After some exceptionally turbulent years, South Africa’s construction industry continues to face challenges – but there are some genuine reasons to be positive.

At BizFunding, we’re not blind to the challenges, but we remain strongly optimistic about SA’s construction industry and all the businesses, big and small, that support it.

This is because the basic drivers for the industry are solid.

Recent signs of recovery

The construction industry has had to overcome major issues, including an unstable market, wildly fluctuating input costs, and industry-wide material and employee shortages.

These challenges sit alongside South Africa’s poor economic state, with inflation at 5.4% (September 2023), a buckled rand caused by weakened investor confidence and a Treasury GDP forecast for 2024 of 1.5%, below population growth.

These hamper the construction industry’s outlook in the short to medium term.

However, according to industry expert Roelof van den Berg, CEO of the GAP Infrastructure Corporation (GIC), there’s a smoother road ahead. Van den Berg says sector growth depends on three factors.

Increased government spending: in June 2020, the government announced investment in infrastructure projects of more than R2.3 trillion over the next 10 years. The pandemic forced many projects to be put on hold, but the bulk of postponed projects were due to be implemented in 2023.

Supply chain issues: these are gradually being resolved and production backlogs being caught up. Prices should see a “discernible decline” back to normal levels throughout the year, predicts Van den Berg.

Skills shortages: an increase in projects and injection of government capital should lead to better employment opportunities. Van den Berg strongly encourages the industry to focus on SA’s youth and promote careers in science, technology, engineering and maths (STEM) among high-school learners, especially in infrastructure development.

A growing base of skilled contractors

Often, the media focuses only on the top players in construction, emphasising the fact that a number of these have quit the country or gone bust during the last decade.

However, it’s important to remember that the industry also includes a diverse range of smaller and mid-sized contractor businesses, which are tough, agile and competitive.

This base of contractors is expanding, developing skills and gradually filling some of the gaps created following the departure of large international companies.

Huge demand for infrastructure

You don’t have to travel far in any direction in South Africa to see that there’s a massive demand for infrastructure development.

This demand is across all sectors and in all nine provinces, from inner-city projects to rural development and new energy initiatives, including:

  • roads/transport
  • housing
  • renewable energy
  • hospitals
  • schools.

Increases in government infrastructure spending

The Government accounts for about 40% of the country’s total infrastructure budget, so performance is key.

In June 2020, it promised infrastructure spending of more than R2.3 trillion over the next 10 years. Cabinet approved the Infrastructure Investment Plan, a pipeline of 62 projects. However, project implementation has been delayed by the pandemic.

In the 2022/23 financial year, at least R117.5 billion was allocated to infrastructure and it’s estimated that Government expenditure will total R903 billion over the next three years.

According to the then Public Works and Infrastructure Minister Patricia de Lille, Government spent 70.6% of the total allocated infrastructure budget in 2019/2020. This figure improved mildly to 73% by 2020/21, she said.

There’s reason to be optimistic that the figure will continue to improve.

A lucrative urban, residential market

Rising inflation and interest rates have led to a slight dip in the lucrative urban residential market.

That said, even during the tough economic woes of the past few years, the residential market has shown healthy growth, with significant development in and around urban centres.

BizFunding: increasing opportunities for small to mid-sized contractors

At BizFunding, we aim to increase opportunities for small to medium contractors by empowering them to fulfil construction tenders. We do this by providing up to 100% tender funding for construction projects and one-on-one support.

We have ground-level experience of the construction industry in South Africa, which is why we prefer to partner with businesses by offering hands-on support instead of just unguided funding.

Our profit-sharing model allows us to help your business succeed and grow by ensuring the contract or tender is fulfilled to your client’s expectations.

If you are a business owner on the road to success, or need funding to help start new projects or purchase orders, we can help you!

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