Construction slides into South Africa’s driver’s seat
South Africa’s economic growth rate slowed in the quarter to March compared with the previous quarter but accelerating growth in the construction industry, which outperformed other sectors, is likely to be a driver in coming months.
The economy expanded by an annualised 4.7 per cent in the first quarter, effectively a slowdown when compared with the last quarter of 2006, in which gross domestic product (GDP) grew by 5.6 per cent. On a YoY basis, economic activity increased by 5.4 per cent in the first quarter compared with the same period last year.
The construction sector recorded rapid growth of 21.3 per cent compared to 16.5 per cent in the fourth quarter of 2006, latest official GDP statistics showed.
Statistics SA(StatsSA) said the strong growth in construction was attributed to increases in non-residential buildings and construction work.
Some of the projects that were making an impact on the GDP were linked to the Gautrain rail link, Airports Company SA airport expansions and Eskom’s drive to increase productive capacity.
Nicky Weimar, an economist at Nedbank, believed construction would increasingly become a driver of growth by feeding into other sectors.
The start of significant government fixed investment spending had added to the construction momentum. For a while, the private sector contributed about 70 percent of fixed investment but with the more than R400bn the government plans to spend over the next three years, the private sector’s share of fixed investment will moderate to approximately 60 per cent.
Absa senior economist Ridle Markus said growth in construction would remain firm.
“I don’t think it can be sustained at 21 percent (the quarter-on-quarter growth) but will remain in the double digits”.
However, John Gomersall, the chief executive of cement producer Pretoria Portland Cement (PPC), said quarter-on-quarter growth in the construction industry might be inconclusive.
But he believed there was steady growth in the sector.
On the question of capacity constraints, Gomersall said short cement supply was being sensationalised. “It’s tight but its not a dramatic shortage.”
Gomersall said PPC was expanding its capacity with a R2 billion capital expenditure project.
Published under Cement News
