SThe construction sector outside Africa posted its best quarterly performance in years.
The Afrimat Construction Index recorded an astonishing 10.2% quarter-on-quarter rise in Q3 2025, signaling a dramatic reversal in fortunes for an industry that has long struggled under the weight of high borrowing costs and weak economic activity.
This impressive double-digit growth marks a decisive break from the downward trajectory that has characterized much of the sector’s recent performance.
The index also recorded a modest increase of 0.4% year-on-year, suggesting that while the recovery is still in its early stages, momentum is gaining momentum on several fronts.
Building materials are driving the revival
At the heart of this resurgence is an unprecedented surge in construction materials production, which economist Dr. Roelof Botha, who compiles the index on behalf of Afrimat, described as one of the strongest increases on record.
The volume of materials produced increased by 13.6% quarter-on-quarter and 5% year-on-year, reflecting a renewed appetite for construction activity across both the public and private sectors.
The majority of indicators tracked by the composite index recorded double-digit growth rates, painting a picture of broad-based improvement rather than isolated patchy strength.
Retail hardware sales increased 8% for the quarter and year, and the amount of building plans passed by local governments also showed an encouraging increase.
Most importantly, construction activity outpaced overall GDP growth in the quarter. This is a rare achievement that confirms that the sector is emerging as a potential driver of economic expansion rather than a drag on growth.
Interest rate easing fuels optimism
The revival of the construction sector has been supported by monetary policy easing, with the South African Reserve Bank cutting prime overdraft interest rates by 25 basis points.
The cumulative 125 basis point interest rate reduction since September last year brings the prime lending rate down to 10.25% as of November 2025, providing meaningful relief to real estate developers and prospective homeowners alike.
Botha is optimistic about the economic recovery continuing, but stressed that further rate cuts are essential to maintain momentum.
The country’s real interest rates (the difference between lending rates and inflation) are historically high and construction activity has long been subdued, and further easing could unlock significant pent-up demand.
With inflation moderately contained and expectations anchored around the Reserve Bank’s target range, economists expect further rate cuts throughout 2025 and into 2026, potentially pushing the prime rate below 10%, creating conditions more conducive to sustained construction growth.
Private sector strengthens as public investment lags
The overall situation is positive, but not all indicators are flashing green. The value of construction work, which relies heavily on government infrastructure spending, remained the only indicator of decline, highlighting persistent challenges around weak capital formation and limited government appetite for large-scale infrastructure investment.
This lack of public sector activity has led to greater emphasis on private sector efforts to foster growth.
Afrimat CEO Andries van Heerden noted that while the company has not yet seen a significant increase in infrastructure development and maintenance, it is seeing small demand across local and private sector projects.
Van Heerden attributes Afrimat’s improved performance to strategic acquisitions, including the integration of the break-even Lafarge cement business.
The company has also restarted a previously dormant quarry in response to growing demand for aggregates and cement, and is poised to take full advantage of this nascent recovery in the cement sector.
Job growth brings hope
One particularly encouraging aspect of the construction recovery is its impact on job creation.
Employment in the sector rose only modestly by 0.7% year-on-year, marking a reversal of the job losses that characterized much of the post-pandemic period.
Construction remains one of South Africa’s most labor-intensive sectors, and sustained growth could create significant employment opportunities in communities hardest hit by unemployment.
The sector’s recovery is even more important given South Africa’s chronic unemployment crisis, with unemployment rates continuing to stubbornly rise despite widespread economic stabilization.
Additional construction activity, particularly in the housing and infrastructure sectors, could provide an avenue for employment for low-skilled workers, while stimulating demand across related industries.
Infrastructure deficit worsens
Despite strong quarterly results, South Africa’s construction sector continues to grapple with fundamental structural challenges. The country’s infrastructure deficit, spanning ports, rail logistics, roads and public works, remains a significant constraint to economic growth and competitiveness.
Industry leaders have stressed that addressing this backlog will require greater collaboration between the public and private sectors, as well as reforms to streamline bidding processes and reduce bureaucratic hurdles that have historically slowed down large-scale projects.
Recent moves toward public-private partnerships in infrastructure development offer some promise, but implementation remains uneven.
The residential real estate market has also faced headwinds, with mortgage applications falling sharply at a time when interest rates were at a 14-year high.
However, early signs suggest that this trend may reverse as interest rate cuts gain momentum and consumer confidence improves under a government of national unity.
Outlook: Cautious optimism prevails
Looking ahead, economists and industry observers are cautiously optimistic about the construction sector’s trajectory.
The combination of accommodative monetary policy, improving business confidence, and selective increases in local spending has created a more supportive environment than in recent years.
Dr Botha stressed that while moderate policy easing is welcome, further rate cuts will be needed to bring South Africa’s cost of capital in line with its major trading partners.
The Reserve Bank’s commitment to a gradual easing cycle, coupled with a still-robust inflation forecast, suggests there is scope for further easing in the coming quarters.
For the construction industry, much depends on whether it can maintain and expand its current momentum.
Reopening of idled quarries, break-even performance of cement factories and increased demand for construction materials all point to improving fundamentals. However, without government action on infrastructure investment, the sector’s growth potential may remain constrained.
What is clear is that after years of stagnation, South Africa’s construction sector has finally turned a corner.
The question now is whether this quarter’s impressive performance signals a temporary dip or the beginning of a sustained recovery that could spur broader economic transformation.
With interest rates trending lower and demand booming, the answer may soon become clear.
Dr Botha remains cautiously optimistic, but emphasizes that government action will play a key role in maintaining this momentum.
“The lack of progress in capital formation in the economy, generally related to key elements of construction work, should be of concern to the government, as the country is in dire need of repair and expansion of infrastructure, particularly roads, water and sewage systems,” he said.
Looking ahead, he expects activity in the construction sector to continue to recover, but added an important caveat. “While we welcome some moderate monetary policy easing, further rate cuts are needed to bring South Africa’s cost of capital in line with its major trading partners.”
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