Local construction activity gains further traction in last quarter

The FNB/BER Civil Confidence Index rose to 22 in the fourth quarter of 2019, 7 points higher than in the third quarter. This marks the first time since 2017’s second quarter that confidence has been above 20.

While higher, the current index level still means that a vast majority (close to eighty per cent) of respondents are dissatisfied with prevailing business conditions.

Confidence improved mainly due to a second consecutive uptick in activity.

Respondents already reported a noticeable increase in activity during the third quarter. A further, and also noticeable, improvement was registered this quarter. In fact, the index measuring activity is now close to its long-term average,” stated Siphamandla Mkhwanazi, Senior Economist at FNB.

According to Statistics South Africa (Stats SA), the real value of expenditure on construction works contracted by 0.4% year-on-year in 2019’s third quarter. The survey results point toward an improvement in 2019’s fourth quarter.

While activity was up, other indices – specifically those measuring tendering competition and the availability of new work – weighed on confidence. Mkhwanazi remarked that “confidence would likely have been higher were it not for the keener tendering competition and concerns regarding the availability of future work. What this implies is that the work that is currently underway is either not expected to be sustained or the growth is limited to a few firms within the sector”.

In conclusion, the FNB/BER Civil Confidence Index gained 7 points to reach 22 in 2019’s fourth quarter.

“The results regarding the growth in activity is heartening as it suggests that there is some life within the sector. Much of this is likely in the renewable energy sector and related to the upgrading/expansion of road infrastructure. As such, it is probably not beneficial to a broad base of firms. This would explain the still tough business conditions with respect to competition and future work,” concluded Mkhwanazi.