It was a sombre tone at this year’s annual AfriSam Budget Breakdown event, with little cheer to be found in the 2024/2025 budget announced by Minister Enoch Godongwana.  

A regular contributor to the Budget Breakdown event, Econometrix chief economist, Dr Azar Jammine, highlighted that the construction and building industries were still in the doldrums, with little sign of emerging from it soon.  

Key culprits 

The low economic growth rate and the poor level of gross fixed capital formation were observed as the key culprits of the challenging milieu. While the Budget Speech contained a theoretical commitment by the government to focus on infrastructure, Dr Jammine noted 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 with 40% to 45% over the past decade. The slight recovery in residential building between 2020 and 2022, because of 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.” 

Speaking at AfriSam’s Annual Budget Breakdown event in Johannesburg, Econometrix chief economist, Dr Azar Jammine, highlighted the demanding conditions in construction, civil engineering and building.

Employment 

The sector’s contribution to national employment has dropped with 40% from pre-Covid-19 figures.

Employment in the construction industry also continued to drop and is now 40% down from the 2019 figures. The sector’s contribution to national employment is today only about 4,5%, having been over 6,5% by 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.  

Construction mafia 

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 is having,” he said. “I only hope that the government will listen to the private sector and involve them more in finding solutions.” 

Growth areas 

Investment in construction had declined 40% to 45% over the past decade.

With the semigration 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, a slight rise in numbers in Gauteng recently may point to a revival.  

Political climate 

Dr Ralph Mathekga, senior expert at Geopolitical Intelligence Services, spoke about the upcoming elections. He stated that this year’s elections are almost as important as the first one. The elections come at a time when people are looking for improved service delivery, and to building new relationships with political leaders. They will be choosing among many different parties and from different independent candidates.  

AfriSam sales and marketing executive, Richard Tomes, said AfriSam’s 90 years was an inspiring achievement built on the sector’s resilience over the years.

“People should rethink the type of future that they want. It is always a voter’s election, but this time we expect to see more of a voice from the voters,” said Dr Mathekga. 

Resilience 

According to Richard Tomes, sales and marketing executive at AfriSam, 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 we have also survived through extremely tough times.” 

He said he believes that the construction sector will come through this challenging period. 

The Budget Speech contained a theoretical commitment by the government for more to be spent on infrastructure, which is good. However, several factors point to an industry that is facing structural impediments to growth. 

Full acknowledgement and thanks go to:

https://www.afrisam.com/ for the information in this editorial.