SMALLER contractors might pull out of 2010 Soccer World
Cup projects because of 'dramatically' rising costs caused by increasing
building material prices, fuel prices and interest rates, experts have
warned.
Colin de Kock, executive director of the Gauteng Master Builders' Association,
said contractors, especially the smaller ones, were feeling the pinch.
'Steel prices have increased by 95% in six months. In October last year,
you would have expected that steel prices would increase by 30% by this
time. No one expected them to increase by almost 100%.'
He said most of the material used in 2010 projects was imported and prices
had gone up because of global demand. De Kock said none of the contractors
would have foreseen such increases when their contracts were signed.
City Press reported yesterday that the World Cup would cost the government
R3bn more than the planned R9,8bn.
Danny Jordaan, local organising committee (LOC) CEO, said an escalation
in costs was expected, but the exact figures were not yet known. 'The
deputy minister of finance (Jabu Moleketi) has said the figure has not
been determined,' Jordaan said yesterday. 'The escalation in costs is
a reality globally.'
He did not think smaller contractors would pull out of 2010 projects as
a result.
The LOC's management meets today, and the rising costs are likely to be
discussed.
Gautrain Management Agency CEO Jack van der Merwe said the Gautrain was
not affected by the increases because the public-private partnership was
based on a fixed-price contract. Spending was based on the CPIX increases
predicted by the Reserve Bank.
'If it's higher than predicted, we would pay the difference,' he said.
However, the Gauteng legislature's public transport committee chairman,
Mbongeni Radebe, warned last month that if interest rates rose above those
budgeted for, spending on the Gautrain would increase to more than the
projected R25,2bn.
The Reserve Bank has raised the repo rate by five percentage points since
June 2006. Domestic and international economic factors, such as surging
oil and food prices, continue to push up inflation and interest rates.
Radebe said Parliament's national oversight committee on transport had
indicated that the cost of the Gautrain could reach R29bn.
In November last year, Moleketi said SA was looking at expanding its supply
base in an attempt to manage and stabilise 2010 prices. The rise in prices
might be attributed to the increased demand for infrastructure, he said.
The government had allocated R8,4bn to construct and upgrade stadiums
and R9bn to build support infrastructure. Experts have warned that 2010
costs will increase and that there is no way to control the prices.
Udesh Pillay, head of the Human Sciences Research Council's 2010 Fifa
World Cup Research Project, wrote in his Business Day column this year
that stadiums, especially those built from scratch in host cities, were
likely to experience proportional increases.
'These are probably attributable to the weakening rand and rising import
and building costs occasioned by turmoil in global markets,' he wrote.
He estimated that over the next two years, costs would rise by an additional
R10bn a year.
