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2025 Budget and the South African Construction Industry

The objective of this review is to highlight comments and announcements related to Public Sector Infrastructure Expenditure, as it would impact the broader construction sector.  It includes an overview of key departments responsible for economic and social infrastructure spending over the 2025 MTEF period (2025/26 - 2027/28). The review includes adjustments for construction cost inflation that can have a material impact on budgetary allocations.

As the Government of National Unity (GNU) reach a tipping point in its ongoing debate, with the Budget Vote eventually passed on the 2^nd of April 2025, changes to the fiscal framework may still be adopted, that could impact revenue projections and/or distribution of expenditure and more importantly infrastructure expenditure. Allowing for the possibility that expenditure estimates may be revised, this Budget Review remains a draft document.

Executive Summary

The 2025 Budget, tabled by Finance Minister Enoch Godongwana, places a renewed emphasis on infrastructure as a catalyst for economic recovery and private sector participation in South Africa. With R1.1 trillion earmarked for infrastructure over the Medium-Term Expenditure Framework (MTEF), the budget reflects a shift toward economic infrastructure such as transport, logistics, energy, and water services. Transport and logistics dominate with R402 billion, while water and sanitation, despite their critical state, face real-term expenditure declines.

Economic growth remains tepid, forecasted at under 2% through 2026, constrained by rising public wage bills, social grants, and policy contradictions like the Expropriation Bill. Despite increased allocations, poor historical spending performance—particularly among local governments—continues to undermine progress.

Key reforms include a revamped Public-Private Partnership (PPP) regulatory framework effective from June 2025, performance-based Urban Development Financing Grants for metros, and consolidated conditional grants to enhance efficiency. The Infrastructure Fund’s 13 blended finance projects—valued at R48.8bn—signal a stronger push for private co-financing.

While social infrastructure (education, health, and housing) sees modest gains, its share in total infrastructure spend drops to below 15% by 2027. Human Settlements, despite budget constraints, is still expected to deliver over 85,000 subsidized houses and 99,000 serviced stands. Education sees marginal increases, while health funding is diluted due to allocations for equipment rather than structural projects.

State-owned enterprises (SOEs), particularly Eskom and Transnet, are slated to drive infrastructure execution. Eskom’s grid expansion and Transnet’s logistics upgrades are major initiatives. However, real expenditure is undermined by persistent underspending, especially in water and sanitation.

Overall, Budget 2025 marks an optimistic but cautious attempt to reboot the construction and infrastructure sector, dependent heavily on improved execution and private sector buy-in amid an uncertain economic and political landscape.

The full 2025 Budget Review is now available to subscribers. 

Click here to download the detailed Public Sector Infrastructure Expenditure Dataset 2010/11 - 2027/28

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