Cape Times

Massive fall in civil constructi­on confidence index

- 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.”

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

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