Wide­spread pes­simism in con­struc­tion sec­tor – CIDB

The Star Early Edition - - BUSINESS NEWS - Roy Cokayne

IM­PROVED prof­itabil­ity re­sulted in im­proved con­fi­dence among civil engi­neer­ing con­trac­tors in the sec­ond quar­ter of this year, but pes­simism has be­come more en­trenched among gen­eral builders.

This was the ma­jor con­clu­sion of the lat­est Con­struc­tion In­dus­try De­vel­op­ment Board (CIDB) small and medium en­ter­prise busi­ness con­di­tions sur­vey.

The sur­vey re­port said that on av­er­age head­line con­fi­dence in­di­ca­tors in both sec­tors reg­is­tered pes­simistic lev­els at be­low 50 in­dex points, which sug­gested the build­ing and con­struc­tion in­dus­try re­mained un­der pres­sure.

“Un­for­tu­nately for build­ing con­trac­tors, sen­ti­ment re­mained down­beat across all three grades and the four prov­inces sur­veyed. This is also mostly true for civil con­trac­tors, with the ex­cep­tion of the Western Cape where con­fi­dence reg­is­tered above the 50-point mark,” it said.

Ntando Skosana, the project man­ager of con­struc­tion in­dus­try per­for­mance at the CIDB, said over­all the pres­sure on busi­ness con­di­tions in the sec­ond quar­ter of this year was ame­lio­rated as prof­itabil­ity found sup­port from a com­bi­na­tion of im­proved mo­men­tum in build­ing ac­tiv­ity and a less hos­tile ten­der­ing en­vi­ron­ment.

From a grades per­spec­tive, the sur­vey re­port re­vealed that Grades 3 and 4 civil con­trac­tors were the only groups where sen­ti­ment im­proved, with con­fi­dence im­prov­ing by 11 in­dex points to 44 points in the sec­ond quar­ter in line with key per­for­mance in­di­ca­tors. Skosana said the smaller grades were re­spon­si­ble for much of the over­all im­prove­ment in the civil sec­tor dur­ing the quar­ter.

“These con­trac­tors pri­mar­ily par­tic­i­pate in re­gional or municipal projects. With June rep­re­sent­ing the end of the municipal gov­ern­ment fi­nan­cial year, it is likely that Grades 3 and 4 civil con­trac­tors ben­e­fit­ted from the ‘rush’ to spend on capex,” he said.

How­ever, sen­ti­ment among Grades 5 and 6 and Grades 7 and 8 civil con­trac­tors de­te­ri­o­rated, drop­ping by 8 in­dex points each as ac­tiv­ity and prof­itabil­ity re­mained un­der pres­sure.

For Grades 7 and 8, an over­whelm­ing ma­jor­ity (83 per­cent) of re­spon­dents rated pre­vail­ing busi­ness con­di­tions as un­sat­is­fac­tory. “At this level, con­fi­dence is at its low­est since the start of the se­ries in the third quar­ter of 2008,” the re­port said.

At a re­gional level, civil con­trac­tor con­fi­dence im­proved in all the sur­veyed prov­inces ex­cept for the Eastern Cape, where 73 per­cent of re­spon­dents were dis­sat­is­fied with pre­vail­ing busi­ness con­di­tions. The im­proved con­fi­dence of civil con­trac­tors in the Western Cape was driven by im­proved busi­ness con­di­tions and more con­struc­tion work be­ing avail­able.

Skosana said the out­come in the Western Cape civil sec­tor was en­cour­ag­ing, with the ma­jor­ity of re­spon­dents be­ing sat­is­fied with pre­vail­ing busi­ness con­di­tions.

“Un­for­tu­nately for the re­main­ing prov­inces, the pic­ture re­mained broadly pes­simistic with the con­fi­dence in­dices com­ing in be­low the 50-point mark,” he said.

Con­fi­dence among gen­eral build­ing con­trac­tors dropped to 42 in­dex points in the sec­ond quar­ter from 46 points in the pre­vi­ous quar­ter.

The re­port said the re­newed pes­simism among gen­eral builders re­sulted from a broad­based de­te­ri­o­ra­tion in un­der­ly­ing in­di­ca­tors.

“Profit mar­gins en­dured a greater squeeze in line with weaker build­ing ac­tiv­ity growth,” it said.

The re­port added that con­fi­dence lev­els in all three gen­eral builder grades were be­low 50 in­dex points in the sec­ond quar­ter, which was in­dica­tive of the wide­spread pes­simism.

It said 56 per­cent of gen­eral builders sur­veyed re­ported lower prof­itabil­ity in the sec­ond quar­ter, the worst level since the first quar­ter of 2012, com­pared to 45 per­cent in the pre­vi­ous quar­ter.

In Gauteng, 64 per­cent of gen­eral builders sur­veyed re­ported lower ac­tiv­ity lev­els, the worst level since the fourth quar­ter of 2009, com­pared with 33 per­cent in the pre­vi­ous quar­ter.

The im­proved con­fi­dence of civil con­trac­tors in the Western Cape was driven by im­proved busi­ness con­di­tions.

PHOTO: SIM­PHIWE MBOKAZI

Con­struc­tion in progress in New­town, Jo­han­nes­burg.

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