The FNB/BER Civil Confidence Index remained firmly in the contractionary territory in the second quarter of 2023, edging 1 index point lower to 41, from 42 points in the first quarter.
Real economic activity in the construction sector had increased further in the first quarter of 2023, reflecting increased civil construction as well as residential and non-residential building activity.
The fieldwork for the second quarter survey was conducted between May 10 and 30 by Stellenbosch University’s Bureau for Economic Research on behalf of FNB.
FNB senior economist Siphamandla Mkhwanazi said the current level of the index meant that slightly less than 60% of respondents were dissatisfied with prevailing business conditions.
Mkhwanazi said broader concern about threats to the economy, a much weaker rand at the time of the survey, and diplomatic missteps likely contributed to the relatively subdued sentiment, given notably better activity.
“The slight deterioration in sentiment masks a significant increase in activity, led by private investment in energy generation,” Mkhwanazi said.
“Importantly, the survey indicates that work will remain well supported into next quarter.”
Irrespective of the largely sideways move in sentiment, FNB said the pace of the recovery in civil construction activity had quickened in the second quarter.
The index measuring activity growth was at its highest since 2007.
Mkhwanazi said they had been cautiously optimistic about the rise in construction activity over the past few quarters.
“The latest results provide an even stronger signal that civil contractors are noticeably busier than they have been in a while. Part of this is due to increased public sector projects related to road and water infrastructure,” he said.
“Crucially, the development of alternative energy infrastructure by the private sector seems to be providing the bulk of the boost.”
The Department of Mineral Resources and Energy (DMRE) has through the Independent Power Producer (IPP) office procured a total of 7 786MW via the Risk Mitigation Programme and Bid Windows 4, 5 and 6, with 2 130 MW already connected to the grid.
A total of 150MW under RMIPPPP and 784MW under Bid Window 5 are envisaged to be operationalised between November 2023 and August 2024, respectively.
The DMRE is also working on procuring a further 10 000MW of renewable energy under Bid Windows 7 and 8; 3 000MW of gas-to-power; 2 500MW of nuclear energy; and 1 230MW of battery storage.
Moody’s Investor Services analyst Vittoria Zoli said the energy sector reforms would likely support the economy and sovereign credit profile over the medium term.
“There is a growing number of projects registered with the National Energy Regulator of South Africa and the private sector, including the mining companies, has a pipeline of 9-10GW of energy projects,” Zoli said.
“The expansion of capacity by the private sector will be supportive of the energy system. Still, the addition of new capacity will require investments in the grid, which could be difficult.”
Meanwhile, Statistics South Africa reported that the real value of construction work increased by 5.7% year-on-year in the first quarter of 2023, from 4.8% in the fourth quarter of 2022.
According to the survey results, growth will likely be even more robust in the second quarter of 2023.
The SA Reserve Bank concurred that the construction sector saw increased activity, driven by civil construction and building projects in the first quarter.
In addition to the higher activity this quarter, respondents were equally optimistic about prospects for the third quarter of 2023.
However, profitability worsened somewhat in the past quarter, even though activity fared well.
“Compared to the robust improvement in construction work, overall profitability disappointed,” Mkhwanazi said.
“This could be due to several factors, including continued margin pressure, which is not uncommon so early in a recovery, and increased input costs.”
The source for this hardhatNEWS is IOL 
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