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Construction Industry Forecast Report January 2025

What to expect in this report: This report provides a comprehensive analysis of the South African construction industry's outlook for 2025 and 2026, highlighting both opportunities and challenges shaping the sector. It begins with an economic overview, examining global and domestic factors influencing construction activity, including GDP growth forecasts, inflation trends, interest rates, and investment sentiment.

The report delves into key constraints affecting the industry, such as political instability, funding shortages, infrastructure underinvestment, and policy uncertainty. A detailed review of total construction activity follows, covering trends in civil construction, building investment, and infrastructure expenditure. The performance of public and private sector investments is analyzed, with a focus on tender activity, project approvals, and investment pipelines across different provinces. The report concludes with forecasts for construction investment, sector growth expectations, and the potential impact of economic and political developments on the industry’s trajectory.

Executive Summary

The South African construction industry outlook for 2025 and 2026 presents a mixed picture, with moderate recovery signs but persistent challenges. The sector has benefited from rising business confidence, lower interest rates, and government efforts to accelerate structural reforms. Private sector investment, particularly in industrial and retail spaces, showed improvement in late 2024, while civil construction sentiment also strengthened. There is growing momentum in public-private partnerships (PPPs), with the government actively seeking private sector involvement in infrastructure projects, water supply, and port operations. However, the postponement of the 2025 Budget, political frictions within the GNU, and slower-than-expected infrastructure spending remain significant concerns.

Despite these positive trends, public sector investment in construction is at an 18-year low, and tender activity has slumped by 35% since the 2024 elections. Government spending on economic infrastructure has been inconsistent, with many metros failing to spend allocated budgets, leading to underperformance in roads, water, and energy investments. The office space sector continues to decline, while overall building approvals and construction investment remain weak. While some recovery is expected, the industry's growth is highly dependent on government’s ability to implement planned reforms, stabilize policy direction, and ensure efficient infrastructure expenditure. If execution improves, construction could see gradual expansion, but delays and funding constraints remain key risks to the sector’s near-term outlook.

Read the full report here

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