The South African Construction Sector

The South African construction industry is a strategic sector that supports the government’s National Development Plan (NDP). During 2016 total nominal expenditure on construction works and related activities totalled approximately R420bn and the sector generated an estimated 1,483,000 employment opportunities across the formal and informal sectors. Infrastructure investment, or Gross Fixed Capital Formation (GFCF), was approximately 19.6% of GDP for 2016, with public sector infrastructure investment contributing 6% to GDP. Government has reiterated its commitment to infrastructure development by earmarking R948bn over the next three years.

Difficult Economic Conditions

Despite this commitment, stakeholders have expressed concern about the sector, especially as 140,000 construction jobs were shed between the first and third quarters of 2017. According to figures released by Statistics South Africa, the construction industry growth rate contracted by 0.8% quarter-on-quarter in Q1 2017 and by 0.5% quarter-on-quarter in Q2 2017. Private sector infrastructure spend, which totalled almost R185.5bn in 2016, is expected to remain muted over the medium-term. As profitability continues to deteriorate, role players report that competition for projects is steadily intensifying.

Report Coverage

The report on the South African construction industry and related activities, which includes scaffolding solutions and structurally insulated panel systems (SIPs), describes current conditions and recent developments. Profiled in the report are 54 companies, including Group Five which recently announced that the group would be disposing of its manufacturing cluster. This forms part of a turnaround strategy to return the company to profitability after the group's core operating profit contracted from R736.5m in 2016 to a year-on-year loss of R659.3m for the financial year ended 30 June 2017. The disposal of Murray & Roberts’ Infrastructure and Buildings businesses was unconditionally concluded and transferred to a consortium led by the Southern Palace Group. The company has since been renamed and re-branded as Concor Construction, which is also profiled in this detailed and informative report.