Renewables boost for South Africa

More civil contractors are satisfied with the South African operating environment, and renewable energy projects are largely responsible for the sector’s solid performance.

The FNB/BER Civil Confidence Index increased from 41 in 4Q2023 to 47 in 1Q2024, the best level since 3Q2016.

The current reading indicated that close to 50% of respondents are satisfied with prevailing business conditions.

The improvement in sentiment was supported by underlying indicators, especially growth in activity.

“The real value of construction works increased by 2.1% on an annual basis in 4Q2023, from 0.1% in 3Q2023. The survey results suggest that this momentum could quicken in 1Q2024”, said Siphamandla Mkhwanazi, Senior Economist at FNB.

The improved activity helped firms to start reasonably profitable.

“Traditionally, the sector has been characterised by very thin profit margins,” said Mkhwanazi.

“However, with better activity – and despite an uptick in tendering competition – profit margins are at historically good levels.”

Although activity and profitably were upbeat, respondents were concerned about the constraints to business operations.

Specifically, the creation of a lack of skilled labour (the highest level since 2008) and access to credit (at an all-time high).

That said, the reasonably solid performance by the civil construction sector was likely driven, but not exclusively, by renewable energy and road infrastructure projects.

“The upbeat sentiment was largely supported by the rest of the survey. In fact, given the current level of activity, one could argue that confidence should have been higher,” said Mkhwanazi.

“However, an uptick in all of the surveyed constraints to business operations probably weighed on sentiment and could limit growth in future”.

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