SA CONSTRUCTION SENTIMENT CRUMBLES UNDER SOFT ECONOMY

Confidence in South Africa’s civil construction sector is
at the lowest in at least 22 years and could stay there for some time.

A gauge tracking sentiment in the sector dropped in
the first quarter to the lowest since its inception in 1997, according to a
statement Tuesday by FirstRand Group’s First National Bank (FNB) and
the Stellenbosch-based Bureau
for Economic Research.

That means 90% of participants in the quarterly
survey are unsatisfied with current business conditions.

That’s consistent with market developments following
the “demise” of construction company
Group Five, said FNB property economist Siphamandla
Mkhwanazi.

Group Five filed for bankruptcy protection earlier
this month, making it the fifth local builder to
enter business rescue in
less than a year. The company’s shares were suspended after 45 years of trading
on the JSE.

While the building industry
is cyclical, the current mix of a depressed economy, high levels of government
debt and a widening budget deficit is proving toxic as contracts dry up.

President Cyril Ramaphosa announced
plans to create a multi-billion rand infrastructure fund last
year in a bid to get financing from both private and state-owned companies to
boost the industry. The construction sector,
that makes up about 4% of gross domestic product, is yet to see
tangible benefits.

“It’s not surprising that the prospects for work are downbeat given the state of the fiscus and the resultant reduction in infrastructure investment by the public sector,” Mkhwanazi said. “Civil contractors should brace themselves for a continuation of the current weak demand.” http://www.engineeringnews.co.za/article/south-african-construction-sentiment-crumbles-under-soft-economy-2019-03-26/rep_id:4136