Civil construction recovery gains pace

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Civil construction activity recorded its biggest improvement in one-and-half years in the fourth quarter of 2011, according to FNB/Bureau for Economic Research civil construction confidence index.

But the survey noted that while the index improved to 26 points in the fourth quarter from 21 points in the preceding period, the latest reading indicated that three quarters of respondents remained dissatisfied with prevailing business conditions. 

Construction activity flowed from a number of sectors, which included Transnet's expenditure on a multi-product pipeline. 

Provincial and local government expenditure on road and water projects continued, while expenditure on road projects would have been higher were it not for the shortage of bitumen that halted a number of projects, according to the study. Private sector expenditure on construction works to sustain mining capacity also continued. 

Similar to the third quarter, tendering competition was less fierce compared to the first half of the year and profitability better compared to the previous two-and-a-half years. 

However, the situation remained far from satisfactory. "Tendering competition remained cut-throat due to the scarcity of work," said Cees Bruggemans, chief economist of FNB. 

83% of respondents indicated that an insufficient demand for construction work hampered their business, while fierce tendering competition continued to depress profitability. As a result, many respondents rated prevailing business conditions as unsatisfactory and business confidence therefore remained low. 

The confidence index can vary between a maximum of 100 - which indicated that all respondents were satisfied with prevailing business conditions - and a minimum of zero, which indicated that all respondents were unsatisfied.

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