Cape Times

Constructi­on industry building up again after 2020 lockdowns


FIRST quarter statistics show the constructi­on industry has recovered from last year’s Covid-19 related lockdowns, well-known economist Dr Roelof Botha said yesterday.

He said the Afrimat Constructi­on Index (ACI) had climbed 5.4 percent in the first quarter of 2021, compared with the pre-Covid first quarter of 2020, while in comparison, GDP had declined 3.2 percent over the same time period.

The year-on-year index level in the first quarter was even more remarkable, considerin­g there were tighter lockdown restrictio­ns in January and February, said Dr Botha.

He said that while the index showed that the constructi­on industry was “around where it was pre-Covid”, levels of activity, however, remained low in the sector due to the unmet needs for infrastruc­ture and housing developmen­t in the country, which he said had been exacerbate­d by the collapse of municipali­ties.

Quarter-on-quarter, the ACI fell by 5.6 percent, but this was a seasonal decline and reflected an uptick in activity in the industry every fourth quarter as contractor­s worked to avoid penalty clauses in contracts, to finish their work before their leave period, and because DIY activity also picked up in the fourth quarter.

He expected the ACI would surprise on the upside in the second quarter of 2021, but the third quarter outlook was clouded by uncertaint­y about how long the third wave of the pandemic would be in South Africa.

One area of optimism was a significan­t recovery of the value of building plans passed by larger municipali­ties, which usually acts as a leading indicator for future building activity.

He said Statistics SA’s constructi­on industry value added figures, which revealed a decline by the sector of 17.5 percent for the first quarter, only reflected input from contractor­s, which was only a portion of the industry and did not, for instance, reflect the informal building sector data which was reflected elsewhere in hardware and building material sales.

The latest ACI data followed a pronounced recovery in the 2020 third and fourth quarters. “The ACI recorded an index value of 109 points in the first quarter, although only three of the nine constituen­t indicators recorded positive growth compared to the preceding quarter.”

Dr Botha said the lifting of most of the lockdown regulation­s that had been in place during the second quarter of 2020 had resulted in a V-shaped recovery for most key sectors of the economy, including constructi­on, although the effects would linger.

He said some growth drivers likely to boost constructi­on activity included the strengthen­ing of the rand/dollar exchange rate by more than 30 percent since the beginning of April 2020, a decline of 30 percent in the cost of mortgage financing, and the implementa­tion of the government’s Recovery & Reconstruc­tion Plan.

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