Despite the sobering messages from South Africa's budget speech on 21 February 2024, the country's construction sector remains resilient – exemplified by construction materials major AfriSam, which is turning 90 this year.
AfriSam gathered its stakeholders again for its Annual Budget Breakdown event in Johannesburg to hear insights from Econometrix chief exonomist Dr Azar Jammine.
A regular contributor to the AfriSam Annual Budget Breakdown, Dr Jammine highlighted that the construction and building industries were still in the doldrums, with little sign of emerging from it soon. Dr Jammine pointed to the low economic growth rate and poor gross fixed capital formation as the key culprits of the challenging milieu. While the Budget Speech contained a theoretical commitment by the government to focus on infrastructure, there was not much to boost confidence.
He noted that private sector capital investment in South Africa had shown some improvement, but this was mainly in machinery and equipment. Investment in construction – including civil engineering – and building had declined 40 to 45% over the past decade. The slight recovery in residential buildings between 2020 and 2022, due to the Covid-19 pandemic, had faded.
“This is horrific, and there is little sign of it recovering,” he said. “The big loser is in the commercial space, which has fallen by 80% in terms of plans passed.”
Employment in the construction industry also continued to drop and is now 40% down from 2019 figures. The sector’s contribution to national employment is today only about 4,5%, having been over 6,5% around 2017.
“No other sector in the economy has been performing as badly,” he said. This was also reflected in the retail sales at builders’ merchants, which now ranked as the weakest segment of the retail sector.
Dr Jammine reiterated that crime was also a central factor in holding back progress in the construction industry and was encouraged by Business Leadership South Africa’s workstreams to work with the government on energy, transport and crime.
“I don’t need to remind members of this audience of the debilitating effect that the construction mafia are having,” he said. “I only hope that government will listen to the private sector and involve them more in finding the solutions.”
With the ‘semi-gration’ of many South African professionals to the Western Cape, he noted that this province had recently taken the lead over Gauteng in terms of residential building plans passed. However, there had been a slight rise in numbers in Gauteng, which may point to a revival.
While the tone was sombre at this year’s Annual Budget Breakdown, AfriSam sales and marketing executive Richard Tomes reminded stakeholders that the company’s 90 years in business should inspire the construction sector to remain resilient.
According to Tomes, the insights from Dr Jammine confirmed that the construction industry will remain under pressure for some time.
“However, what we can learn from AfriSam’s 90-year legacy is that the industry is very resilient,” he said. “Over the past 90 years, we have seen good times and survived extremely tough times.”
He said he believed the construction sector – as with AfriSam – would come through this challenging period and continue creating concrete possibilities for South Africa.
“As AfriSam, we look forward to being the construction industry’s partner of choice through thick and thin,” he said.
AfriSam’s executive chairman, Eric Diack, agreed the company had seen many ups and downs and hailed the Johannesburg event as an important forum for AfriSam and its stakeholders to gain vital insights to chart the path forward.
