Construction index reflects big downturn in building materials sales
The Afrimat Construction Index for the first quarter of 2018 shows a large downturn year on year as SA’s mining and construction industries remain mired in negative territory.
While the real growth rate has ticked up in other sectors of the economy in the period, volumes and sales of building materials fell in the quarter, along with subsectors such as construction employment and buildings completed, as part of a declining general trend in 2017.
"A lot of things that could have gone wrong went wrong," economist Roelof Botha said.
Botha compiles the index on behalf of Afrimat, an open-pit mining company and supplier of industrial minerals and construction materials.
"It is de facto restrictive monetary policy … the Reserve Bank is being over-cautious."
Botha said declines in interest rates in SA since December 2016 had trailed falls in consumer inflation by 180 basis points to date. Meanwhile, confidence in the construction and building sectors had been muted by threats of land expropriation without compensation.
But Botha also said raised employment levels during the quarter showed robust building activity in the "informal sector". However, mainstream infrastructure development had been blighted by years of muted private and public sector spending, including for dams, roads and human settlements.
The country’s ailing infrastructure markets were given a further shock last week when JSE-listed construction and engineering group Basil Read announced it had entered into voluntary business rescue after failing to raise bridge funding for the finalisation of contracts.
The FNB/BER civil construction confidence index has been struggling to exit record lows. Meanwhile, efforts by Murray & Roberts to buy peer group Aveng at the same time German investor Aton is seeking to buy all of its assets shows structural changes across the industry.
"The announcement … that Basil Read is applying for business rescue is a clear indication of the critical state of the construction industry," Mohau Mphomela, executive director of Master Builders Association North, said on Tuesday.
"If we lose our big construction companies, we lose not only many jobs but also our national capacity to build the infrastructure a growing economy needs."