ASSOCIATIONS
From a grades perspective , Grades 5 and 6 civil contractor confidence was mostly flat against the backdrop of better activity , while pressure on profitability persisted . The uptick in confidence for Grades 3 and 4 was slight and was barely supported by underlying indicators . The increase in confidence for Grades 7 and 8 was notable , from 24 points to 30 . This comes on the back of improved activity and profitability .
At the regional level , civil contractors across all four provinces registered confidence levels of below 40 index points . This implies that , on average , more than 60 % of respondents in each of those provinces rated business conditions as unfavourable during the survey quarter .
Skosana points out that the provincial picture for civil contractors was rather glum , especially considering the reversed gain in confidence for the Western Cape cohort , where confidence plunged to its worst level since the second quarter of 2013 . “ While one saw some improvements in sentiment among the other three provinces , this was overshadowed by the outcome in the Western Cape .”
The first quarter of 2018 is yet another period where strain in both the building and civil engineering sectors is highlighted . The outcome in confidence levels in both sectors is below 40 index points , which is broadly in line with the poor levels of the underlying indicators . They persisted below their long-term averages . Discouragingly , future activity momentum is likely to remain under pressure in both sectors . This is partly reflected in the indicator rating insufficient demand for building and construction work as a constraint , which remains elevated in both cases .
The latest gross domestic ( GDP ) growth statistics from Statistics SA ( Stats SA ) show a fourth consecutive decline in output in the construction sector . Output fell by 1.4 % quarter-on-quarter in the fourth quarter of 2017 . Discouragingly , this quarter ’ s survey results suggest that the pressure in both building and civil construction activity could persist . The outlook for activity in both sectors is further clouded by the recent government Budget for 2018 , which reiterated the reduction in expenditure away from capital and towards consumption expenditure . Indeed , about 47 % ( or R39.7-billion ) of the R85-billion in spending reductions consists of cuts to conditional infrastructure grants to provincial and local government .
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Contractor grading designation is determined by the firm ’ s financial capability and works capability . Financial capability relates to financial history ( turnover ), the value of completed contracts and the amount of working capital the company can muster to sustain a contract , such as available capital . Available capital is determined from the liquid cash resources available to the company , including bank balances , loans that may be leveraged and any financial sponsorships .
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