BUSINESS NEWS - South Africa’s building industry is in dire straits, with confidence among major contractors declining to record low levels as a result.
The latest FNB-Bureau for Economic Research (BER) building confidence index released on Tuesday reveals that confidence declined in the third quarter to 35 index points on a 100-point scale from 39 in the second quarter of 2021.
This means that across the building sector pipeline, 65% of respondents are dissatisfied with prevailing business conditions, said FNB/BER. Confidence among main contractors slipped to 18 in the third quarter from 22 in the second quarter.
FNB senior economist Siphamandla Mkhwanazi said sentiment in the building sector remains downbeat, which is partly due to the moderation in main contractor activity, resulting in profitability coming under noticeable strain.
However, Mkhwanazi said other factors not explicitly captured by the survey have also dampened sentiment.
“These include delays in the municipal approval of projects, the so-called ‘construction mafia’ and government inaction regarding the rollout of key building projects.
“This contrasts with the more upbeat results for the retail hardware sector. This, however, may not be sustained for much longer,” he said.
Double whammy
BER senior economist Craig Lemboe said business confidence in the construction industry has reached record low levels as the combined effect of the sector’s general state of decline and the unexpected shock of mass riots, which knocked business confidence hard in the third quarter of 2021.
Lemboe made this remark last week during a webinar on the role of construction in the economic recovery of South Africa, hosted by Construction Alliance South Africa (Casa).
“This is the lowest of all sectors, signifying deep concerns among respondents that business conditions in the construction industry are not conducive for the country’s planned infrastructure rollout programme,” he said.
