South Africa’s construction industry has seen its output decline for nine consecutive years, with the sector struggling with weak demand and declining business confidence.
This is despite the fact that the rest of the economy is expected to perform well in 2025, growing 2.1% year-on-year in the third quarter.
Additionally, the sector’s decline comes amid several government initiatives to encourage infrastructure investment and the construction of private energy generation projects.
The industry is now a shadow of its former self, with iconic construction companies such as Murray and Roberts under enormous financial pressure and resorting to business rescue.
More importantly, the industry’s decline is increasingly being felt due to South Africa’s infrastructure collapse, as the government has failed to invest adequately in maintaining and updating infrastructure.
As the country’s population continues to grow, the infrastructure designed and built 25 years ago can no longer keep up with the demands placed on it, resulting in regular breakdowns and interruptions in service delivery.
Apart from the government, private companies are also hesitant to invest in fixed assets in South Africa amid heightened uncertainty and economic slowdown.
As a result, there is little work for construction companies, especially when it comes to the large projects seen in the 2000s.
The construction industry is steadily shrinking as a result of a combination of lackluster government spending and corporate uncertainty.
Kevin Rings, chief economist at Stanlib, revealed in a recent research report that the sector is on track for the ninth consecutive year of annual decline.
This means that output in this sector has been declining year-on-year for nearly a decade, with little sign of improvement.
Mr Rings explained that this was quite surprising given that most sectors of the South African economy had performed well throughout 2025.
In the third quarter of 2025, SA’s GDP grew by 0.5% sequentially. In comparison, revised Q2 2025 increased by 0.9% and Q1 2025 by just 0.1%.
Over the past year, the economy grew by a very welcome 2.1%, with an upward revision in the previous quarter and almost all economic sectors registering growth in the quarter.
Despite this, sectors such as construction are still in decline. South Africa’s mining and manufacturing industries also remain under pressure.
These industries are particularly important in South Africa’s unemployment reduction efforts because they can absorb low-skilled workers relatively quickly.
weak link
Despite the current downturn in the construction industry’s fortunes, a glimmer of hope has emerged from the steady implementation of the government’s reform agenda.
This agenda calls for the private sector to play a greater role in the South African economy, particularly in the key sectors of energy and logistics.
Economists expect this to result in a significant increase in private sector fixed investment in the South African economy, boosting the construction sector.
This is critical to accelerating sustainable South Africa’s economic growth, as fixed investment in the country has declined sharply since the 2010 FIFA World Cup.
South Africa’s fixed investment ratio as a percentage of GDP has remained stable at around 14-15% for the past 15 years.
This is well below all-time highs and much lower than South Africa’s emerging market economies, which typically have fixed investment rates of 20-40% of GDP.
Because of this difference, South Africa’s economic growth has been slower than other countries over the past 15 years.
Emerging market countries such as India, Indonesia, and China enjoy economic growth rates averaging 4.5% per year.
By comparison, South Africa has grown at an annual rate of less than 1% as businesses are reluctant to invest in the local economy and the state’s balance sheet is too weak to drive meaningful investment.
This fiscal mismanagement and the need to invest trillions of rands has effectively left the government with no options.
We must rely on the private sector, which has the capital and expertise to rescue South Africa’s infrastructure and update it to foster faster economic growth. Private companies have about R1.8 trillion in cash in banks.
South Africa’s GFCF-to-GDP ratio has fallen from around 30% in 1976 to 15% in 2024, reflecting restrained investment by private companies, utilities and the government.
To stem this decline, the government is implementing wide-ranging reforms across key sectors and seeking to increase private participation and investment.
Together with the government-led investment package, approximately R1 trillion of infrastructure investment is expected over the next three years.
