South Africa’s construction sector looks set for bumper fourth quarter

Construction and mining were the worst affected SA industries during the second quarter of 2020, with construction falling 33.4% year on year, data from Stats SA showed on Tuesday.

However, low interest rates and huge pressure to catch up on projects is pointing to a bumper fourth quarter, Afrimat said, amid a meaningful recovery in the third.

The second quarter was a “predicable disaster”, says economist Roelof Botha, but the industry seems to be recovering rapidly.

This is evident through, among other signs, a 4% year-on-year increase in hardware sales in June, he said.

SA’s construction industry slumped in the first three months of 2020, with the Afrimat Construction Index showing that activity in the sector was just below that of the same period in 2011.

The index for the second quarter released on Thursday showed a decline to 65.4 points, meaning activity was less than two-thirds of that of the first quarter of 2011, which is used as a basis for comparison.

The index, compiled by Botha, is a composite indicator of the level of activity in the building and construction sectors.

Constituent indicators within the index include salaries and wages in the construction sector, the value of buildings completed, sales of building materials, as well as passing of building plans.

“When the lockdown came, the sector temporarily almost ground to a halt, with April recording insignificant levels of activity for every key indicator relevant to construction,” Afrimat said.

Before the Covid-19 pandemic, the sector had been battling with low levels of business confidence, high interest rates, declining levels of public sector expenditure on infrastructure and lethargic economic growth in general.

The sector only contributes about 3.3% to South Africa’s GDP, but has critical links to other sectors and is crucial to the development of new infrastructure.