Civil confidence falls to five-year low in first quarter
The first-quarter fall in civil confidence to its lowest level since 2011 unveils a weakening in South Africa’s construction activity that is likely to continue throughout the year.
First National Bank (FNB) and the Bureau for Economic Research’s (BER’s) latest Civil Confidence Index shows a 14-point plunge to 28 in the first quarter of the year, despite recording a marginal improvement to 42 in the fourth quarter of 2015.
“The lower confidence reflects a marked deterioration in construction activity and more competitive environment,” FNB senior industry analyst Jason Muscat says, indicating that the current levels suggest that more than 70% of respondents were dissatisfied with prevailing business conditions.
“The current survey results suggest that, follow-ing the mild uptick in the fourth quarter of 2015, growth in construction works likely eased in the first quarter of 2016,” he notes.
This year, and possibly the next year as well, will see a continued moderation on the back of lower public-sector capital expenditure (capex) and persistently weak growth in private-sector capex.
“The percentage of respondents that rated insufficient demand for new construction work as a business constraint jumped to 85, a four-year high.”
Muscat points to South African Reserve Bank data showing fourth-quarter growth in the real value of construction works accelerating to 4% year-on-year from 3.7% in the preceding quarter.
“Construction activity was largely supported by capital outlays by provinces and municipalities, while capex by private enterprises, particularly in the mining sector, remained weak,” he says.
The muted construction activity growth has intensified tendering competition, reaching a five-year high in the first quarter of the year, as com- panies fought for those projects that were avail- able.
However, despite the lower activity and higher competition, the index shows that overall profitability remains relatively stable.
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