Mas­sive fall in civil con­struc­tion con­fi­dence in­dex

The Star Early Edition - - NEWS - Ka­belo Khu­malo

THE FIRST Na­tional Bank (FNB) and Bu­reau for Eco­nomic Re­search (BER) Civil Con­fi­dence In­dex re­leased yes­ter­day showed that con­struc­tion ac­tiv­ity in South Africa de­clined sharply in the sec­ond quar­ter of this year to lev­els last seen in 2011.

The in­dex nose­dived from 40 points in the first quar­ter to 28 in the quar­ter un­der re­view.

Ja­son Mus­cat, a se­nior eco­nomic an­a­lyst at FNB, said the in­dex showed that more than 70 per­cent of re­spon­dents were dis­sat­is­fied with busi­ness con­di­tions.

Mus­cat said the fall in the in­dex was con­sis­tent with an en­vi­ron­ment of con­strained cap­i­tal ex­pen­di­ture by the public sec­tor.

“The spate of sov­er­eign debt rat­ings down­grades, as well as the uncer­tain min­ing sec­tor out­look in the wake of the new Min­ing Char­ter, bodes ill for the fu­ture of the civil con­struc­tion sec­tor,” Mus­cat said.

“Some paras­tatals have al­ready can­celled bond auc­tions due to fears that the up­take may be too weak be­cause of the rat­ings down­grades. This af­fects their abil­ity to fund large cap­i­tal projects.”

Ear­lier this month, the Rand Mer­chant Bank/BER Busi­ness Con­fi­dence In­dex plunged by 11 points to 29 points in the sec­ond quar­ter of this year – its big­gest de­cline in nine years. This was largely the re­sult of weak busi­ness ac­tiv­ity.

JSE-listed con­struc­tion com­pany Afrimat launched the Afrimat Con­struc­tion In­dex (ACI) last week.

Ac­cord­ing to the ACI, the con­struc­tion sec­tor ex­panded by 22.7 per­cent be­tween the third quar­ter of 2010, the in­dex’s base pe­riod, and the first quar­ter of this year.

The ACI is based on six dif­fer­ent in­di­ca­tors, in­clud­ing the build­ing ma­te­ri­als sales in­dex, build­ings com­pleted within larger mu­nic­i­pal­i­ties, build­ing plans passed by larger mu­nic­i­pal­i­ties, the FNB/BER Build­ing Con­fi­dence In­dex, the FNB/BER Civil Con­struc­tion In­dex, and re­tail sales of hard­ware, paint and glass.

Chris Camp­bell, the chief ex­ec­u­tive of Con­sult­ing Engi­neers South Africa, said yes­ter­day the largely neg­a­tive busi­ness sen­ti­ment meant that in­vest­ment in con­struc­tion would re­main poor.

“There are in­di­ca­tions that earn­ings have reached an up­per turn­ing point, with a softer growth out­look in the medium term for the in­dus­try.

“Busi­ness con­fi­dence lev­els first need to be re­stored to en­cour­age higher lev­els of in­vest­ment and kick-start the be­lea­guered South African econ­omy,” Camp­bell said.

Statis­tics South Africa this week said the coun­try had shed 48 000 jobs in the first quar­ter of this year. How­ever, the con­struc­tion sec­tor cre­ated 12 000 jobs dur­ing this pe­riod, mak­ing it the big­gest con­trib­u­tor to em­ploy­ment.

Mus­cat said the out­look for the con­struc­tion sec­tor would re­main de­pressed, be­cause macro-eco­nomic fac­tors did not sup­port growth.

“The fac­tors lead­ing to the slow­down in con­struc­tion ac­tiv­ity – namely, a broad-based fall in de­mand led by the public sec­tor – are un­likely to im­prove over the short to medium term.

“It is there­fore rea­son­able to ex­pect civil con­trac­tor ac­tiv­ity to be un­der pres­sure for the rest of the year.”


An un­em­ployed man holds a self-made ad­ver­tis­ing board of­fer­ing his ser­vices at a traf­fic in­ter­sec­tion.

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