Construction World August 2018

Business confidence RETREATS After surging from 34 to 45 in the first quarter, the RMB/BER Business Confidence Index (BCI) deteriorated to 39 in the second quarter of 2018. This means that close to three fifths of respondents now regard prevailing business conditions as unsatisfactory – a disappointing outcome, yet probably an accurate reflection of reality.

Ettienne le Roux, Chief Economist at RMB.

T he second-quarter survey was con- ducted between 7 May and 5 June, and included 1 700 business people in the building, manufacturing, retail, wholesale and new vehicle trade sectors. Details The first quarter’s 11-point jump in the BCI was owing mainly to the euphoria surround- ing the change in the country’s political leadership in February. Yet, as we noted at the time, it would be unusual for confidence to be sustained after such a significant jump. Moreover, we felt that as the excitement was likely to wear off, and the reality of still subdued economic activity kicked in, confidence would soften in the second quarter. Our intuition has proved to be correct. Not only did business activity remain disap- pointingly weak – worsening even, in some sectors – but 'Ramaphoria' also faded in the wake of the ever-rising petrol price, the political debate around 'expropriation of land

cent noticeable growth in the sales volumes of furniture, appliances, building materials and other durable goods just about came to a halt in the second quarter. New vehicle dealers also witnessed a noticeable worsening in sales, possibly because consumers had brought their purchases forward to the first quarter to pre- empt paying even more, given the 1% hike in the VAT rate on 1 April – a dynamic that is likely to also have affected retailers selling other expensive consumer goods. Dealer confidence dropped from 52 index points to 35 in the second quarter. A striking deterioration in demand knocked manufacturing confidence from 37 to 27 in the second quarter – a drop that almost wiped out all of the first-quarter improvement in sentiment. Disconcerting is the fact that domestic as well as export sales volumes slackened. And production volumes did not fare much better. The exception in the second quarter were wholesalers. Their confidence jumped from 53 to 62 in the second quarter. We find this upturn difficult to explain, which makes us doubt its staying power. Bottom line Despite the second-quarter decline in the RMB/BER BCI, the trend in business confidence remains upwards, even if only tentatively so. To help preserve and make this increase more of a lasting one, it is important that the political and policy fac- tors currently weighing down on confidence are resolved. In this regard, it certainly would help if the (unnecessary) uncertainty that surrounds both the Mining Charter and the government’s land reform plans is settled. Delivering on the government’s stated priori- ties of, for example, removing the remaining bottlenecks in the telecommunication and tourism sectors would be a significant step to further boosting confidence and helping lift GDP growth onto a higher trajectory. “Acting on these initiatives cannot hap- pen soon enough. This is especially so con- sidering that global headwinds are mounting and domestically, the inflation as well as interest-rate cycles have, in all likelihood, bottomed out,” said Ettienne le Roux, Chief Economist at RMB. 

without compensation' intensifying, and growing signs that the strong synchronised global economic upswing has started to fizzle out. Consequently, despite still low inflation and, related to that, low interest rates, busi- ness sentiment deteriorated in four of the five sectors making up the RMB/BER BCI. After jumping from 34 to 41 in the first quarter, building contractor confidence retracted to 37 in the second quarter. This happened notwithstanding continued and improved activity in the non-residential sector – albeit from heavily depressed levels. Building activity in the residential property market changed very little in the second quarter. Following a large 13-point rise to 42 in the first quarter, retail confidence retreated to 33. Clothing retailers experienced seem- ingly better trading conditions during the second quarter, with food retailers continu- ing to see a recovery in sales relative to last year’s dismal performance. By contrast, re-

“There will be an exciting line-up of new products and services, live demonstrations and free-to-attend seminars at this year’s Electra Mining Africa,” says Gary Corin, Managing Director of Specialised Exhibitions Montgomery, organisers of the show. “New technologies and innovation are influencing the way we do business and it’s imperative that those in the industry keep up-to-date with these trends.” New to this year’s show will be the Artisans Training Centre developed in partnership with The SAJ Competency Training Institute and the South African Equipment Export Council (SACEEC), which will be a fully functional workshop where learners will be demonstrating the skills they learn. Top industry speakers will More than just a show From 10-14 September at the Expo Centre in Nasrec, Johannesburg, leading players in the mining, manufacturing, electrical and power industries will be engaging with visitors and displaying their latest products, services and solutions.

present at the conferences hosted by leading industry associations SAIMM, LEEASA and WIMSA, which will be taking place alongside Electra Mining Africa. Further knowledge and learning will be central to the SAIMechE hosted daily free-to-attend seminars. 

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CONSTRUCTION WORLD AUGUST 2018