Afrimat Construction Index continues to outperform general economy

07 July 2017

Despite negative perceptions, South Africa’s economy remains resilient, while the construction industry remains healthy and continues to perform well, says Afrimat CEO Andries van Heerden.

This is evident in the Afrimat Construction Index (ACI) having expanded by 22.7% between the third quarter of 2010 (the base period) and the first quarter of this year, which is more than double the rate of growth in the economy as a whole (in real terms).

After reaching an eight-quarter high of 127 in the fourth quarter of last year, the ACI decreased to 122.7 in the first quarter of this year; however, the construction sector at large, remains on a stronger footing than seven years ago.

The ACI, which is released quarterly, is a composite index of the level of activity within the building and construction sectors and is compiled by economist Dr Roelof Botha on behalf of Afrimat.

At the quarterly release of the index, Botha reiterated that the composite index provides a balanced and realistic view of the level of activity in the construction sector, as it evens out the contradictory trends apparent in the construction sector that are often portrayed individually by other indexes.

The ACI index trend has not escaped the negative impact of recent events, which include the dismissal of Pravin Gordhan as Finance Minister in March; increasing evidence of State capture; a ratings downgrade of sovereign bonds to junk status by two influential credit ratings agencies and a downgrade by another; and a return to a technical recession.

These developments have added to the decline in business and consumer confidence, as seen by the latest Rand Merchant Bank and Bureau for Economic Research Busiess (BER) Business Confidence Index, which has slipped to levels last witnessed during the 2009 recession.

The ACI is calculated from nine different constituent indicators: the volume of building materials produced; the sales value of building materials; the value of buildings completed within larger municipalities; the value of building plans passed by larger municipalities; the First National Bank (FNB)/BER building confidence index; the FNB/BER civil construction index; retail trade sales of hardware, paint and glass; formal employment in construction; and the value added by the construction sector.

Confidence levels in the construction sector were also considerably higher in the first quarter of this year than in 2010, with more than 400 000 additional formal sector jobs created in construction since the base period.

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