bmi strategy consulting unit cc - strategicforum.co.za · 30/03/2007 · 2 ©bmi-brscu buffalo...

©BMI-BRSCU1

TowardsMaking sense of the future of the Distribution Market

Dr. Llewellyn B. LewisDr. Llewellyn B. LewisMarch 2007March 2007

THE STRATEGIC FORUMTHE STRATEGIC FORUMA place of assembly

for strategic conversations

BMI

Studium Ad Prosperandum

Voluntas in Conveniendum

BUILDING RESEARCHSTRATEGY CONSULTINGUNIT cc

Reg. No. 2002/105109/23

•BMI




Reg. No. 2002/105109/23

•

THE STRATEGIC FORUMwww.strategicforum.co.za

©BMI-BRSCU2

Buffalo Building Supplies (9 branches)Builders Warehouse (12 branches)*Cashbuild (150 branches)C T M (66 branches)D.A.W.N (Wholesale Distributor) (7 warehouses)Delarey (4 branches)*Federated Timbers (33 branches)*Homewarehouse (1 branch)Iliad Africa (73 branches)Italtile (8 branches, including Franchisees)Mica Hardware (200 branches)**Pennypinchers (25 branches) ***Buildit (200 branches) ****SERVISTAR (14 branches)* Tile Afrika and San Afrika (35 branches)Tile Warehouse (8 branches)* Timber City (39 branches) **** These Distributors are part of the MASSMART Group.**Micabuild is part of the Supergroup*** Pennypinchers and Timber City are part of Steinhoff International**** Buildit is part of the SPAR Group

SA’S MAJOR DISTRIBUTORS

884 Branches

884 Branches

The arrival of the Retailers!

The arrival of the Retailers!

©BMI-BRSCU3

Low Low HighHighPOWERPOWER

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PLAYERSPLAYERSIn the KnowIn the Know

RESERVESRESERVESKeep InformedKeep Informed

CROWDCROWDMinimal EffortMinimal Effort

REFEREESREFEREESKeep SatisfiedKeep Satisfied

BYSTANDERS ACTORSBYSTANDERS ACTORS

For the first time in 3 decades, new role playersare entering the Distribution market

and offering prospective

consumers much more valuethan in the past . . .

For the first time in 3 decades, new role playersare entering the Distribution market

and offering prospective

consumers much more valuethan in the past . . .

PROPERTY DELIVERYPROPERTY DELIVERY

We bought Builders Warehouse and did the acquisitions – it’s

less than three years, and we have a R4n business for the full year, slightly more than that. . . .

(Mark Lamberti, CEO Massmart,23 February 2006)

We bought Builders Warehouse and did the acquisitions – it’s

less than three years, and we have a R4n business for the full year, slightly more than that. . . .

(Mark Lamberti, CEO Massmart,23 February 2006)

©BMI-BRSCU4

PROPERTY DELIVERYPROPERTY DELIVERYWarnings of a slowdown in the building supplies

industry are rife as fewer residential plans are passed and rising interest rates mean people are reluctant to

extend themselves and build new homes.But the CEO of bulk retailer Massmart, Mark

Lamberti, said the group would embark on plans to expand its Builders Warehouse brand

aggressively, despite all the talk of a building slowdown.

The group plans to capture market share from the more established building-material groups by

extending its offer to appeal to contractors and do-it-yourself enthusiasts, and plans to have 100 stores by

2009, from which it expects sales of more than R7bn.Lamberti said: “There is continued consumer interest in durables and home improvement, despite some

uninformed comments to the contrary.”

©BMI-BRSCU5

PROPERTY DELIVERYPROPERTY DELIVERY

The market is worth about R90bn. Last year we did R2.7bn. I’m not sure what Massmart’s turnover is in the building materials area.

Now we concentrate on the necessary and structural side, not thedecorative side of the business, although we sell something close to

500 000 litres of paint a week that is necessary, as well as it is decorative.

And we don’t do gold taps, we don’t do braai’s, we don’t do the other stuff. We are into the structural, necessary side of the market. (Pat Goldrick,

CEO, Cashbuild, Moneyweb, 22 September 2006)

©BMI-BRSCU6

COMMODITY

MIDDLE INCOME DWELLINGS

(> R250 000 < R2,2 Mio)


(> R250 000 < R2,2 Mio)

LUXURY DWELLINGS(> R2,2 Mio)


AFFORDABLE DWELLINGS(< R250 000)


Product range

HOTELS

LOW/HIGHRISEFLATS

TOWNHOUSESCLUSTERS

ASPIRATIONAL

DISTRIBUTOR STRATEGIC SPACE ANALYSISM

arke

t Spe

ctru

m

©BMI-BRSCU7

COMMODITY


(> R250 000 < R2,2 Mio)


(> R250 000 < R2,2 Mio)





