Construction sector projected to be boosted by rioting, and looting repairs
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CONSTRUCTION sector activity was up a solid 4 percent in the second quarter over the first three months of 2021, and rebounded swiftly and in a big way over the same quarter in 2020 due to the Covid-induced low base effect, renowned economist Dr Roelof Botha said yesterday.
Speaking at the release of the Afrimat Construction Index (ACI), and on behalf of Afrimat, he said the ACI came to 110.3 points in the second half of 2021, a rebound of 55 percent compared to the same quarter last year. The construction industry continues to improve, he said in a telephone interview.
The quarter-on-quarter improvement was fuelled by strong increases in construction sector employment, as well as building material sales.
Some 156 000 jobs were created in construction since the second quarter of 2020.
Botha said other encouraging improvements in the constituent indicators were the value of building plans passed, and the value of buildings completed in the country’s larger municipalities.
“Unfortunately, the post-pandemic recovery in construction remains incomplete, with the second quarter still lagging the same quarter in 2019, pre-Covid, by 6.8 percent.”
However Botha said he was confident it would continue.
Damage done to buildings through the rioting and looting in July, and likelihood of additional spend on building, repairs and security in KwaZulu-Natal and Gauteng, was likely to boost construction activity in the third quarter and probably also into the fourth quarter, he said.
In recent months, inflation had started to decline and was well below the upper end of the South African Reserve Bank’s inflation target range, which meant interest rates could remain at low levels into 2022.
“The 30 percent decline in the cost of mortgage financing at the prime rate has already aided the return to higher house prices, as well as an increase in the value of new mortgage loans,” he said.
In addition, two gauges of business confidence had recorded an immediate recovery from the decline that followed the July unrest.
Botha said several companies with a strong foothold in the construction sector value chain had recently posted impressive financial results.
Examples include JSE-listed Cashbuild and Murray & Roberts, which indicated its order book had reached a new record of R60.7 billion.
“However, all eyes will now be on government’s Recovery and Reconstruction Plan, which has been rather slow out of the starting blocks.”
He said hopefully, further relaxation of lockdown regulations and the tax bonanza on the back of record mining sector profits would contribute to speedier implementation of this plan.
Afrimat’s chief executive, Andries van Heerden, said positive economic momentum was being felt within the group, albeit slowly, and momentum and commitment from the government was needed to accelerate muchneeded infrastructure projects, which business was ready to execute on.