Cement manufacturer PPC said it was facing a difficult business environment in South Africa, with housing construction plans under pressure due to high interest rates and pressure on household incomes.
PPC is one of the oldest companies in South Africa. The company was founded in 1892 as the country’s first cement manufacturing company.
PPC has contributed to the country’s development for many years, supplying cement for major projects such as the Union Buildings, Cape Town Stadium and Loftus Versfeld’s original concrete stands.
The company currently produces around 11.5 million tonnes of cement annually across sub-Saharan Africa, but its traditional position does not protect it from current economic headwinds.
The cement giant’s latest annual report paints an alarming picture. South Africa’s private construction sector is plagued by high interest rates, slowing household income growth and limited public infrastructure spending.
“These macroeconomic headwinds are particularly evident in South Africa, where the formal construction sector continues to face significant structural and financial challenges,” PPC said.
The company highlighted that South Africa’s cement usage remains well below the world average, with per capita consumption of only 228 kg, compared to the global average per capita cement consumption of 540 kg.
The company noted that this is a sign that there is room for growth if infrastructure investment gains momentum.
The company is also fighting unfair competition from cheap cement imports and a carbon tax system that disadvantages local producers.
“Disparities in carbon tax enforcement between domestic manufacturers and importers remain a source of unfair competition and require urgent policy attention,” the PPC said.
Despite these pressures, the company is trying to focus on performance and capital discipline.
PPC added that informal building activities, industrial development and the potential for public-private partnerships are emerging as bright spots.
PPC noted that these segments offer small but meaningful opportunities for regions such as South Africa, Zimbabwe and Botswana.
Confidence building has taken a hit in South Africa
PPC chairman Jabu Moleketi added that logistics inefficiencies and power supply issues were placing further strain on the company’s operations.
“Rising interest rates for much of the year suppressed construction activity and weakened consumer demand,” he said.
“Logistics inefficiencies continue, increasing reliance on road transport, particularly along major rail routes. This has increased operating costs and placed further pressure on an already strained road infrastructure.”
While electricity supplies have shown signs of stabilization, consistency and predictability of energy access remains essential for uninterrupted operations. Looking ahead, Moleketi pointed to potential tailwinds.
“The start of a cycle of lower interest rates, coupled with increased private sector participation and renewed efforts to address public infrastructure, including those outlined in the 2024 State of the Union address, suggests a more positive outlook for the construction sector,” he said.
However, the recovery may not be immediate, as the latest FNB/BER Confidence Building Index shows.
After a slight rise in the first quarter of 2025, it fell by five points to 36 in the second quarter, meaning nearly two-thirds of respondents remain dissatisfied with the status quo.
Construction subcontractors, prime contractors, and hardware retailers reported the steepest declines in sentiment.
Prime contractor confidence fell to its lowest level since Q3 2022, mainly due to further weakness in the residential sector.
According to Stats SA, real spending on residential buildings fell by 8.4% year-on-year in the first quarter.
“The residential building sector is under pressure, with respondents pointing to a deterioration in activity and overall profitability,” said Sifamandla Mkhwanazi, senior economist at FNB.
Mkhwanazi also noted that the number of orders has fallen, suggesting tensions may continue in the short term.
But nonresidential construction is doing well. “The non-residential building sector is currently significantly outpacing the residential building market in growth,” he said.
He attributed this performance to both a lower base and increased demand for office and industrial space.
Early activity indicators were more encouraging. The Quantity Surveyor believes that business confidence has risen to 50, the highest level since 2017, on the back of increased activity.
“Work in the opening phase of the construction pipeline is clearly gaining momentum,” Mkhwanazi said. “However, as with its current activities, it appears to be primarily focused on the non-residential sector.”
However, Mkhwanazi warned that even the upbeat sales forecast for next quarter could fall short.
“Some of the factors that contributed to last quarter’s sales growth, particularly the consumer income windfall from two-pot retirement plans, are likely to be less pronounced going forward.”
“These developments point to the possibility of a long-term sector recovery, but the impact will depend on consistency,” Moleketi said.
