Construction activity in South Africa is not as depressed as suggested by the media, large construction firms or industry analysts,says Afrimat CEO Andries van Heerden.Afrimat is a JSE-listed open pit mining company, as well as industrial mineral and construction material supplier.
The company on Thursday released the findings of the inaugural Afrimat Construction Index (ACI) in Johannesburg.
The ACI is a composite index of the level of activity within the building and construction sectors. It will be released on a quarterly basis.Compiled by economist Dr Roelof Botha on behalf of Afrimat, ACI indicates a relatively strong performance in construction activity since the third quarter of 2010, used as the base year for the ACI.
In the 25 quarters since then, activity in the construction industry expanded by 28.1%, until the fourth quarter of 2016.
By comparison, South Africa’s GDP expanded by 11.5% over this period.
Van Heerden noted that Afrimat had, over the last few years, seen a shift from large construc-tion projects to smaller projects.This shift, however, did not benefit large construction companies, which often “had the ear” of the media. The pressure large cement companies experienced was also caused more by past deals and expansion projects in Africa, rather than South African market conditions, he noted.
“This study supports Afrimat’s argument over the last five years that construction is healthier than many people believed,” said Van Heerden.For 2017, ACI shows the likelihood of a marginal decline in the level of construction activity, owing mainly to weak values for building plans passed by larger municipalities.
This indicator might not include all building activity, as many residential extensions and renovations were not reported to local government.Also, political turmoil following the municipal elections in the second half of last year might have skewed the numbers.
The ACI is calculated from six different indicators: the building materials sales index; buildings completed within larger municipalities; building plans passed by larger municipalities; the FNB/Bureau for Economic Research (BER) Building Confidence index; the FNB/BER Civil Construction Index and retail trade sales of hardware, paint and glass.
Retail hardware store sales have improved by over 70% since the third quarter of 2010, while the sales of building materials and the value of building plans approved both improved by 24% over the past 25 quarters.
Further, longer-term expansion in construction activity is indicated by a rising trend for hardware and building material sales. This is supported by a rise of three points in the FNB/BER Building Confidence Index for the first quarter of 2017, its best level in 12 months.
