Who Owns Whom

The WOW report on the Manufacture of Clay and Concrete Bricks in South Africa paints a picture of the industry’s performance as it relates to the construction sector, which is essentially the sole outlet of the brick manufacturing industry.

As opposed to the lacklustre performance and outlook for the construction sector in the short term, brick manufacturing, a subsector of the construction industry, has shown resilience in a difficult economic environment.

The construction industry has seen a continued long term decline which accelerated in the recent past. In evidence. The WOW report records that the industry’s total income has been declining by around 2% per annum from 2011 to 2021. Illustrating the extent of the recent decline, the industry contracted by a quarter in Q2 2022 compared to the pre-pandemic Q2 2019.

Informal building, additions and DIY projects driving growth in brickmaking

Yet, looking at the brick manufacturing industry, the major players had a good year. For instance, Brikor reported a revenue increase of 34.6% increase in the year to end February 2022, and Corobrik invested in additional capacity and new technologies to support its many export markets in the US, many Eastern countries, and other African states. The brick manufacturing industry is looking hopeful.

The most recent records available show an increase in the value of building plans, and new additions, an increase largely reflecting increased spending on DIY projects, additions and alterations, and growth in the informal building sector. This is reflective of sustained bricks demand. The observation that additions and alterations are doing better than new builds indicates an increased financial pressure on South African consumers.

Brick manufacturing demand is largely generated by construction activity in the private sector. The unavoidable inference is that the sustained demand and hopeful outlook for brick manufacturing offsets the shrinking activity in public sector construction activities.

The government’s role in the declining construction industry

This is confirmed by numerous comments and reports about the dramatic decline in government-led infrastructure projects. Stats SA records that investment spending has fallen from 30% of GDP in the 1980s to 16% in the early 2000s and 5.8% on average over the last five years. This is the past, and there are mixed feelings about the future and any possible revival. The broken promises and endless delays in getting to implement some of the promised infrastructure projects are making people wary.

The Development Bank of Southern Africa (DBSA), which is mandated to implement the 2018 Infrastructure Fund, has R5.9bn in projects at an advanced state. If we place this in the context of the R100bn promised by President Cyril Ramaphosa in his 2018 State of the Nation Address (SONA) when he took office, it is fair to deduce that in the six years since he took over, less than 6% of that commitment has been realised.

In February 2022, Ramaphosa’s announcement of a public sector infrastructure programme of more than R810bn over the next three years has been met with some scepticism given the repeated implementation delays and with the laser focus directed at solving the energy crisis.

Brick manufacturing creates a lot of employment and a lot of opportunities for local small-scale brickmaking. Most of them are not even captured in formal company operations records. It is primarily the private sector which has shown a much more stable demand for bricks. Low margins and high transport costs favour local (small-scale) production. Public sector development finance institutions should actively support entrepreneurs wishing to engage in brickmaking.

Informal brick makers in South Africa

Driving through rural areas and townships, one cannot ignore the plethora of smaller brickmakers that are very active in the small business sector or what is now termed the township economy. These Informal brick maker businesses are generally unable to comply with the Environmental Impact Assessments (EIAs) regulation and do not have required licences due to the costs involved.

They are, however, one of the drivers of economic activity on the ground and have the potential to play an active role in the building of low-cost housing which begs the question of why the development finance institutions including the Department of Small Business do not see value in empowering these small players by simplifying the procurement process of low-cost housing, where self-help housing with local brick makers can save government funding RDP houses is currently overlooked.

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