Building, civil engineering confidence slips two points in Q3

The ongoing pessimism in the general building and civil engineering contractors’ sectors is being seen in the Construction Industry Development Board’s (CIDB’s) latest small and medium-sized enterprise (SME) Business Conditions Survey, which slid two points to 40 in the third quarter.

The third-quarter outcome marked the second year in a row that confidence has been below the neutral 50-point mark in the SME segment for both the building and civil engineering sectors.

“The trajectory in the third quarter was broadly similar to the previous quarter. Once again, we saw building activity lose momentum and, in turn, place further downward pressure on profit margins. Disconcertingly, the profitability indicator for the sector has deteriorated to an all-time low,” said CIDB monitoring and evaluation project manager Ntando Skosana.

The CIDB SME Business Conditions Survey is conducted quarterly among grade 3 to 8 CIDB-registered contractors.

Confidence levels mostly remained in contractionary territory in the general builder segment across grades 5 and 6 and grades 7 and 8; however, sentiment improved among grade 3 and 4 building contractors from 41 in the second quarter to 47 points in the quarter under review.

“Although confidence picked up for the smaller grades, this was not supported by the underlying indicators. In fact, this group of contractors saw significantly lower profits,” said Skosana.

Civil engineering confidence slid five index points to 38 during the third quarter, with respondents reporting less favourable business conditions and weakening civil construction activity, on the back of insufficient demand for construction work.

Confidence edged down to 43 points for grades 3 and 4 and improved to 44 points for grades 5 and 6 and to 21 points for grades 7 and 8.

“For grades 3 and 4, the slowdown in construction activity had a pronounced negative impact on profitability, which deteriorated to its worst level on record. In contrast, for grade 5 and 6 civil contractors, the more favourable sentiment was supported by the improvement in the underlying indicators,” Skosana said.

While the confidence index for grade 7 and 8 civil contractors picked up, an overwhelming majority of respondents were dissatisfied with prevailing business conditions in the quarter under review.

“From this perspective, it makes sense that the underlying indicators continued to deteriorate, with activity and profitability indicators reaching multiyear lows.”