After having slipped to 44 in the second quarter of this year, the FNB/Bureau for Economic Research (BER) Civil Confidence Index reached an eight-year high of 50 in the third quarter.

According to the BER, this current reading means that half of respondents are satisfied with prevailing business conditions. The FNB/BER Civil Confidence Index ranges between a maximum of 100, indicating that all respondents are satisfied with business conditions, and a minimum of zero, indicating universal dissatisfaction.

A level of 50 indicates an equal division between satisfied and dissatisfied respondents. The fieldwork for the third quarter survey was conducted between August 7 and 26.

While sentiment improved, momentum in activity eased somewhat, though it remained above the long-term average. Sentiment was bolstered by a rise in overall profitability, which reached its highest level since 2007, despite a decrease in activity and heightened tender price competition.

“Respondents have been upbeat about work for the last few quarters, so the softer activity reading this quarter comes off a high base and is therefore not entirely indicative of a weaker environment, especially when considering sentiment,” FNB senior economist Siphamandla Mkhwanazi said on September 25.

However, he also noted that this was in contrast to the “very downbeat” outcome for investment in construction works published by Statistics South Africa for the second quarter.

Despite the somewhat lower activity levels, overall profitability saw a significant improvement, contributing to increased confidence.

“Firm profit margins seem to be increasing. This, again, is a reflection of a sector that is faring reasonably well,” Mkhwanazi added.

The outlook for the sector remains mixed. While order books deteriorated, they merely returned to the levels recorded at the start of the year. Respondents also expressed expectations of better activity and employment in the next quarter.

Although growth in activity came under pressure, it remained above the long-term average and still reflected an improvement compared to the same period last year.

“Even though activity deteriorated somewhat this quarter, business confidence moved higher on the back of better profitability. Encouragingly, respondents expect work to trend higher once more next quarter,” Mkhwanazi said.

He further noted that this was in step with their comments, which seemed to suggest that there was a noticeable rise in tender activity.

However, participants continued to express concerns about the negative impact of the construction mafia and government inefficiency on the construction sector.