At this year’s AfriSam Budget Breakdown event, Dr Azar Jammine, economist at Econometrix, highlighted key trends, stating that the R903 billion in public sector infrastructure expenditure earmarked for the 2023/24 to 2025/26 financial years is encouraging. 

“These numbers are so big that if we were to see their full implementation, it would be a game changer not only for the construction sector, but for the entire economy,” said Jammine. “Where the real hope lies is in government getting its act together and starting to implement its capital projects.” 

He noted the importance of how Minister of Finance Enoch Godongwana dealt with plans to restructure Eskom’s capital debt, as any worsening of the energy crisis could undermine the economic predictions in the 2023 Budget Speech. If load-shedding is exacerbated, Jammine said the country may not even reach its meagre 0.9% growth target for the year. In such a scenario, government’s own spending plans would be further dampened by lower tax revenues. 

The question Jammine posed is whether there is the political will within the governing party to allow Eskom’s debt restructuring to take place. Such a move is inevitable, however, as he foresees a complete realignment of politics in the general elections of 2024. 

Stimulating employment 

Focusing on the construction industry, Jammine once again painted a sobering picture, but highlighted the sector’s potential to deliver economic benefits. Currently, construction provides some 7.8% of the country’s employment, even though it makes up just 2.6% of GDP. “Implementing government’s infrastructure projects would spark massive job creation, and the economy could grow by 5-6% a year,” Jammine explained. 

Commenting on Jammine’s presentation, Richard Tomes, sales and marketing executive at AfriSam, said “Although the operating environment remains challenging, one of the positive elements AfriSam has noted is the increase in the infrastructure spend budget allocation, and we remain hopeful that the implementation of the infrastructure projects will gain momentum and start delivering true value for the construction industry.” 

Trading trends 

Industry data shows that considerable overcapacity is still evident in the non-residential building sector, especially commercial office and retail space. This is subduing demand for new developments, with the total value of non-residential building plans passed in 2022 hovering around the R1 billion mark, compared to R3 billion in 2016. The brief recovery in the residential building sector – as homeowners renovated for home offices – has also tailed off. Additionally, cement demand suffered negative growth in 2022 and is expected to improve only marginally over the next few years. 

Rallying the sector 

“With many of us operating in the same industry, material matters such as the external environment we operate within not only relates to AfriSam, but also to our stakeholders’ businesses,” added Tomes, explaining the rationale for the annual AfriSam Budget Breakdown event. 

“We hope that the information being shared will not only provide them with insight about some of the decisions that AfriSam takes, but will also provide them with valuable insights to enable decision-making in their own businesses or organisations to ensure their future success and sustainability,” Tomes concluded. 

Jammine’s full presentation can be downloaded at www.afrisam.co.za/budget-breakdown-2023.