SA contractors’ confidence is at historic low

Spurred by slowdown in construction

CONFIDENCE among small and medium civil contractors slumped to a historic low in the third quarter of this year. The latest Construction Industry Development Board (CIDB) SME business conditions survey revealed that civil contractor confidence fell by 6 index points on a 100-point scale to 27 points during the third quarter.

Gauteng was the only province where sentiment improved, with confidence in the Western Cape and KwaZulu-Natal deteriorating to its lowest level on record. Confidence in Gauteng improved by 20 index points to 47 points, but remained below the key 50-index point level that indicated respondents were neutral. Civil contractor confidence in the Western Cape slumped by 32 index points to 21 points, while that of KwaZulu-Natal civil contractors dropped by 11 index points to 18 points.

The CIDB said construction activity came under immense pressure during the third quarter, with contractor respondents experiencing a slowdown in construction activity increasing to 65 percent from 45 percent.

It said the lower activity resulted in profitability coming under pressure during the quarter, with weaker profit margins exacerbated by tougher tendering competition. The indicator measuring competition in tendering prices rose to 48 percent from 35 percent.

The CIDB added that the outlook for construction activity did not look promising. It said this was illustrated by the uptick in the number of respondents experiencing insufficient demand for construction work as a constraint to 77 percent from 71 percent.

Building confidence shed a further three index points to a level of 30 points in the third quarter, which is the lowest level in almost seven years. The CIDB reported that confidence was below 40 points across all the grades and provinces, which confirmed the industry was still under immense pressure.

It said building contractors were challenged by poorer business conditions and the employment indicator was also weaker.

Ntando Skosana, the project manager for monitoring and evaluation at the CIDB, said the third quarter survey results suggested that pressure on smaller building contractors in particular was escalating.

“The fact that the lower confidence was so pervasive across grades and provinces highlights the broad based nature of weakness in the building and construction sectors.”