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South African construction sentiment crumbles under soft economy

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Group Five filed for bankruptcy protection earlier this month, making it the fifth local builder to enter business rescue in less than a year.

Wednesday 27, March 2019

(Bloomberg) --Confidence in South Africa’s civil construction sector is at the lowest in at least 22 years and could stay there for some time.

In a statement, First National Bank (FNB) and the Stellenbosch-based Bureau for Economic Research, stated that gauge tracking sentiment in the sector dropped in the first quarter to the lowest since its inception in 1997.

This means 90 per cent of participants in the quarterly survey are unsatisfied with current business conditions.

Group Five’s shares were suspended after 45 years of trading on the Johannesburg Stock Exchange.

While the building industry is cyclical, the current mix of a depressed economy, high levels of government debt and a widening budget deficit is proving toxic as contracts dry up.

President Cyril Ramaphosa announced plans to create a multi-billion-rand infrastructure fund last year in a bid to get financing from both private and state-owned companies to boost the industry.

The construction sector, that makes up about four per cent of gross domestic product, is yet to see tangible benefits.

Siphamandla Mkhwanazi, the FNB property economist, said, “It’s not surprising that the prospects for work are downbeat given the state of the fiscus and the resultant reduction in infrastructure investment by the public sector, civil contractors should brace themselves for a continuation of the current weak demand.”

 

TAGS : Group Five, Civil Construction

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