The FNB/BER Civil Confidence Index fell to a dismal 13, from 21 in 1Q2021.

While respondents were somewhat disappointed with the level of activity, the extent to which confidence declined was not entirely supported by the underlying indicators.

The FNB/BER Civil Confidence Index rose steadily between 3Q2020 and 1Q2021. This quarter, however, the index fell to 13, from 21 in 1Q2021.

In other words, the current index level means that the vast majority (close to ninety per cent) of respondents are dissatisfied with prevailing business conditions.

Statistics South Africa (Stats SA) data showed that the real value of investment in construction works declined by almost 18% year-on-year (y-o-y) in 1Q2021. Due to base effects, annual growth will likely rebound noticeably in 2Q2021. “While in the official data growth in construction works will be higher in 2Q2021, the survey data suggests that this is not the experience of the majority of respondents. Indeed, against expectations of an improvement, the index measuring activity was unchanged between 1Q2021 and 2Q2021. This could have weighed on confidence,” said Mkhwanazi.

Also stunting confidence was keener tendering competition. Firms are having to price tenders more aggressively (i.e., with narrower profit margins) in order to secure work.

Regarding the outlook, the demand for new construction work remains scarce. This is further complicated by procurement delays, especially in the public sector. According to Mkhwanazi, “there was a rise in the number of survey respondents who commented that the amount of time between tender closing date and tender adjudication is increasing, to the detriment of firms”.

In conclusion: The FNB/BER Civil Confidence Index declined to 13 in 2Q2021, from 21 in 1Q2021.

“It’s highly unlikely that, on an annual basis, construction activity will contract again in 2Q2021. However, against expectations, it does seem as though the momentum in construction activity seen since 3Q2020 has stalled. Furthermore, the percentage of firms that find new construction demand to be elusive remains elevated. This suggests that activity growth may be restrained beyond the low base induced improvement over the near term,” remarked Mkhwanazi.