Construction activity in SA at almost 7-year high
Activity in South Africa's construction industry picked up significantly in the third quarter of 2023, boosted by improved public sector spending, residential refurbishment, and a continued drive for renewable energy, according to the latest Afrimat Construction Index.
The index, compiled by economist Roelof Botha and released on Thursday, rose 9.2% in the three months to end-September compared to the second quarter, lifted by a jump in wholesale construction as well as employment.
The figures are in stark contrast to StatsSA data on Tuesday, which showed that construction activity fell 2.8% in the third quarter relative to the second.
Speaking to News24, Botha said the GDP figures likely missed some buoyant activity in the informal sector but added that there were two stories to tell in the figures, with some areas of construction still beset by high interest rates.
The Afrimat index is a gauge of activity in the sector, and uses nine subindices, including employment, wages and construction-related retail sales. The third-quarter figure of 131.5 points means activity is more than 30% higher than the first quarter of 2011, which is used as a benchmark.
Of the indices, wholesale construction trade rose 21.4% while employment picked up another 4%, extending gains this year, but the value of building plans passed crashed more than 24%.
Botha said when looking at the indicators, items like building materials and construction trade were arguably less sensitive to interest rates, but areas that were, such as buildings completed or value of plans passed, had taken "one hell of a hit." StatsSA data in terms of retail sales were also focused on the formal sector, he said.
Stores
"If you drive from Pietersberg, or Polokwane, to Tzaneen, every 200m, you can see hardware stores left and right of that main road, and these are not Mickey Mouse shops," he said.
"I can almost guarantee you that none of them, none one single one, is part of the sample at StatsSA where they survey hardware sales. So, there is still that underestimation. The informal sector activity is boosting this to some extent."
Other areas boosting the industry are some infrastructure projects coming through, as well as road maintenance and large renewable energy projects, he said.
This was in spite of what he says are still overly restrictive interest rates. Many on the residential side of things have faced an extended period of pressure in terms of borrowing costs.
"They realise the prospect of building a new house is too expensive, so they are fixing their existing houses. This is your do-it-yourself guys and girls at work, but not the contractors."
Botha added he is also confident of an improvement in 2024.
"I don't see any reason for this to change, because the need for more decent housing, the need for renewables, is just so great. The need to fix the roads, fix Durban port," he said.
"If rates can start coming down early next year, that's the trigger that we need. Especially in the residential property market, which is flat, flat, flat right now."-Fin24
The index, compiled by economist Roelof Botha and released on Thursday, rose 9.2% in the three months to end-September compared to the second quarter, lifted by a jump in wholesale construction as well as employment.
The figures are in stark contrast to StatsSA data on Tuesday, which showed that construction activity fell 2.8% in the third quarter relative to the second.
Speaking to News24, Botha said the GDP figures likely missed some buoyant activity in the informal sector but added that there were two stories to tell in the figures, with some areas of construction still beset by high interest rates.
The Afrimat index is a gauge of activity in the sector, and uses nine subindices, including employment, wages and construction-related retail sales. The third-quarter figure of 131.5 points means activity is more than 30% higher than the first quarter of 2011, which is used as a benchmark.
Of the indices, wholesale construction trade rose 21.4% while employment picked up another 4%, extending gains this year, but the value of building plans passed crashed more than 24%.
Botha said when looking at the indicators, items like building materials and construction trade were arguably less sensitive to interest rates, but areas that were, such as buildings completed or value of plans passed, had taken "one hell of a hit." StatsSA data in terms of retail sales were also focused on the formal sector, he said.
Stores
"If you drive from Pietersberg, or Polokwane, to Tzaneen, every 200m, you can see hardware stores left and right of that main road, and these are not Mickey Mouse shops," he said.
"I can almost guarantee you that none of them, none one single one, is part of the sample at StatsSA where they survey hardware sales. So, there is still that underestimation. The informal sector activity is boosting this to some extent."
Other areas boosting the industry are some infrastructure projects coming through, as well as road maintenance and large renewable energy projects, he said.
This was in spite of what he says are still overly restrictive interest rates. Many on the residential side of things have faced an extended period of pressure in terms of borrowing costs.
"They realise the prospect of building a new house is too expensive, so they are fixing their existing houses. This is your do-it-yourself guys and girls at work, but not the contractors."
Botha added he is also confident of an improvement in 2024.
"I don't see any reason for this to change, because the need for more decent housing, the need for renewables, is just so great. The need to fix the roads, fix Durban port," he said.
"If rates can start coming down early next year, that's the trigger that we need. Especially in the residential property market, which is flat, flat, flat right now."-Fin24
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