S.Africa Construction Index down but sector remains upbeat - CNBC Africa

S.Africa Construction Index down but sector remains upbeat

Southern Africa

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A construction site. PHOTO: Getty Images

According to the First National Bank and Bureau of Economic research report, the Index fell despite the full majority of respondents being satisfied with prevailing business conditions.

“I think it’s the actual underperformance, particularly coming from state-owned enterprises of what actually gets spent, relative to what was said had been spent,” Sizwe Nxedlana, chief economist at First National Bank, told CNBC Africa.

“If you look at the construction confidence numbers, we think it ties in very nicely with the official fixed investment numbers, which show very strong growth in actual fixed investment by the private sector, and also fixed investment by the general government. Very weak fixed investment [is however] coming from state-owned enterprises.”

According to the Index, the decline in confidence was likely due to a lower than expected increase in construction activity, as well as a mild deterioration in profitability during the quarter.


A moderate increase in construction work during the quarter however helped keep confidence above the neutral 50-index point level.

The Index over the past three years has been on the downward, having fallen even lower this year in particular.

(READ MORE: S.Africa's construction sector confidence down for 2013 Q2)

“If you look at the survey, you see that we’re still in negative territory in terms of overall confidence, particularly if you look at business activity. So the actual amount of work that’s available peaked almost 70 to 80 index points in 2006 to 2007, obviously in the lead up to the World Cup, bottomed at [roughly] minus 80 in terms of the actual demand for work around 2010,” Nxedlana explained.

“Over the last three years, we’ve seen confidence almost triple but from minus 80 to almost zero, so we’re almost at breakeven point now.”

Nxedlana added that confidence and figures in the sector were a lot less negative than what they were two years ago, but that the outlook for the sector remains significantly upbeat.

(WATCH VIDEO: FNB 2013 Q3 confidence rises despite lower activity)

“If you look at the fixed investment numbers, there we’re starting to see a little bit more positive news. Fixed investment actually accelerated, grew just shy of five per cent. If you look at who’s doing the fixed investment, it’s general government – municipalities and to a lesser extent provinces – and the private sector,” said Nxedlana.