Construction World October 2017

COMMENT

In the last two weeks of August, 1 600 senior executives from various fields (building, manufacturing, retail, wholesale and the motor trade sectors) were surveyed. I here compare the third quarter to the second quarter. If one has to see a positive in these results, it will be that business confidence did not reduce further. The improvement can be attributed to the fact that the period had no dramatic political event. In the preceding period, which saw the collapse to 29 points, the cabinet was reshuffled which in turn led to a credit downgrading. Still, 35 is a long way from even a neutral 50. Two things are worrying: the outlook is generally pessimistic, and of the five sectors that were surveyed, four of them did not even post a 50 point reading. In the second quarter of the year, the RMB/ BER Business Confidence Index (BCI) plunged from 40 to 29 (100 being utmost confidence). In the third quarter this index rose with six to 35. This means that almost seven of every 10 respondents are unsatisfied with current business conditions.

Building does not function in isolation As the building sector does not operate in a vacuum, but influenced by each of the other four sectors that were surveyed, it is beneficial to take a look at each of the sectors individually. Manufacturing, seen by most as one of the only ways to entrench South Africa’s position as an economic powerhouse in Africa, rose from an alarmingly low 16 to 27 – still massively low. The motor trade sector lifted from 11 to 19. Retail confidence rose from 35 to 38, while the wholesale sector sank from 49 to 48. Unlikely rise In the building sector the confidence rose from 36 to 44 – against expectation. This means that this sector’s confidence is now on the level it was for the last 18 months. Realistically an increase in this sector’s confidence level is unlikely as it finds itself in an environment where the South African economy is not going to experience fireworks: domestic demand is weak, business activity is subdued, profitability is weak because of increased competition and the political situation remains uncertain. Researchers say the current economic climate is indicative of GDP-growth that will be around a mere 1%, further influenced by limited private sector investment and negative job growth.

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Wilhelm du Plessis Editor

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PUBLISHER Karen Grant

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CONSTRUCTION WORLD OCTOBER 2017