Construction activity gained traction in the third quarter, outperforming overall GDP even though it remained weaker than the levels recorded in the same period last year.
This is captured in the latest Afrimat construction index, which showed a strong double-digit increase quarter on quarter, marking a notable turnaround from the second quarter’s softer outcome.
“The majority of indicators recorded double-digit growth rates, while the volume of building materials produced enjoyed the second highest year-on-year increase and the third highest quarter-on-quarter increase,” said economic adviser to the Optimum group Roelof Botha, who compiled the index on behalf of Afrimat.
In the third quarter under review, the index recorded a 10.2% quarter-on-quarter increase and a 0.4% year-on-year gain.
The latest indicators point to a sector gaining traction across several fronts on a quarter-on-quarter basis. Hardware retail sales grew 7.7%, while the volume of building materials produced rose 13.6%. Other drivers of the rebound included a 14.4% increase in buildings completed, a 13.7% rise in building plans passed and a 10.4% gain in sale of wholesale construction materials.
The improvement suggests easing conditions in a sector that has long been constrained by slow infrastructure rollout and inconsistent investment flows. While the latest uptick does not signal a full recovery, it points to a stabilising trend.
According to Botha a further cut of 25 basis points in interest rates during this period also played a role in the improvement of several indicators, especially in the values of building plans passed and retail trade sales of hardware.
“The lack of progress with capital formation in the economy, which is generally associated with a significant element of construction works, should be of concern to the government, as the country is in dire need of repairs and expansion of infrastructure, especially roads, water and sewerage,” Botha said.
Looking ahead, he expects a further recovery in construction sector activity. “While the modest easing of monetary policy is welcome, additional interest rate cuts are needed to bring the cost of capital in South Africa in line with our key trading partners,” he said.
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