SA’s construction sector recovery slowed a little in the first quarter of 2021 due to seasonal effects as well as the second wave of Covid-19, according to an index tracking activity in the sector.
After a coronavirus-induced slump in the second quarter of 2020, building materials and mining group Afrimat’s construction index has been positive for three consecutive quarters, indicating some resilience for an industry that employs about 8% of SA’s workforce.
The index uses 100 points as a neutral level, and it fell 5.6% to 109 points relative to the fourth quarter of 2020. The index, compiled by economist Roelof Botha, uses the first quarter of 2011 as a benchmark, meaning activity was 9% above that period.
Year on year, however, the index was up 5.4% in the first quarter of 2021, whereas GDP contracted 3.2% in real terms (excluding the effects of inflation).
Botha said on Tuesday the first quarter was generally subdued as much of the sector shuts down for holidays in December, meaning activity ramps up before then as contractors strive to meet deadlines.
“Given two thirds of the first quarter of 2021 saw a return to lockdown conditions, the impact was expected to be more serious,” said Botha. He added that while the sector's performance in the second quarter of 2021 was likely to have shown continued recovery, a third wave now posed a threat.
Subindices include salaries and wages in the construction sector, the value of buildings completed, sales of building materials, as well as passing of building plans.
Only three of the nine subcomponents recorded quarter-on-quarter growth in the first three months of 2021, with building materials volumes up 5.4%. Concerningly, retail trade sales of hardware fell 10.6%.
Construction and mining were the worst affected SA industries during the second quarter of 2020, with construction activity falling just over a third year on year.
According to Botha, the lifting of most of the lockdown regulations that had been in place during the second quarter of 2020 had resulted in a V-shaped recovery for most key sectors of the economy, including construction, although the effects of the pandemic would linger on for much of 2021.
“One area of optimism is the significant recovery of the value of building plans passes by the larger municipalities, which traditionally acts as a leading indicator for future building activity,” he said.
Further reasons for optimism are low interest rates, with rand strength in 2021 boding well for keeping inflation contained, said Botha. The government’s infrastructure plans also add to a brighter outlook.
Botha added that many economists expect GDP growth of above 4% during 2021, which could provide the momentum required for sustained growth from 2022 onwards.
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