The Afrimat Construction Index (ACI) for Q3 2024 has indicated a significant improvement in three of its indicators, ‘Buildings Completed’, particularly in the metros and larger municipalities (up by 23.3%), ‘Employment in Construction’ up by 14.64% and ‘Sales Values of Building Material’ up by 5.9%.
Other indicators that recorded meaningful improvements on a quarter-on-quarter basis were the value of ‘Building Plans Passed’, the volume of ‘Building Materials Produced’, and the renumeration of construction sector employees.
“However, compared to Q3 2023, the general lethargy in construction sector activity has persisted with the ACI declining by 1.3% overall since then,” comments economist Dr Roelof Botha who compiles the index on behalf of Afrimat.
He adds that little doubt exists over the depressing effect that high interest rates continue to exert on the built environment, most notably exceptionally high debt-servicing ratios and a persistent decline in the real value of credit extension, as also confirmed by several other key economic indicators.
During Q3 2024, SA’s real GDP only managed a 0.3% increase year-on-year, declining from the level recorded in Q2 2024 whilst the latest Absa/BER purchasing managers’ index (PMI) for manufacturing has again slipped.
The residential property market also continues to lag, with the BetterBond Index of home loan applications having declined by 13% since the MPC started to implement a restrictive monetary policy stance, resulting in the highest commercial lending rates in fourteen years, despite the absence of demand inflation in the economy.
“On a positive note, the rate hiking cycle is reversing somewhat, although the two declines of 25 basis points each since September 2024 are inadequate to assist the country’s quest for higher economic growth and employment creation. Hopefully, the MPC will lower rates further early in 2025, which is one of the most important triggers for reviving construction sector activity.”
He notes another positive development – the inaugural national summit for crime-free construction sites, held in Durban mid-November 2024. A spokesperson for the Master Builders Association, representing more than 4 000 construction companies, described it as “groundbreaking.”
“The declaration signed at the summit outlines a framework of interventions to combat criminality at construction sites, including the strengthening of industry legislation, developing structured policies, enhancing data systems, and establishing rapid-response mechanisms to expedite arrests and prosecutions for extortion,” says Dr Botha.
Encouraged by the ACI, CEO Andries van Heerden says that the Group previously indicated that across the construction landscape, the ‘Construction Materials’ segment enjoyed slightly elevated volumes from road, rail, and dam projects and Afrimat continues to experience demand for its aggregates.
He adds that while Afrimat has not yet seeing a massive uptick in the infrastructure development and maintenance side of the economy, slowly but surely small pockets of demand are opening reiterating that SA needs improvement in the ports, rail logistics, and a generally higher economic growth rate, to stimulate the economy further and to help provide much-needed jobs.
