/01

2007

/07

2008

/01

2008

/07

2009

/01

2009

/07

2010

/'01

2010

/'07

R M

illi

on

s (

Cu

rren

t V

alu

e)

Total gross new mortgage loans and re-advances 12 per. Mov. Avg. (Total gross new mortgage loans and re-advances )

© BMI-BRSCU

It will FUNDAMENTALLY depend on the strategy of

the FINANCIAL INSTITUTIONS.



75 © BMI-BRSCU


Total Mortgage Advances: 2002 - 2009The Strategic Forum Scenarios: 2010-2020(Source: SARB; MFA DATABASE, BMI-BRSCU Workings)

4570

22

2968

84

1948

56

2210

00

2850

00

3500

00

4350

00

4550

00

4500

00

4250

00

3850

00

3900

00

4050

00 4550

00

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

550,000

600,000

650,000

700,000

750,000

800,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

R M

illi

on

s (C

on

stan

t 20

09 V

alu

es)

High Road New York Scenario: 2010-2020

Higher Middle Road London Scenario: 2010-2020

Lower Middle Road Sao Paolo Scenario: 2010-2020

Low Road Harari Scenario: 2010-2020

Sao Paolo Scenario:2010-2020

Sao Paolo Scenariois Current

Most likely future Scenario

R305 Billion decline in

only 3 years!

It could take a decade to get

back to the 2006 level!


76 © BMI-BRSCU

TOTAL INVESTMENT IN BUILDING BY SECTOR: 2000-2020www.strategicforum.co.za

TOTAL INVESTMENT IN BUILDING: 2000-2009 THE STRATEGIC FORUM SCENARIOS: 2010-2020

(Source: SARB, StatsSA, MFA, BMI-BRSCU Workings)

15,000

40,000

65,000

90,000

115,000

140,000

165,000

190,000

215,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

R M

ILL

ION

S (

2009

VA

LU

ES

)

TOTAL BUILDINGS : 2000-2007: LOWER MIDDLE ROAD SOYUZ SCENARIO: 2008-2015

1984 PEAK LEVEL OF INVESTMENT

TOTAL BUILDINGS HIGH ROAD COLUMBUS SCENARIO

TOTAL BUILDINGS LOW ROAD CHALLENGER SCENARIO

TOTAL BUILDINGS HIGHER MIDDLE ROAD APOLLO SCENARIO


CURRENT MOST LIKELY SCENARIOBETWEEN SOYUZ AND CHALLENGER


77 © BMI-BRSCU

TOTAL INVESTMENT IN BUILDING BY SECTOR: 2002-2020www.strategicforum.co.za

TOTAL INVESTMENT IN BUILDING: 2000-2009 THE STRATEGIC FORUM SCENARIOS: 2010-2020

(Source: SARB, StatsSA, MFA, BMI-BRSCU Workings)

15,000

40,000

65,000

90,000

115,000

140,000

165,000

190,000

215,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

R M

ILL

ION

S (

2009

VA

LU

ES

)

TOTAL BUILDINGS : 2000-2007: LOWER MIDDLE ROAD SOYUZ SCENARIO: 2008-2015


TOTAL BUILDINGS HIGH ROAD COLUMBUS SCENARIO

TOTAL BUILDINGS LOW ROAD CHALLENGER SCENARIO

TOTAL BUILDINGS HIGHER MIDDLE ROAD APOLLO SCENARIO


CURRENT MOST LIKELY SCENARIOBETWEEN SOYUZ AND CHALLENGER

The difference between “high road” and “lower middle road” could be R350 Billion and 700 000 jobs over the 10 years to 2020.


