The index measuring activity growth has deteriorated for the second consecutive quarter. Despite this, it remains above the long-run average.
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The FNB/BER Civil Confidence Index held steady in the second quarter of 2026 after falling 9 index points to 43 in the first three months.
However, more than 55% of respondents were dissatisfied with prevailing business conditions, and growth in construction works slowed slightly.
The index measuring activity growth has deteriorated for the second consecutive quarter. Despite this, it remains above the long-run average.
“Based on the survey results, growth in construction works likely eased this quarter. This is largely due to the higher cost environment and the uptick in general economic uncertainty resulting from the US-Iran war,” said FNB senior economist Siphamandla Mkhwanazi in a statement.
Additionally, the survey showed strong activity growth in the second quarter of 2025, and because respondents are asked to compare the current quarter to a year ago, base effects may also result in a weaker index reading.
According to Statistics South Africa, the real value of construction works rose by a significant 5.1% year-on-year (y-o-y) in the first quarter, following a 0.2% y-o-y contraction in the fourth quarter of 2025.
“We should see work regain momentum if the current Middle East peace deal holds and normal trade flows resume. Demand from, among others, the energy, mining, and transport infrastructure sectors will persist,” said Mkhwanazi.
The higher cost environment has also led to increased competition in tendering prices. Yet sentiment remained supported by a relatively upbeat reading for overall profitability, which was unchanged from last quarter.
“For existing contracts, firms seem to have been able to pass on some of the higher input costs to clients,” said Mkhwanazi.
Regarding the outlook, the index measuring firms’ rating of insufficient new demand as a business constraint (a proxy for order books) moved further below its long-term average, signalling somewhat better order books.
The effect of weaker activity growth and keener tendering price competition on sentiment this quarter was offset by stable overall profitability and somewhat better order books, he said.
“On balance, the results were encouraging. The negative effect of rising input costs on work was expected, and activity should rebound once these cost pressures normalise, which is looking increasingly likely given the latest geopolitical developments,” said Mkhwanazi.
The findings correlate broadly with the Afrimat Construction Index (ACI), which was released days ago and which showed a marginal year-on-year increase of 0.3% in construction activity in the first quarter, boosted by year-on-year increases of more than 5% in the value of both construction works and buildings completed, whilst employment and sales of building materials also improved.
Economist Dr Roelof Botha, on behalf of Afrimat, said that although activity levels in construction remain subdued, the ACI’s seasonally adjusted reading had risen for a third consecutive quarter, the first time this has occurred since a brief recession in 2020.
BUSINESS REPORT