After registering a level of 41 in 4Q2023, the FNB/BER Civil Confidence Index increased to 47 in 1Q2024, its best level since 3Q2016. As such, the demand for construction work remains robust in Q1, and overall, civil construction activity continues to broadly outperform the rest of the economy.
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The current reading means that almost 50% of respondents are satisfied with prevailing business conditions. The better sentiment was supported by the underlying indicators, particularly growth in activity.
“The real value of construction works increased by 2.1% on an annual basis in 4Q2023, from 0.1% in 3Q2023. The survey results suggest that this momentum could quicken in 1Q2024”, notes Siphamandla Mkhwanazi, Senior Economist at FNB.
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 remarks.
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- FNB_BER Civil Confidence Index, 2024Q1
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- Growth in civil construction activity, 2024Q1
Lack of skilled labour
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).
In conclusion: After declining to 41 in 4Q2023, the FNB/BER Civil Confidence Index rose to 47 in 1Q2024.
The reasonably solid performance by the civil construction sector, in terms of work, registered since the second half of 2022 continued into the first quarter of this year. This was most likely driven – but not exclusively – by renewable energy and road infrastructure projects.
According to Mkhwanazi, “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 of the surveyed constraints to business operations probably weighed on sentiment and could limit growth in future”.
About the survey
The FNB/BER Civil Confidence Index can vary between a maximum of 100 (which indicates that all respondents were satisfied with prevailing business conditions) and a minimum of zero (indicating that all respondents were dissatisfied). A level of 50 indicates that the respondents are equally divided between those satisfied and dissatisfied.
The fieldwork for the first quarter survey was conducted between 8 and 26 February, 2024.
Listen to Mkhwanazi’s voice note here.
