ACI rose 2.5% year-on-year, outperforms real GDP growth rate

Afrimat Construction Index (ACI) has displayed its third consecutive quarterly improvement in Q4 2024, marking a significant shift in South Africa's construction sector. Compiled by economist Dr. Roelof Botha on behalf of Afrimat, the ACI acts as a composite index measuring the level of activity within the building and construction sectors. Dr. Roelof Botha shared insights on the recent findings of the ACI during a CNBC Africa interview. Dr. Botha acknowledged the progress made but emphasized the need for cautious optimism due to five out of ten indicators still being negative year-on-year. While there has been a recovery post-COVID, challenges like increased interest rates and infrastructure issues continue to impact the sector. Despite outperforming GDP on a year-on-year basis, the construction sector has lagged behind in quarter-on-quarter terms. Dr. Botha explained that the focus on household consumption expenditure in Q4 tends to overshadow construction activity during that period. However, the collaboration between the private and public sectors, especially in infrastructure development, is anticipated to spur growth in the construction industry. Interest rates have been highlighted as a key factor influencing construction activity. Dr. Botha stressed the need for significant rate cuts to stimulate construction and lower the cost of capital in South Africa. With the current real prime rate being the highest globally, Dr. Botha expressed the urgency for further rate reductions to drive substantial growth in the sector. The interview highlighted the importance of various structural and operational factors like energy supply, skilled labor availability, private sector investment, and government efficiency in municipal budgets. Dr. Botha emphasized the need for a collaborative effort between the private and public sectors to enhance construction activity. In conclusion, Dr. Roelof Botha's insights shed light on the ongoing challenges and opportunities in South Africa's construction sector. While there has been a positive trajectory in the ACI, sustained efforts and policy adjustments are essential to ensure a robust and lasting recovery in the industry.