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.