Afrimat has released the findings of its Afrimat Construction Index (ACI) for the second quarter of 2024. 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 Afrimat.
According to Dr Botha, it was encouraging to see seven of the 10 indicators that make up the ACI turning positive this quarter, with the “Value of Wholesale Sales of Building Materials” once again one of the star performers, showing quarter-on-quarter growth of 9,2%. This indicator was also the only one to record a positive year-on-year trend.
Other indicators that performed well on a quarter-on-quarter basis were the “Volume of Building Materials Produced”, “Sales Values of Building Materials”, and “Retail Trade Sales – Hardware”.
Although the values of “Building Plans Passed” and “Buildings Completed” recovered exceptionally well quarter-on-quarter, the year-on-year changes in these two indicators are still of some concern, having declined by 21% and 20%, respectively.
Dr Botha says while it is clear that the cost of South Africa’s restrictive monetary policy continues to take its toll on the economy, with increasing debt servicing costs placing households and businesses alike under pressure, on a positive note, the currency strength, which has already led to several declines in fuel prices, is bound to assist in a further lowering of inflation during the rest of the year.
“Another reason for optimism over an imminent recovery of the economy is the remarkable turnaround that has been achieved in the stability of electricity supply, with an end to loadshedding likely by the end of March 2025.”
He adds that the appointment of South Africa’s first Cabinet under the new Government of National Unity has been met with an overwhelming positive response by business leaders, while also receiving a thumbs-up from global capital markets.
“Visible signs of the higher level of urgency in addressing the country’s logistics challenges have already come to the fore. Apart from the ongoing cooperation between the government and the private sector via the National Logistics Crisis Committee, the Department of Transport has approached Business Unity South Africa to assist in the establishment of a private sector participation unit. With lower interest rates around the corner and a new era of cooperation between the private and public sectors looming, the construction sector is bound to start expanding soon.
“Although the increase of 8,8% in the ACI since the first quarter of 2024 is most welcome, the year-on-year decline of 1,9% is unfortunate, especially against the background of the dire need for housing development and the associated infrastructure,” says Dr Botha, adding that the ACI is not alone in reflecting subdued economic activity, with the latest Absa/BER Purchasing Managers’ Index for manufacturing having slipped below the neutral level of 50.
“The residential property market has also been dealt a severe blow, with the BetterBond Index of home loan applications having declined by 24% since the second quarter of 2022.”
Afrimat CEO Andries van Heerden has reassured stakeholders that the strategic acquisition of Lafarge assets in South Africa is integrating well into Afrimat. “The aggregates part of the acquisition integrated quickly, strengthening our locations across the country.”
Volume levels across the Construction Materials segment were maintained in the first quarter of the new financial year. By the second quarter, the integrated Lafarge quarries increased volumes.
He expresses optimism about the future of Afrimat, pointing out that the aggregate volumes strongly support the data in this edition of the ACI. “The group is encouraged by the government’s statements about increasing infrastructure spending, and we are well-positioned for these projects once they materialise.”
Van Heerden concludes by saying that Afrimat remains focused on ensuring that its diversified and multi-disciplined approach to projects delivers returns to shareholders. “We remain driven by cash generation, with net cash from operating activities delivering a compound annual growth rate of 19,4% from February 2009 to February 2024.”