South Africa: Business confidence in construction falls
Thématique :
sud afrique
By Roy Cokayne, Business Report, 15/12/2008
Pretoria - Business confidence in the construction industry was knocked in the fourth quarter of this year by disappointing business conditions, according to the FNB civil construction confidence index released on Friday.
The index, compiled by the Bureau for Economic Research, dropped further from a level of 69 in the third quarter to 60 in the fourth quarter.
The index was at 76 in the first quarter and 71 in the second quarter of this year.
But Cees Bruggemans, the chief economist of First National Bank, said survey respondents did not expect a further deterioration in overall business conditions and construction activity levels in the first quarter of next year.
He said the drop in confidence in the fourth quarter could be related to the fact that business conditions "turned out well below expectations".
"In particular, the growth in construction activity disappointed and a net 50 percent of the respondents reported that the fourth quarter rate was below that of the same quarter a year ago," he said.
Comments by respondents to the survey indicated that a number of factors could have contributed: the high level of interest rates, weaker private sector demand to shortages of public sector funding, poor administration and slow payments by government clients.
It was not surprising that respondents to the survey indicated that they had experienced a sharp escalation in tender price competition during the quarter because of reports of weaker overall demand levels, he said. Bruggemans said 49 percent of respondents in the third quarter survey indicated a keener tendering environment compared with the same quarter a year ago, but this figure jumped to 64 percent in the latest survey.
The tighter demand conditions led to margin compression, resulting in the overall profitability of construction companies that participated in the survey turning out well below expectations.
Bruggemans said the moderation in construction activity resulted in 7 percent of the survey respondents indicating that they were reducing the number of people employed in their organisations.
"Nevertheless, good-quality, skilled labour remains a constraint on companies and 84 percent of the respondents to the survey indicated that skilled labour shortages are hampering their construction activities," he said.
Pretoria - Business confidence in the construction industry was knocked in the fourth quarter of this year by disappointing business conditions, according to the FNB civil construction confidence index released on Friday.
The index, compiled by the Bureau for Economic Research, dropped further from a level of 69 in the third quarter to 60 in the fourth quarter.
The index was at 76 in the first quarter and 71 in the second quarter of this year.
But Cees Bruggemans, the chief economist of First National Bank, said survey respondents did not expect a further deterioration in overall business conditions and construction activity levels in the first quarter of next year.
He said the drop in confidence in the fourth quarter could be related to the fact that business conditions "turned out well below expectations".
"In particular, the growth in construction activity disappointed and a net 50 percent of the respondents reported that the fourth quarter rate was below that of the same quarter a year ago," he said.
Comments by respondents to the survey indicated that a number of factors could have contributed: the high level of interest rates, weaker private sector demand to shortages of public sector funding, poor administration and slow payments by government clients.
It was not surprising that respondents to the survey indicated that they had experienced a sharp escalation in tender price competition during the quarter because of reports of weaker overall demand levels, he said. Bruggemans said 49 percent of respondents in the third quarter survey indicated a keener tendering environment compared with the same quarter a year ago, but this figure jumped to 64 percent in the latest survey.
The tighter demand conditions led to margin compression, resulting in the overall profitability of construction companies that participated in the survey turning out well below expectations.
Bruggemans said the moderation in construction activity resulted in 7 percent of the survey respondents indicating that they were reducing the number of people employed in their organisations.
"Nevertheless, good-quality, skilled labour remains a constraint on companies and 84 percent of the respondents to the survey indicated that skilled labour shortages are hampering their construction activities," he said.
