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DRIVERS South Africa has for many years been an exporting nation, with precious metals and minerals predominating. Manufacturing has made a strong showing in recent years boosted by government initiatives such as the Motor Industry Development Programme. The importance of minerals beneficiation in adding value to raw minerals is widely accepted, putting the spotlight on the need for continuous technology improvement and new investments. Fixed investment into South Africa, particularly foreign direct investment related to expanding our export potential and minerals beneficiation capacity, is an important driver of growth in our group’s activities in South Africa and the SADC region. High levels of fixed investment growth in emerging markets and a shift by the United States to sourcing its strategic oil requirements from West Africa will provide opportunities for our international engineering and contracting businesses. Continued demand from first world markets and growth in China provides an additional platform for growth, particularly for the group’s automotive and transport systems manufacturing activities. THE INTERNATIONAL ECONOMY The global economy faces major potential threats. These include an ongoing decline in world financial markets; the Brazil default contagion effect on emerging markets; little potential for resolution in the Middle East and pending military action by the USA against Iraq; mixed signals such as higher unemployment and poor corporate profits in the USA and a two-speed economy in the UK (financials and services thriving, but manufacturing in recession). Even against this background, forecasters still expect improved GDP growth in the USA, in Europe and Japan later this calendar year with further improvements in 2003 and 2004. THE SOUTH AFRICAN ECONOMY The domestic economy has shown remarkable resilience largely due to sound macro management by the South African Treasury and Monetary Authorities. An unfortunate rise in producer and consumer inflation brought about by last year’s sharp depreciation in the Rand and a higher oil price is causing widespread concern, but this adverse trend should start to reverse late in 2002. GDP growth over the next three years is expected to remain mediocre at between 2% and 3%, although lower interest rates and stronger demand from South Africa’s trading partners for commodities in 2003 and 2004 may bring about more buoyancy. These levels of growth are unlikely to satisfy the pent-up demand in our country for jobs, redistribution of opportunity and wealth and the provision of basic services for all. There is wide-ranging consensus in government, organised labour, business and the broader community that significant foreign direct investment is needed to push GDP growth rates up to the 5% or 6% per annum which will provide the opportunity to satisfy the needs of all our citizens. It is as important to create a climate conducive to investment in South Africa as it is to promote tourism to our country. We all need to work continuously to enhance and sustain the confidence of the global investment community. Recognising the need for robust debate during South Africa’s social and economic transformation, we will need to contextualise and balance this in a way that does not damage confidence in the stability and growth prospects of our economy or the value of our currency. CORPORATE GOVERNANCE We are fortunate as a nation that we have been working hard since 1994 to improve governance and ethical behaviour in both the public and private sectors. Progress is demonstrated by the large number of high profile prosecutions that have taken place, the tightening of standards and controls in our financial services sector and on the JSE Securities Exchange and finalisation of the King II recommendations on corporate governance. Recent shocking incidents and disclosures from the American corporate world serve to emphasise the need for constant vigilance and the ratchetting up of reporting standards and corporate behaviour. Murray & Roberts has emphasised and published its Core Values for the past 15 years and is committed to professionalism, integrity and transparency in all we do. We are proponents and supporters of sustainable development in its wider sense and are privileged to have partnered the 2002 World Summit on Sustainable Development held in Johannesburg. APPRECIATION Our thanks are due in full measure to our chief executive Brian Bruce and his executive leadership team for driving the implementation of Rebuilding Murray & Roberts and for their non-negotiable commitment to sustainable earnings growth and value creation. They have confronted all of the difficult issues facing the group in an admirably transparent manner. Every aspect of our operation has been put under scrutiny and subjected to change or transformation of one form or another in the quest for continuous improvement. I wish to thank my colleagues on the board for their support of this process and their guidance throughout the year. Change has also occurred in our top executive team. John Stanbury left the group and resigned as a director in November last year. Jo Grové resigned as a director in February this year after the repositioning of Unitrans as a non-strategic holding. Unitrans remains an important contributor to the group’s bottom line and we thank Jo for his contributions as a director and appreciate his ongoing leadership of Unitrans. André de Nysschen has made the decision to leave the group after 19 years of service and has resigned from the board with effect from 31 August 2002. André’s career with Murray & Roberts related mostly to our manufacturing and structural engineering activities. In recent years he stabilised our investment in AWI, focusing on the company’s operational efficiency. André leaves with our best wishes and warm gratitude. It is with sadness that I report the passing of two of our former directors during 2002. JW (Robbie) Robertson passed away in May. Robbie joined Murray & Stewart in 1936 and progressed from junior engineer level to become the managing director and then chairman. He was appointed a director of Murray & Roberts Holdings in 1964 and served as deputy chairman of that board from 1974 to 1978. Robbie played a major role in bringing about the full merger of Murray & Stewart and Roberts Construction in 1979. Charl van der Merwe passed away in September. Charl joined Murray & Roberts in 1987 with the acquisition of Gillis-Mason, a company he helped to develop in the 1960’s. He was appointed a director of Murray & Roberts Holdings in 1988 and retired in 1994. Charl was chief executive and chairman of Murray & Roberts Construction between 1989 and 1992. He made an important contribution to our group and to the South African construction industry over many years. ANNUAL GENERAL MEETING The notice convening the annual general meeting to be held on 28 October 2002 is set out on page 80 of this report. I would like to encourage shareholders to attend and participate in this meeting where directors will be present to address any matters which may be raised. PROSPECTS Murray & Roberts moves into the future with a healthy balance sheet, a record order book for its project activities and excellent demand for its products. The company is looking to grow both organically and by acquisition through the year ahead. Chief executive Brian Bruce has a good story to tell about the last two years and what he plans for the years that lie ahead. Aggressive targets have been set through to 2005 with strong determination throughout his executive leadership team for their achievement.  David Brink Chairman |
