Building industry slump deepens

CONFIDENCE in the building index slumped in the second quarter to its lowest level since 2012.

The FNB/Bureau for Economic Research (BER) building confidence index released yesterday lost 14 points to drop to 29 points on a 100-point scale in the quarter to wipe out the 12 point improvement in the first quarter. The current level of the index indicates that more than 70 percent of respondents were dissatisfied with prevailing business conditions. The Afrimat construction index, also released yesterday, also showed a downward trend in construction activity in the first quarter.

Economist Roelof Botha, who compiles this index on behalf of Afrimat, said it was concerning the country’s most labour-intensive sector was not growing, as confirmed by the first quarter gross domestic product data released by Statistics South Africa. Botha attributed this to high interest rates, policy uncertainty, particularly on land reform, and a strong rand, which caused the mining sector to contract in the first quarter.

He said fiscal pressure resulting from an unavoidable conservative budget in February and dysfunctional local authorities which hampered infrastructure development also contributed to the declined in the sentiment. The release of these indexes coincided with Master Builders Association North executive director Mohau Mphomela calling for urgent action to save the construction industry. Mphomela said the announcement last week that Basil Read Construction, a wholly-owned subsidiary of the listed construction group, had applied for business rescue was “a clear indication of the critical state of the construction industry”.

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Article and Image Source:  Business Report (Pretoria News)

Author: Roy Cokayne

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