Decline in insured construction activity to continue – Bryte

04 October 2017

Insured construction activity contracted by 15% year-on-year in the second quarter.

Southern African proactive business risk specialist Bryte Insurance (formerly known as Zurich Insurance) this week released its Construction Activity Monitor for the three months to June 30.

The report provides a high-level overview of activity within the South African construction sector, which plays a fundamental role in growing the economy through infrastructure investment. It also measures the change, on a quarterly basis, in insured construction projects undertaken by small, medium-sized and large construction entities.

According to the monitor, the decline in construction activity is forecast to continue for the remainder of the year. 

 “The first two quarters of this year have proven to be rather challenging for the construction sector due to depressed macro factors and low business and investor confidence,” Bryte Insurance product technical specialist Xolile Kahlanoted in a statement.

The downward pressure in activity was also reflected in stock performance on the JSE, as recorded by the Heavy Construction Index, the monitor highlights, noting that share prices fell by 12.88% month-on-month in the second quarter of the year, when compared to a 2.39% decline in the second quarter of 2016.

Additionally, Statistics South Africa in September reported that the value of approved building plans had decreased by 12.9%, or about R5.8-billion, between January and May this year, when compared to the same period in the previous year. 

Further, the analysis of order books from the seven largest South African construction companies, as reflected in their recent financial results, also showed a 26% contraction during the first quarter of this year, when compared to previously reported figures. This translates to an average contraction of about 3.8% per company, the monitor states.

Government spending, meanwhile, has steadily increased over the years and when examining spend as a total share of gross domestic product, trends in the Bryte Construction Activity Monitor are mirrored, including the peak in projects and the steady decline of activity in the last few years. 

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