The small and medium-sized enterprise (SME) segment in both the building and civil engineering sectors remained under pressure in the first quarter of this year, with the latest Construction Industry Development Board (CIDB) business conditions survey marking the seventh consecutive quarter that business confidence for both sectors registered below the neutral 50-point mark.
The general builders segment remained pessimistic, as building activity weakened, edging up one point to 46 index points; however, tendering competition intensity abated slightly, alleviating some of the pressure on profitability.
While sentiment and business activity deteriorated for builders Grades 5 to 8, which dropped to below the neutral 50-point mark, the smaller Grades 3 and 4 builder confidence rebounded from 20 index points to 55 during the quarter under review.
“After ending 2016 on a disappointing note, the smaller Grades 3 and 4 regained some ground this quarter. The underlying performance indicators improved immensely, especially building activity growth which is currently at a two-year high,” explained CIDB monitoring and evaluation project manager Ntando Skosana.
The survey found that the business confidence of the civil contracting sector declined four index points to 37 during the first quarter, as civil contracting profitability came under more pressure, on the back of weaker construction activity, and tendering competition intensified.
“Civil confidence is disconcertingly low at this stage – the worst level in nearly five years. An overwhelmingly high majority of 63% respondents dissatisfied with prevailing business conditions during the quarter. What is even more concerning is the fact that the deterioration was broad-based across all grades and provinces,” Skosana said in a statement.
The index shows that the largest drop in confidence emerged from the smaller Grades 3 and 4 contractors, which decreased ten index points to 33, while Grades 7 and 8 experienced a marginal decline.
“Going forward, the outlook for both sectors remains clouded, especially against the backdrop of weakness in the broader macroeconomy. General builders expect to see some improvement in activity in the near term, while there is very little pointing towards improvements for civil engineers,” the CIDB concluded.