The South African building sector is showing signs of life, but challenges remain, according to the latest FNB/BER Building Confidence Index, which held steady at 40 in the fourth quarter of 2024. File: Independent Newspapers
The South African building sector is showing signs of life, but challenges remain, according to the latest FNB/BER Building Confidence Index, which held steady at 40 in the fourth quarter of 2024.
While the overall index remained unchanged, the current reading means that the majority (60%) of respondents are dissatisfied with prevailing business conditions.
Compared to the third quarter, sentiment was a mixed picture with improved sentiment by main contractors (+10), quantity surveyors (+5), and building material manufacturers (+2). However, sentiment declined in the subcontractors (-2), architects (-3) and hardware retailers (-7) sectors.
Main contractors are experiencing a surge in activity, with confidence levels reaching their highest point in a decade.
"While the jump in confidence was somewhat surprising, the improvements in the underlying indices suggest that this is indeed an accurate reflection of the mood of contractors," said Siphamandla Mkhwanazi, a senior economist at FNB.
This optimism was supported by a marked increase in activity, employment growth and overall profitability. Residential building activity also partially recovered in the fourth quarter.
However, Mkhwanazi said looking ahead, weak order books suggest that further growth could be limited. The lack of new demand as a business constraint rose and suggests that contractors are still concerned about the short-term prospects for the sector.
“In addition, the negative impact of the construction mafia remains a concern,” he added.
Meanwhile, subcontractors are facing tough times. Their confidence has plummeted, largely due to a sharp decline in demand for residential solar installations following the end of load-shedding.
"Building subcontractors are struggling as reflected in their confidence reading of 39 (down from 58 a year ago)," states the report.
Building material manufacturers saw a slight uptick in confidence, but it remains low at 18, up 2 index points.
Hardware retailers experienced a dip in confidence despite strong sales, likely driven by factors like lower inflation and increased consumer spending. After rising to 57 in the third quarter, the business confidence of hardware retailers declined to 50 in the fourth quarter.
Architects and quantity surveyors also faced setbacks, with their confidence levels dipping to 42 after respondents highlighted the difficulties and delays in getting municipal plan/project approval. This, as well as payment delays, weighed on their mood, resulting in business confidence readings lower than what activity would suggest.
Looking ahead, Mkhwanazi said, “Further and faster growth in building sector activity depends on a quick turnaround in terms of project and plans approval by municipalities. This could be another significant hurdle should demand for building work rise more substantially.”
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