78 © BMI-BRSCU

DECLINE

Credit andCapital markets

CLOSED

GROWTH

Credit andCapital markets

OPEN

High Road

Low Road

Lower MiddleRoad

Upper Middle Road

10%40%

20% 30%

THE STRATEGIC FORUM SCENARIOSwww.mindofafox.com

79 © BMI-BRSCU

2010 2011 2012 2013 2014 2015-18.40% 2.90% 1.52% 6.95% 3.33% -6.45%26.79% 7.51% 1.07% -0.57% -6.11% -0.04%0.34% 5.32% 1.37% 4.50% 0.41% -4.59%

-24.19% -12.97% 2.44% 4.00% 8.06% 10.17%21.07% -7.38% 9.14% 16.28% 3.90% -8.11%5.93% -8.72% 4.61% 8.16% 3.90% 3.98%

-3.88% 0.63% -2.75% -3.56% 13.05% 0.56%1.53% -1.40% 0.01% 0.04% 0.04% 0.00%5.08% -12.07% -6.67% -16.88% 17.19% 0.67%3.36% -6.99% -2.35% -5.41% 9.36% 0.02%

Total Investment In ConstructionTotal Investment In Building and Construction

Sector and SegmentTotal Private ResidentialTotal Public ResidentialTotal Residential

Total Public Non-ResidentialTotal Non Residential

Total Unrecorded Additions & AlterationsTotal Investment In Building

Year on Year Growth INVESTMENT IN BUILDING AND CONSTRUCTION: 2010-2015 (CONSTANT 2009 VALUES)

Total Private Non-Residential

SHORT-TERM OUTLOOK BY SECTOR & SEGMENT: 2010-2015: R MIOwww.strategicforum.co.za


80 © BMI-BRSCU

The Major GAMEBREAKING POTENTIAL lie in the following areas:

An igniting vision of nation-building through home-ownership, property as a preferred investment and building as an engine for growth and wealth-creation;

Interest Rates falling further by 1-2 percentage points;

The Banks relaxing their stringent lending criteria and promoting Home Ownership as an Engine for Growth and Wealth Creation;

Return of Investor Confidence, Banks first and then Consumers;

Reinvented Investment Climate. (Source: BMI-BRSCU)



81 © BMI-BRSCU

The Major GAMEBREAKING POTENTIAL lie in the following areas:

An igniting vision of nation-building through home-ownership, property as a preferred investment and building as an engine for growth and wealth-creation;

Interest Rates falling further by 1-2 percentage points;

The Banks relaxing their stringent lending criteria and promoting Home Ownership as an Engine for Growth and Wealth Creation;

Return of Investor Confidence, Banks first and then Consumers;

Reinvented Investment Climate. (Source: BMI-BRSCU)


“We are pleased with the performance of our financial sector.It has proven to be remarkably resilient in the face of the recent financial crisis and the global economic meltdown.” (President Jacob Zuma: SONA: Feb 2011)

“The raft of reforms from Basel that other banks are now grudgingly having to implement have been practised (reluctantly) by our banks for years."Our banking system is ahead of the game," says Banking Registrar, Errol Kruger.Indeed, it is ranked sixth out of 133 for "financial soundness", way above banks in the US which are ranked 108, or the UK at 126. (Moneyweb, 23 April 2011)


82 © BMI-BRSCU

In order to achieve the VISION FOR THE BUILDING INDUSTRY SYSTEM a collaborative culture is required based on trust and cross boundary networking and dynamic Public, Private Sector Partnerships that can deliver on Infrastructure, Housing, Health, Education, Safety and Security et al and make South Africa a Winning Nation and a World model of Nation Building and Reconciliation. (Source: BMI-BRSCU)



83 © BMI-BRSCU

Productive capacity

Alliances,Joint

Ventures

Cross functional

Networking

Enterprise Development,

BEE

Skills Training and

Development

Leadership,Lobbying,Advocacy

Modeling cooperative behaviour

REINVENTION

The Hot Spot Scenario: mapping emergence(Based on Gratton: 2007: 145)

Building: The Engine for Growth and Wealth

Creation.

Management Training and Development

PRIVATE SECTOR

Public Sector Labour

The GOLDEN Triangle

Research has indicated that we can create jobs in six

priority areas. These are infrastructuredevelopment, agriculture, mining and beneficiation,

manufacturing, the green economy and tourism.

We cannot create these jobs alone. We have to work with business, labour and the communityconstituencies. (Pres Jacob Zuma: SONA: 2011)

The Private Sector accounts for 77% of Building activity and the Public Sector 23%.

