The FNB/Bureau of Economic Research (FNB/BER) Civil Confidence Index fell to nine index points during the first quarter of this year, from 15 in the fourth quarter of 2021.

The odds remain stacked against a meaningful recovery in the civil construction sector this year, says FNB senior economist Siphamandla Mkhwanazi.

The current index level means that more than 90% of respondents are dissatisfied with prevailing business conditions. Civil contractors were noticeably more upbeat about activity and profitability next quarter, although even this was not enough to lift sentiment.

“It is discouraging that sentiment in the civil construction sector remains so weak while confidence in the broader economy is improving,” says Mkhwanazi.

Civil construction sector activity fared better during the quarter, albeit only marginally better than confidence. According to Statistics South Africa, the real value of civil construction works contracted by 3.9% year-on-year in the fourth quarter of 2021. A similar, if not less severe, decline is likely this quarter.

“Although stable, the level of construction activity is still well below previous highs. This prolonged period of weak activity is likely taking its toll on the business mood of civil contractors,” Mkhwanazi notes.

The decrease in confidence was despite an improvement in some of the underlying indicators, particularly activity. Also weighing on sentiment is the amount of time it takes after tender submission for projects to be adjudicated and awarded.

“While the survey doesn’t explicitly ask this, a rising number of respondents commented that the delays in project awards are inhibiting growth in the sector,” Mkhwanazi points out.

A stabilisation in activity growth and an expectation that activity will improve further next quarter were unable to offset concerns about the slow pace at which project tenders are adjudicated and awarded.

“Further to the survey results, the announcement end-February by the National Treasury to suspend all tenders advertised by the public sector on or after February 16, 2022, with no new tenders after this date until it has reviewed and amended the procurement framework, could have a detrimental effect on the sector depending on how long it persists.

“Civil construction activity is much more dependent than other sectors on public sector spending. Even after years of decline, the odds remain stacked against a meaningful recovery in the civil construction sector during 2022,” he reiterates.