Contractors feel the pinch

Xolile Bhengu

Xolile Bhengu

Civil construction confidence dropped five points in the second quarter of the year, as small contractors begin to feel the pinch of increased costs and power supply constraints for their projects.

The First National Bank (FNB) Civil Construction Confidence Index for the second quarter of 2008, compiled by the Bureau for Economic Research, yesterday reported a decline from a confidence level of 76 in the first quarter to an index of 71 in the second quarter.

The survey polls more than 40 civil construction companies on their outlook for the sector.

Cees Bruggemans, chief economist for FNB, said overall business conditions remained favourable, but larger construction companies were doing better than smaller contractors.

He said large companies which benefitted from participating in mega contracts such as the Gautrain, Sanral road building projects, Eskom and Transnet capital expansions remained upbeat about current business conditions, but smaller contractors polled indicated that a number of factors were tempering their optimism.

"The more important factors were the sharp slowdown in residential township development work, political in-fighting in the Western Cape constraining the flow of work, weak capacity at the local government level, and slow payment by public sector departments and municipalities, which often leads to cash flow problems and financial stress being experienced by civil contractors," he said.