Mining, renewable energy the construction sector’s only hope – FNB
The First National Bank (FNB)/Bureau for Economic Research Civil Confidence Index (CCI) remained at an all-time low during the second quarter of the year.
Underpinning the depressed confidence in the industry was a further decline in construction activity, which led to paper-thin profit margins.
The CCI gained one point to 11 in the second quarter with close to 90% of respondents remaining dissatisfied with prevailing business conditions.
Statistics South Africa recorded a 0.9% annual decline in the real value of construction works during the first quarter, while the second quarter survey revealed the lowest activity growth level since 2010.
According to FNB property economist Siphamandla Mkhwanazi, this means that the slowdown in construction activity is expected to continue and most likely intensify.
In addition to current weak demand, new demand is not forthcoming, Mkhwanazi said on Tuesday.
He pointed out that 88% of respondents in the CCI considered insufficient demand for new construction work, a proxy for order books, to be a constraint on their business operations.
“The performance of the sector over the next few months will be determined by how the current fiscal constraints are addressed and whether or not this leaves room for increased public infrastructure spending.
“For now, the sense is that the scope for this is limited. However, there is still an opportunity for greater (policy) certainty in the mining and renewable energy sectors to boost private sector fixed investment. This could offset, in part, the effect of lower public sector capital expenditure,” said Mkhwanazi.
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