Johannesburg – After declining 17 index points in the fourth quarter of last year, the FNB/BER Civil Confidence Index gained some ground in the first quarter, rising to 40 from 35.
This, however, is still below the 50 point threshold at which confidence tips into positive territory.
The current level of the index means that sixty per cent of respondents are dissatisfied with prevailing business conditions, FNB said in a statement on Tuesday.
Statistics South Africa (Stats SA) calculated the real growth in construction works at 2.3 percent year-on-year in the fourth quarter of 2016, up from 1.3 percent in the prior quarter.
FNB notes overall investment in the economy declined by 4.4 percent year-on-year in the fourth quarter of 2016. Civil contractors reported a further improvement in construction activity in the first quarter, which likely boosted confidence.
“Civil construction activity held up fairly well towards the end of last year. This was mainly due to a recovery in mining investment on the back of higher global commodity prices. This quarters’ survey results suggest a further, albeit marginal, improvement”, says Jason Muscat, Senior Economic Analyst at FNB.
“However, while the renewed investment by the mining sector is positive for construction activity, investment by the public sector remains weak and is expected to be so at least over the short-to-medium term”, adds Muscat.
The concern regarding activity going forward is shared by respondents. An increasing number of them cited the lack of new construction work as a constraint to their business operations, says FNB.
While construction activity was somewhat higher in the quarter, conditions in the sector are still tough. “Tendering competition remains elevated, which has weighed on profitability”, notes Muscat. According to the survey, overall profitability is at its worst level since 2011.
Going forward, growth in the sector is likely to be limited by the weak outlook for public sector fixed investment.
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