Construction activity levels remain 'ultra-depressed'- survey

0:00
play article
Subscribers can listen to this article
Confidence levels in the civil construction industry remains subdued.
Confidence levels in the civil construction industry remains subdued.
  • Sentiment in the civil construction industry remains subdued, despite easing of lockdown restrictions.
  • Gains in confidence levels made prior to the second quarter have essentially been wiped out, says an economist.
  • The majority of respondents are disappointed in the prevailing business conditions.


Despite the easing of lockdown restrictions in the third quarter, activity and confidence levels in the construction industry are still very low, according to the FNB/BER Civil Confidence Index released on Tuesday.

The survey, a partnership between FNB and the Bureau for Economic Research which measures sentiment in the civil construction industry, rose to 11 in the third quarter, up from a record low of 5 in the previous quarter amid the height of lockdown restrictions. The low confidence levels reflect weak demand, which is expected to persist over the short term, the report indicated.

"Even though lockdown restrictions eased such that construction firms could operate more normally, activity levels remained ultra-depressed with only a marginal improvement from 2Q2020," the report read.

The current index level shows that the majority of respondents – almost 90% - are disappointed in the prevailing business conditions.

The index increased from a depressed level of 10 in the first quarter of 2019 to 24 in the first quarter of 2020, but these gains were reversed when the Covid-19 lockdown was implemented as activity came to a "standstill", explained FNB property economist Siphamandla Mkhwanazi. "Understandably confidence fell sharply," he added.

"It is disappointing now with the restrictions on construction sector activity lifted that confidence still remained this low in the third quarter," said Mkhwanazi. "Essentially, all the confidence gains of the 12 months prior to 2Q2020 have been wiped out," he said.

Activity in the industry may have improved from the second quarter, but it is still below levels recorded in the third quarter, he explained.

According to Statistics South Africa (Stats SA), the real value of construction works declined by 30.9% year-on-year (y-o-y) in the second quarter, this in comparison to a -1.9% contraction y-o-y for quarter one.

The latest survey suggests a further fall in activity in the third quarter, but it is unlikely as dire as that registered in the second quarter. A mild decline such as that recorded in the first quarter is also too optimistic," said Mkhwanazi.

Low demand

Respondents also stated that demand for new work was insufficient given normal business requirements. Tendering competition also intensified. "Given current demand conditions, what we are seeing in the survey results is that the lack of work has resulted in more aggressive competition by contractors for the little work which is available," said Mkhwanazi.

"There has been an increased focus (and talk) about infrastructure development as a mechanism to boost economic growth post the pandemic.

"These results suggest that this has not yet translated into tangible opportunities for civil contractors," said Mkhwanazi.

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For only R75 per month, you have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today.
Subscribe to News24
ZAR/USD
16.40
(-0.42)
ZAR/GBP
21.19
(+0.34)
ZAR/EUR
19.13
(+0.54)
ZAR/AUD
11.51
(+0.29)
ZAR/JPY
0.16
(+0.06)
Gold
1868.34
(-0.57)
Silver
23.32
(-0.35)
Platinum
850.00
(-2.24)
Brent Crude
39.48
(-4.73)
Palladium
2191.55
(-2.59)
All Share
51896.97
(-0.79)
Top 40
47576.46
(-0.74)
Financial 15
9756.70
(-2.69)
Industrial 25
72681.12
(-0.25)
Resource 10
47826.96
(-0.63)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
Yes, and I've gotten it.
23% - 130 votes
No, I did not.
51% - 290 votes
My landlord refused
26% - 150 votes
Vote