Delays in awarding infrastructure projects are believed to be responsible for confidence in South Africa’s civil construction industry dropping in the fourth quarter of this year.

Confidence levels deteriorated despite most of the underlying indicators, such as activity and profitability, improving in the fourth quarter.

The FNB/Bureau for Economic Research (BER) civil confidence index, released on Monday, dropped by two points on a 100-point scale to 15 in the fourth quarter.

This follows the index rising by four index points to 17 in the third quarter of 2021 despite most of the underlying indicators worsening in the third quarter of this year.

The current level of the index means 85% of civil construction respondents to the FNB-BER survey are dissatisfied with prevailing business conditions.

The index has been hovering around the 20-point mark since the middle of 2017.

Looking forward

FNB Senior Economist Siphamandla Mkhwanazi said it is difficult to pinpoint the reasons behind the persistently weak level of confidence.

Mkhwanazi said the low level of civil contractor confidence is justified although the further decline during the fourth quarter is at odds with some improvement in underlying activity.

“One possible qualification is that, even though the growth in activity is somewhat better this quarter compared to a few years ago, the total value of construction activity is still much lower.

“An acceleration in the rollout of infrastructure projects by the state and further progress on structural and regulatory reform to boost private sector infrastructure spend would go a long way to alleviate the woes in this sector,” he said.

Looking ahead, Mkhwanazi said there are signs that activity could improve further even if only slightly.

Mkhwanazi said the rating of insufficient new demand as a business constraint declined from 89% in the third quarter of this year to 83% in the fourth quarter, which is its lowest level since the fourth quarter of 2020.

“Respondents noted that there is indeed an improvement in tender activity. However, tender awards are lagging significantly, and the validity of tenders is increasingly being extended. This means that, while there is interest, not all projects will be realised, or at best,
be commissioned in good time”.

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