New low for civil contracts

2011-04-13 00:00

CONFIDENCE and activity levels in the civil construction sector sank to new lows yesterday and the outlook for the sector remains relatively uncertain.

Commenting on the latest FNB Bureau for Economic Research (BER) civil construction confidence index released yesterday, FNB chief economist Dr Cees Bruggemans told The Witness the outlook for small to medium firms is particularly bleak. This, he said, is because they have not benefited from the increase in provincial government spending on key projects.

The index slumped to an 11-year-low of 21 points in the first quarter of 2011 from 27 in the previous quarter, with just over one in five civil contractors rating business conditions as satisfactory.

Although larger firms have benefited from increased spending, Bruggemans warned that it is unclear whether this spending pattern will continue in the new financial year.

“One hopes that the increase in activity from provincial governments is sustainable, rather than a case of them needing to meet their budgets before the financial year-end.”

Although a recent Consulting Engineers South Africa (Cesa) survey revealed that the consulting engineering industry continues to operate in a challenging environment, Cesa hopes that spending on infrastructure projects such as roads, water and electricity will support the wider construction sector.

Bruggemans believes that, unlike previous cycles, the civil construction industry will emerge out of the slump before the building sector.

“Civil work remains high.

“The availability of earmarked funds [such as the regional and municipal infrastructure grants] and intense pressure on government officials to deliver may see the dire need for infrastructure maintenance and expansion [such as water supply and treatment plants] translate into effective new work for civil contractors,” Bruggemans added.

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