Product range

HOTELS

LOW/HIGHRISEFLATS

TOWNHOUSESCLUSTERS

ASPIRATIONAL

DISTRIBUTOR STRATEGIC SPACE ANALYSISM

arke

t Spe

ctru

m

©BMI-BRSCU8

Mar

ket S

pect

rum CURRENT

COMPETITIVE ARENA OF PENNYPINCHERS

SHOPPING> 75000 M2

OFFICESOFFICE PARKS

INDUSTRIALMANUFACTURING

GOVERNMENTBOT/MOT/APOP

Product range

COMMODITY ASPIRATIONAL

DISTRIBUTOR STRATEGIC SPACE ANALYSIS

SHOPPING10000-75000 M2


©BMI-BRSCU9

CURRENT COMPETITIVE ARENA OF PENNYPINCHERS

OFFICESOFFICE PARKS

INDUSTRIALMANUFACTURING

GOVERNMENTBOT/MOT/APOP

Product range

COMMODITY ASPIRATIONAL

DISTRIBUTOR STRATEGIC SPACE ANALYSIS



Mar

ket S

pect

rum

SHOPPING> 75000 M2

©BMI-BRSCU10

BUILDING & CONSTRUCTION INVESTMENT

R158 559 MILLIONBUILDING INVESTMENT

R102 559 MILLIONCONSTRUCTION INVESTMENT

R56 000 MILLION

CONTRACTOR (50,8%)

R32 219 MILLIONCONTRACTOR (50,8%)

R32 219 MILLION

SUBCONTRACTOR (49,2%)

R31 205 MILLIONSUBCONTRACTOR (49,2%)

R31 205 MILLION

LABOUR (40%)

R63 424 MILLION

LABOUR (40%)

R63 424 MILLION

DIRECT TO USER (40%)

R38 054 MILLIONDIRECT TO USER (40%)

R38 054 MILLIONMATERIAL (60%)

R95 135 MILLIONMATERIAL (60%)

R95 135 MILLION

INDIRECT VIA DISTRIBUTION (60%)

R57 081 MILLION

INDIRECT VIA DISTRIBUTION (60%)

R57 081 MILLION

LARGE IND BUILDERS MERCHANT (10%)

R9 513 MILLION

LARGE CHAIN BLDRS MERCHANT(25%)

R23 784 MILLION

LARGE CHAIN BLDRS MERCHANT(25%)

R23 784 MILLION

HYPERMARKET/SUPERMARKET(5%)

R4 757 MILLION

HYPERMARKET/SUPERMARKET(5%)

R4 757 MILLION

SPECIALIST SHOP(5%)

R4 757 MILLION

SPECIALIST SHOP(5%)

R4 757 MILLION

LOCAL HARDWARE STORE(15%)

R14 270 MILLION

LOCAL HARDWARE STORE(15%)

R14 270 MILLION

RESIDENTIAL INVESTMENT

R12 775 MILLION

NON RESIDENTIAL INVESTMENT

R36 500 MILLION

UNRECORDEDADDITIONS AND ALT’S INVEST**

R26 673 MILLION

* Constant 2006 Prices** Residential and Non Residential

RESIDENTIAL INVESTMENT

R39 386 MILLION

CURRENT REALITY OF BUILDING & CONSTRUCTION: 2006CURRENT REALITY OF BUILDING & CONSTRUCTION: 2006

©BMI-BRSCU11

CURRENT REALITY OF BUILDING INDUSTRY SYSTEM

AVERAGE ANNUAL (1993-2006) BUILDING ACTIVITY (BPP+BC) BY PROVINCE VOLUME (M2) AND PERCENTAGE

(Source: StatsSA, BMI-BRSCU Workings)

25.94%

5.88%

40.67%

14.07%

3.88%

0.88%

3.43%1.84%

3.41%

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000W

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20%

25%

30%

35%

40%

45%

PE

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©BMI-BRSCU12

Housing Stock in South Africa by type of Dwelling: 2006: Units(Source: StatsSA, Census 2001; BMI-BRSCU Workings)

3,784,281

3,634,888

1,012,737

412,375

120,610

459,529

1,376,707

1,654,788

30,610

3,653

12,490,178

0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 14,000,000

House or brick structure on a separate stand or yard < 80 m2

House or brick structure on a separate stand or yard > 80 m2

Flat in block of flats + Town/cluster/semi-detached house (simplex: duplex:triplex)

House/flat/room in back yard

Room/flatlet not in back yard but on a shared property

Informal dwelling/shack in back yard

Informal dwelling/shack NOT in back yard e.g. in an informal/squattersettlement

Traditional dwelling/hut/structure made of traditional materials

Caravan or tent

Private ship/boat

TOTAL

12,4 MILLIONDWELLINGS IN SOUTH AFRICA.

MOSTLY HOUSES ON SINGLE STANDS.

NEARLY 80% OWNED.


