Civil engineering confidence picked up by six index points to 43 in the second quarter of 2017, according to the Construction Industry Development Board’s (CIDB) SME business conditions survey.

This follows a largely flat 2016 and a disappointing start to 2017, the CIDB said. The board explained that in sum, pressure on business conditions was ameliorated as profitability found support from a combination of improved momentum in building activity, and a less hostile tendering environment.

From a grades perspective, Grades 3 and 4 civil contractors were the only groups where sentiment improved. The confidence indicator for this group picked up by 11 index points to 44 in Q2, in line with key performance indicators.

Ntando Skosana, project manager of Construction Industry Performance at the CIDB said: “The smaller grades were responsible for much of the overall improvement in the civil sector during the quarter. These contractors primarily participate in regional or municipal projects. With June representing the end of the municipal government financial year, it is likely that Grades 3 and 4 civil contractors benefitted from the “rush” to spend on capex.”

Conversely for Grades 5 and 6 as well as Grades 7 and 8 civil contractors, sentiment deteriorated as activity and profitability remained under pressure.

At the regional level, civil contractor confidence picked up in all the surveyed provinces except for the Eastern Cape, where 73% of respondents were dissatisfied with prevailing business conditions.

On the other hand, in the Western Cape confidence rose from 50 index points to 57 during the quarter. Civil contractors in the province were optimistic on the back of improved business conditions and more construction work being available.

“The outcome in the Western Cape civil sector is encouraging, with the majority of respondents being satisfied with prevailing business conditions. Unfortunately for the remaining provinces, the picture remained broadly pessimistic with the confidence indices coming in below the 50-point mark” Skosana said.

General building confidence

Unlike the civil sector, general building confidence dropped to 42 index points in 2017Q2, from 46 previously. “Discouragingly, the theme of pessimism was further entrenched during the quarter, against the backdrop of weaker construction activity,” the CIDB said.

Skosana said that contrary to last quarter, “the somewhat more benign tendering environment for public sector building projects failed to support profitability this time round. In all, there was renewed pessimism in the building sector during Q2.”

For all three grades, confidence was below 50 index points. However, Grades 3 and 4 building contractors lost the most confidence to 41 index points, the level of confidence for Grades 7 and 8 contractors remained the lowest at 39 index points. Sentiment for Grades 5 and 6 contractors was barely changed at 43 index points.

Building confidence across all the four surveyed provinces was also downbeat and below 50 index points.

Skosana explained that where general builders in the Western Cape had held the fort of optimism over the past few quarters, this changed during the quarter. “Nevertheless, building contractors in this province remain the least pessimistic,” she said.

Western Cape building contractor confidence dropped significantly to 47 points (the lowest level since 2014Q4), from 64 previously. Gauteng builders also lost confidence in line with poorer activity and profitability. Although sentiment improved in the Eastern Cape and KwaZulu-Natal, confidence levels remained depressed.

* The fieldwork for the 2017 Q2 survey was conducted during the period 2 May and 6 June 2017.