For companies in the local building and construction sector, diversification of activities and markets has long been a favoured strategy. In recent years, they have placed greater emphasis on international expansion through acquisitions, new investments or contractual work.
These companies are now present in countries on most of the continents, in some cases with large operations. In times of rand weakness, their international interests have helped greatly towards countering weak or patchy demand in SA. For some, revenues and profits have soared when local activity levels and foreign earnings have both moved favourably, as happened 12-18 months ago.
The offshore earnings remain highly sensitive to exchange rates. With the rand recovering since early last year, several companies in this sector have recorded hefty charges for foreign exchange losses.
But the success of the foreign expansions is not being judged only on short-term financial results. Other considerations include risk management, experience, reputation and enhanced capacity to keep valuable skills and resources active.
Aveng, which now has one of the largest offshore exposures, has a strategic aim of attaining half its revenues in hard currency. Its interims to December last year showed it already derived about 40% of its revenue from outside SA, about 27% coming from Africa and the Middle East and about 15% from Australasia and Southeast Asia.
Much of this group's offshore presence dates back to LTA's acquisition several years ago of McConnell Dowell, an Australian-listed construction company. Aveng later acquired LTA, which was then controlled by Anglo American. In April this year the group said it would increase its current 63% stake in McConnell Dowell to 100% through a scheme of arrangement.
Murray & Roberts reduced its offshore presence when it closed the Canadian operation of Alloy Wheels Industries, after failing to turn the business around.
However, it has expanded its activities elsewhere, particularly in Africa and the Middle East, where it has made significant inroads. In Dubai, it built the landmark, up-market hotel Buyj Al Arab, a 321 m-high construction on an artificial island about 100 m off the coast. It is now working on 22 projects in the region, in Egypt, Bahrain and the United Arab Emirates, among other countries.
As with Aveng, the geographical breakdown of M&R's 2002 revenues shows SA now contributes only 60% (of which about a third is from exports). The remainder is from the rest of Africa (15%), Middle East (14%) and the rest of the world (11%).
The smaller construction groups have moved offshore on a more selective basis.
Concor derives about 15%-20% from the rest of Africa, though it is reducing its presence in Mozambique because of adverse trading conditions. WBHO expanded in Botswana last year by acquiring Suncon, a medium-sized building company.
