The FNB/BER Civil Confidence Index has continued its downward trend, dropping three points to 45 in the first quarter of 2025, after declining to 48 in the final quarter of 2024.
The index reached an eight-year high of 50 in the third quarter of 2024.
The decline in contractor confidence was driven by weaker overall profitability and a gloomier outlook for business conditions, the report said. Despite a slight improvement in activity, more than half (55%) of respondents were dissatisfied with the prevailing business environment.
A decline in confidence over the last two quarters of 2024 reflects the drop in the real value of construction. Stats SA data showed that the real value of construction work shrank 3.4% year on year in the fourth quarter of 2024, showing a slight improvement from the 3.6% decline in the third quarter.
“For a while now, surveys have suggested that activity in the civil construction industry is very slowly, but surely, gaining momentum. However, this is probably inadequate to address SA’s pressing infrastructure needs,” said FNB senior economist Siphamandla Mkhwanazi.
However, the index suggests that construction spending is expected to improve in the next quarter.
The index indicates that fewer challenges were faced by businesses in their operations in the first quarter of 2025 compared with the end of 2024. However, the rating for new demand, which reflects order books, only showed a slight improvement, indicating that any recovery in the sector was expected to be slow and gradual.
“With the closure of ArcelorMittal (Amsa) now confirmed for the second quarter of 2025, and if negotiations to keep it open fail, it is highly likely that shortages of construction material will soon be a key concern to contractors again,” said Mkhwanazi.
Amsa, as the largest steel producer in SA, is a key supplier of steel and other essential materials used in construction. The government is in talks with the steel producer to save company’s loss-making operations.
Business Day reported earlier this week that trade, industry and competition minister Parks Tau said negotiations with Amsa were continuing and it was hoped that a deal to save the business could be hammered out this week.
In January, Amsa announced its decision to close its long steel operations in Newcastle and Vereeniging, affecting at least 3,500 jobs.
The index further highlighted that the availability of construction materials worsened, reaching its lowest level since before the Covid-19 pandemic, suggesting ongoing supply chain issues that could further hinder the sector's recovery.
“Growth in activity is, compared to the longer-term average, not faring too poorly. However, the amount of work currently under way is not enough to address SA’s deep infrastructure backlog while order books are consistent with only a lukewarm improvement going forward,” said Mkhwanazi.
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