Civil engineering industry gauges uptick in activity
CAPE TOWN – The FNB/BER Civil Confidence Index reached its highest level in the fourth quarter since the second quarter of 2017 due to increased activity in the renewable energy and road construction sectors.
FNB senior economist Siphamandla Mkhwanazi yesterday said that sentiment rose to 22 in the fourth quarter.
Mkhwanazi said the upswing was the first above 20 since the second quarter of 2017. The fourth quarter reading was also 7 points higher than in the third quarter of 2019.
While higher, the current index level still meant however that a vast majority (close to 80 percent) of respondents were dissatisfied with prevailing business conditions. Confidence had improved mainly due to a second consecutive uptick in activity.
“Respondents already reported a noticeable increase in activity during the third quarter. A further, and also noticeable, improvement was registered this quarter. In fact, the index measuring activity is now close to its long-term average,” said Mkhwanazi.
The views were in line with the views of many construction industry executives interviewed by Business Report recently, who have reported slightly improved trading conditions.
According to Statistics South Africa (StatsSA), the real value of expenditure on construction work contracted by 0.4 percent year-on-year in the third quarter of 2019, but Mkhwanazi said the FNB/BER Civil Confidence Index pointed toward an improvement in the fourth quarter that was likely to be reflected in StatsSA statistics.
“While activity was up, other indices – specifically those measuring tendering competition and the availability of new work – weighed on confidence.”
Mkhwanazi said confidence would likely have been higher were it not for the keener tendering competition and concerns regarding the availability of future work.
“This implies the work that is under way is either not expected to be sustained or the growth is limited to a few firms within the sector,” he said.
However, the index results were “heartening” as it suggested there was some life within the sector.
“As such, it is probably not beneficial to a broad base of firms. This would explain the still tough business conditions with respect to competition and future work,” he said.
The FNB/BER civil confidence index can vary between a maximum of 100 (which indicates that all respondents were satisfied with prevailing business conditions) and a minimum of zero (indicating that all respondents were dissatisfied).
A level of 50 indicates that the respondents are equally divided between those satisfied and dissatisfied. Fieldwork for the fourth quarter survey was done between October 14 and November 18, 2019.