Construction Sector Outperforms The Economy – ACI
This is according to the Afrimat Construction Index (ACI), produced by open-pit mining company, Afrimat, which indicates that the sector had expanded by 25.4% since 2010.
The composite construction index provides a balanced view of the level of activity in the construction sector and is calculated from nine different constituent indicators. The improvement in the ACI, between the third and fourth quarters of 2017, was mainly directed by the value of buildings completed by major municipalities, retail sales values for hardware, glass and paint, and sales value of building materials produced.
According to economist, Dr Roelof Botha, President Ramaphosa’s jobs summit, which is expected to commence in the coming months, will strengthen the economy and expand infrastructure. In addition, a soon-to-be-elected Presidential Economic Advisory Council would assist with greater coherence and consistency in the implementation of the economic policy. However, Botha warned that the decision by Parliament to permit the committee to consider amending the Constitution to proceed with the expropriation of land without compensation may hinder the revival of business confidence and construction activity.
Furthermore, Botha indicated that government needed to urgently address the late payments issue of revenue and expenditure from municipal finances. National Treasury has identified this problem area as a threat to the financial stability of several municipalities, where municipal creditors totaled R41.2bn, of which 39.3% was compensated to Eskom and 17.7% to water boards. National Government and the Provinces owed municipalities a combined R6.6bn.
Afrimat CEO, Andries van Heerden, was encouraged by the results of the ACI fourth quarter and hoped for a positive outcome in the first quarter of 2018. He stated, however, that the delay in construction material products had strongly affected KwaZulu-Natal and southern Gauteng, where Afrimat’s Glen Douglas and Clinker operation experienced reduced volumes. Furthermore, van Heerden commended President Ramaphosa for directly addressing issues that incorporated public private partnerships and communicated inadequacy within certain SOEs.
“By delving into the constituents of the ACI, like Professor Botha does, we are also able to check and benchmark that the areas that we are involved in are returning the necessary value to shareholders, and this does seem to align,” concluded the CEO.