Construction confidence hits 4-year high

25 April 2013

South Africa’s construction confidence reached a four-year high in the first quarter of the year, according to the First National Bank/Bureau for Economic Research (FNB/BER) civil confidence index released in Johannesburg last week.

The index moved up from 36 points in the fourth quarter of 2012 to 51 points in the first quarter of 2013, the highest it has been since 60 points in early 2009.

“Construction firms have been able to restore profitability following a prolonged period of intense margin pressure,” FNB’s chief economist, Sizwe Nxedlana, said in a statement.

“Confidence increased even though the slower growth in construction activity continued for the second consecutive quarter,” the report said.

Activity accelerated in the first nine months of 2012, but slowed down possibly as a result of the completion of large projects with a break before the take-up of new projects, as well as a number of other factors.

The unrest at Eskom’s Medupi power station led to a 10-week delay in construction, and is thought to have affected the activity levels of public corporations, while uncertainty in the mining sector was cited as the cause of the slow-down in construction in the private sector.

Contributing positively to confidence levels was an increase in government spending, particularly in municipal and provincial capital expenditure.

The index also showed evidence that civil construction activity should continue to grow in the second quarter of the year.

“Not only is the rating of insufficient demand as a constraint at its lowest level since the second quart of 2009, the number of months work on hand also rose noticeably in the first quarter of 2013,” Nxedlana said.

The FNB/BER building confidence index also showed an improvement for the first quarter of 2013, rising to its highest reading since 2010.

“The rising demand for building materials shows that the building recovery is gaining some recovery,” Nxedlana said.

“The increase in building activity of main contractors seems to be leading to higher growth in building material sales.”

SAinfo reporter