Construction World January 2021

COMMENT

According to the First National Bank/Bureau for Economic Research Building Confidence Index, confidence in the building sector gained 20 points to 24 (off an all-time low) in the third quarter of 2020. This has risen to 29 in the fourth quarter. This is the best level in two years.

S iphamandla Mkhwanazi, FNB’s senior economist, said that the main contractor confidence reached 21– it is the highest it has been for 2020. This was due to the better sentiment that existed in the third quarter and due to increased activity. He said that although 21 is lower than in the third quarter of 2019, the rate of decline is less in the third quarter of 2020. The lift in confidence is also because of an increase in profitability. Residential vs. non-residential There is a clear diversion between the confidence and activity among residential builders when compared to the experience of non-residential builders. The index that measures activity in the residential sector improved but activity in the non-residential sector decreased to levels experienced during the second quarter, when COVID-19 restrictions were at their toughest. However, the upward trend in the residential sector primarily came from residential

subcontractors. The reason for this is twofold: additions and alterations had to be made to enable thousands to work at home. In addition, the increase in mortgage activity increased renovations. These are smaller projects, with a shorter duration and of a far lower value that may not have longevity. Building material confidence slipped to 31 in the fourth quarter. Even with this decline, production in this sector experienced its best level since 2018. Mkhwanazi said that although production was higher, an increasing number of builders did raise the issue that an inadequate supply of building materials was constraining business. Aspasa, in a release to industry, stated that “mines and quarries are set to boom in the New Year when a host of building and construction projects which have been delayed due to COVID-19 get under way. The fact that many construction companies are closing later and opening as soon as 4 January 2021 suggests that there is a lot of work out there and that these companies

are catching-up on lost time. As a result, the requirement for sand, stone, natural stones, clay bricks and all manner of mined commodities will be in high demand.” Even though the building pipeline remains constrained, confidence among architects rose to 30 in the fourth quarter. In stark contrast, confidence among quantity surveyors fell to zero. One can only hope that the government’s drive for infrastructure development will have a positive impact on this index and that the construction industry is afforded the opportunity to be the significant source of employment in a post-pandemic reality.

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CONSTRUCTION WORLD JANUARY 2021