The civil engineering sector in South Africa is expected to continue its upward trend into the first quarter (Q1) of the New Year, following research data by FNB and the Bureau for Economic Research (BER) showing that the sector reached its highest level in Q4 since Q1 2017 (*).
Confidence measured by the FNB/BER Civil Construction Index showed that it had “ticked up on the back of better activity and, in turn, profitability”, a statement said after the recent findings.
FNB senior economist Siphamandla Mkhwanazi said in Q3, when the index rose to 24 before rising further to 31 in Q4, “the survey results indicated a marked increase in quarter-on-quarter activity growth”.
Commenting on the views gauged from respondents who participated in the index’s findings, Mkhwanazi cautioned though that “history has taught us that we need to take respondents’ expectations with a pinch of salt.
“This is even more so this quarter because many of the comments regarding the outlook relate to an increase in work on renewable energy projects.
“Realistically, it is uncertain at this stage just how quickly investment in green energy will progress.”
However, the BER stated that the more optimistic view on the outlook was somewhat supported by the rating of insufficient new demand as a business constraint – a proxy for order books – which eased to 73%, from 83% in 3Q2022.
The Bureau emphasised that while the results this quarter were encouraging, the disconnect between activity growth (which is well above the survey’s long-term average) and sentiment (which is stuck well below 50 compared to a long-term average of 46) highlighted the effect that factors not expressly surveyed had on the mood of contractors.
Mkhwanazi said: “Once again, concerns around the protracted delays between tender adjudication and award, and the cost of business forums or the construction mafia, were mentioned.
“These concerns weigh increasingly on sentiment.”
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