Robust sector lifts Afrimat index higher

While SA’s economy dragged overall in the third quarter, improved construction sector performance lifted the latest Afrimat Construction Index (ACI) to a seven-year high.

“Significantly, this is the highest level since the fourth quarter of 2016, and if the current momentum can be maintained in the fourth quarter of 2023, it may herald a new, sustained growth phase in the construction sector,” economist Roelof Botha, who compiles the index for the JSE-listed building materials and mining group, said on Thursday.

Highlights of the latest index included new jobs in the sector rising 11% year on year as 145,000 were added since the year began. Building materials rose 9.8% quarter on quarter, and wholesale trade construction lifted 24.4% year on year.

As a result, there were positive real growth rates quarter on quarter in six of the nine indicators used in the ACI, which gauges activity in the building and construction sectors, leading to the index improving 11.2 points to 131.5. The ACI’s yearon-year rise moved from less than 1% in quarter two to 5.4% in quarter three, “signalling the likelihood that construction sector activity may have entered a new, sustained growth phase” said Botha.

In an interview with Business Day on Thursday, he said the construction sector would not be hurt as much by local ports issues, particularly in Durban, and other challenges that stateowned freight and logistics group Transnet faces as the construction sector can get most of what it needs to operate locally, except for items such as cranes that might have to be imported.

Many issues have kept cargo ships waiting for longer to enter and be processed by local ports because of myriad issues. “The current situation with cement, steel and more [is that] most of it is available locally,” he said.

The latest reading comes as the domestic economy struggles, with high interest rates weighing on other sectors. “The positive trend [in construction] seems to have been influenced by the increase in the public sector’s spending on capital formation, which will hopefully continue and gather momentum over the next few years as the damage done to the country’s infrastructure by state capture is addressed,” said Botha.

He said factors that may spur further growth next year are more public-private partnerships; privatising repair and maintenance of logistics infrastructure; and police and contractors working together to take on the construction mafia.