Business confidence of construction contractors hit an eight-year high during the third quarter of 2024.
This is according to the FNB/BER Civil Confidence Index, which showed that confidence reached an eight-year high of 50 during the third quarter after slipping to 44 during the second quarter.
The current reading means that half of the respondents are satisfied with prevailing business conditions. Their sentiment increased but the momentum in activity eased somewhat, although it still remains above the long-term average.
“Respondents have been upbeat about work for the last few quarters so the softer activity reading this quarter comes off a high base and is therefore not entirely indicative of a weaker environment, especially when considering sentiment,” said FNB senior economist, Siphamandla Mkhwanazi.
However, Mkhwanazi added that it was in contrast to the “very downbeat” outcome for investment in construction works published by Statistics South Africa for the second quarter.
Despite somewhat lower activity, overall profitability improved significantly, lifting confidence, according to the FNB/BER Civil Confidence Index.
“Firm profit margins seem to be increasing. This, again, is a reflection of a sector that is faring reasonably well,” Mkhwanazi said.
In terms of the outlook, the picture is mixed. Order books deteriorated but merely back to the level recorded at the start of the year.
Meanwhile, respondents expect better activity and employment during the next quarter.
“Even though activity deteriorated somewhat this quarter, business confidence moved higher on the back of better profitability. Encouragingly, respondents expect work to trend higher once more next quarter,” Mkhwanazi said.
“This is in step with their comments, which seem to suggest that there is a noticeable rise in tender activity. However, participants continue to lament the damaging impact of the construction mafia and government inefficiency on the sector.”
