The construction sector increased its value add to the economy by ”an impressive” 4.1 percent in real terms in the second quarter compared with the previous quarter, economist Dr Roelof Botha said yesterday.
He said this at the release of the Afrimat Construction Index (ACI) yesterday - the index is a composite indicator of the level of activity within the building and construction sectors.
Botha said the increase was despite events that put additional pressure on economic activity in the second quarter, including the KwaZulu-Natal floods, strikes at major mining companies, weaker precious metals and iron ore prices, high fuel costs, load shedding, rail transport problems and increasing inflation.
He said one of the most encouraging features of the index was the positive trend for the volume and the value of building material sales, which may be regarded as leading indicators for future construction activity.
“The best-performing indicator was the value of buildings completed in the metros and larger municipalities, with a 21 percent year-on-year rate of increase. The increase in employment in construction in the second quarter was also encouraging, and will hopefully continue as government starts embarking on more public/private partnerships as part of the promised infrastructure drive,” he said.
Building material sales increased 9.6 percent (quarter-on-quarter) and by 4.4 percent compared to the second quarter of 2021.
He said the public sector still lagged behind the private sector in capital formation, which is the aggregate demand component that ultimately incorporates construction sector activity.
“Infrastructure investment by government has not yet resulted in higher levels of public sector expenditure on capital projects,” Botha said.
Private sector capital formation produced an 8.7 percent increase, in real terms, during the second quarter, compared to the second quarter of 2021.
Fixed capital formation by state corporations however managed to increase in real terms, both in quarter-on-quarter and year-on-year terms.
“Another positive development is the rise in the SME Business Confidence Survey for the construction sector, a quarterly survey conducted by the Bureau for Economic Research on behalf of the Construction Industry Development Board. This index recorded a level of 42 during the second quarter, compared with 35 in the first quarter,” said Botha.
He believed that fiscal constraint was not the root cause of the lack of public sector spending on infrastructure, but due to over-regulation, a lack of requisite skills, especially in project management, and the dysfunctional state of a large number of municipalities.
“Fortunately, government has acknowledged that all of these under the new growth and reconstruction strategy and visible signs of deregulation have already come to the fore,” he said..”
Afrimat CEO Andries van Heerden said although there was an uptick in the ACI, “construction and infrastructure activity remains low. Thankfully, our Construction Materials segment continues to benefit from being well located, efficiency drives, and product diversification. Similarly, in the Industrial Minerals segment, sector diversity, is proving to be a solid support.”
BUSINESS REPORT