The FNB/BER Civil Construction Index reverted back to its third quarter level in the fourth quarter, meaning that almost 60% of respondents were dissatisfied with prevailing business conditions, but indicators point to a rebound, at least in the short term.

The sub-indices painted a more upbeat picture than the overall decline in the index.

Growth in activity continued to gain momentum, resulting in better than average overall profitability.

“Activity in the civil construction sector has been on an upward trajectory for the past few quarters. However, according to Statistics South Africa it fell back somewhat in the third quarter, contracting in real terms by 0.9% year-on-year”, FNB senior economist Siphamandla Mkhwanazi said yesterday.

“The underlying data related to activity, profitability and tender competition are much more positive than what sentiment suggests. In fact, the sector seems to be experiencing a period of sustained activity growth. One can therefore conclude that confidence is being negatively affected by factors not directly related to current demand, along with broader pessimism from other parts of the economy relating to load-shedding, logistical constraints and the fiscus, among others,” he said.

The survey results suggested that construction activity likely rebounded in the fourth quarter.

On the outlook, respondents’ own expectations for next quarter, an improvement in order books, and a decline in the index measuring the keenness of tendering price competition – which is at its lowest level since 2013 – all suggested that the growth momentum will be sustained, at least over the near term.

Growth in construction actvity. Source: FNB/BER

“The survey results reveal a sector in which demand is currently relatively abundant, and the pipeline of work robust,” said Mkhwanazi.

He said respondents remained concerned about the prevalence of criminal activity in the sector, as well as the uncertainty created by the cancellation of tenders and delays in tender adjudication, which may have weighed on the overall business mood.

The FNB/BER civil confidence index can vary between a maximum of 100 (which indicates that all respondents were satisfied with prevailing business conditions) and a minimum of zero (indicating that all respondents were dissatisfied). A level of 50 indicates that the respondents are equally divided between those satisfied and dissatisfied.

BUSINESS REPORT