Wednesday, 09 July 2008 02:00

Building Confidence Tumbles

The FNB Building Confidence Index measures the business confidence of all the major role players and suppliers involved in the building industry such as architects, quantity surveyors, contractors, sub-contractors, wholesale and retail merchants, and manufacturers of building materials.

Construction IndustryThe index is compiled quarterly from the building, manufacturing, retail and wholesale opinion surveys undertaken by the Bureau for Economic Research (BER) at Stellenbosch University. The BER business survey in the building industry was conducted between May 5 and June 6, 2008.

 
The index declined from a level of 66 in 1Q 2008 to 50 in 2Q 2008. The latter level compares with an index value of 88 in the corresponding quarter a year ago.
 
The decline in business confidence over the past quarter was due to a moderation in all categories, except in the case of quantity surveyors where confidence increased by 5 index points. The latter development can possibly be related to the fact that second quarter business conditions turned out somewhat better than expected by the respondents at the time of the previous survey. However, an analysis of other survey indicators shows that quantity surveyors are also starting to experience the moderation in overall building activity.

The second quarter growth in building activity in this sector of the building industry has hit a brick wall and was well below expectations. For example, whereas a net 39% of respondents expected a weakening in Q2 2008, the latest survey results revealed that in fact a net 69% experienced a decline in workloads.
 
Possible reasons for the sharply weaker demand for residential building were, amongst others, rising interest rates and building costs, tightening of credit standards by banks, the lagged impact of the introduction of the National Credit Act in 2007, a deterioration in consumer confidence and rising food and fuel price inflation that is eroding the buying power of consumers.
 
The weakening in demand levels resulted in a sharp rise in tendering competition. It was therefore not surprising that a net 68% of respondents to the second quarter survey reported that the profitability of their businesses deteriorated notably.
In view of the sharp deterioration in the tempo of residential building activity, job shedding took place. Indeed, a net 44% of the respondents to the survey reported that the number of people employed was below that of a year ago.
 
As far as business prospects for Q3 2008 were concerned, the view was expressed by respondents that business conditions were likely to remain unfavourable, but no major further deterioration was expected by the respondents to the survey.

Business confidence of non-residential building contractors moderated further from an index value of 78 in Q1 2008 to 70 in the second quarter. In Q4 2007 the index stood at 92.
 
Respondents to the BER survey reported that business conditions turned out well below expectations. For example, whereas a net 9% of respondents expected an deterioration in the growth in building activity at the time of the previous survey, Q2 2008 results indicated that a net 37% of non-residential contractor participants experienced a decline in activity.
 
The moderation in the demand for building work translated into a relatively sharp increase in the intensity of tendering competition. Given the foregoing development, margin compression ensued with the result that the overall profitability of the respondents to the survey deteriorated.
 
Growth in building employment remained fairly stable during the survey quarter, but respondents expect job shedding to occur during Q3 2008.
 
Regarding the prospects for 3Q2008, Loos said that the survey participants do not expect major changes in business conditions.

 

The building industry has done little to help solve its own skills shortage over the past year, the Gauteng Master Builders Association (GMBA) said on Thursday.

Construction IndustryWhat the industry needed was a unified approach to skills training, GMBA president Neil Duncan said in a statement.

"A large number of independent company training initiatives have been, and are being, implemented, and should be commended. But we need to strive for a more unified approach which would be more effective and ensure consistency in training content and standards."

The problem was complex in that labour-only sub-contractors -- who were responsible for a lot of construction work -- did not contribute to the skills development levy, and were not answerable to employers.

"They do not have the desire, time or financial resources to participate in skills development. There is no doubt that apathy and frustration exist among employers in dealing with the issue," Duncan said.

The independent training initiatives were attempts to alleviate internal skills shortages, but they needed to be aligned with recognised qualifications.

He called for the Construction Education and Training Authority and the building industry to work together on addressing the skills shortages.

 

 

Robust growth in the residential building industry over the past two years has spurred another building materials company, African Brick Centre, to list on the JSE’s AltX on Monday to raise money for expansion.

Construction IndustryAfrican Brick Centre has aggressively rolled out its retail network to 24 outlets in five provinces, but the demand for building materials just keeps rising.

Group CEO Beno van Graan said on Friday: “To accommodate the high demand for our products, a third manufacturing facility is planned at Zuurbekom, a 70ha industrial site near the large Syferfontein clay reserves.”

The group consists of two divisions, clay brick manufacturing and the retail distribution of building supplies focusing on the “wet trade”, which Van Graan said were the raw materials used to build the shell of a building, such as cement, sand, roof tiles and paint.

“At a cost of R15m, the plant (in Zuurbekom) should be operational within 30 weeks after construction commences. It will have a capacity to produce 40-million bricks a year, with construction planned to start shortly after the listing date,” said Van Graan.

He said money from the listing would accelerate the planned expansion of the African Brick Centre brand and its retail network and facilitate the introduction of new products. It would also facilitate funding for an empowerment transaction and further acquisitions.

He said additional retail outlets were in the pipeline, with at least six franchise outlets expected to open over the next 12 months. Four of these were at advanced negotiation stages with third parties.

In a prelisting private placement on Friday, the company offered 45-million shares at a subscription price of R1 each, raising R45m. Another R55m will be raised through the sale of 55-million shares by the vendors at a sale price of R1 each.

A total of 320-million shares were issued on Monday on the open market with a par value of 0,1c per share. African Brick Centre’s original manufacturing facility is situated in Krugersdorp, with a second in Lenasia.

“The company also owns a retail division. It is the first face-brick manufacturer also to stock its stores with a full complement of hardware products.

“Its strategic advantage exists in selling through its own branded retail outlets, with its competitors relying mainly on large wholesale consumers and project developers,” said Van Graan.

Through its retail chain, African Brick Centre sells 120-million bricks a year to a client base of 12000. “Since 1983, the company has sold close to 1-billion bricks,” said Van Graan.

 

Monday, 13 December 2004 02:00

Building industry confidence at 96%

Stellenbosch Bureau for Economic Research (BER) says building industry confidence is at levels last seen in the economic upswing of 1978 to 1981

Tuesday, 13 July 2004 02:00

Confidence up in building industry

Demand driving residential sector

Monday, 16 August 2004 02:00

Activities marginally up

The BER Composite Business Confidence Index for the Building Industry has shown a further marginal increase during the second quarter of 2004

Friday, 13 August 2004 02:00

Construction 'fronting' exposed

The National Federation for the Building Industry, is to publish the names of its members caught "fronting" for white-owned companies.

Friday, 18 June 2004 02:00

Keeping ahead of the game

Wilson Bayly Holmes-Ovcon makes the contracting business look easy - until you look at the performance of its peers in the construction sector

Friday, 30 April 2004 02:00

Clay brick sector geared for growth

CONTRACTORS and developers in the Western Cape with healthy order books have had fears allayed that a shortage of clay bricks

Wednesday, 24 March 2004 02:00

Clay brick industry geared for growth

Contractors and developers in the Western Cape with healthy order books have had fears allayed that a shortage of clay bricks might cause a 2004 building bottleneck.

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