Impact Of COVID-19 On Building And Construction Sector Persists Into 202Q3

“What is significant is that underlying activity, especially in the civil engineering sector, continued on a relatively weak path even compared to 2020Q2. During this period, the construction sector was shut down for much of the quarter to contain the spread of COVID-19. One would have hoped for a more noticeable rebound now that the sector is allowed to operate more normally, albeit with stricter health and safety protocols in place,” said Ntando Skosana, Construction Industry Performance.

Among general building (GB) firms, larger firms in Grades 7 and 8 remain the most pessimistic with confidence at 7 index points. From a provincial perspective, confidence in the Eastern Cape fell from 17 index points to 0, although activity was better, it remains weak.

Like general building firms, civil engineering (CE) firms in Grades 7 and 8 were the least optimistic with confidence at 12 in 2020Q3. The low confidence is supported by the activity index which points to a further contraction in 2020Q3, similar to that registered in 2020Q2. “It’s disheartening that activity among larger GB and CE firms is struggling to regain the little momentum it had at the start of the year. It seems that even projects agreed on and awarded before the lockdown have stalled,” notes Skosana. From a regional perspective, confidence was higher in the Western Cape (27) and KwaZulu-Natal (25), while none of the respondents in Gauteng were satisfied with prevailing business conditions.

The outlook for both GB and CE is downbeat as measured by the rating of insufficient demand for work as a business constraint. This suggests that activity growth will be lower for longer. “This is further emphasised by the comments from respondents, many of whom lament the slow pace at which tenders are being made available and awarded,” said Skosana

The sector is in a very difficult position with regards to current and available work. This prevailed even before the COVID-19 lockdown, but post-lockdown shows little sign of improving.

“In July, 50 new Strategic Integrated Projects (SIPS) were gazetted in line with the emphasis by policymakers on infrastructure spending, along with other economic and social benefits, as a key tool needed to assist South Africa’s economic recovery following COVID-19. While this is still the case, this quarter’s survey results do not reflect any noteworthy movement toward implementation. In fact, one could argue that the increase in activity that the infrastructure drive will bring is desperately needed, sooner, rather than later,” commented Skosana.