AfriSam CEO Rob Wessels
The South African construction sector is still facing "very tough and difficult" conditions, with the 2.5% inflation rate creating an even tighter environment, Econometrix chief economist Dr Azar Jamine said on Friday.
Speaking to industry representatives during an AfriSam-hosted post-Budget briefing, he said this cast a negative shadow over employment, as the construction industry created more informal employment than any other sector in the country.
"If there is going to be an improvement in your business over the next few years, it's more because the overall cycle is now turning," he told delegates, adding that it was a "horrible picture" for the civil engineering sector.
Jamine also said that, with State-owned enterprises having run out of cash, it also placed a damper on the civil construction industry. "Temper your enthusiasm," he warned.
He further pointed out that the nonresidential sector has taken a greater hammering than the residential sector, but there were some signs of improvement.
"Strangely, in this economy, the construction of shopping centres has continued to rise. I thought there was overdevelopment and then suddenly the latest figures have shown a revival."
Speaking to Engineering News Online after the briefing, AfriSam acting CEO Rob Wessels highlighted that there were some green shoots in the industry, with construction and materials companies reporting cautious optimism.
"The sector is feeling encouraged by some of the changes in the country of late," he added.
Being more concentrated in retail than bulk cement supply, Wessels explained that the company has experienced an uptick in sales, but added that it was being applied to improvements in the residential sector, rather than new builds.
Jamine explained that the delay in new builds was a result of the fact that housing prices had been subdued, which limited the returns for property developers. "With the possibility of interest rate cuts, it will gradually look up," he pointed out.
Wessels agreed, adding that the industry had to be patient. "This is not a quick fix", he said. However, he said the uptick in AfriSam's sales had indicated that consumers were more confident in spending.
"There is renewed optimism and when there's optimism, suddenly people feel more confident," said Wessels.
"[People are] not going to build when they're not confident," Jamine added.