South Africa’s construction sector generates 130,000 jobs a quarter1 and is heading into a R1 trillion infrastructure cycle, but the businesses delivering the work still struggle to access the construction finance they need to mobilise projects from day one.

Speaking at the 14th edition of Big 5 Construct South Africa, Clinton Thomas, Head of Product at Lula, brought this reality to light.

“The cash flow problem facing construction SMEs is not a symptom of poor management; it is baked into the project cycle itself. The business wins the tender, orders the materials and starts the work, but payment only arrives months later. This is the reality of construction financing in South Africa, where contractors often need access to working capital long before they can invoice or receive payment. Timing is everything. Instead of bottlenecks, SMEs need finance that gets them on site with the right materials at the right time.”

One of the construction sector’s most persistent problems in development and delivery comes down to funding. For many SMEs, access to tender finance in the weeks between award and mobilisation is the difference between delivering on time and losing the contract entirely. Small contractors are falling behind because the funding they need arrives after the costs they need to cover, impacting service delivery, timelines and liquidity. With the South African construction market expected to reach R160.65 billion in 2026 at a 4.8% annual growth rate, and the public sector infrastructure spend forecast anticipated to reach R1.06 trillion over the 2026-2029 medium-term expenditure framework, SMEs need better cash flow support.

The data Lula brought to the Big 5 Construct South Africa stage also challenged a widespread assumption about the sector. Construction SMEs are not in distress – they are in demand, but their growth depends on funding the gap between a project being awarded and the income it eventually generates.

Construction accounts for 15% of Lula’s total book exposure and the company has issued over 16,000 advances to more than 4,000 companies at an average of R370,000. Around 37% of the advances within the construction sector exceed R250,000 and nearly 10% are more than R1 million.

At the end of Q2 2025, nearly 96,000 government invoices older than 30 days – a combined value of R12.4 billion – remained unpaid, while private sector payment cycles can stretch upwards of 150 days. This constricted flow of cash has been disrupting project delivery for years and, with construction firms forming a significant slice of South Africa’s SME base, it is easy to see how liquidity has become a systemic bottleneck. Currently, more than two-thirds of SMEs expect to require additional financing within six months to fund working capital, and 40% are relying primarily on self-funding.

There are multiple cost categories sitting inside this gap: upfront materials, weekly wages and subcontractor fees, equipment, fuel and transport, supplier deposits, retention periods, and the compounding pressure of running multiple live projects simultaneously. For many businesses, access to a building material loan or other forms of short-term construction finance can determine whether a project starts on time or falls behind schedule with consequences that extend into other contracts, supplier relationships, reputation, and the ability to bid competitively for the next opportunity.

When capital is structured around the friction points experienced by the SME, then it ensures that they have the liquidity they need to put materials on site before invoicing. This ensures that companies can mobilise immediately and deliver on time despite payment delays. Modern solutions are more sensitive to the needs and pain points of a sector set to boom by providing frictionless access to the right resources.

“What construction SMEs need is working capital that moves at the speed of a project, not a bank’s credit committee. They should be supported by a different approach to underwriting that bypasses conventional credit assessments built around static financial snapshots, and instead focuses on real-time transaction data,” Thomas explained. “Lula’s model makes funding decisions that reflect how a SME actually trades across the frequency, consistency and pattern of its inflows.”

South Africa’s infrastructure ambitions will only be sustainably realised if SME contractors doing the work can fund their mobilisation from Day One. The timing constraint does not have to be a bottleneck, nor does it have to inhibit growth and employment, not with funding that recognises where the SME is today.

“Growth fails when companies cannot access capital at the moment it is needed,” Thomas concluded.

For more on how South African construction businesses are managing the funding gap, visit lula.co.za/blog/business-funding/funding-for-a-construction-business/.