Demand for construction work remains strong during Q1 2024

Demand for construction work remains strong during Q1 2024

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The FNB/BER Civil Confidence Index for Q1 2024 has recorded its best level since Q3 2016 with almost 50% of those surveyed satisfied with prevailing business conditions.

The optimism was supported by underlying indicators, particularly growth in activity. According to Senior Economist at FNB, Siphamandla Mkhwanazi, the real value of construction works increased by 2.1% on an annual basis in Q4 2023, from 0.1% in Q3 2023, suggesting that this momentum could quicken in Q1 2024. The improved activity has helped firms to remain reasonably profitable.

“Traditionally the sector has been characterised by very thin profit margins. However, with better activity – and despite an uptick in tendering competition – profit margins are at historically good levels,” he says.

While activity and profitability were upbeat, respondents raised concerns relating to the constraints to business operations. Most notably, the rating of the lack of skilled labour (which is now at its highest level since 2008) and access to credit (at an all-time high).

The reasonably solid performance by the civil construction sector, in terms of work, registered since the second half of 2022 continued into Q1 2024. This was most likely driven – but not exclusively – by renewable energy and road infrastructure projects.

“The upbeat sentiment was largely supported by the rest of the survey. In fact, given the current level of activity, one could argue that confidence should have been higher. However, an uptick in all the surveyed constraints to business operations probably weighed on sentiment and could limit growth in future”.

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