he Afrimat Construction Index (ACI) recorded a solid recovery in the second quarter, with several key indicators having made a strong rebound since the first quarter of the year.
The index, compiled by economist Dr Roelof Botha on behalf of JSE-listed construction materials and industrial minerals producer Afrimat, showed a 21.7% quarter-on-quarter increase in the value of buildings completed indicator, while the sales value of building materials indicator was up by 13% and the volume of building materials produced by 10%.
However, the recovery of the ACI was fairly predictable, as the indicators included in the index came off the low base recorded in the first quarter of the year, Botha points out.
The further marginal decline in the prime overdraft rate during the second quarter also played a role in the improvement, he adds.
“Despite the impressive [6.8%] quarter-on-quarter overall increase in the ACI during the second quarter, which is more than double the GDP growth rate, it remains a point of concern that the year-on-year change remained negative at 4.4% lower year-on-year,” Botha says.
FUTURE FORECAST
A further recovery in construction sector activity is expected, especially owing to the upward trend in the value of building plans passed, as well as the rise in the latest reading of the BetterBond Index of Home Loan Applications, he highlights.
“The impact on the residential property market of the recent lowering of the country’s benchmark lending rate has been reflected in the latter index increasing by 14% year-on-year during July and August.
“In the process, the number of home loan applications reached its highest level since the third quarter of 2022, when record-high interest rates really started biting into the pockets of prospective homebuyers.”
Further, the residential property market is slowly but surely building up steam, which will ultimately benefit construction activity at large.
“However, the pace of further recovery in the construction sector will only gain significant traction once the prime rate has returned to its level of 7% that existed immediately after the pandemic, and the government takes real action on vital infrastructure projects,” emphasises Botha.
Meanwhile, Afrimat noted that it was starting to see early progress in infrastructure spending by the government with the rebuilding of the country’s rail systems.
This, along with the expansion of the electricity distribution network, bodes well for the future of our Construction Materials business, says Afrimat CEO Andries van Heerden.
Additionally, 50% of the Transnet-approved quarries are owned by Afrimat, which positions it well to support Transnet’s infrastructure development and maintenance across all six major rail corridors.
Afrimat also continues to evolve its cement strategy, aligning with global sustainability trends and operational efficiency, he says.
“The traditional cement model is no longer viable in today’s market. By reducing reliance on costly and environmentally-taxing components and incorporating extenders, we can supply compliant, cost-effective and lower-carbon cement products to the market,” Van Heerden says.
Demand for low-carbon cement is supported by attractive sales volumes, he adds.