While civil work from provinces and municipalities has held up well, contributing to an increase of three points in the First National Bank (FNB) and the Bureau for Economic Research’s (BER’s) Civil Confidence Index to 42 points in the fourth quarter of 2015, weak spending on construction by State-owned enterprises and the private sector will continue to weigh on growth.
Despite the rise in confidence, the current level of the index indicated that close to 60% of respondents were dissatisfied with prevailing business conditions.
“Civil contractors were relatively downbeat for much of 2015. After averaging 51 index points in 2014 and 53 in 2013, confidence averaged only 41 in 2015,” FNB senior industry analyst Jason Muscat pointed out.
However, overall profitability saw a noticeable improvement during the quarter as tendering competition eased, lifting confidence.
Confidence was further boosted by respondents’ expectations that construction work and profitability would be noticeably better in the first quarter of this year.
“Respondents’ predictions have been very inaccurate in the past and, while it contributed to the uptick in confidence in the fourth quarter, it is probably too optimistic,” Muscat warned.
The percentage of respondents citing new demand as a constraint to business operations was somewhat lower in the fourth quarter, although still relatively high.