Civil construction contractors’ confidence rises to 31
5TH DECEMBER 2022
BY: SCHALK BURGER
CREAMER MEDIA SENIOR CONTRIBUTING EDITOR
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The FNB and Bureau for Economic Research (FNB/BER) Civil Confidence Index increased further to 31 in the fourth quarter of the year, up from 24 during the preceding quarter.
The higher confidence was supported by better activity and profitability, says FNB senior economist Siphamandla Mkhwanazi.
“There is a clear improvement in civil construction activity this quarter, which should continue into 2023.
“However, this should be viewed with caution, as respondents pin much of their optimism relating to future activity on renewable energy projects. We have been disappointed by the pace of the rollout of these projects in the recent past,” he highlighted.
After registering a low of only nine in the first quarter of the year, the confidence of civil contractors has gradually risen over the course of the year, and the index is at its best level since the beginning of 2017.
Despite the improvement, when compared to the long-run average of 43, the sentiment for the quarter is still quite downbeat. The current index level means that slightly less than 70% of respondents were dissatisfied with prevailing business conditions, he said.
“Confidence ticked up on the back of better activity and, in turn, profitability. Last quarter the survey results indicated a marked increase in quarter-on-quarter activity growth. Encouragingly, there seems to have been a further improvement in the fourth quarter,” he added.
Further, respondents are also upbeat about prospects for the first quarter of 2023, which could also have lifted confidence.
“History has taught us that we need to take expectations with a pinch of salt. This is even more so this quarter because many of the comments regarding the outlook relate to an increase in work on renewable energy projects.
“Realistically, it is uncertain at this stage just how quickly investment in green energy will progress,” Mkhwanazi emphasised.
However, the more optimistic view on the outlook is somewhat supported by the rating of insufficient new demand as a business constraint, which is a proxy for order books, which eased to 73% in the fourth quarter from 83% in the third quarter.
“While the results this quarter are encouraging, the disconnect between activity growth, which is well above the survey’s long-term average, and sentiment, which is stuck well below 50 and when compared to a long-term average of 46, highlights the effect that factors not expressly surveyed have on the mood of contractors.
“Once again, concerns around the protracted delays between tender adjudication and award and the cost of business forums, or the construction mafia, were mentioned. These concerns weigh increasingly on sentiment,” Mkhwanazi noted.