Economy: Fall in cement sales goes against increase in construction

2009-04-14 00:00

Daily cement sales in South Africa and certain neighbouring states continue to decline on a year-on-year basis, in line with growing negative sentiment in the building industry.

This is despite the fact that between October 2008 and March 2009, demand from the construction sector increased by 12% fuelled by the massive national infrastructure spending spree.

Although regional industry sales for March 2009 — which includes South Africa, Botswana, Namibia, Lesotho and Swaziland — increased four percent year on year, the trend on a sales-per-day basis dropped 10,2% year on year.

This is according to the latest PPC Cement Sales Monitor for March 2009.

While sales in KwaZulu-Natal remain relatively strong, three major markets — Gauteng, the Western Cape and the Eastern Cape — continue to experience notable declines.

The overall decline in year-on-year cement sales per day is mirrored by the latest gauge of sentiment in the building industry.

The First National Bank Building Confidence Index, which measures the business confidence of major role players and suppliers in the building industry, declined from an index value of 40 during the final quarter of 2008 to 28 in the first quarter of this year.

The index, undertaken by the Bureau for Economic Research, came in at a level of 66 one year ago.

Despite the softening trend in sales, several positive trends are evident in the cement sales report.

Nationally, the ramp-up in demand from the construction sector undoubtedly serves as ample evidence that the country’s massive infrastructure spending spree is supporting the building sector.

“Infrastructure projects are ramping up their consumption of cement,” confirmed the cement sales report.

The report also noted that the latest figure (March 2009) is an improvement on February’s 13,9% decline in sales.

“[This confirms] that sales in February were negatively affected by high rainfall in most summer rainfall provinces,” stated the report.

In addition, KwaZulu-Natal cement sales appear to have stabilised by late 2008 and early 2009, albeit at a slightly lower level compared with 2007.

Other regions such as Limpopo, Mpumalanga, North West, Namibia and Botswana continued to deliver growth in March 2009.

The report also revealed that “bag markets continue to display growth, indicating that rural demand is interest rate insensitive”.

Looking forward, the monitor revealed that over R10 billion worth of major projects was announced last month.

“The largest of these was the new mine, Thubelisha, in Mpumalanga.”

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