Construction sector activity remained subdued in the first quarter even though several sectors in the economy recovered and went into a new expansion phase since the lifting of most of the lockdown regulations, the Afrimat Construction Index (ACI) showed.
Economist Dr Roelof Botha said while the index showed there was construction activity, as evidenced by relatively high retail hardware sales figures for the past five quarters, not enough big projects were being awarded if infrastructure development was to succeed due to red tape, inefficiencies by state organisations and a disconnect between the government and private sector to cooperate.
“Just, for example, take roads. Nearly 1000 new vehicles take to the roads in Gauteng alone every calendar day of the year. We need much more road development. The private sector has the skills to get infrastructure development done,” he said.
He said the ACI had returned to a traditional trend of declining between the fourth quarter and the first three months of the following year, recording a drop of 3.5 percent in the index value.
Compared to the first quarter of last year, the picture for the industry was “more positive”, with four of the nine sub-indicators recording positive growth, while two others were unchanged.
The only sub-indicator that recorded positive growth between the fourth quarter of last year and the first quarter of 2022 was the value of wholesale sales of construction and building materials.
“Ever since the ACI recorded its highest level yet, namely 143.8 during the third quarter of 2016, a combination of high-interest rates, low economic growth, state capture, public sector incompetence and high levels of violent crime have dampened activity in the construction sector,” said Botha.
He said a serious obstacle was the prevalence of intimidation, extortion and violence on construction sites, which had reached “crisis levels.”
“As long as the value of construction works represents only 4 percent of the country’s infrastructure project pipeline, new jobs will not be created at scale in the sector,” he said.
Compared to the first quarter of 2021, the shining stars of the latest ACI were the volume of building materials produced, the values of buildings completed in the larger municipalities, and wholesale sales of construction and building materials.
Since the fourth quarter of 2021, the worst performing sub-indicator was labour remuneration, which fell more than 15 percent.
He said the negative impact of higher interest rates was already being felt in a decline, in real terms, of average house prices and also in the value of building plans passed by the larger municipalities. He said there was likely a big backlog of building plans that needed to be passed at the municipalities.
Afrimat’s CEO, Andries van Heerden said a recovery to pre-Covid levels in the Construction Materials and Industrial Minerals segments of the group's business showed there continued to be construction activity in the country, although on a smaller scale, which suited the Afrimat efficiency model.
edward.west@inl.co.za
BUSINESS REPORT