©BMI-BRSCU13


TOTAL FORMAL DWELLINGS IN SOUTH AFRICA BY PROVINCE : 2006(Total = 8,96 Million Housing Units)

(Source: StatsSA, AMPS 2006, BMI-BRSCU Workings)

893,774 605,597 2,304,154 1,484,489 782,054 200,943 1,011,358 568,854 1,113,6680

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

- E

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5%

10%

15%

20%

25%

30%

35%

40%

4.88 5.06 4.04 4.84 4.97 4.44 4.98 4.68 4.04

Household Size

PE

RC

EN

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©BMI-BRSCU14

DWELLING UNITS BY TYPE AND RACE GROUP: 2006(Source: StatsSA, Census 2001; BMI-BRSCU Workings)

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

Black African Coloured Asian White

House or brick structure on a separate stand or yard < 80 m2 House or brick structure on a separate stand or yard > 80 m2

Flat in block of flats + Town/cluster/semi-detached house (simplex: duplex: triplex) House/flat/room in back yard

Room/flatlet not in back yard but on a shared property Informal dwelling/shack in back yard

Informal dwelling/shack NOT in back yard e.g. in an informal/squatter settlement Traditional dwelling/hut/structure made of traditional materials

Caravan or tent Private ship/boat

Total number of Houses in South Africa12,490,178

House or Brick Structure on separate stand or yard

Traditional hut/structure

Informal dwelling/shack NOT in backyard


©BMI-BRSCU15

DWELLING UNITS OWNED BY RACIAL GROUP: 2006: UNITS(Total = 12,490,178)

(Source: StatsSA, Census 2001; BMI-BRSCU Workings)

Black, 9,605,621, 77%

Coloured, 1,015,577, 8%

Asian, 317,720, 3%

White, 1,551,261, 12%

BLACKS OWN OR OCCUPY 77% OF THE

DWELLINGS IN SA BY NUMBER


©BMI-BRSCU16

TOTAL DWELLING UNITS BY VALUE AND RACIAL GROUP: 2006: R MILLIONS(Total = R1,890,403 Million)

(Source: StatsSA, Census 2001; BMI-BRSCU Workings)

Black, 864,186, 46%

Asian, 102,796, 5%

White, 715,841, 38%

Coloured, 208,111, 11%

BLACKS OWN OR OCCUPY

46% OF DWELLINGS BY VALUE


©BMI-BRSCU17

R1,9 Trillion of Private

Residential Real Estate.

Requiring continuous

Improvement


©BMI-BRSCU18

TOTAL INVESTMENT IN NON RES BUILDING BY SEGMENT: 2006: R MILLION(TOTAL = R212 722 765)

(Source: StatsSA, Shopping Centre Council, SAPOA, BMI-BRSCU Workings)

Office and banking , 42,106,053, 20%

Shopping , 40,626,216, 19%

Industrial and warehouse , 56,314,710, 26%

Other buildings , 23,551,675, 11%

Additions and alterations , 50,124,110, 24%


©BMI-BRSCU19

R212 Billion of Private

Commercial Real Estate.Requiring

continuous Refurbishing


©BMI-BRSCU20

Market 2006 %Size R*1000 by value

56,922 3,090,544 6.62%32,005 1,610,782 3.45%88,928 4,701,326 10.07%

- Ceilings and 23465 507718 1.09%Partitioning (m2*1000) 6968 156567 0.34%

30,433 664,285 1.42% - Walling 1,149,045 1,515,304 3.25% (BE*1000) 202,073 245,165 0.53%

2,448,365 1,808,118 3.87%4,557,078 2,403,859 5.15%8,356,561 5,972,445 12.80%

359,741 474,408 1.02%5,851 944,474 2.02%

- Flooring 17,495 1,543,184 3.31% (m2*1000) 6,535 288,230 0.62%

39,005 3,153,742 6.76%2,881 296,518 0.64%

65,917 5,281,674 11.32% - Cement (Tonnes) 9,226,525 6,089,506 13.05%

4,967,386 3,278,475 7.02%14,193,911 9,367,981 20.07%

2,323 1,184,147 2.54% - Taps and Fittings 3,400 482,135 1.03% (Units*1000) 1,558 142,257 0.30%

29,238 347,281 0.74%34,196 971,672 2.08%

- Plumbing Pipes 12,923 379,840 0.81% & Fittings (LM*1000) 31,136 1,952,137 4.18%

572,065 1.23%44,059 2,904,043 6.22%

315 623,530 1.34%6,356 1,519,541 3.26%3,742 908,306 1.95%

189 240,392 0.52% - Frames 3,970 899,833 1.93% (Units*1000) 2,613 740,262 1.59%

207 70,421 0.15%150 97,580 0.21%

98 16,624 0.04%7,038 1,824,720 3.91%

- Roof Trusses - Timber Prefab trusses 5,074 1,544,615 3.31% (Units*1000) - Timber On-site trusses 1,465 544,742 1.17%

- Steel Prefab trusses 339 228,100 0.49%5,288 2,317,458 4.97%4,651 149,817 0.32%6,591 147,240 0.32%5,848 126,072 0.27%

17,089 423,130 0.91%13,535 211,688 0.45%

217,062 3,226,477 6.91% - Particleboard & MDF (m2*1000)** 24,704 2,409,669 5.16%

22,851 501,483 1.07%46,672,848 100.00%

TOTAL INV IN BLDNG & CONSTR* 158,559,94229.44%49.06%

95,135,965* Includes unrecorded Additions and Alterations, AND including Construction activity.** 35% of PB & MDF is used in Building Industry and 65% in Furniture and Other.Source: BMI-BRSCU Database

