CAPE TOWN - THE Afrimat Construction Index staged a “remarkable” recovery in the third quarter of 2020 following the sharp decline in the second quarter that was induced by the lock-down regulations, economist Dr Roelof Botha said yesterday (thur).
The index moved back to above the 100-level mark, with the quarter-on-quarter percentage change from July to September at a high 69.1 percent. However, the index remained 6.7 percent lower than in the third quarter of 2019.
Botha said it was encouraging that the four-quarter average of the ACI had remained above the base level of 100. He said in recent discussions with contractors, they had told him that tender activity had “exploded” in the past month.
After dropping to a low of 68.6 in the second quarter, the index reached 115.9 in the third quarter. Dr Botha predicted a record high being reached in 2021.
He said the systematic lifting of most of the lock-down regulations had led to a V-shaped recovery for most key sectors, including construction.
“Despite disappointing third quarter GDP (gross domestic product) data on the construction sector , it seems clear that retail and wholesale trade sales for hardware and building materials are fuelling the recovery in the sector,” said Botha.
The low interest rate environment, which allowed more people to spend money on home improvements and home building, and the many people working from home that needed to do house alterations, were likely fuelling building material and hardware sales, he said.
The discrepancy between the official value-added data and the retail and wholesale sales figures for construction and building materials was related to an underestimation of the size of informal construction activity, particularly in rural areas and the outskirts of metropolitan municipalities.
He said there were a number of growth drivers for construction in 2021 including low interest rates, and the government’s new infrastructure drive, which included 62 key projects identified under the Sustained Infrastructure Programme (SIP), several of which had already been gazetted for tender applications.
A technical task team to assist with project implementation, comprising people with experience in project management, engineering, financial management and administration, had been selected from more than 1200 applicants.
Another boost to construction in 2021 was the record export performance by agriculture and mining, which had ensured balance of payments stability, and which was one of the reasons for the sustained recovery of the rand exchange rate.
And, after being in contraction mode for nine successive months, the Absa Purchasing Managers’ Index (PMI) for manufacturing had been above the neutral level of 50 since May, while an index level of 60.9 in October meant the PMI recorded its highest level in two decades.
“Part of the economic success prior to the financial crisis of 2008/09 was related to the low-cost housing drive under the Reconstruction and Development Programme and the country is now on the verge of another construction-led economic growth phase,” he said.
Afrimat’s chief executive, Andries van Heerden, said he was pleased that the ACI has shown signs of recovery, an said that for Afrimat, any disruption caused by the Covid-19 pandemic had been countered by their diversification strategy, as well as the implementation of other proactive measures to manage its impact.
BUSINESS REPORT