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Opencast mining company Afrimat has released the findings of the third Afrimat Construction Index ( ACI ) for the second quarter of 2017 . The ACI is a composite index of the level of activity within the building and construction sectors , compiled by renowned economist Dr Roelof Botha on behalf of Afrimat , and calculated from nine different constituent indicators , including the FNB / BER building confidence index .
According to Dr Botha , the index was impacted by low levels of business and consumer confidence during the second quarter of the year , mainly influenced by a series of political shocks , including major changes to the executive leadership at National Treasury and the fiscal threat imposed by significant losses at a number of stateowned enterprises .
Dr Botha points out that policy uncertainty is acting as a constraint to the expansion
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of productive capacity in the economy , while durable consumption expenditure by households also continues to decline , in real terms .
Despite these and other well-publicised obstacles to construction activity and the economy in general , the ACI declined only marginally in the second quarter of 2017 . After reaching an eight-quarter high of 127 in the fourth quarter of 2016 , the ACI has now declined for two successive quarters to reach a level of 117 in the second quarter of 2017 .
“ We expect a return to a positive trend within the next two quarters ,” says Dr Botha , who points out that real retail trade sales actually reached a record high in the second quarter . “ South Africans are realising that we are not in a recession , and with the ANC electoral conference drawing nearer , which will almost certainly produce
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more policy certainty , one can expect construction to start doing a little bit better . As the municipalities that were affected by changes in the last municipal elections find their feet , that could also start having a positive effect .”
The construction sector remains on a stronger footing than seven years ago , with the ACI having expanded by 17.7 % since the third quarter of 2010 ( the base period ) — almost 50 % higher than the rate of growth of the economy as a whole over this period ( in real terms ). Dr Botha says 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 of conditions in the construction sector that are often portrayed by the individual components that comprise the index .
It remains a point of concern that the value of building
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plans approved by the larger municipalities continues to perform poorly , while confidence levels in the construction sector declined dramatically in the second quarter of 2017 . Formal employment in the industry also took a knock between April and June 2017 . However , if the growth rate starts to pick up in the second half of the year as expected , a resulting increase in government infrastructure spend , especially at the municipal level , could result in significant job creation .
Dr Botha believes that the tide may be turning for construction activity . “ Fortunately , the South African Reserve Bank decided to ease the debt servicing burden of South African households and businesses , with a marginal decline in the repo rate having been announced in July 2017 . Due to a sharp retreat of inflationary pressures in the South African economy , further interest rate cuts are widely
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