Civil confidence index plummets to 13
The FNB/Bureau for Economic Research (BER) Civil Confidence Index has fallen to a dismal 13 points in the second quarter, from 21 points in the first quarter.
This means that close to 90% of respondents to the index’s survey are dissatisfied with prevailing business conditions.
Statistics South Africa’s data for real value of investment in construction works showed a decline of almost 18% year-on-year in the first quarter, which means that, owing to base effects, annual growth will likely rebound noticeably in the second quarter.
However, FNB property economist Siphamandla Mkhwanazi says that while official growth in construction works will be higher in the second quarter, the survey data suggests that it is not the experience of the majority of respondents.
“Against expectations of an improvement, the index measuring activity was unchanged between the two quarters and this could have weighed on confidence.”
Also impeding confidence was keener tendering competitions. Mkhwanazi says firms are having to price tenders more aggressively, with narrower profit margins, to secure work.
In terms of outlook, the demand for new construction work remains scarce. This is being exacerbated by procurement delays, particularly in the public sector.
The BER notes a rise in the number of survey respondents who commented that the amount of time between tender closing and tender adjudication is increasing, to the detriment of firms.
Mkhwanazi deems it unlikely that, on an annual basis, construction activity will contract again in the second quarter; however, against expectations, it does seem as though the momentum in construction activity seen since the third quarter of 2020 has stalled.
Moreover, the percentage of firms that find new construction demand to be elusive remains elevated.
This suggests that activity growth may be restrained beyond the low-base-induced improvement over the near term.
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