CAPE TOWN – The FNB/BER Civil Confidence Index remained below 20 for the sixth consecutive quarter, rising by one point to 18 in the fourth quarter of 2018.

The current index level means that more than 80 percent of respondents are dissatisfied with prevailing business conditions.

“While confidence remained stable at a very low level, growth in construction activity deteriorated noticeably. This is on top of falling demand for the most part of the last 18 months,” remarked Jason Muscat, Senior Economic Analyst at FNB. 

Statistics South Africa (Stats SA) data showed that the real value of construction works declined by an annual rate of 3.6 percent in the third quarter following a 0.5 percent annual drop in the second quarter. 

These results suggest a similar, possibly even worse, performance in the fourth quarter.

Growth in construction activity

The index measuring the lack of new demand as a constraint on civil contractors, a proxy for the state of order books, remained above 90 percent. 

According to Muscat “this means that there is no respite in the offing. Civil construction activity likely declined this quarter with no sign of improving over the short-term. A very downbeat outlook indeed”.

Amid the environment of increased scarcity of work, tendering competition eased for the second consecutive quarter. “It is surprising to see that the intensity of price competition in the sector has continued to diminish. However, it is unlikely to continue, given the state of activity growth and the outlook,” said Muscat. 

The fact that civil contractors remain predominantly pessimistic, as reflected by the FNB/BER Civil Confidence Index, is easily justified by the underlying indices, particularly relating to activity.

“It is difficult to conceive a further, and potentially steeper, fall in construction activity after the declines already experienced over the past few quarters. However, that is what the Q4 survey results suggest. This means that the economy is yet to see any real benefit from President Ramaphosa’s key focus on stimulating fixed investment,” said Muscat.

BUSINESS REPORT ONLINE