Sub-total

Sub-total - Windowsills (Lm*1000) - Fasciaboards (Lm*1000)

* Vinyl

* Facebricks* Faceblocks* Stockbricks

* Carpeting

* StockblocksSub-total - Paving (BE*1000) - Ceramic Wall Tiles (m2*1000)

Sub-total* Ceilings* Partitioning

Sub-total

THE MARKET FOR MAJOR BUILDING PRODUCT GROUPS: 2006 (2006 VALUES)

PRODUCT GROUP - Roofing (m2*1000) - Vertical Cladding (m2*1000)

* Ceramic Tiles* Other Tiles

- Glass and Mirrors (m2*1000) - Doors (Units*1000)

Subtotal

- Chromeware - Brassware - Fittings & Accessories

- Pipes & Fittings inside Building - Pipes & Fittings from Building

- Built in Cupboard

- Geysers (Units*1000)

- Garage Doors (Units*1000)

Sub-total

- Sanware (Units*1000)

- Pipes & Fittings to Building

Building Industry

Sub-total - Guttering and Downpipes (Lm*1000) - Décorative Paint (Litres*1000)

TOTAL MAJOR BUILDING MATERIALS - Insulation (m2*1000)

MAJOR BLDNG MAT'LS AS % OF TOTAL B & C MATLSMAJOR BLDNG MAT'LS AS % OF INV. IN BLDNG & CONSTR

TOTAL BUILDING AND CONSTRUCTION MATERIALS

- Bargeboards (Lm*1000)

ConstructionSub-total

Subtotal

- Window - Door

- Shower - Patio


©BMI-BRSCU21

The market for major Building Product Groups by value: 2006

10.07%

1.42%

12.80%

1.02%

2.02%

11.32%

20.07%

2.54%

2.08%

6.22%

1.34%

3.26%

1.95%

0.52%

3.91%

4.97%

0.91%

0.45%

6.91%

5.16%

1.07%

0% 5% 10% 15% 20% 25%

Roofing and Vertical Cladding

Ceilings and Partitioning

Walling*

Paving

Ceramic Wall Tiles

Flooring

Cement

Sanware

Taps, Mixers and Fittings

Plumbing Pipes and Fittings

Geysers

Glass and Mirrors

Doors

Garage Doors

Frames

Roof Trusses

Windowsills, Fasciaboards and Bargeboards

Guttering and Downpipes

Decorative Paint

Particleboard and MDF*

Insulation

Total value of major Building Product Groups = R46,7 Billion in 2006.Major Building Product Groups

account for 49,06% of Total Building and Construction Materials and 33,8%

of Total Investment in Building and Construction.


©BMI-BRSCU22

CEMENT SALES METRIC TONNES 1952 to 2006

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

| 55 | 62 | 69 | 76 | 83 | 90 | 97 | 04 |

Source: SARB; SACPA; C & CI; MFA DATABASE

ME

TR

IC T

ON

NE

S P

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MO

NT

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CEMENT SALES CONFIRM HEALTHY INDUSTRY GROWTH

©BMI-BRSCU23

CEMENT SALES ANNUAL PERCENTAGE CHANGE OF SIX MONTH MOVING AVERAGE

-20

-10

0

10

20

30

| 55 | 62 | 69 | 76 | 83 | 90 | 97 | 04 |

Source: SARB; SACPA; C & CI; MFA DATABASE

AN

NU

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CH

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INDUSTRY GROWTH IN HIGH TEENS

©BMI-BRSCU24

HISTORY OF CEMENT MARKET

INVESTMENT IN BUILDING AND CONSTRUCTION AND CEMENT SALES: 1980-2006

6,000

7,000

8,000

9,000

10,000

11,000

12,000

13,000

14,000

15,000

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

To

nn

es

*10

00

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000

70,000

75,000

80,000

R M

illi

on

s (

20

06

Va

lue

s)

Cement Sales Total Investment in Building Total Investment in Construction

Cement sales closely correlated with

Investment in Building and Construction

Cement

Building

Construction

©BMI-BRSCU25

CURRENT REALITY OF CEMENT MARKET

Domestic Cement Sales by Sector: 2006

Building, 9,226,527, 65%

Construction, 4,967,386, 35%

©BMI-BRSCU26

Domestic Cement Sales by End-use Sector: 2006

1.72%

16.85%

16.16%

3.80%

4.72%

5.92%

1.45%

49.39%

0% 10% 20% 30% 40% 50% 60%

Mining

C.P.M.