In Construction the Public Sector accounts for 56% of activity and the Private Sector 44%. (BMI-BRSCU estimates: 2011)

The Private Sector accounts for 77% of Building activity and the Public Sector 23%.

In Construction the Public Sector accounts for 56% of activity and the Private Sector 44%. (BMI-BRSCU estimates: 2011)

HOTSPOT SCENARIO FOR THE BUILDING INDUSTRYwww.strategicforum.co.za


84 © BMI-BRSCU

THE ROLE OF PUBLIC AND PRIVATE SECTOR IN BUILDING INDUSTRY: 2010www.strategicforum.co.za

INVESTMENT IN BUILDING BY SECTOR: 2010(TOTAL = R159,277 BILLION)

(Source: StatsSA, SARB, BMI-BRSCU Workings)

Public Sector23%

Private Sector 77%


85 © BMI-BRSCU

THE ROLE OF PUBLIC AND PRIVATE SECTOR IN BLDNG & CONSTR: 2010www.strategicforum.co.za

INVESTMENT IN BUILDING AND CONSTRUCTION BY SECTOR: 2010(TOTAL = R334,221 BILLION)

(Source: StatsSA, SARB, BMI-BRSCU Workings)

Public Sector56%

Private Sector 44%


86 © BMI-BRSCU

NATIONAL ISSUES

GROWTH WEALTHEMPLOYMENT PROPERTY

ORGANISATION’S ROLE

INVESTMENT ENVIRONMENT

MARKETING LOGISTICS

VISIONBuilding is the engine for growth and wealth creation through Property Ownership and THE ORGANISATION is the preferred Partner for good as the green BUILDING solution of choice.

MANUFACTURING

BUILDING INDUSTRY AN ENGINE OF GROWTH

REINVENTIONDoing well while

doing good.

REINVENTIONDoing well while

doing good.

YESTERDAY’S ECONOMY

TOMORROW’SECONOMY

NARROW FOCUS ON COMPANY

NARROW FOCUS ON COMPANY

BROAD FOCUS ON CONTRIBUTION TO NATIONAL ISSUES

BROAD FOCUS ON CONTRIBUTION TO NATIONAL ISSUES

Overarching vision aligned with National Issues, adapted and customised by the organisation for their own vision and values. MISSION

Developing and growing competitive awareness, knowledge and support of END USERS and maintaining consistent standards in the environmentally friendly production of PRODUCTS for good value and performance in building.

VALUESThe Organisation has an igniting vision, a culture, or mind set of co-operation, collaboration and cross-boundary networking; and a production capability to facilitate delivery of fit for purpose products and

solutions and based on the unashamedly ethical values and code of conduct of:• Respect• Responsibility• Honesty• Integrity• Accountability• Collaboration

BORROWBUY BURN

ENVIRONMENTALSUSTAINABILITY

SOCIALSUSTAINABILITY

ECONOMICSUSTAINABILITY



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“I see myself as a person with vision in our industry about building things and innovating things and that is not a CEO function necessarily” (Adrian Gore in Gleason: 2011; 164)

“. . . the Board is there to understand the big picture, to understand the relationship of the business with the society, particularly with the environmental issues, particularly with the political issues, but to think in 30 year terms, not to think in three-year terms.” (Bobby Godsell in Gleason: 2011: 149)


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“A mission statement in a corporate sense is a definition of purpose: it circumscribes and defines what you do. In a personal sense a mission statement, as opposed to goals, is not what you want to have, it’s not even what you want to do, it’s who you want to be, and that takes some thinking.” (Mark Lamberti in Gleason: 2011: 149)


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TowardsBuilding: The Engine for Growth and Wealth Creation

Dr. Llewellyn B. LewisMay 2011

THE STRATEGIC FORUM

A place of assembly for strategic conversations

THE STRATEGIC FORUMwww.strategicforum.co.za

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Making sense and animal spirits march 2011 sv

Economy & Finance

Transcript of Making sense and animal spirits march 2011 sv