JSE-listed diversified miner and materials supplier Afrimat finds in its latest construction index that eight of the nine constituent indicators of the index recorded real growth rates in the second quarter of the year, compared with the first quarter.

Notably, the construction sector added more than 100 000 jobs in the quarter, outperforming all other sectors of the economy.

The Afrimat Construction Index (ACI) increased to a level of 115.4 in the second quarter, compared with 109.1 in the prior quarter.

The ACI measures the level of activity within the building and construction sectors and is compiled by economist Dr Roelof Botha.

He says the quarter-on-quarter increase of 5.8% is higher than the increase in the country’s gross domestic product over the same period, which is a welcome improvement on the decline in construction activity recorded in the first quarter.

However, the year-on-year increase was less than 1%, signalling the need for macroeconomic policies aimed at construction activity expansion and business encouragement.

Moreover, other highlights of the ACI for the second quarter were positive real growth rates in the wholesale sales values of construction materials and value of buildings plans passed categories, as well as an increase in volume of building materials produced.

Botha says the results of the ACI in the second quarter are especially encouraging against the background of high interest rates and the low growth macroeconomic environment.

“The positive trend has been influenced by the increase in the public sector’s spending on capital formation, which will hopefully continue and gather momentum over the next couple of years, as the damage done to the country’s infrastructure by State capture is addressed,” he adds.

Botha believes the lethargy in the year-on-year performance of construction sector activity is, in the main, the result of the South African Reserve Bank’s hawkish monetary policy, which has resulted in the highest interest rates in 15 years.

“Hopefully, interest rates will be lowered before the end of the year, which will go a long way to restoring consumer confidence and to lower the costs of construction-related projects, which are essential for the quest to restore the quality of the country’s infrastructure.”

Botha further notes that a new-found urgency is emerging within government on the dire state of South Africa’s infrastructure, which promises to breathe some life into construction sector activity.

He says it is encouraging to witness evidence of closer cooperation between government and the private sector in the identification and design of crucial interventions to upgrade roads, harbours, freight railways and electricity supply.

INDICATORS

Employment in construction increased by 8.6% quarter-on-quarter and by 10.8% year-on-year, wholesale construction trade increased by 8.5% quarter-on-quarter and 10.5% year-on-year and building material sales increased by 5.8% quarter-on-quarter but declined by 1.5% year-on-year.

Constructed value added declined by 6.3% quarter-on-quarter but grew by 4% on a year-on-year basis.

Retail trade sales (hardware) grew by 2.9% quarter-on-quarter but declined by 2.1% year-on-year, while building material volume grew by 3.7% quarter-on-quarter and declined by 2.8% year-on-year.

Building plans passed (in value) increased by 18.8% quarter-on-quarter, but declined by 3.4% year-on-year.

Salaries and wages in construction grew by 0.4% quarter-on-quarter but declined by 3.8% year-on-year, while buildings completed (in value) increased by 3.7% quarter-on-quarter but decreased by 33.2% year-on-year.

The overall ACI growth of 5.8% quarter-on-quarter compares with 0.6% growth year-on-year, while the country’s gross domestic product grew by 4.7% quarter-on-quarter, but declined by 0.1% year-on-year.