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Afrimat Construction Index ticks up, but talks on land may dampen mood

15th March 2018

By: Irma Venter

Creamer Media Senior Deputy Editor

     

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The 2017 fourth quarter results of the Afrimat Construction Index (ACI) show an upward trend, broadly in line with the uptick in South Africa’s gross domestic product.

After reaching an eight-quarter high of 127 at the end of 2016, the ACI declined for two successive quarters before recovering in the third quarter.

It increased again in the fourth quarter of 2017 by 1.9%, to reach a level of 125.4.

Afrimat is an openpit mining company providing industrial minerals and construction materials to the regional market. The ACI is a composite index of the level of activity within the building and construction sectors, compiled by economist Dr Roelof Botha on behalf of Afrimat.

The 2017 fourth quarter ACI indicates that the construction sector at large continues to outperform the economy, with the ACI having expanded by 25.4% since the third quarter of 2010 (the base period). This is higher than the rate of growth of 15.8% for the economy over this period (in real terms).

The index is calculated from nine different constituent indicators.

The improvement in the ACI between the third and fourth quarters of 2017 was driven mainly by the value of buildings completed by major municipalities; the retail sales values for hardware, glass and paint and the sales value of building materials produced.

Five of the nine indicators included in the ACI showed improvements during the fourth quarter, with two others declining by less than 0.5%.

Botha says the improvement in the ACI bodes well for the construction sector’s growth prospects in 2018, particularly owing to the change in the country’s political leadership.

He warns, however, that the decision by Parliament to pass a motion for the Constitutional Review Committee to consider amending the Constitution to allow expropriation of land without compensation, may place a damper on the revival of business confidence and construction activity related to land improvements.

“Another vexed issue that government will have to address with some urgency is late payments on both the revenue and expenditure side of municipal finances,” says Botha.

“National Treasury has identified this problem area as a threat to the financial stability of several municipalities.

“At the end of last year, municipal creditors totalled R41.2-billion, of which 39.3% was owed to Eskom and 17.7% to water boards.

“On the debtors’ side, national government and the provinces owed municipalities a combined R6.6-billion. Any threats to the financial viability of local governments undermines progress with housing and infrastructure projects.”

Afrimat CEO Andries van Heerden says he is hopeful that the ACI’s positive trend will flow into the first quarter of 2018.

“We witnessed a reduction in sales volumes during the last quarter of 2017, with the slow-down exacerbated in November and December in construction material products.

“This was felt more strongly in KwaZulu-Natal and southern Gauteng, where our Glen Douglas and Clinker operation experienced reduced volumes.

“We nevertheless are optimistic about the change in leadership of the country – there is no doubt that the political uncertainly of the last few months of 2017 worsened the situation.”

 

Edited by Creamer Media Reporter

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