General building confidence has dropped by three index points in the second quarter. Photo: Simphiwe Mbokazi/African News Agency (ANA)
JOHANNESBURG - Confidence in both the building and civil engineering sectors declined to its worst level in six years in the second quarter of this year, according to the latest Construction Industry Development Board (CIDB) small and medium-enterprise (SME) business conditions survey.

Discouragingly, the outlook for activity remains clouded as the constraint of insufficient demand for new work remained elevated for both sectors, the survey report said.

Confidence levels for both the building and civil sectors dropped to 33 index points in the second quarter, which means that 67percent of building and civil contractors were dissatisfied with business conditions in the quarter.

General building confidence, as measured by the survey, dropped by three index points in the quarter to 33. Confidence in the building sector was last at this level in the second quarter of 2012.

The report added that building activity deteriorated while profitability and employment indicators remained under pressure.

The indicator rating insufficient demand for new building work as a constraint to business operations increased slightly to 74 percent.

“This bodes ill for building activity in the near term,” the report said.

It added that the underlying indicators on balance remained at weak levels across the board, which probably explained why confidence levels were chronically low compared to long-term averages.

Concerning

At provincial level, building contractor confidence ticked up by two index points to 56 in the Western Cape, was unchanged in the Eastern Cape and dropped in KwaZulu-Natal.

However, Ntando Skosana, CIDB project manager for monitoring and evaluation, said the worst outcome in confidence was recorded for Gauteng building contractors, where an overwhelming 83percent were dissatisfied with business conditions.

“It is concerning that this level of confidence marks a joint all-time low,” he said.

Civil engineering confidence also declined by three index points during the quarter.

The report said this deterioration largely mirrored weaker profitability.

It said 61percent of respondents reported lower profitability during the second quarter, which was a mere 2 percent shy of its worst historic level.

Skosana said from a provincial perspective the picture was rather disappointing with sentiment deteriorating across the board and the highest confidence levels registered were in the low 30s.

The highest confidence was recorded in the Western Cape at a very weak 33 index points, with confidence levels for the rest of the provinces in the 20s.

The latest gross domestic product (GDP) growth statistics released recently by Statistics SA showed a fifth consecutive decline in output in the construction sector, with output falling 1.9percent quarter on quarter in the first quarter of this year.

Skosana said the unfavourable outcome for this quarter’s survey results suggested that the negative trend in both building and civil construction activity continued into the second quarter.

- BUSINESS REPORT