05/10/2022
Conditions in the South African construction sector remains perplexed, particularly in the civil industry. The disconnect between government podium talk and reality is clear but yet there seems to be some encouraging factors at play. Any growth or uptick in data indicators comes off a low base, given the gradual decline in investment over the years, but it has to start somewhere. Confidence levels remain overwhelmingly poor amongst civil contractors, according to the FNB/BER civil confidence index, at a satisfaction rate of just 24 percent for the 3rd quarter of 2022 (but is better than 10 percent in the previous quarter) and is at the highest level since 2020. Confidence amongst consulting engineers in South Africa, according to CESA's bi-annual survey, is also looking a little better, reaching close to 60 percent in the second half of 2021, linked to improved business conditions and remained above 50 percent for the first half of 2022. Mining companies are more eager to invest in mining infrastructure, and along with an increase in renewable energy projects that are slowly but surely coming off the ground (although the contribution to the civil sector is low), this offers further potential for investment in the industry. The nominal value of civil tenders released in the 3rd quarter of 2022 jumped by 66 percent q-q and 37 percent on a year on year basis, with an increase in the value of both water related and road projects out to tender. Postponements and delays are at the order of the day, but this at least offers some encouragement. How this will filter through to hopefully improved business conditions in the industry and higher turnover remains to be seen. It is relatively certain that 2022 will remain a challenging year for the sector and what 2023 will offer depends entirely on government's commitment to increase infrastructure spending, proactively facilitate private sector participation and increase accountability across all spheres of government to honour budgetary commitments.
