Civil building contractor confidence has declined after hitting an almost eight-year high of 47 during the first quarter of 2024.
This is according to the FNB/Bureau for Economic Research Civil Confidence Index which showed sentiment down to 44 during the second quarter of the year.
“The current reading means that more than 55% of respondents are dissatisfied with prevailing business conditions. The slight deterioration in the business mood mimics the slow down in activity,” the index report said.
“Nonetheless, the activity growth indicator is still well above its long-term average,” it said.
According to Statistics South Africa (Stats SA), the real value of construction work projects decreased by 7.8% year-on-year during the first quarter, while the value reading for the second quarter was more upbeat.
However, FNB senior economist, Siphamandla Mkhwanazi said the survey results were “not nearly as pessimistic” as the Stats SA data suggests.
“This is largely due to the nature of the survey, which is predominantly focused on very large contractors and those that work in the private sector,” Mkhwanazi said.
Civil construction work is expected to increase over the next few months. The rating of the lack of new demand as a business constraint, a proxy for order books, reached its best level since 2008.
“The significant improvement in order books is a very positive development and in effect means that prospects for future work are similar to that registered when the bulk of construction related to the 2010 FIFA World Cup final was under way or about to start,” he said.
Mkhwanazi said projects related to renewable energy have continued to sustain civil construction activity.
“However, there seems to be a shift away from predominantly solar projects to wind,” he added.
He said that while still above the long-term average, sentiment remained “relatively low”.
“Given the underlying conditions, especially activity, confidence should be higher. However, uncertainty regarding the political environment and the impact of crime, corruption and government inefficiency is likely weighing on business confidence,” Mkhwanazi said.
