Building confidence levels remain depressed
GENERAL building confidence levels remain depressed despite the latest Construction Industry Development Board (CIDB) small to medium enterprise conditions survey revealing that they remained flat in the first quarter of this year.
The survey revealed that conditions were more favourable for building contractors with better activity and some alleviation in pressure on profitability. However, it said the indicator rating insufficient demand for new building work as a constraint to business operations remained elevated at 73 percent, its highest level since the third quarter of 2016.
Building confidence for builders was unchanged in the first quarter at 36 index points on a 100-point scale.
Ntando Skosana, project manager for monitoring and evaluation at the CIDB, said although there were positive movements in some of the underlying indicators across the grades, confidence remained below long-term averages.
The Western Cape was the only province where confident levels were above the 50-point neutral mark, despite declining to 54 points from 57 index points in the fourth quarter of last year.
Sentiment improved for builders in Gauteng, KwaZulu-Natal and the Eastern Cape, but was oscillating around the poor level of 30 index points, it said.
Skosana said this meant a high majority of about 70 percent of respondents were dissatisfied with current business conditions. “This should not come as a surprise, especially when one looks at the underlying indicators,” she said.
In Gauteng, the percentage of building contractors reporting a slowdown in building activity dropped to 27 percent after slumping to its worst historical level of 81 percent in the fourth quarter.
This lifted profitability after it also deteriorated to its worst level of record in the previous quarter.
However, in KwaZulu-Natal the percentage reporting weaker profits increased to 78 percent from 75 percent in the previous quarter.
An overwhelming 81 percent also cited insufficient demand as a hindrance to their activities compared to 74 percent in the previous quarter. This suggested “rough seas ahead” for building activity in the province, the report said Building activity momentum continued to improve in the Eastern Cape in the first quarter, resulting in an improvement in profitability.
Alleviating pressure
Confidence among civil engineering contractors ticked up by a single index point to 36 points, while some positive movements in construction activity assisted in alleviating some pressure off profitability. Both activity and profitability were lifted from exceptionally low levels in the previous quarter.
Skosana said civil contractors across all four major provinces registered confidence levels below 40 index points, which implied that on average more than 60 percent of respondents in each of these provinces rated business conditions as unfavourable in the first quarter.
“The provincial picture for civil contractors was rather morose, especially in light of the reversed gain in confidence for the Western Cape, where confidence plunged to its worst level since the second quarter of 2013.”
Future activity momentum in both the building and civil engineering sectors was likely to remain under pressure.