Major solar shift in South Africa

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27-06-2024
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Business Tech
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Renewable energy projects continue to sustain civil construction activity, even though there has been a shift from solar to wind energy.

The FNB/BER Civil Confidence Index fell from the nearly eight-year high of 47 in 1Q2024 to 44 in 2Q2024.

The reading means that just over 55% of respondents are dissatisfied with the prevailing business conditions.

The slight drop in the business mood simulates the slowdown in activity.

Nevertheless, the activity growth indicator is still well above its long-term average.

Stats SA said that the real value of construction works recreated by 7.8% year-on-year in 1Q2024, and a more upbeat reading is possible for 2Q2024.

“The survey results of the last few quarters are not nearly as pessimistic as the Stats SA data suggests. This is largely due to the nature of the survey, which is predominantly focused on very large contractors and those that work in the private sector,” said Siphamandla Mkhwanazi, Senior Economist at FNB.

Work is also expected to increase in the following months, with the rating of the lack of new demand as a business constraint – a proxy for order books – reaching its best level since 2008.

“The significant improvement in order books is a very positive development and, in effect, means that prospects for future work are similar to that registered when the bulk of construction related to the 2010 FIFA World Cup final was underway or about to start,” said Mkhwanazi.

Solar to wind

Although slightly lower, activity growth remained well supported. The pipeline of work also improved noticeably.

“Projects related to renewable energy have continued to sustain civil construction activity.”

“However, there seems to be a shift away from predominantly solar projects to wind”.

Although South Africa experienced a solar boom in 2023 amid heightened load shedding, solar energy cannot be harnessed at night or during cloudy conditions, limiting its potential in South Africa’s move away from fossil fuels.

Wind energy, on the other hand, can be harnessed at any time of the day, making it a better source of baseload power.

Overall, despite being above the long-term average, sentiment in the civil construction industry is still relatively low.

“Given the underlying conditions, especially activity, confidence should be higher. However, uncertainty regarding the political environment and the impact of crime, corruption and government inefficiency is likely weighing on business confidence,” said Mkhwanazi.