Civil construction confidence remains in doldrums

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There is still dissatisfaction in the business conditions within the civil construction industry, according to the FNB and Bureau of Economic Research Civil Confidence Index.

The index for the third quarter, released on Tuesday was only marginally higher than for the second quarter.

It came in at 17, up from 15 in Q2. 

This shows that construction activity growth was poor during the quarter, reinforcing the trend from previous quarters, according to the index report. The index has been below 20 for more than a year. More than 80% of respondents of the index said they are dissatisfied by the prevailing business conditions. 

“Civil contractors remained severely pessimistic and with good reason. The current business environment of low activity growth and weak order books have persisted for some time,” said Jason Muscat, senior economic analyst at FNB.

Muscat also noted that although data from Statistics South Africa showed that the real value created in construction work during the second quarter improved to 5.2% year-on-year, it is unlikely this momentum was sustained in the third quarter.

The index also reflected that order books came under further pressure during the quarter. “Construction activity growth remains poor and order books suggest that it is unlikely to improve over the short term,” the report read.

Tendering price competition eased during the quarter. “Less keen tendering competition has little to do with the state of activity in the industry and more to do with the fact that there are less contractors. This is reflected in the number of major contractors that have gone into business rescue or liquidation since the start of the year,” Muscat explained.

“The current decline in public sector infrastructure spending is really hitting civil contractors hard. However, this may turn around over the medium term if the recently announced fiscal stimulus package, which is pro-infrastructure, is implemented expeditiously,” he added.

The president on Friday announced the stimulus package which seeks to boost economic growth and facilitate a recovery by implementing several measures across different sectors. One of these measures include a R400bn infrastructure fund, Fin24 previously reported.