Confidence in the civil construction industry reached a three-year high during the third quarter of 2012, the latest First National Bank (FNB) and the Bureau of Economic Research (BER) construction confidence index found on Tuesday.
The FNB/BER report said that a gain of 4 index points to 42, was achieved on the back of on-track provincial capital project spending, particularly road and water infrastructure projects.
Construction activities at power utility Eskom’s Medupi, Kusile and Ingula power stations and Transnet-led infrastructure projects also contributed to higher confidence during the quarter.
However, FNB chief economist Cees Bruggemans pointed out the recovery in the construction sector was expected to continue over the next few quarters, but that the pace relied on the public sector’s ability to realise spending on their capital expenditure (capex) budgets.
He pointed to a R12.8-billion underspend by municipalities during the year ended June 2012. Only 72.5% of the total capital budget for the full year was realised.
Provincial capex rose 14.6% during the first quarter of the year, with capex in KwaZulu-Natal, Gauteng and the Free State growing robustly, while projects struggle to get off the ground in the Eastern Cape, Limpopo and North West provinces.
Despite the increased activity levels, profitability came under renewed pressure during the third quarter, as input prices increased faster than tendering prices, said Bruggemans.
The rise in activity has led to some constraints in the construction sector, most notably the shortage of skilled labour.