Construction activity remained lethargic in the third quarter of 2024 when compared with the same period last year, an index of construction-related activity showed yesterday.
The Afrimat Construction Index (ACI) declined by 1.3% in the third quarter, but on a more positive note, seven of the 10 constituent indicators comprising the index were in positive territory, much the same as the previous quarter.
Economist Dr Roelof Botha said a significant improvement in three indicators was feature of the third quarter. These were the “Buildings Completed” data, particularly in the metros and larger municipalities, which was up 23.3%, “Employment in construction” up 14.6%, and “Sales Values of Building Material,” which was up by 5.9%.
Other indicators that recorded meaningful improvements on a quarter-on-quarter basis were the value of “Building Plans Passed,” the volume of “Building Materials Produced,” and the remuneration of construction sector employees.
Dr Botha said there was little doubt about the depressing effect that high interest rates were exerting on the construction industry, most notably exceptionally high debt-servicing ratios and a persistent decline in the real value of credit extension, as also confirmed by several other key economic indicators.
During the third quarter, real gross domestic product (GDP) weakened by 0.3% year-on-year following a similar increase in the second quarter, whilst the latest Absa/BER purchasing managers’ index for manufacturing again slipped to below the neutral level of 50.
Dr Botha said the residential property market also continued to lag, with the BetterBond Index of home loan applications having declined by 13% since the SA Reserve Bank’s Monetary Policy Committee (MPC) started to implement a restrictive monetary policy stance, resulting in the highest commercial lending rates in 14 years despite the absence of demand-driven inflation in the economy.
He said that, more positively, the rate hiking cycle was reversing somewhat, although the two declines of 25 basis points each since September were inadequate to assist the country’s quest for higher economic growth and employment creation.
“Hopefully, the MPC will lower rates further early in 2025, which is one of the most important triggers for reviving construction sector activity,” he said.
Dr Botha said another positive development was the inaugural national summit for crime-free construction sites, held in Durban on November 19. A spokesperson for the Master Builders Association, representing more than 4 000 construction companies, described it as “groundbreaking.”
“The declaration signed at the summit outlines a framework of interventions to combat criminality at construction sites, including the strengthening of industry legislation, developing structured policies, enhancing data systems, and establishing rapid-response mechanisms to expedite arrests and prosecutions for extortion,” said Dr Botha.
Afrimat’s CEO Andries van Heerden said he was encouraged by the ACI data.
“Across the construction landscape, the Construction Materials segment enjoyed slightly elevated volumes from road, rail, and dam projects, and we continue to experience demand for our aggregates,” he said.
Van Heerden said that while the group was not yet seeing a massive uptick in the infrastructure development and maintenance side of the economy, slowly but surely small pockets of demand were opening up.
He said South Africa needs improvement in the ports, rail logistics, and a generally higher economic growth rate to stimulate the economy further and to help provide much-needed jobs.
BUSINESS REPORT