The Construction Industry Development Board (CIDB) small and medium-sized enterprises (SME) business conditions survey has shown that civil contractor confidence fell by six index points to a historic low of 27 during the third quarter.
Weakness in all the underlying indicators, especially construction activity, contributed to the drop in confidence. Discouragingly, CIDB said, demand for new construction remained a constraint and implied that activity growth was likely to remain under pressure in the near future. From a grades perspective, confidence fell to historic lows of 25 and 15 for Grades 5 and 6, and Grades 7 and 8, respectively. Respondents in these grades experienced a sharp slowdown in activity, which weighed on profitability.
Meanwhile, general building confidence has been trending downwards since early 2017. During the third quarter, business confidence shed three index points to 30. CIDB monitoring and evaluation project manager Ntando Skosana noted that business confidence among general builders fell to its lowest level in almost seven years.
“Unfortunately, the outlook for this sector does not look promising, as the demand for new building work remains a constraint.” She added that the third-quarter CIDB survey results suggested that pressure on smaller building contractors, in particular, is escalating. Since last year this time, business confidence for Grades 3 and 4 builders has dropped by a cumulative 19 index points to 28.
On a provincial level, the deterioration in sentiment for both general builders and civil contractors in the Western Cape was of particular interest. “After outperforming other provinces for some time before this quarter, building and civil contractors in the Western Cape came under pressure, in line with other provinces.
“The fact that lower confidence was so pervasive across grades and provinces, highlights the broad-based nature of weakness in the building and construction sectors.” Skosana stated. The CIDB SME business conditions survey is conducted quarterly among Grades 3 to 8 CIDB-registered contractors (categorised into Grades 3 and 4, Grades 5 and 6 and Grades 7 and 8), both for the general building and civil industries.