CONSTRUCTION ACTIVITY TO IMPROVE IN THE LATTER PART OF THIS YEAR – BOTHA

Economist Dr Roelof Botha, who compiles the Afrimat Construction Index (ACI) on
behalf of construction materials and industrial minerals supplier Afrimat, has
expressed confidence that construction activity in South Africa will improve
during the second half of this year and gain momentum in 2020.

“The gradual implementation of the new growth plan
published by the National Treasury places emphasis on creating new
infrastructure and targeting sectors with high growth and employment creation
potential, which could consolidate the latest modest recovery of construction
sector activity and lead to a new sustained growth path,” Botha commented on
Tuesday in a release outlining the performance of the ACI, a composite index of
the level of activity within the building and construction sectors, during the
second quarter.

The ACI had mirrored the performance of economic
activity in the second quarter of the year, increasing by 3.1% quarter-on-quarter.

Compared with the first quarter, the best
performing indicators included in the ACI were the values of buildings
completed, labour remuneration and the volume of building materials produced.

Only two indicators recorded declines, which was in
line with the traditional recovery of construction activity during the second
quarter of each year.

Botha said it was encouraging to note that the
four-quarter average of the ACI had stabilised at a level 13.8% higher than
during the first quarter of 2011 – the base period for the ACI.  

“This growth nearly matches that of the total South
African economy, with real value added in the non-agricultural sectors having
increased by 14% since the first quarter of 2011. It indicates too, that while
the construction sector is still under severe pressure, it is not yet on its
knees, as the level of activity has increased at almost the same pace as
overall economic activity.”

He added that the declining trend in the ACI’s
four-quarter average value that lasted for seven successive quarters had been
halted, and that a new growth phase may have commenced on the back of interest
rate relief, albeit marginal.

He also pointed out that the ACI could receive a
boost from the implementation of the National Treasury’s proposed new growth
plan.

“The plan, which has been welcomed by the private
sector at large, seeks to start removing obstacles to higher economic growth
and job creation and to incentivise activity in labour-intensive sectors.
Construction remains the most labour-intensive sector of the South African
economy and stands to gain from pragmatic and focused growth policies, such as
resuscitating the Reconstruction and Development Programme housing scheme,”
said Botha.

He further noted that it was evident that government
intended to rectify the declining ratio of infrastructure spending to
consumption spending by the public sector. “The expansion of infrastructure in
South Africa has become critically important, a fact that has been acknowledged
by President Cyril Ramaphosa and
Finance Minister Tito Mboweni.
The construction sector stands to gain from the new-found emphasis on raising
the country’s economic growth rate.”

“The construction industry at large has a pivotal
role to play in the quest for job creation on a significant scale.”

Looking ahead to the second half of the year, he
said it was encouraging that the South African National Roads Agency Limited
(Sanral) was expecting “an imminent resurgence” of road construction
projects. “According to Sanral, road construction tenders to the value of
more than R40-billion will come to the market over the next two to three
years.”

Other encouraging news that emanated from the
second-quarter GDP data was the surge in real gross capital formation, which
had increased by a “staggering” 18% quarter-on-quarter, following a
declining trend that had lasted for several years.

However, two lingering concerns were the decline in
the value of building plans passed and the downward trend in the volume of
building materials produced.

Despite a marginal improvement in the second quarter, the latter indicator is hovering at levels that are 25% lower than two years ago. “One explanation may be the entry of informal sector agents that fall outside the scope of official statistical surveys,” noted Botha.https://www.engineeringnews.co.za/article/construction-activity-to-improve-in-the-latter-part-of-this-year-botha-2019-09-18/rep_id:4136