The Civil Confidence Index (CCI) of FNB and the Bureau for Economic Research (BER) gained five points from the last quarter (Q4) to register a level of 21 for Q1 this year.
And although this is the 3rd consecutive increase for the index, the latest uptick from 16 CCI points in Q4 to the current level is still not boding well for the sector, especially with Covid-19 reverberations still weighing on civil confidence.
According to a summary statement by the BER, the overall mood remains negative.
“Although better, the current index level means that the vast majority (close to 80%) of respondents are dissatisfied with prevailing business conditions.”
Sentiments reflected by the CCI’s improved confidence level should be seen against the backdrop of higher activity off a plunging base.
In this regard the Bureau quotes Stats SA, saying that “the real value of construction works contracted by 17.6% year-on-year (y-o-y) in 4Q2020, after declining by 22.1% in 3Q2020”.
Adding context, the BER said, based on these survey results, a further improvement (or rather, a slowing in the rate of decline) was likely in 1Q2021.
More to the point, construction spending was down 18.7% y-o-y last year.
FNB property economist, Siphamandla Mkhwanazi, said this was despite civil construction improving during Q12020.
“Before 2Q2020 we noted that there was a latent recovery in civil construction activity. Then came the pandemic which negatively affected the civil construction sector, even more so than the rest of the economy.
“Promisingly, we are now in a similar position as a year ago, with activity, cautiously, and off a very low base, starting to improve.
“A number of large construction companies have shared that there seems to be more tendering activity, particularly on the road infrastructure front, but also in mining and renewable energy. While these results don’t necessarily contradict that, it does suggest that this improvement in tendering activity is not the experience of most contractors.”
Mkhwanazi added that profitability and shrinking prospects for new work also influenced the overall picture.
“It is encouraging that activity continued to gather momentum this quarter. The concern, however, is the trajectory for the rest of the year. Despite some anecdotal evidence to the contrary, too many civil contractors are still experiencing a shortage of new work.”
