Respondents in the construction activity and S&P PMI surveys were optimistic about the rest of the year for construction as well as business activity.
South Africa’s economy is still volatile, with different sectors performing better at different times. The latest data shows some good news that construction activity was the best in 11 years in the fourth quarter of 2025, but the S&P Global PMI disappointed again with business activity declining sharply amid weak demand.
According to the FNB/BER Civil Confidence Index, it gained nine points to reach 52 in the fourth quarter of 2025 after an increase of two index points in the third quarter. This marks the joint best level (along with the third quarter of 2016) in 11 years.
The Index can vary between a maximum of 100, which indicates that all respondents were satisfied with prevailing business conditions, and a minimum of zero, indicating that all respondents were dissatisfied. A level of 50 indicates that the respondents are equally divided between satisfied and dissatisfied.
The current reading means that more than 50% of respondents were satisfied with prevailing business conditions, Siphamandla Mkhwanazi, senior economist at FNB, says.
“Supporting the higher sentiment reading was a sharp improvement in activity growth. According to Statistics SA, the real value of construction works contracted by 3% year-on-year in the third quarter. The survey results point to a much less pronounced decline in activity in the fourth quarter off the back of renewable energy and mining projects.”
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Overall profitability for construction activity at best level since end of 2007
In addition to more work, overall profitability was also higher. Therefore, the index measuring the growth in overall profitability registered its best level since the end of 2007.
“It is a stretch to claim that profit margins are as generous as they were in the run-up to the 2010 FIFA World Cup final, when work was much more abundant, but it is clear that civil contractors are enjoying better margins. This undoubtedly contributed to the better business mood,” Mkhwanazi says.
Looking ahead, respondents expect activity to continue on this upward trajectory in the first quarter of 2026. However, order books, as proxied by the rating of new construction demand as a business constraint, were only slightly better compared to the third quarter.
Mkhwanazi says the higher sentiment was in step with better activity and overall profitability which suggests a potential rebound in the sector. “The forward-looking indicators, while mixed, suggest that the momentum will likely be maintained over the near-term.
“The civil construction survey is the best non-official gauge for infrastructure investment. On that score, the survey results are quite positive. However, the spread of activity seems to be clustered in renewable energy generation and mining, which is not bad – or even surprising – but does suggest that key reforms in other areas of the economy are still lacking,” Mkhwanazi pointed out.
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No good news from S&P PMI
However, the S&P Global South Africa PMI ended the year in its weakest position since last January, as customers rowed back on spending, leading to a sharp reduction in business activity. Firms also curtailed their purchases and input stocks, but employment edged higher and confidence towards the outlook remained strong.
The S&P Global South Africa Purchasing Managers’ Index is a composite gauge designed to provide a single figure snapshot of operating conditions in the private sector economy. Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
The headline PMI dropped to 47.7 in December, from 49.0 in November, signalling a moderate and faster decline in operating conditions at South African companies. The index remained in contraction territory throughout the final quarter of the year, with the latest reading the weakest in 11 months.
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Business activity decreased sharply in S&P PMI
Business activity decreased sharply over the course of December, with the contraction widespread across the monitored sectors and the most marked since last January. Firms surveyed reported that output had fallen amid challenging economic conditions and weaker client demand.
New work intakes declined in December for the third consecutive month, and the downturn was the sharpest recorded since March 2024. A lack of household spending, pullbacks in business orders, and lower sales from international clients were all cited by survey panellists.
Focusing on 2026, South African firms looked past their current struggles to predict a robust upturn in business activity for the next 12 months. They are hopeful for a pick-up in both economic conditions and client sales, while also highlighting new projects as a reason to be confident.
Business optimism was higher than the long-run trend, despite easing slightly from November.
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Damper conditions in fourth quarter after strong quarters for S&P PMI
David Owen, senior economist at S&P Global Market Intelligence, says after a strong couple of quarters, the South African economy experienced damper conditions in the fourth quarter, with business activity declining for three months running.
“The downturn has been mainly down to a pullback in demand, which deepened in December as customers reacted to an uplift in price pressures in the month before and broader economic headwinds.
“Subsequently, firms showed greater caution towards purchases, recording a fresh reduction in December, as well as a decrease in stock volumes. However, the employment picture was slightly brighter, with the data signalling a slight rise attributed to short-term hires.”
Owen says for the year ahead, South African firms gave reasons to be confident that the current downturn in business conditions will fade. “Survey comments pointed to a positive demand outlook, hopes of reduced headwinds and stronger customer relationships.”