FNB/BER business confidence index rebounds in Q2’24

The FNB Construction Confidence Index in South Africa is showing signs of improvement as sentiment in the building sector rises, with five of the six sub-sectors reporting higher confidence in the second quarter of 2024. Siphamandla Mkhwanazi, Senior Economist at FNB, shared insights on the study results in an interview with CNBC Africa. According to Mkhwanazi, despite some market hesitancy related to the recent elections, there is a positive outlook among industry players, although it still falls below the long-term average. The official statistics released by Statistics South Africa may not fully support this optimistic sentiment, highlighting the need for caution in interpretation. One of the key reasons for the uptick in activity is the divergence between the residential and non-residential building sectors. The non-residential sector, particularly offices, faced challenges during the pandemic but is now seeing improvements as businesses adopt hybrid work models. Additionally, industrial sectors like data centers and warehousing are driving growth in non-residential construction. However, the residential sector continues to struggle with high interest rates. The increased building activity is currently concentrated in the Western Cape region, largely driven by rebuilding efforts after recent storms and winds. While the activity is expected to spread to other regions facing similar challenges, it is important to note that the growth is primarily driven by reconstruction projects rather than underlying economic fundamentals. Overall, the FNB Construction Confidence Index reflects a cautious optimism in the South African building sector, pointing towards potential recovery and growth in the coming months.