The wholesale sale and building material sector continued to perform during Q2 2024, showing quarter-on-quarter growth of 9.2% according to the Afrimat Construction Index (ACI) which tracks the level of activity in the built environment. It was also the only indicator (out of ten) that recorded a positive year-on-year trend.
Other indicators in the ACI that performed well on a quarter-on-quarter basis were ‘Volume of Building Materials Produced’, ‘Sales Values of Building Materials’, and ‘Retail Trade Sales – Hardware’, according to economist Dr Roelof Botha who compiles the ACI on behalf of Afrimat.
Although the values of ‘Building Plans Passed’ and ‘Buildings Completed’ recovered well quarter-on-quarter, the year-on-year changes in these two indicators are still of some concern, having declined by 21% and 20% respectively, he says.
“While it is clear that the cost of South Africa’s restrictive monetary policy continues to take its toll on the economy, with increasing debt servicing costs placing households and businesses alike under pressure, on a positive note, the currency strength which has already led to several declines in fuel prices, is bound to assist in a further lowering of inflation during the remainder of the year.”
“Another reason for optimism over an imminent recovery of the economy is the remarkable turnaround that has been achieved in the stability of electricity supply, with an end to load shedding likely by the end of March 2025.”
He added that the appointment of South Africa’s first Cabinet under the new Government of National Unity (GNU) has been met with an overwhelming positive response by business leaders, whilst also receiving a thumbs-up from global capital markets.
“Visible signs of the higher level of urgency in addressing the country’s logistics challenges have already come to the fore. Apart from the ongoing cooperation between the government and the private sector via the National Logistics Crisis Committee, the Department of Transport has approached Business Unity South Africa to assist in the establishment of a private sector participation unit. With lower interest rates around the corner and a new era of cooperation between the private and public sectors looming, the construction sector is bound to start expanding soon.”
“Although the increase of 8.8% in the ACI since the first quarter of 2024 is most welcome, the year-on-year decline of 1.9% is unfortunate, especially against the background of the dire need for housing development and the associated infrastructure,” he said, adding that the ACI is not alone in reflecting subdued economic activity, with the latest Absa/BER Purchasing Managers’ Index for manufacturing having slipped below the neutral level of 50.
