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Johannesburg – Confidence in the civil construction industry is at its lowest level since the beginning of 2012, at 35 index points. This is apart from the first quarter when the index was at 28.
The FNB and Bureau of Economic Research (BER) civil confidence index, released on Tuesday, dropped 17 index points.
This is despite a rise in confidence by 24 index points between the second quarter of the year and the third quarter.
“The fall in the index means that 65% of respondents are dissatisfied with prevailing business conditions,” stated the report.
Factors contributing to the drop in confidence include “lower activity growth”, increased competition and as a result weaker profitability.
“The weaker activity as well as increased tendering price competition took its toll on overall profitability. In fact, the index measuring profitability declined to its lowest level in two years,” said Jason Muscat, senior economic analyst at FNB.
The decline in government investment in the sector has also contributed to the weaker demand.
There was also lower construction and demand in the private sector, such as mining.
“The slowdown in government investment is unlikely to be a short-term phenomenon, despite government’s recent commitment to invest more than R900bn in infrastructure over the next three years,” said Muscat.
Demand for in the first quarter of 2017 is expected to improve, and civil contractors expect improved activity in the sector.
However demand will still be below the five-year average, said Muscat.
Annual growth in the construction sector dropped by 0.3% in the second quarter, and 1.5% in the third quarter, according to data from Statistics South Africa (StatsSA). This may impact GDP growth in the fourth quarter.
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