Construction sector activity levels up by nearly 7% in second quarter, index shows

CONSTRUCTION sector activity levels improved by almost 7 percent in the second quarter compared to the previous quarter, according to the latest Afrimat construction index.

Economist Roelof Botha, who compiles the index on behalf of Afrimat, said yesterday that seven out of the eight indicators recorded gains in the second quarter compared to the previous quarter.

Botha said the only indicator that was negative in the second quarter was the quarter-on-quarter value added in construction, which was marginally negative at -1.8 percent.

He added that the star performers in the second quarter were the value of buildings completed in the country’s larger municipalities, labour remuneration in construction and both the value and volume of building materials produced.

“It’s also encouraging that the overall index has improved by 15.1 percent since the first quarter of 2011, the base year, which is marginally higher than the increase in the country’s real GDP of 13.8 percent over this same period,” he said.

Botha stressed it was a misconception to suggest the construction sector was on its knees, despite sluggish growth in the first half of this year.

He said total output for the sector’s contractors amounted to R89 billion during the first six months of this year, representing an increase of 7.2 percent over the first half of last year in nominal terms.

“The average inflation rate in this period was under 5 percent, so it is real growth. The bottom line is that construction is not doing fantastically well, but it is alive and kicking and it needs a spark.

“It needs lower interest rates and more policy certainty and this land reform thing (expropriation of land without compensation) must go away,” he said.

Botha attributed the financial plight of many companies in the listed construction sector to a variety of factors, including the fact their overheads were probably a lot higher than smaller companies, the loss of some business to smaller firms, and lack of infrastructure expenditure by government because of fiscal constraints.

He added that it was encouraging that South Africa’s leading business cycle indicator had improved by almost 9 percent since the first quarter of 2016.

He said the country’s GDP expanded by R156bn during the first six months of this year, representing nominal growth of 6.9 percent compared to the same period last year.

“Based on year-on-year comparisons therefore, South Africa is not in a recession,” he said.