News Research

Civil construction firms remain under pressure with high costs of materials and security related expenses

High costs of building materials and security related expenses are weighing heavily on civil construction firms, according to the latest FNB/BER Civil Confidence Index for Q3 2022. 

Siphamandla Mkhwanazi, Senior Economist at FNB, says it has become a feature of the survey results since 2020 that the construction industry has been experiencing severe profitability strain relative to work, with the pressure initially stemming from Covid-19 compliance costs and a loss of productivity.

While Q3 2022 recorded an improvement in confidence, a level last reached during 2020, the majority of civil contractors remain dissatisfied with current business conditions.

Confidence remained relatively low despite a marked increase in near-term construction activity. This is likely because, while construction work is increasing, the level of activity is still below that of previous years. In addition, confidence is also being dampened by other factors such as weak order books and thin profit margins,” he says.

While there is some activity in the sector, it is not enough to lift growth into positive territory. In addition, part of the better activity is most likely related to the post-flood rebuilding efforts in KwaZulu-Natal, which is temporary.”