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April 30, 2008

Infrastructure boom creates growth for South African firms

Infrastructure boom creates growth for South African firms

The infrastructure boom in South Africa is creating the most potential for growth for firms, according to some partners speaking to IAB for this year’s survey of the country.

Overall fee income has topped ZAR8.7 billion ($1.2 billion) and overall fee income growth is standing at 14 percent, which is slightly down on last year’s figure.

Grant Thornton South Africa grew only 6 percent but the group’s national chair, Leonard Brehm, expects revenue growth for next year to reach double-digits, partly because of the increase in infrastructure spending.

He told IAB the firm has a “substantial” tourism, hospitality and leisure business that has worked on nine of ten projects to either build or develop football stadiums ahead of the 2010 Football World Cup, which South Africa is hosting. “There’s been a lot of work in that regard,” he said. The mid-tier firm also launched a new project finance sector in February this year. “Grant Thornton is very large in the project finance business internationally and it was with their encouragement and assistance that South Africa opened its division,” Brehm explained.

Large-scale project

Predictions from the networks and associations indicate the infrastructure boom could last anywhere from five years to more than a decade, and Grant Thornton is not alone in reaping the benefits.

Danie van Heerden, KPMG’s executive partner of marketing and communications, said infrastructure development is one of four big growth areas for KPMG. The firm experienced 17 percent fee income growth during the past 12 months.

“That is where we find most of our new work coming through,” he said, adding that the firm is involved with the Gautrain – an underground train that is being built to link the cities of Pretoria and Johannesburg. Van Heerden said the project is one of the largest public private partnerships in the world.

Van Heerden pointed to forensic accounting, the outsourcing of internal audits and the private equity industry in South Africa as other areas of growth for the firm. With regard to private equity, van Heerden told IAB that the industry in South Africa is probably “a year or two behind the UK” and there will be more work in the year to come unless it is adversely affected by global stock market conditions.

H

Skills shortage On the flipside, the ongoing skills shortage has once again been identified by partners as a hindrance to growth.

Deloitte & Touche (Southern Africa) chief executive Grant Gelink said that if Deloitte could get 10 percent more skilled staff “we would be very happy”. However, he noted that the Big Four firm is reaping the benefits of having invested heavily in bursaries and talent development for a number of years.

Gelink predicted that the skills shortage could worsen in the coming years. With 12 percent fee income growth, Deloitte is another firm to benefit from the infrastructure boom and Gelink said one of the challenges in the year ahead will be keeping up with clients’ growing needs.

“I was talking to a [chief executive] of a construction company and he said to me he cannot see a let up [in work] for the next ten years,” Gelink remarked. “If he’s right by the way, then that skills shortage… suddenly becomes very, very acute.”

Carolyn Canham

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