Afrimat Construction Index bounces back in second quarter

The Afrimat Construction Index (ACI) has managed to bounce back in the second quarter of this year.

The ACI is a composite index of the level of activity within the building and construction sectors and is compiled by economist Dr Roelof Botha on behalf of the JSE-listed midtier mining and materials company.

Botha says it is encouraging to see seven of the ten indicators that make up the index turn positive in the second quarter, with the ‘Value of Wholesale Sales of Building Materials’ once again a star performer, showing quarter-on-quarter growth of 9.2%.

This indicator is also the only one to record a positive year-on-year trend.

Other indicators that performed well on a quarter-on-quarter basis were the ‘Volume of Building Materials Produced’, ‘Sales Values of Building Materials’, and ‘Retail Trade Sales – Hardware’.

The values of ‘Building Plans Passed and Buildings Completed’ also recovered well quarter-on-quarter. However, these indicators’ year-on-year changes are still of concern, having declined by 21% and 20%, respectively.

“Although the increase of 8.8% in the ACI since the first quarter of 2024 is most welcome, the year-on-year decline of 1.9% is unfortunate, especially against the background of the dire need for housing development and associated infrastructure,” notes Botha.

He adds that it is clear that the cost of “South Africa’s restrictive monetary policy” continues to take its toll on the economy, with increasing debt servicing costs placing households and businesses under pressure.

However, the rand’s strength, which has already led to several fuel price cuts, is likely to assist in further lowering inflation during the rest of the year.

“Another reason for optimism on an imminent recovery of the economy is the remarkable turnaround that has been achieved in the stability of electricity supply, with an end to loadshedding likely by the end of March, 2025,” says Botha.

He also notes that the appointment of South Africa’s first Cabinet under the new Government of National Unity has been met with an overwhelming positive response by business leaders, while also receiving a thumbs-up from global capital markets.

“Visible signs of the higher level of urgency in addressing the country’s logistics challenges have already come to the fore,” says Botha.

“Apart from the ongoing cooperation between the government and the private sector via the National Logistics Crisis Committee, the Department of Transport has approached Business Unity South Africa to assist in the establishment of a private sector participation unit.

“With lower interest rates around the corner and a new era of cooperation between the private and public sectors looming, the construction sector is bound to start expanding soon.”