Confidence among civil contractors has reached its best level in eight years, while concern over construction mafias continues to grow.
Despite the rise in tender activity highlighted in the FNB/BER civil confidence index which climbed to 50 in the third quarter from 44 in the second, some participants continue to lament the damaging effect of crime and government inefficiency on the sector. According to the index, while sentiment has risen, the level of activity has tapered off a bit, though it still exceeds the long-term average.
The Afrimat construction index, published earlier this month, also pointed to signs of recovery. These included a winter free of load-shedding, a stronger rand and increased confidence in the government of national unity.
“Even though activity deteriorated somewhat this quarter, business confidence moved higher on the back of better profitability. Encouragingly, respondents expect work to trend higher once more next quarter,” FNB senior economist Siphamandla Mkhwanazi said.
Respondents have been upbeat about work for the past few quarters so the softer activity reading this quarter comes off a high base and is therefore not entirely indicative of a weaker environment, especially when considering sentiment, the FNB/BER index shows.
However, Mkhwanazi said that this contrasted sharply with the disappointing investment figures for construction works reported by Stats SA for the second quarter of 2024.
In April, a study by the Global Initiative Against Transnational Organised Crime, based in Geneva, said the extortion economy in Cape Town had become deeply rooted. The tactics used in the city’s underground economy were spreading across SA, making it challenging to combat.
Regarding construction mafias, it said methods had been copied and adapted from KwaZulu-Natal and similar extortion practices had spread to other parts of the country.
Police seem to be ramping up their efforts to crack down on the mafia groups in Durban, with reports on Wednesday that four alleged construction mafia suspects were shot while attempting to extort R60,000 from a construction project on O’Flaherty Road in Sydenham.
Mkhwanazi said in terms of the outlook the picture was mixed. Order books deteriorated, but were merely back to the level recorded at the start of the year. Meanwhile, respondents expected better activity (and employment) next quarter.
The sluggish economic growth in SA during the first quarter was reflected in the construction sector. This stagnation is attributed to various factors, including the high cost of capital, with the prime overdraft rate at 11.5%, which is 150 basis points above pre-Covid-19 levels. /With Kabelo Khumalo
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