The index, compiled by economist Roelof Botha, declined 2.2% in the fourth quarter compared to the third, amid a slump in the value of new buildings completed of almost a fifth, though it still recovered 1.9% year on year. SA's GDP had shrunk 1.3% in the fourth quarter of 2022 on a quarterly basis, which came as a surprise to economists, who had expected modest growth.
"It's bad news," Botha told News24. "One would expect in a country like SA, with a huge and growing population, and very obvious infrastructure deficiencies, and a very obvious lack of sufficient housing in poorer areas ... to do stuff like resuscitate the RDP housing programme and get cracking on infrastructure."
The index is a composite indicator of the level of activity in the building and construction sectors, with its nine constituents also including salaries and wages and retail trade sales.
The best-performing indicator in the fourth quarter was the value of wholesale sales of construction materials, which rose 9.3% on an annual basis. The index figure for the last quarter means activity is just over 20% higher than it was in the first quarter of 2011, which is used as a benchmark.
Hardware retail sales provided a boost to the index on a quarterly basis, with an increase of 8%. The remuneration of construction workers was the best-performing indicator, compared to the third quarter of 2022, achieving a double-digit increase.
Poor public spend
Botha said a number of factors were at play, including load shedding eroding the ability of households to spend on upgrades and renovations, but higher interest rates were also suppressing activity.
The cost of credit – and capital – as measured against the prime overdraft rate, has increased by 54% since the Reserve Bank's latest hiking cycle began in 2021.
Dysfunctional municipalities were also part of the problem, Botha said. The Treasury has admitted that, out of a total of 257 municipalities, 175 may be on the "brink of a crisis." Of these, 151 are deemed "bankrupt and insolvent," unable to pay creditors and third parties, including the South African Revenue Service and pension funds.
Botha described the rate of public sector gross capital formation as "pathetic".
"The global average for total capital formation GDP ratios is 28%, we are at 14%, and that is thanks to the private sector," he said. Of that 14%, government's is 4 percentage points, and "it is even declining".
"The problem is skills and lack of political will to involve the private sector participation to the maximum possible degree," he said.
Botha added that he didn't expect an improvement in the index in the first quarter of 2023, amid the headwinds at play, but also due to the first three months of the year being traditionally slow for the industry. The period includes the tail of the December holidays, the shortest month of the year, as well as a number of public holidays, he said.
If the index remaining static, it would likely be "first prize," he said.
The source for this hardhatNEWS is News24 
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