Readymix Producers

Resellers

Civil Construction

Building Construction

Blenders

Other

Total Sales for 2006 = 14,193,913 Tonnes

CURRENT REALITY OF CEMENT DISTIBUTION

The bulk of the finished product is distributed through

the retail trade (‘Resellers’) and would ultimately be utilised by

the small- to medium-sized builders, emerging contractors and DIY users. (CNCI Annual

Report, 2005)

©BMI-BRSCU27

Domestic Cement Sales by Method of Packaging: 2006

BULK, 50.57% BAGS, 49.43%


©BMI-BRSCU28

Cement Sales by Province: 2006

8.2

9%

7.4

4%

37.6

0%

3.9

7%

4.1

3%

10.6

1%

2.8

9%

3.7

5% 6.6

0%

1.6

0%

13.1

1%

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000LIM

PO

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100

0

0%

5%

10%

15%

20%

25%

30%

35%

40%


©BMI-BRSCU29

BUILDING INDUSTRY CEMENT MARKET BY SECTOR : 2006TOTAL CEMENT MARKET = 9,226,525 TONNES

TOTAL CEMENT IN RESIDENTIAL SECTOR,

6,236,005, 68%

TOTAL CEMENT IN NON RESIDENTIAL SECTOR,

2,990,520, 32%

TOTAL CEMENT IN NON RESIDENTIAL SECTOR TOTAL CEMENT IN RESIDENTIAL SECTOR


©BMI-BRSCU30

DEMAND AND MARKET SHARE FOR CEMENT IN RESIDENTIAL BUILDING BY SEGMENT: 2006: TONNES

39,640

125,915

334,618

185,711

235,246

484,781

506,485

546,438

336,966

1,195,653

3,991,453

637,640

1,606,912

6,236,005

0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000

- Site and Service and Selfhelp (SHELP 1)

- Site and Service and Selfhelp (SHELP 2)

- Incremental Selfhelp Core House (INC/SHECH)

- Incremental Selfhelp Small House (INC/SHESH)

- Conventional Low Income Small House (CONV/LISH)

- Conventional Low Income Small House (CONV/LASH)

- Std Middle Inc Small House (STD/MISH)

- Std Middle Inc Afford Small House (STD/MASH)

- Std Middle Inc Upmarket Small House (STD/MUSH)

- Luxury House (LUX/LUSH)

TOTAL CEMENT IN HOUSING SEGMENT

- Recorded Additions and Alterations (EQ UNITS)

- Unrecorded Additions and Alterations (EQ UNITS)

TOTAL CEMENT IN RESIDENTIAL SECTOR


©BMI-BRSCU31

DEMAND AND MARKET SHARE FOR CEMENT IN NON RESIDENTIAL BUILDING BY SEGMENT: 2006: TONNES

349,563

454,432

639,701

87,391

237,703

1,768,790

627,473

594,257

2,990,520

0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000

- Offices

- Shops (Commercial)

- Industrial

- Other (Including Casinos)

- Recorded Additions and Alterations

TOTAL CEMENT IN PRIVATE NONRESIDENTIAL SEGMENT

- Unrecorded Additions and Alterations

TOTAL CEMENT IN PUBLIC NONRESIDENTIAL SEGMENT

TOTAL CEMENT IN NONRESIDENTIAL SECTOR


©BMI-BRSCU32

CURRENT REALITY OF PPI & CPI

PRODUCTION PRICE INDEX (PPI) OF SELECTED BUILDING MATERIALS: 2000-2006

90

100

110

120

130

140

150

160

170

180

190

200

210

220

230

January

Febru

ary

Marc

hA

pril

May

June

July

August

Septe

mber

Oct

ober

Nove

mber

Dece

mber

January

Febru

ary

Marc

hA

pril

May

June

July

August

Septe

mber

Oct

ober

Nove

mber

Dece

mber

January

Febru

ary

Marc

hA

pril

May

June

July

August

Septe

mber

Oct

ober

Nove

mber

Dece

mber

January

Febru

ary

Marc

hA

pril

May

June

July

August

Septe

mber

Oct

ober

Nove

mber

Dece

mber

January

Febru

ary

Marc

hA

pril

May

June

July

August

Septe

mber

Oct

ober

Nove

mber

Dece

mber

2000 2001 2002 2003 2004

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

Price Increases of most of the major building

products exceeded CPI substantially.

©BMI-BRSCU33

CURRENT REALITY OF PPI & CPI

Production Price Index (PPI) by type of Material: December 2006 (2000 = 100)

100110120130140150160170180190200210220230240250260270280290300310320

SA Pine

, kiln

drie

d

Paints

Bricks

- Sto

ck

Bricks

- Fac

e

Cemen

t buil

ding

bloc

ks

Sand

Aggre

gate

d cr

ushe

d sto

ne (a

s fro

m 2

/86)

Ord

inary

and

exte

nded

cem

ent

Natur

al st

one,

cut a

nd s

awn

Glass

, for

bui

lding

indu

stry (

as fr

om 1

/93)

Gypsu

m b

oard

Drop

in ce

iling

tiles-

gyps

um

Drop

in ce

iling

tiles-

mas

onite

Flush

doo

rs

Draina

ge

Plumbin

g

Ceram

ic & e

ncau

stic w

all &

floor

tiles

& m

osaic

s

Wov

en n

eedl

e pu

nch

carp

eting

Ceilin

g m

ater

ials

Partit

ioning

mat

erial

s

Sheet

, gal

vani

zed

Cemen

t (Ret

ail)

Concr

ete

roof

tiles

Fibre

cem

ent r

oof s

heet

s

Coate

d pr

ofile

d GM

S she

etin

g

Vinyl fl

oor t

iles

Vinyl s

heet

ing

Was

h an

d ba

sin

WC p

ans a

nd b

idet

s

Coppe

r pip

es

Glas

s fo

r the

buildi

ng in

dustr

y - c

ut to

size

Buildin

g an

d co

nstru

ction

Buildi

ng con

struc

tion

: Bui

lding

indu

stries

Buildi

ng con

struc

tion

: Civi

l eng

ineer

ing

CPI

Ind

ex (

2000 =

100)

CPIPrice doubling since

January 2000

Most Building Products took advantage of the

boom to increase prices in excess of CPI.

