The outlook for South Africa’s construction industry over the next four years will be moderate, compared to the industry’s performance between 2012 and 2016, says data analysis company Timetric.
Contributing to this is poor investor sentiment as a result of slow economic growth, and the embattled rand, which both impact construction spending.
Growth in the industry
Infrastructure investment in the transport and logistics, energy, and low-cost housing sectors are expected to create growth in the industry over the next four years (2017 – 2021).
These projects will be underpinned by the ever increasing need for housing as urbanisation rates continue to rise.
In a report by Statistics South Africa on human settlement growth rates, the number of building plans passed grew by 6% in nominal terms in the last financial year. This shows an increase from R101.4 billion in 2015 to R107.5 billion in 2016. The total value of completed buildings grew by 8.3% in nominal terms. This showed an increaseR56.7 billion in 2015 to R61.4 billion in 2016.
Investing in infrastructure
In its 2017 budget, the South African government has plans to invest R947.2 billion in public sector infrastructure as part of its medium-term strategic framework.
Affordable housing projects are also on the cards to cater for the country’s lower and middle income citizens. The Human Settlements Housing Program spearheaded by the Department of Human Settlements is an example of this, and involves the construction of 1.6 million housing units by 2019.
Transport infrastructure, with roads being prioritised at the forefront, will also see considerable government investment in order to improve the mobility of citizens, freight and logistics.
In its 2017 budget, government also plans to spend R135.5 billion on road infrastructure over the next three years.
According to Timetric, the local construction industry’s growth will be driven by government plans to increase the share of renewable energy in terms of total installed electricity capacity, and encourage investment in renewable energy infrastructure.
Based on the Integrated Resource Plan (IRP), government plans to increase the share of renewable energy in total installed electricity capacity from 16.2% in 2016 to 22.3% in 2020.
View a sample of the report here.