building confidence drops
16 September 2008
Civil construction confidence dropped marginally in the third quarter of 2008, a study released on Tuesday said. FNB chief economist Cees Bruggemans said overall business conditions remained relatively favourable in the civil construction industry. The workload of larger construction companies continued to be boosted by large infrastructure-related projects such as the Gautrain, Sanral road building and upgrading projects, Eskom and Transnet capital expansions.
Bruggemans said relatively weak construction activity levels experienced in the Western Cape and a slowdown in the township services and the development market had an adverse impact on the overall survey results. According to Bruggemans, the growth in civil construction activity during the third quarter of 2008 was well below the expectations of respondents. Whereas 67 percent of respondents in the previous survey reported that insufficient demand for construction was a constraint, the figure rose to 84 percent in the third quarter of 2008.
"The weaker demand conditions experienced by respondents resulted in a rise in tendering competition for new work. "Gross margins came under pressure and the overall profitability of survey respondents consequently suffered," the study noted. As a result of the tighter market conditions, the growth in employment moderated. However, 88 percent of participants in the survey complained that shortages of high-quality skilled labour constrained their business operations. As far as the outlook for the fourth quarter was concerned, respondents expected business conditions to remain "fairly stable".