South Africa Construction Market to Grow at 8.93% CAGR to 2018

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Synopsis

This report provides detailed market analysis, information and insights into the South African construction industry, including:

• The South African construction industry’s growth prospects by market, project type and type of construction activity
• Analysis of equipment, material and service costs across each project type in South Africa
• Critical insight into the impact of industry trends and issues, and the risks and opportunities they present to participants in the South African construction industry
• Analyzing the profiles of the leading operators in the South African construction industry.
• Data highlights of the largest construction projects in South Africa

Summary

The South African construction industry registered a compound annual growth rate (CAGR) of 8.65% during the review period (2009–2013). This growth was supported by increased government spending in the country’s residential, infrastructural and commercial construction projects. The residential and infrastructure construction markets drove growth, as the preparation for both the World Cup and 2009 Confederations Cup supported improvements and acceleration in construction activities. Moreover, the government has also adopted the National Infrastructure Plan (NIP) and announced National Budget estimates in order to develop the country’s infrastructure. Therefore, a large number of announced projects will provide hope for the construction industry, as corruption, mismanagement and price fixing within the industry all threaten to undermine the proper implementation of these developments. Timetric expects the South African construction industry to record a CAGR of 8.93% over the forecast period (2014–2018).

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Key highlights

• In nominal terms, the total construction value add in South Africa registered a nominal CAGR of 9.97% during the review period. The value add is anticipated to record a nominal forecast-period CAGR of 7.70%, driven by a decline in the confidence of building construction and civil engineering construction. According to the Bureau for Economic Research (BER), the building confidence index declined by 11.0 index points, going from 52.0 points in the first quarter of 2014 to 41.0 points in the second. The civil confidence index declined by 11.0 index points over the same period, going from 55.0 to 44.0 points. The total outlook for construction in South Africa over the forecast period remains positive.
• The South African Construction industry is undergoing a period of unfavorable conditions as a consequence of economic indicators, which continue to disappoint the building industry. There are fewer projects in the construction market with a higher interest rate, dampening the country’s growth of real estate construction projects. According to BER, the building confidence index declined by 11.0 index points, going from 52.0 in the first quarter of 2014 to 41.0 in the second. This was largely due to the weak demand from private sector, prolonged strike in platinum sector, acceleration in the project postponement rate, increasing interest rates and declining exports. The industry is set to rebound over the forecast period, due to improved economic conditions, increase in profitability, and investment in the construction industry.
• The South African government is taking various initiatives to improve the country’s transport infrastructure. The National Transport Master Plan 2050 (Natmap) was approved by the South African government in 2010, with an aim to expand the country’s rail network and ports with an investment of ZAR750.0 million (US$102.5 million). The government adopted the National Infrastructure Plan in 2012, with the objective of investing ZAR827.0 billion (US$100.7 billion) over a period of three years, from 2013–2014 until 2015–2016, to build and upgrade infrastructure in South Africa. Additionally, with the Public Transport Strategy (2007–2020), the government plans to improve the country’s public transport by establishing the integrated rapid public transport network (IRPTN), and developing rail corridors and bus rapid transit systems (BRTs).
• The South African construction market will also be supported by the country’s macroeconomic factors, which include mortgage loans, interest rate and inflation. According to the latest data from Absa Bank Ltd (ABSA), private sector mortgage loans (which comprise both commercial and residential mortgage loans) recorded a growth of 3.4% at the end of June 2014 and annually, with commercial and residential mortgage loans recording respective growths of 6.1% and 2.4% in the first half of 2014. Moreover, mortgage interest rates climbed by 50.0 basis points in January 2014, going from 8.5% in 2013 to 9.0% annually, while inflation maintained stability in the first half of 2014, at 5.3%, after increasing from 3.5% in 2011, 4.6% in 2012 and 5.2% in 2013. Inflation and mortgage interest rates are expected to increase further in 2014 and 2015, depending on present global and economic trends, highlighting the growth prospects of the South African construction market.
• According to the National Budget, the South African government increased its expenditure for social infrastructure, which includes the development of education, health and other formal communities. The expenditure is expected to increase from ZAR30.0 billion (US$3.7 billion) in 2012–2013 to ZAR43.0 billion (US$4.0 billion) in 2016–2017. The main emphasis will be on the refurbishment of clinics and hospitals, and clearance of school infrastructure backlogs. This will contribute to the institutional construction market’s continued expansion over the forecast period.

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Scope

This report provides a comprehensive analysis of the construction industry in South Africa. It provides:

• Historical (2009-2013) and forecast (2014-2018) valuations of the construction industry in South Africa using construction output and value-add methods
• Segmentation by sector (commercial, industrial, infrastructure, institutional and residential) and by project type
• Breakdown of values within each project type, by type of activity (new construction, repair and maintenance, refurbishment and demolition) and by type of cost (materials, equipment and services)
• Analysis of key construction industry issues, including regulation, cost management, funding and pricing
• Detailed profiles of the leading construction companies in South Africa

Reasons to buy

• Identify and evaluate market opportunities using Timetric’s standardized valuation and forecasting methodologies
• Assess market growth potential at a micro-level with over 600 time-series data forecasts
• Understand the latest industry and market trends
• Formulate and validate business strategies using Timetric’s critical and actionable insight
• Assess business risks, including cost, regulatory and competitive pressures
• Evaluate competitive risk and success factors

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