General shortage of skills continue to hurt South African construction industry, a new survey has revealed. The Construction Industry Development Board and Bureau for Economic Research SME Business Conditions Survey for 2016 Q1 indicates that general builder confidence dropped from 46 to 44 in the first quarter of 2016, which is attributed to a slowdown in building activity and increasing pressure on profitability.
The research shows that general builders in Grades 5 and 6 and Grades 7 and 8 recorded higher confidence levels, improving by five and nine index points respectively, while general builders in Grades 3 and 4 dropped 24 index points.
Despite the raise in Grades 7 and 8, confidence remains below the 50 point mark that is the cutoff point between contraction and expansion. Considering the whole region, business confidence rose in the KwaZulu-Natal and Eastern Cape. However general builders in the Gauteng and Western Cape Province were not satisfied with current business conditions compared to the fourth quarter of 2015.
Civil contractor confidence dropped from 41 to 40 in the first quota of 2016. This means six out of every 10 respondents believe business conditions are unsatisfactory. Compared to the previous year, business conditions deteriorated, there was a slump in construction activities, increase in retrenchments and pressure on profitability rose.
Across the grades, civil contractors in Grades 7 and 8 were the only grades that recorded higher confidence. Business confidence among Grades 3 and 4 and Grades 5 and 6 dropped by 9 and 8 index points respectively. Regionally, Gauteng recorded an improvement of nine index points while KwaZulu-Natal, the Western Cape and Eastern Cape declined by two, five and 12 percentage points respectively.
PwC’s third edition of South Africa Construction confirms these research findings reporting that South Africa’s construction industry encountered a challenging year in 2015, characterized by industrial actions, delays on projects and questions raised around safety concerns on structural projects.
The 2015 financial year recorded a decrease in market capitalization and financial performance. Eight out the nine companies showed a decrease in market capitalization. In aggregate for the nine companies analyzed, market capitalization declined by 38% as at June 30 2015.
According to the survey, lack of access to work remains a challenge for both general building and civil engineering class of works in all grades, at a net balance of 70%.
