While the FNB/BER building confidence index held steady at 40 points in the third quarter of 2024, 60% of respondents still said they were dissatisfied with the state of the construction sector.
Still, confidence among main contractors jumped by 10 points to a decade-high 51, fuelled by higher activity, employment growth, and improved profitability, suggesting positive momentum in the sector.
“While the jump in confidence was somewhat surprising, the improvements in the underlying indices suggest that this is indeed an accurate reflection of the mood of contractors,” said FNB senior economist Siphamandla Mkhwanazi.
In comparison to the third quarter of 2024, the following changes in sentiment were recorded: main contractors (+10 points), quantity surveyors (+5), building material manufacturers (+2), sub-contractors (-2), architects (-3), and hardware retailers (-7).
Residential building rebounded rebounded in the fourth quarter after struggling earlier this year. Non-residential activity continued to increase, albeit off a low base. While activity was higher, order books remained comparatively weak.
“Despite more work currently, the lack of new demand as a business constraint rose and suggests that contractors are still concerned about the short-term prospects for the sector,” said Mkhwanazi.
Weak order books indicate further growth may be constrained. Additionally, Mkhwanazi said the continuing threat posed by construction mafias remained a significant concern.
The survey shows that building sub-contractors are struggling, with their confidence dropping to 39 points from 58 last year. The demand for residential solar installations, which boosted the sector in 2022 and 2023, has fallen sharply due to the suspension of load-shedding.
“Although up two index points, the business confidence of building material manufacturers is still relatively low at 18. There was, however, some improvement in production and a decline in production costs relative to the same time last year,” the Bureau for Economic Research (BER) said in a statement accompanying the survey results.
Confidence among hardware retailers fell to 50 points in the fourth quarter after rising to 57 in the preceeding three months. Despite the decline in overall business sentiment, sales performed exceptionally well, with the sales volume index reaching its highest level in three years.
“The improvement in hardware sales is consistent with somewhat better consumer spending as a result of lower inflation, the September interest rate cut and the boost to income from pension withdrawals following the recently implemented two-pot system,” said Mkhwanazi.
Activity among architects and quantity surveyors fell slightly in the fourth quarter though it remains above the long-term average. Sentiment for both sub-sectors was registered at 42 points.
Mkhwanazi said respondents cited delays in municipal plan approvals and payments, which dampened confidence despite stronger activity.
Though the building pipeline is stable, sentiment remains below average. Mkhwanazi warned that growth in the sector depends on quicker municipal approvals, which could be a challenge if demand rises significantly.
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