The construction sector is poised to make a robust start in 2024 in South Africa, standing out among the limited economic sectors showing promising activity. After years of underinvestment in infrastructure and grappling with the impact of a high-interest rate environment, the construction industry in the country witnessed a notable surge in activity throughout 2023.The Afrimat Construction Index (ACI), a key indicator for the construction sector, reached its highest level in nearly seven years during the three months leading up to September. It is noteworthy that the ACI considers data from both formal and informal construction-related sales, providing a comprehensive view compared to Statistics SA’s formal sector-only construction data. Additionally, the FNB/BER Civil Confidence Index released in December, while still reflecting some dissatisfaction with prevailing business conditions, painted an optimistic picture for the sector. Sub-indices related to activity growth indicated positive momentum, contributing to an overall improvement in profitability. FNB senior economist Siphamandla Mkhwanazi observed an upward trajectory in civil construction activity in the preceding quarters, and despite a contraction noted by Statistics SA in the third quarter, survey results from FNB/BER suggested a potential rebound in the fourth quarter of 2023. Economist Dr. Roelof Botha, compiler of the ACI, expressed anticipation that 2024 would be a highly favorable year for construction. Factors such as the focus on renewable energy, the urgency to address logistical challenges, government spending on roads and other projects ahead of the election, and sustained growth in new capital formation were identified as key drivers for the sector. Additionally, the potential for lower interest rates in early 2024 and the launch of the fifth phase of the Expanded Public Works Programme (EPWP) were seen as further catalysts for construction growth.
The EPWP Phase 4, which spanned from 2019/20 to 2023/24, created over 4.5 million work opportunities, approaching the target of 5 million. The upcoming Phase 5 aims to enhance service quality, training, and exit opportunities for participants. Survey results and respondents’ expectations indicated positive growth momentum, with a decline in the index measuring tendering price competition, suggesting sustained expansion in the near term.Despite these positive developments, a concerning factor for construction companies is the presence of the “construction mafia,” causing disruptions and financial losses through extortion at construction sites. President Cyril Ramaphosa’s commitment to address this issue with a dedicated police unit signaled a governmental effort to tackle the problem. Companies in the construction sector, such as Afrimat and Raubex Group, reported significant increases in their construction materials businesses. Raubex Group, although facing challenges such as delays, an energy crisis, and supply chain disruptions, expressed confidence in delivering solid results due to a strong order book and a robust pipeline of projects. In its 2023 annual report, JSE-listed WBHO highlighted an increase in gross fixed capital formation, contributing to gains in construction GDP in 2023. These positive indicators collectively suggest a promising outlook for the construction sector in South Africa as it enters 2024.