©BMI-BRSCU34

CURRENT REALITY OF BUILDING COSTS & CPI

TOTAL BUILDING COST INFLATION (AVERAGE BPP+BC) VS CPI: 1994-2006

0%

5%

10%

15%

20%

25%

30%

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

PE

RC

EN

TA

GE

CH

AN

GE

Building Cost inflation (Change in Cost - Change in Volume) CPI

Total Building Costs exceeded CPI by a HUGE margin since

2003.

©BMI-BRSCU35

FUTURE OF BUILDING TO 2015

TOTAL BUILDING ACTIVITY: 2000-2006 THE STRATEGIC FORUM SCENARIOS: 2007-2015

10,000

30,000

50,000

70,000

90,000

110,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

R M

ILL

ION

S (

2006

VA

LU

ES

)

TOTAL BUILDINGS : 2000-2015: SOYUZ SCENARIO 1984 PEAK LEVEL OF INVESTMENT

TOTAL BUILDINGS COLUMBUS SCENARIO TOTAL BUILDINGS CHALLENGER SCENARIO

TOTAL BUILDINGS APOLLO SCENARIO

1984 PEAK LEVEL OF INVESTMENT

CURRENT MOST LIKELY SCENARIOBETWEEN SOYUZ AND APOLLO

1984 Peak level of Investment exceeded in 2006.

Growth to 2010R92 Billion excluding Unrecorded

Home Improvement

©BMI-BRSCU36

FUTURE OF AFFORDABLE & OTHER HOUSING TO 2015

INVESTMENT IN AFFORDABLE AND OTHER HOUSING: 2002-2015: SOYUZ SCENARIO

11272 12144 11545 12446 13836 12635 13014 14094 15063 14601 13121 12311 11923 11606

8669 10418 12679 1518

5

1708

6

1588

6

1653

5

17972

19132

18012

1618

7

1518

7

14709

14316

19941 22562

24224

27630 3

0922

28520

29550 32065 34195

32613

29308

27498

26632

25923

0

5000

10000

15000

20000

25000

30000

35000

40000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

R M

ILL

ION

S (

20

05

VA

LU

ES

)

Total Affordable Housing Investment Total Other Housing Investment Total Housing

Investment in Affordable Housing almost the size of All

Other Housing.

©BMI-BRSCU37

The Home Improvement Market: 2002 - 2006Soyuz Scenario: 2007-2015

1697

3

1801

3 1994

6

2515

0

2851

8

2390

6

2456

1

2536

0

2702

93007

7

2182

5

2189

5

2200

1

2534

5

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

R M

illio

ns

(200

6 V

alu

es)

Scenarios for Home Improvement

The Home Improvement Market will continue to grow

with the aspirations of consumers.

©BMI-BRSCU38

INVESTMENT IN CONSTRUCTION: 2001-2006THE STRATEGIC FORUM SCENARIOS: 2007-2015

32

82

3

36

51

1 42

74

7

48

17

1

53

22

4

56

000 6

35

00

75

00

0

88

50

0 97

00

0

82

50

0

75

75

0

71

50

0

61

00

0

57

50

0

0

20,000

40,000

60,000

80,000

100,000

120,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

R M

ILL

ION

S (

200

5 V

AL

UE

S)

MOTORWAY SCENARIO HIGHWAY SCENARIO FREEWAY SCENARIO

BYWAY SCENARIO Series5

The currentMOST LIKELY FUTURE

is theFREEWAY SCENARIO

1980 PEAK LEVEL OF INVESTMENT

Investment in Construction could grow well beyond 2010.

THE FUTURE OF CONSTRUCTION TO 2015

1980 Peak level of Investment exceeded in 2009.

©BMI-BRSCU39

Investment in Building and Construction : 1946 - 2006Strategic Forum Scenarios: 2007-2015

0

20,000

40,000

60,000

80,000

100,000

120,000

1946

1948

1950

1952

1954

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

R M

illi

on

s (

Co

ns

tan

t 2

00

6 v

alu

es

)

Investment in Construction : 1946 - 2006

Investment in Building : 1946 - 2006

Investment in Building : 2007 - 2015 : Soyuz Scenario

Investment in Construction : 2007 - 2015 : Freeway Scenario

Investment in Construction could exceed Building by 2010.

