Building confidence at 25-year high, South Africa

Building confidence at 25-year high, South Africa
Published: 14 December 2004

Building industry confidence was at levels last reached in the economic upswing of 1978/81, with the fourth quarter business confidence of contractors in the residential sector at 96 percent compared with 87 percent in the third quarter and only 48 percent as recently as the second quarter 2003, the Bureau for Economic Research at the University of Stellenbosch said on Monday.

Building conditions in the non-residential sector have shown a substantial improvement and indications are that the demand for non-residential building work is now recovering over a broad front. Confidence amongst non-residential contractors was now at 91 percent from 74 percent in the third quarter and only 40 percent in the first quarter 2003.

Respondents to the fourth quarter survey anticipated a further improvement in building activity during the first quarter next year.

Cement sales in South Africa rose by 26.1 percent year-on-year to a record 1,103,317t in November after a 10.3 percent YoY rise in October to 1,010,980t and are now up 18.2 per cent YoY for the first 11 months of the year, data released by the Cement & Concrete Institute (CNCI) show.

This is the third consecutive month that South African cement volumes have exceeded one million tons in a month after this milestone was breached for the first time in June. In June, cement sales surged by 31.5 percent year-on-year to a then-record 1,002,377t.

In 2003, domestic cement sales grew by seven percent to 9,105,466t after increasing by 5.9 percent to 8,511,851t in 2002 following only 1.8 percent growth in 2001.

Nominal annual cement capacity is estimated at 13Mt with exports to neighbouring countries amounting to 1.2Mt in the first 11 months of 2004.

The rate of increase in building costs, as measured by the BER Building Cost Index, has risen by 13.5 percent year-on-year during the fourth quarter of 2004.

Given the relatively robust recovery in the effective demand for non- residential buildings, building costs are expected to exhibit a rising tendency going forward and the BER consequently forecast that building costs will rise by 12 percent in 2005.