Afrimat Construction Index reports 1.3% YoY decline

Afrimat has released the findings of its Afrimat Construction Index (ACI) for the 1Q24 in South Africa. According to Dr Roelof Botha, the weak economic growth during the first quarter of the year was evident in the construction sector, with eight of the 10 constituent indicators of the ACI recording YoY declines and the ACI growth rate slipping to just below zero. The index recorded a level of 103.7 in the first quarter, compared to 117.3 in the previous quarter, and 105 in the 1Q23. 

He adds that the 1.3 per cent YoY decline in the ACI compares to the annualised 0.5 per cent increase in the country’s GDP, with a decline of almost nine per cent in the construction sector’s value-added being of concern. “On the upside, the decrease was somewhat offset by the 10.1 per cent YoY increase in the value of wholesale sales of construction materials.” 

Looking ahead at the prospects for the construction sector for the rest of the year, Dr Botha is confident that the consistent decline in the Consumer Price Index will force the SARB’s hand to lower interest rates at the July meeting of the Monetary Policy Committee, especially now that the European Central Bank has cut its key rate from four to 3.75 per cent. “Significantly lower interest rates are required to incentivise capital formation and construction activity and the proverbial ball should start rolling soon.” 

Afrimat’s CEO, Andries van Heerden, said that while the construction sector has remained relatively weak, the recent results achieved by the group itself were outstanding thanks to the team’s collective efforts. “These results,  the highest in the group’s history, were underpinned by a focus on cash generation, strict capital allocation, and maintaining a strong balance sheet, which continues to support diversification. The Bulk Commodities segment was responsible for the bulk of the profitability, although the Construction Materials division also increased revenue due to increased demand from the road and rail industries.”