The ACI is an index of the level of activity in the building and construction sectors. Picture: Courtney Africa/Independent Newspapers
A lowering of South Africa’s high real interest rates, currently the highest in the world with homeowners paying an average R4 000 per month more on their bonds, could boost confidence in the construction sector in the fourth quarter, economist Dr Roelof Botha said yesterday.
The Afrimat Construction Index (ACI) increased 8.8% in the second quarter over the first quarter, but the year-on-year decline was 1.9%, which was unfortunate against the background of the dire need for housing development and the associated infrastructure, Dr Botha said.
He said the ACI was not alone in reflecting subdued economic activity, with the latest Absa/BER Purchasing Managers’ Index for manufacturing having slipped below the neutral level of 50.
He said the residential property market had also been dealt a severe blow, with the BetterBond Index of home loan applications down 24% since the second quarter of 2022. Betterbond’s bond owners were paying an average R4000 a month extra on their bonds due to high interest rates, he said.
He said the only economic priority the government should be focusing on is job creation, as only one extra job meant a broadening of the tax base and one family taken out of poverty. Dr Botha said he could not understand why the Monetary Policy Committee (MPC) was keeping interest rates so high as inflation had been within the MPC’s target range for 14 months.
The ACI is an index of the level of activity in the building and construction sectors.
Seven of 10 indicators that make up the ACI turned positive in the second quarter, with the “Value of Wholesale Sales of Building Materials” the best performer, showing quarter-on-quarter growth of 9.2%.
This indicator was also the only one to record a positive year-on-year trend.
Other indicators that performed well on a quarter-on-quarter basis were the “Volume of Building Materials Produced”, “Sales Values of Building Materials”, and “Retail Trade Sales – Hardware”.
The values of “Building Plans Passed” and “Buildings Completed” recovered well quarter-on-quarter, but the year-on-year changes were still of some concern, having declined by 21% and 20%, respectively.
Dr Botha said that on a positive note, the currency strength had led to several declines in fuel prices and was bound to assist in further lowering inflation this year.
Another reason for optimism was the turnaround in the electricity supply. The Government of National Unity had been met with a positive response by business leaders and a thumbs-up from global capital markets.
There were also signs of urgency in addressing logistics challenges, further indication of a new era of cooperation between the private and public sectors, said Dr Botha.
Afrimat chief executive Andries van Heerden said they were encouraged by the government’s statements about increasing infrastructure spending, and the group was well-positioned for these projects once they materialised. He said that by the second quarter, the integrated and recently-acquired Lafarge quarries increased Construction Materials volumes for the group.
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