GFCF 2023Q4 may underestimate performance in local construction sector

The Gross Fixed Capital Formation (GFCF) estimates released by Stats SA for the fourth quarter of 2023 indicate ongoing pressure on the construction industry, particularly in residential and civil construction works. Residential investment has seen a significant decline, while the non-residential market has shown some growth, likely fueled by renovations and alterations related to renewable energy projects. However, there are concerns about the accuracy of growth rates due to fluctuations in imports of machinery and equipment. The civil construction market experienced a downturn after several quarters of growth, with machinery imports for renewable energy projects affecting growth rates. Provincial government expenditure on construction projects has been below expectations, despite budgetary allocations. National Treasury is taking a stricter approach to municipalities not spending allocated funds. The construction labor force is showing signs of recovery, but challenges persist in government expenditure and investment sentiment. Private sector investment is gradually increasing, with the renewable energy sector playing a significant role, but may have lost some momentum towards the end of the year.
Listed construction companies have shown mixed performance, with some experiencing gains while others faced losses. Overall, there’s a cautious outlook on the construction sector’s recovery, with the need for more efficient expenditure and improved investor confidence. While there are some positive indicators, the construction sector still faces challenges in returning to pre-COVID levels. The forthcoming financial statistics will provide more clarity on the sector’s performance. Click here to read the full review