After registering a level of 41 in the fourth quarter of 2023, the FNB/Bureau for Economic Research (BER) Civil Confidence Index increased to 47 in the first quarter of this year, its best level since the third quarter of 2016.
The current reading means that almost 50% of respondents are satisfied with prevailing business conditions.
The better sentiment was supported by the underlying indicators, particularly growth in activity.
“The real value of construction works increased by 2.1% on an annual basis in the fourth quarter of 2023, from 0.1% in the third quarter. The survey results suggest that this momentum could quicken in the first quarter of 2024,” explains FNB senior economist Siphamandla Mkhwanazi.
The improved activity is said to have helped firms remain reasonably profitable.
“Traditionally the sector has been characterised by very thin profit margins. However, with better activity – and despite an uptick in tendering competition – profit margins are at historically good levels,” remarks Mkhwanazi.
While activity and profitability were upbeat, respondents raised concerns relating to the constraints to business operations.
This is reflected in the rating of the lack of skilled labour (which is now at its highest level since 2008) and access to credit (at an all-time high).
The reasonably solid performance by the civil construction sector, in terms of work, registered since the second half of 2022 continued into the first quarter of this year.
This was most likely driven by, but not exclusively, renewable energy and road infrastructure projects, FNB posits.
“The upbeat sentiment was largely supported by the rest of the survey. In fact, given the current level of activity, one could argue that confidence should have been higher.
“However, an uptick in all of the surveyed constraints to business operations probably weighed on sentiment, and could limit growth in future,” Mkhwanazi avers.
The fieldwork for the first-quarter survey was conducted between February 8 and 26.