BUSINESS confidence in the civil and engineering sector was at an eight-year high in the third quarter, boosted by increases in profitability and contract tender price competition, and despite the impact of the construction mafia, according to an index that tracks these sentiments,
The FNB/BER Civil Confidence Index for the third quarter, released yesterday, showed it had reached a level of 50, after slipping to 44 in the second quarter of 2024.
The latest reading means that half of the respondents were satisfied with prevailing business conditions.
While sentiment among the respondents improved, the momentum in activity eased somewhat, even though activity levels were still above the long-term average.
FNB senior economist Siphamandala Mkhwanazi said in a statement: “Respondents have been upbeat about work for the last few quarters so the softer activity reading this quarter comes off a high base and is not entirely indicative of a weaker environment, especially when considering sentiment.
“However, this is in contrast to the very downbeat outcome for investment in construction works published by Statistics SA for the second quarter of 2024. The most recent Afrimat Construction Index, which measured building and construction activity, also increased by 8.8% in the second quarter compared with the first quarter of 2024, but the year-on- year decline was still 1.9%.”
Overall profitability in construction and engineering improved significantly, lifting confidence, according to the FNB/BER Civil Index.
“Firm profit margins seem to be increasing. This, again, is a reflection of a sector that is faring reasonably well,” said Mkhwanazi.
In terms of the outlook, the picture was mixed. Order books had deteriorated, but only to a level recorded at the start of the year. Meanwhile, respondents to the compilers of the index said they expected better activity, and employment, in the fourth quarter.
“Respondents expect work to trend higher once more next quarter. This is in step with their comments that seem to suggest that there is a noticeable rise in tender activity. However, participants continue to lament the damaging impact of the construction mafia and government inefficiency,” said Mkhwanazi.
The FNB/BER civil confidence index can vary between a maximum of 100, which indicates that all respondents are satisfied with prevailing business conditions, and a minimum of zero, indicating that all respondents were dissatisfied.
BUSINESS REPORT