Construction activity increases in 4Q11

As a result, three quarters of respondents rated prevailing business conditions as unsatisfactory, despite the FNB/BER civil construction confidence index increasing from 21 in 3Q11 to 26 in 4Q11. The 5-index point increase only cancelled the losses of the previous year and brought confidence back to the same level compared to a year ago.

Construction activity flowed from a number of sectors.

• In the case of the public corporations, Transnet's expenditure on a multi-product pipeline boosted construction works, but Eskom's expenditure on the power stations has largely shifted from construction works to machinery and equipment.
  
• Provincial and local government expenditure on road and water projects continued. Expenditure on road projects would have been higher were it not for the shortage of bitumen that halted a number of projects.
  
• Private sector expenditure on construction works to sustain mining capacity also continued.

The persistent recovery in activity slowed retrenchments. Employment declined at its slowest pace in two years.

Similar to 3Q11, tendering competition was less fierce compared to the first half of the year and profitability better compared to the previous 2½ years. However, the situation remained far from satisfactory. "Tendering competition remained cut-throat due to the scarcity of work." Some 83% of respondents indicated that an insufficient demand for construction work hampers their business. The fierce tendering competition continued to depress profitability. As a result, many respondents rated prevailing business conditions as unsatisfactory and business confidence therefore remained low.

FNB/BER Civil Confidence Index
Percentage satisfied

Civil construction
Growth in construction activity

Civil construction
Tendering competition

Source: BER Stellenbosch