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February 2016
Housing
C
onfidence was boosted by
an improvement in overall
profitability amid continued
restrained growth in construction
activity. FNB Economics Senior In-
dustry Analyst, Jason Muscat says
that the current level of confidence
still suggests that close to 60% of
civil contractors are dissatisfied with
prevailing business conditions.
The FNB/BER Civil Confidence
Index edged higher to 42 points in
the fourth quarter of 2015, from 39
in third quarter of 2015. Despite the
rise in confidence, the current level
of the index indicates that close to
60% of respondents are dissatisfied
with prevailing business conditions.
“Civil contractors were relatively
downbeat for much of 2015. After
averaging 51 index points in 2014 and
53 in 2013, confidence averaged only
41 in 2015,” says Muscat.
The change in the fortunes of
civil contractors is largely due to a
slowdown in construction activity.
According to revised figures from the
South African Reserve Bank (SARB),
the growth in the real value of con-
struction works rose by an annual
rate of 5,2% in the third quarter 2015,
a far cry from the average of 15,1%
in 2014. The current survey results
suggest that the growth in construc-
tion works likely slowed in the fourth
quarter of 2015. “Althoughwork from
provinces andmunicipalities has held
up well, weak spending on construc-
tion by state-owned enterprises and
the private sector continues to weigh
on growth,” added Muscat.
Overall profitability saw a notice-
able improvement during the quarter
as tendering competition eased,
lifting confidence. Confidence was
further boosted by respondents’
expectations that construction work
and profitability will be noticeably
better in first quarter of 2016. “Re-
spondents’ predictions have been in-
accurate in the past, andwhile it con-
tributed to the uptick in confidence in
fourth quarter of 2015, it is probably
too optimistic,” says Muscat.
The percentage of respondents
citing new demand as a constraint
to business operations was some-
what lower in fourth quarter of
2015, although still relatively
high.
He concludes: “Although
confidence edged higher in
fourth quarter of 2015 on the
back of a marked improve-
ment in profitability, the
majority of civil contractors
remain dissatisfied with pre-
vailing business conditions.
Growth in construction work
likely slowed during the quarter and
is set to remain fairly subdued over
the short- to medium term. This is
The state of civil construction
The FNB/BER Civil Confidence Index increased by 3 index points to 42
in the fourth quarter of 2015, showing that construction confidence
was marginally higher.
Although work
from provinces and
municipalities has held
up well, weak spending
on construction by
state-owned enterprises
and the private sector
continues to weigh on
growth.
largely due to the demand for new
work which, albeit slightly higher in
fourth quarter of 2015, continues to
be relatively scarce.”
■
Jason
Muscat