THE FUTURE OF BUILDING & CONSTRUCTION TO 2015

©BMI-BRSCU40

Scenarios for Building and Construction

SECTOR AND SEGMENT Weights 2005 2002 % 2003 % 2004 % 2005 % 2006 % 2007 % 2008 % 2009 % 2010 %

PRIVATE RESIDENTIAL Dwelling-houses 49.7 11714 3 12569 7 14016 12 16139 15 18020 12 16000 -11 15500 -3 16500 6 17000 3 Townhouses & Flats 27.4 3532 16 5188 47 6345 22 8898 40 10293 16 9500 -8 10000 5 11000 10 12500 14 Other (Incl. hotels & casinos) 0.9 1078 63 708 -34 1085 53 292 -73 363 24 300 -17 250 -17 280 12 300 7

Additions & alterations 22.0 4822 -3 5117 6 5666 11 7145 26 8101 13 7200 -11 6250 -13 6220 0 6200 0

Sub-Total 100 21145 6 23582 12 27112 15 32473 20 36776 13 33000 -10 32000 -3 34000 6 36000 6

PUBLIC RESIDENTIAL Public authorities. 97 4651 11 4786 3 3846 -20 2587 -33 2600 1 3000 15 4000 33 4500 13 4650 3 Public corporations 3 45 86 19 -58 17 -9 7 -60 10 45 20 100 50 150 65 30 45 -31

Sub-Total 100 4696 11 4805 2 3863 -20 2594 -33 2610 1 3020 16 4050 34 4565 13 4695 3

TOTAL RESIDENTIAL 25841 7 28387 10 30975 9 35067 13 39386 12 36020 -9 36050 0 38565 7 40695 6

PRIVATE NON-RESIDENTIAL Offices 16.4 3233 -29 2462 -24 2848 16 3064 8 3454 13 4200 22 4800 14 5200 8 5800 12 Shops 28.5 2264 -55 3002 33 3731 24 4259 14 4490 5 5000 11 5400 8 5800 7 6260 8 Industrial & warehouse 22.8 4029 11 3415 -15 4686 37 5324 14 6321 19 6670 6 7400 11 8000 8 8400 5 Other 5.4 2022 27 1763 -13 1562 -11 1009 -35 864 -14 1380 60 1400 1 1500 7 1750 17

Additions & Alterations 26.8 5741 2 5241 -9 5551 6 5029 -9 5872 17 6900 18 7000 1 7500 7 8290 11

Sub-Total 100 17289 -15 15885 -8 18377 16 18684 2 21000 12 24150 15 26000 8 28000 8 30500 9

PUBLIC NON-RESIDENTIAL Public Authorities 82 7739 1 10505 36 11226 7 12286 9 13000 6 13300 2 14000 5 14500 4 15500 7 Public Corporations 18 1870 44 1808 -3 1489 -18 2062 39 2500 21 3200 28 3500 9 4500 29 5500 22

Sub-Total 100 9609 8 12314 28 12714 3 14348 13 15500 8 16500 6 17500 6 19000 9 21000 11

TOTAL NON-RESIDENTIAL 26898 -8 28198 5 31091 10 33032 6 36500 10 40650 11 43500 7 47000 8 51500 10

TOTAL INVESTMENT IN BUILDINGS 100 52739 -2 56585 7 62067 10 68099 10 75887 11 76670 1 79550 4 85565 8 92195 8

Investment in Residential and Non Residential Unrecorded Additions and Alterations: 2002 - 2006 and Soyuz Scenario: 2007 - 2015 (2006 Values)2002 % 2003 % 2004 % 2005 % 2006 % 2007 % 2008 % 2009 % 2010 %

Residential Unrecorded Additions and Alterations 12151 12896 6.12% 14280 10.73% 18005 26.09% 20416 13.39% 18145 -11.13% 15751 -13.19% 15675 -0.48% 15625 -0.32%Non Residential Unrecorded Additions and Alterations 6117 5585 -8.69% 5915 5.90% 5359 -9.40% 6257 16.76% 7353 17.51% 7459 1.45% 7992 7.14% 8834 10.53%TOTAL Unrecorded Additions and Alterations 18268 18481 1.16% 20194 9.27% 23364 15.70% 26673 14.16% 25497 -4.41% 23210 -8.97% 23667 1.97% 24458 3.34%

Investment in Construction by Sector : 2002 - 2006 and Freeway Scenario by Sector : 2007 - 2015 (2006 Values)SECTOR AND SEGMENT Weights 2006 2002 % 2003 % 2004 % 2005 % 2006 % 2007 % 2008 % 2009 % 2010 % Roads Streets, Bridges etc 23.65% 7298 49.03% 8220 12.63% 9321 13.39% 11007 18.08% 13244 20.33% 14891 12.43% 17783 19.42% 18930 6.45% 20574 8.68% Waterworks 9.35% 3238 7.99% 3518 8.63% 3945 12.14% 4620 17.10% 5236 13.34% 5785 10.48% 6555 13.31% 7487 14.22% 8138 8.70% Sewerage 4.62% 1610 -0.12% 1731 7.52% 1961 13.25% 2267 15.65% 2587 14.11% 2858 10.45% 2993 4.72% 3407 13.86% 3705 8.75% Other Construction Works 29.39% 11114 -7.45% 14782 33.00% 16879 14.19% 17995 6.61% 16458 -8.54% 17196 4.48% 22208 29.14% 28798 29.68% 32029 11.22% Private Sector 32.99% 13246 17.18% 14495 9.43% 16065 10.83% 17335 7.91% 18474 6.57% 22771 23.26% 25463 11.82% 29878 17.34% 32553 8.96%TOTAL INVESTMENT IN CONSTRUCTION 100.00% 36507 11.23% 42747 17.09% 48171 12.69% 53224 10.49% 56000 5.21% 63500 13.39% 75000 18.11% 88500 18.00% 97000 9.60%

