FNB/BER Civil Confidence Index finds ‘some life’ within construction sector

9th December 2019 By: Marleny Arnoldi - Creamer Media Online Writer

First National Bank (FNB) and the Bureau for Economic Research (BER) says construction activity has continued to improve in the fourth quarter of the year.

The higher activity lifted the FNB/BER Civil Confidence Index to 22, from 15 in the third quarter.

This marked the first time since the second quarter of 2017 that the index rose to levels above 20.

However, despite the improvement in construction activity, weak demand remained a key constraint to the sector and companies’ order books. FNB in a statement on Monday said the majority – nearly 80% – of respondents to the index were still dissatisfied with prevailing business conditions.

According to Statistics South Africa, the real value of expenditure on construction works contracted by 0.4% year-on-year in the third quarter, but FNB’s survey results point toward an improvement in the fourth quarter.

“While activity was up, other indices, specifically those measuring tendering competition and the availability of new work, weighed on confidence. Confidence would likely have been higher were it not for the keener tendering competition and concerns regarding the availability of future work.

“What this implies is that the work that is currently under way is either not expected to be sustained or the growth is limited to a few firms within the sector,” said FNB economist Siphamandla Mkhwanazi.

He added that the results of the index regarding growth in activity were heartening as it suggested that there was some life within the sector.

“Much of this was likely in the renewable energy sector and related to the upgrading or expansion of road infrastructure. As such, it was probably not beneficial to a broad base of firms and tough business conditions remain.”