Construction Monitor July 2017

The second quarter of 2017 (April-June) saw quite big declines in overall activity, as well as less projects in the pipeline. This is largely in line with the extremely weak economy. Business and consumer confidence indicators are at financial crisis levels. Consumers are cash strapped, and business and investors are too sceptical to invest in South Africa. The total value of construction projects awarded in the second quarter of the year contracted by 31 percent, compared to the same quarter last year. There were also 23 percent less projects out to tender in total, this is along with postponement rates and cancellations remaining high in historical terms. Fewer projects being awarded means there is expected to be less activity in the short term, and less tenders coming out means that there is expected to be less activity in the medium term. Along with contracting pipeline activity in the private building market, the indicators overall suggest the outlook worsened significantly in the 2nd quarter.

However, going into the first month of the second half of the year, the economic outlook improved ever so slightly in July. A cut in interest rates as well as some more positive indicators on the overall retail market leads us to believe that the economy could lift itself out of the technical recession in the next quarter. This will be positive for the construction sector, but marginal. High levels of policy uncertainty do however remain, especially in the mining as well as agricultural industries. 

 © Industry Insight 2017