TOTAL INVESTMENT IN BUILDING AND CONSTRUCTION* 107514 -2 117813 7 130432 10 144688 10 158560 12 165667 1 177760 4 197732 8 213653 8* Including Unrecorded Additions and Alterations

INVESTMENT IN BUILDINGS, 2002 TO 2010 (Calendar Years): RAND MILLIONS (At Constant 2005 Prices). Basic data: SARB, Stats SA, MFA DATABASE. (Revised FEB 2007)

©BMI-BRSCU41

FUTURE OF RESIDENTIAL PROPERTY TO 2015

Residential Mortgage Advances : 2001 - 2006The Strategic Forum Scenarios: 2007-2015

194

597

196

602

2086

26

253

848

286

716 32

9000

3500

00

3300

00

345

000

3600

00

3750

00

3550

00

3600

00

365

000

3850

00

180,000

220,000

260,000

300,000

340,000

380,000

420,000

460,000

500,000

540,000

580,000

620,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

R M

ILL

ION

S (

200

6 V

AL

UE

S)

Miami ScenarioAlgarve ScenarioIpanema ScenarioMombasa ScenarioMiami ScenarioAlgarve ScenarioMombasa Scenario

Ipanema Scenariois Current

Most Likely Future

©BMI-BRSCU42

Total Mortgage Advances: 2002 - 2006The Strategic Forum Scenarios: 2007-2015

27

89

82

28

56

23 32

87

63

38

64

52

41

23

00

43

50

00

41

00

00

43

50

00

46

000

0

49

00

00

47

50

00

47

20

00

48

00

00

51

00

00

200,000

300,000

400,000

500,000

600,000

700,000

800,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

R M

illi

on

s (

Co

nst

ant

2006

Val

ue

s)

New York Scenario London Scenario

Sao Paolo Scenario Harari Scenario

Sao Paolo Scenariois Current

Most likely future Scenario

SCENARIOS FOR TOTAL MORTGAGE ADVANCES

©BMI-BRSCU43

FUTURE OF MORTGAGES OUTSTANDING TO 2015

TOTAL MORTGAGES OUTSTANDING: 1994-2006IPANEMA SCENARIO: 2007-2015

620

692

789 83

1

809

809

742 75

0

731

683

617

1480

1360

128

0

1200

110

0

1050

980

890

800

710

638

0

200

400

600

800

1000

1200

1400

1600

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

R B

ILL

ION

S (

200

6 V

AL

UE

S)

Mortgages Outstanding will Double by 2015

©BMI-BRSCU44

Investment in Building and Construction: 2006-2015The Total Market for Building Materials: 2006-2015

The market for major Building Material Groups: 2006-2015

95,1

35,9

65

99,4

00,3

82

106,6

55,8

66

118,6

39,1

84

128,1

92,0

37

122,4

86,1

64

111,1

16,5

31

107,6

66,6

40

95,6

17,5

30

91,8

15,4

07

0

50,000,000

100,000,000

150,000,000

200,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

R*1

00

0 (

20

06

VA

LU

ES

)

Total Building and Construction Materials Total Investment in Building and Construction Total Major Building Materials

Scenarios for Building Materials

©BMI-BRSCU45

The market for major Building Product Groups: 2006-2015Soyuz and Columbus Scenarios

94,6

69,8

94

101,4

80,4

74 1

16,3

25,5

83

136,4

31,4

42

155,5

31,8

44

153,2

24,1

70

149,2

41,7

88

151,0

22,5

10

148,1

50,0

33

149,6

22,9

43

95135964.9

8

99400382.2

9

106655865.7

118639184.1

128192037

.4

123692763.7

112293730.6

108874439.8

96825929.8

5

93024406.9

9

80,000,000

90,000,000

100,000,000

110,000,000

120,000,000

130,000,000

140,000,000

150,000,000

160,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

R*1

00

0 (

20

06

VA

LU

ES

)

Total Building and Construction Materials: Columbus Scenario Total Building and Construction Materials: Soyuz Scenario

Scenarios for Building Materials

©BMI-BRSCU46

Towards making sense of the future of DistributionDr. Llewellyn B. LewisDr. Llewellyn B. Lewis

MarchMarch 20072007

THE STRATEGIC FORUMTHE STRATEGIC FORUMA place of assembly

for strategic conversations

BMI




Reg. No. 2002/105109/23

•BMI




Reg. No. 2002/105109/23

•

THE STRATEGIC FORUMwww.strategicforum.co.za

bmi strategy consulting unit cc - strategicforum.co.za · 30/03/2007 · 2 ©bmi-brscu buffalo...

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