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Africa|Business|Construction|Contracting
Africa|Business|Construction|Contracting
africa|business|construction|contracting

Civil Confidence Index declines to 41 points, despite increase in construction activity

6th December 2023

By: Schalk Burger

Creamer Media Senior Deputy Editor

     

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The FNB/Bureau for Economic Research Civil Confidence Index declined to 41 in the fourth quarter, despite activity, profitability and tender competition data being more positive, and confidence is being negatively affected by factors not directly related to current demand.

The current reading means that almost 60% of respondents are dissatisfied with prevailing business conditions. However, the subindices paint a more upbeat picture of the sector. Growth in activity continued to gain momentum resulting in better-than-average overall profitability.

“Activity in the civil construction sector has been on an upward trajectory for the past few quarters. However, according to Statistics South Africa, it fell back somewhat in the third quarter, contracting in real terms by 0.9% year-on-year. That said, the survey results suggest that construction activity likely rebounded in the fourth quarter,” says FNB senior economist Siphamandla Mkhwanazi.

The survey results reveal a sector in which demand is currently relatively abundant and the pipeline of work robust. However, respondents remain concerned about the prevalence of criminal activity in the sector as well as the uncertainty created by the cancellation of tenders and delays in tender adjudication, which may have weighed on the overall business mood, he adds.

Further, in terms of respondents’ expectations for the next quarter, an improvement in order books and a decline in the index measuring the keenness of tendering price competition, which is at its lowest level since 2013, all suggest that the growth momentum will be sustained, at least over the near term, he noted.

“The underlying data related to activity, profitability and tender competition are much more positive than what sentiment suggests. In fact, the sector seems to be experiencing a period of sustained activity growth.

“One can therefore conclude that confidence is being negatively affected by factors not directly related to current demand, along with broader pessimism from other parts of the economy relating to loadshedding, logistical constraints and the fiscus, among others,” Mkhwanazi says.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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