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Civil confidence falls to lowest level since 2011 – BER

Civil confidence falls to lowest level since 2011 – BER

Photo by Duane Daws

28th June 2017

By: Megan van Wyngaardt

Creamer Media Contributing Editor Online

     

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The First National Bank (FNB)/Bureau for Economic Research’s (BER’s) Civil Confidence Index fell to 28 in the second quarter, from 40 in the first quarter, indicating that more than 70% of respondents are dissatisfied with prevailing business conditions.

This, along with the first quarter of 2016, is the joint lowest confidence since the end of 2011.

Underpinning the lower confidence was a noticeable decline in construction activity, with Statistics South Africa revealing that the real value of construction works had contracted by 0.1% year-on-year, following growth of 2.3% in the fourth quarter of 2016.

Meanwhile, BER warned that the survey results for this quarter pointed to a more severe drop-off in the second quarter.

“The fall in construction activity is consistent with an environment of constrained public sector capital expenditure. Therefore, although quite stark, the decline in activity is not entirely surprising,” said FNB senior economic analyst Jason Muscat.

The decline in construction activity also caused profitability to deteriorate markedly in the quarter. “The spate of sovereign debt ratings downgrades, as well as the uncertain mining sector outlook in the wake of the new Mining Charter, bodes ill for the future of the civil construction sector.

“Some parastatals have already cancelled bond auctions due to fears that the uptake may be too weak because of the ratings downgrades. This affects their ability to fund large capital projects,” Muscat pointed out.

Looking ahead, he noted the factors leading to the slowdown in construction activity, namely a broad-based fall in demand led by the public sector, were unlikely to improve over the short- to medium-term.

“It is, therefore, reasonable to expect civil contractor activity to be under pressure for the rest of the year,” remarked Muscat.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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