The Afrimat Construction Index (ACI) continued its upward trend in third quarter of the year.

The ACI is a composite index of the level of activity within the building and construction sectors, and is compiled by economist Dr Roelof Botha on behalf of the mining and materials company.

“Similar to the reading last quarter, seven of the ten constituent indicators comprising the index are in positive territory, but of particular note this time around is the significant improvement in three indicators this quarter,” says Botha.

These include Buildings Completed, particularly in the metros and larger municipalities, which was up by 23.3%; Employment in Construction, which was up by 14.6%; and Sales Values of Building Material, which increased by 5.9%.

Other indicators that recorded meaningful improvements on a quarter-on-quarter basis were the value of Building Plans Passed, the volume of Building Materials Produced and the remuneration of construction sector employees, as indicated in Salaries & Wages – Construction.

However, it’s not all good news in the newest ACI.

“Compared with the third quarter of last year, it is clear that the general lethargy in construction sector activity has persisted, with the ACI declining by 1.3% overall since then,” notes Botha.

He adds that there is little doubt over the depressing effect that high interest rates continue to have on the construction industry, most notably high debt-servicing ratios and a persistent decline in the real value of credit extension, as confirmed by other economic indicators.

During the third quarter of the year, South Africa’s real GDP only managed a 0.3% increase year-on-year and declined from the level recorded in the second quarter, whilst the latest Absa/BER purchasing managers’ index for manufacturing has again slipped to below the neutral level of 50.

The residential property market also continues to lag.

“On a positive note, the rate-hiking cycle is reversing somewhat, although the two declines of 25 basis points each since September are inadequate to assist the country’s quest for higher economic growth and employment creation,” says Botha.

“Hopefully, the [South African Reserve Bank’s] Monetary Policy Committee will lower rates further early in 2025, which is one of the most important triggers for reviving construction sector activity.”

Botha notes that another positive development has been the inaugural national summit for crime-free construction sites, held in November.

“The declaration signed at the summit outlines a framework of interventions to combat criminality at construction sites, including the strengthening of industry legislation, developing structured policies, enhancing data systems and establishing rapid-response mechanisms to expedite arrests and prosecutions for extortion.”

Afrimat CEO Andries van Heerden says he is encouraged by the newest ACI data.

“We previously indicated that across the construction landscape, the Construction Materials segment enjoyed slightly elevated volumes from road, rail, and dam projects, and we continue to experience demand for our aggregates.”

He confirms that while the group has not yet seen a significant uptick in the infrastructure development and maintenance side of the economy, small pockets of demand are opening up.