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Johannesburg - The First National Bank (FNB)/Bureau of Economic Research (BER) civil construction confidence index fell from 27 in the fourth quarter of 2010 to 21 in the first quarter of this year - its lowest level in 11 years.
A reading of 21 indicates that only one out of five civil contractors rated prevailing business conditions as satisfactory.
However, not all of the accompanying survey results show a situation as dire as the fall in confidence indicates.
"A positive development is that construction activity was slightly better in 1Q 2011 compared to previous quarters," said FNB chief economist Cees Bruggemans.
This extends the trend that started in the second quarter of 2010.
The uptick in activity in the first quarter of 2011 appears to stem mainly from new work commissioned by the provinces.
Little new work continues to come from the private sector (mainly infrastructure for housing projects and capital spending in the mining sector). Work from the public entities either went ahead at the same pace (such as the power stations for Eskom) or declined as projects were completed (such as the roads for the SA National Roads Agency and the Gautrain).
In the first quarter mainly larger companies benefited from the new work contracted by the provinces, as the size and complexity of the projects were too big for the smaller firms.
Hopefully, said Bruggemans, the uptick in work will turn out to be lasting and part of a sustained turnaround, and not a temporary move due to provincial officials trying to achieve budget spending targets before the end of the fiscal year in March.
"Notwithstanding the likely bottoming out of construction activity, conditions remained extremely tough and unsatisfactory in the civil construction sector," he said.
"Insufficient demand for work remained a huge constraint. As a result, tendering competition remained extremely fierce. This, in turn, suppressed profits and left firms with no other option than to continue retrenching staff to curtail costs."
A reading of 21 indicates that only one out of five civil contractors rated prevailing business conditions as satisfactory.
However, not all of the accompanying survey results show a situation as dire as the fall in confidence indicates.
"A positive development is that construction activity was slightly better in 1Q 2011 compared to previous quarters," said FNB chief economist Cees Bruggemans.
This extends the trend that started in the second quarter of 2010.
The uptick in activity in the first quarter of 2011 appears to stem mainly from new work commissioned by the provinces.
Little new work continues to come from the private sector (mainly infrastructure for housing projects and capital spending in the mining sector). Work from the public entities either went ahead at the same pace (such as the power stations for Eskom) or declined as projects were completed (such as the roads for the SA National Roads Agency and the Gautrain).
In the first quarter mainly larger companies benefited from the new work contracted by the provinces, as the size and complexity of the projects were too big for the smaller firms.
Hopefully, said Bruggemans, the uptick in work will turn out to be lasting and part of a sustained turnaround, and not a temporary move due to provincial officials trying to achieve budget spending targets before the end of the fiscal year in March.
"Notwithstanding the likely bottoming out of construction activity, conditions remained extremely tough and unsatisfactory in the civil construction sector," he said.
"Insufficient demand for work remained a huge constraint. As a result, tendering competition remained extremely fierce. This, in turn, suppressed profits and left firms with no other option than to continue retrenching staff to curtail costs."
