Confidence in South Africa’s consulting engineering sector under pressure

Confidence among South Africa’s consulting engineering firms has come under renewed pressure in recent months having recovered earlier in the year from the 16-year low recorded during 2015.

Consulting Engineers South Africa’s (Cesa’s) Bi-annual Economic and Capacity Survey shows that, while confidence levels are above 2015 levels, they remain subdued and below the average of the last five years.

The survey, which covers the period from January to June 2016, also highlights that growth in gross fixed capital formation is lagging gross domestic product growth, a trend that is expected to continue for the next three years.

Weak confidence levels in the sector are a reflection of low levels of business confidence more generally.

“Business confidence is negatively impacted by poor economic growth, threatened by a looming recession, increase in political instability and tightening of monetary policy alongside a sharper than expected increase in inflation,” Cesa CEO Chris Campbell said in a statement.

“Confidence levels amongst firms have deteriorated over the last few years, alongside modest increases in fee earnings,” he added.

Cesa has 537 member firms, which employ just over 24 315 people and earn yearly fee income of R25-billion.

Fee earnings in the first six months of 2016 fell marginally by 0.2% compared to the last six months of 2015, following the increase of 6% in the previous period. Larger firms reported a stronger decline of 5.3%, while medium- and smaller-size firms improved earnings by 15.1% and 10.6% respectively.

Respondents expect earnings to increase by 6% in nominal terms during the last six months of 2016, compared with the first six months of the year.