Sentiment in civil construction increased to a more than a six-year high during Q1 2023, reflecting improvement for four consecutive quarters, according to the latest FNB/BER Civil Confidence Index.
Business confidence has also increased on the back of better activity with Stats SA reporting a 1.2% annual decline in the real value of construction works in Q4 2022 from a yearly contraction of 3.1% in Q3 2022.
This possibly points to an annual expansion in construction during Q1 2023 with the higher activity boosting overall profitability, says Siphamandla Mkhwanazi, Senior Economist at FNB. “Civil contractors have experienced significant profit margin pressure over the past few years. This seems to have eased somewhat this quarter, adding to the more upbeat mood.”
Availability of work has been predicted to continue trending higher with the index’s rating of insufficient demand for new work as a business constraint – a proxy for order books – having fallen to its lowest level since 2014.
“Anecdotally, there does seem to be an increase in tendering activity in the public sector related to water and road infrastructure in particular. Assuming these tenders are awarded, it will greatly boost construction work over the next few quarters. In the private sector, investment in alternate energy sources is buoyant,” he says.