- The civil confidence index ticked up for the fourth quarter.
- However, the lack of new work remains a concern and I dimming prospects for coming quarters.
- Sustainable improvement in civil confidence work depends on the implementation of infrastructure development plan as well as bid window five of the renewable energy procurement programme.
There has been some improvement in construction activity, but concerns over the lack of new work in the civil industry is dampening sentiment for the coming quarters.
The FNB/BER Civil Confidence Index was released on Monday. After falling to five points in the second quarter, due to the hard lockdown, it has been steadily picking up – registering 11 points for the third quarter and now 16 points for the fourth quarter. The index can vary between zero and 100 – it measures respondents' satisfaction with prevailing business conditions in the industry.
"Although better, the current index level means that the vast majority (more than 80%) of respondents are dissatisfied with prevailing business conditions," the report read.
An improvement in construction activity, off a low base, resulted in higher profitability for the industry.
"Relative to the third quarter, the rise in construction activity was not insignificant this quarter. However, it is likely restricted to specific sectors, most notably renewable energy," said Siphamandla Mkhwanazi, property economist for FNB.
"Moreover, activity remains below that registered just before the pandemic which is still fresh in the minds of contractors. As such, the higher activity was not sufficient to lift confidence meaningfully," Mkhwanazi added.
Civil contractors are also concerned about the future, they have been battling with poor order books over the last few years, Mkhwanazi noted. "This is likely due to the shortage of large-scale and long-term projects. So, while some contractors may have work currently, they are unsure about the prospects in the coming quarters," said Mkhwanazi.
"As things stand, the increase in activity this quarter is unlikely to be sustained over the medium term, and this is what the low confidence reflects," he said.
A sustainable improvement depends on the implementation of infrastructure development plans and bid window five of the renewable energy procurement programme.