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- Create Date July 22, 2024
- Last Updated July 22, 2024
* New * Public Sector Building Tender Values June 2024
The estimated value of public building tenders released during June 2024, fell by 19 percent y-y, as government tenders are held back post-election
The decline in the value of building tenders released by the public sector continued in June, down 19 percent y-y to R1.7bn, following the 58 percent decline in May. However, Gauteng bucked the trend and recorded the highest tender value for the month, with tenders estimated at around R700m, a significant increase from the same period in 2023 when projects worth less than R50m was released to tender. Overall tender values were 2 percent lower in the 2nd quarter of 2024, following an increase of more than 100 percent in Q1, resulting in an overall 32 percent y-y increase for the first six months of 2024. Gauteng recorded the largest increase over the six month period (in rand terms) as tender values rose R1.3bn to an estimated R1.6bn. Kwazlulu Natal where tender values exceeded R2.4bn, recorded a 10 percent y-y decline, and even though Western Cape showed a two-fold increase, tender values were still below R1bn.
Following a dismal performance in June, the value of public sector building projects awarded during the 2nd quarter of 2024 was marginally lower, down 1 percent, fdollowing a moderate 3 percent increase in Q1. Northern Cape showed a notable improvement, up 600 percent between January and June 2024, compared to the same period in 2023, while awards in Kwazulu Natal increased by 27 percent. Overall, the value of awards increased by just 1 percent y-y in the first six months of 2024.
The slowdown in tender activity during the last two months is likely related to the post-election period, with government departments refraining from releasing new tenders. In the lead-up to the election, there was an emphasis on increasing expenditure related to social infrastructure due to its impact on voter perceptions. Post-election, tender activity generally slows, as new administrations take over and current tenders are scrutinized, potentially causing delays. New administrations might also reprioritize expenditure, which could result in either the cancellation or reduction of social infrastructure spending, or an acceleration in expenditure, leading to increased tender activity. Regardless, the transition period will take time.
Given the significant decline in private sector building approvals, which will adversely impact construction over the next 12 to 18 months, it has become increasingly important to monitor opportunities in public sector or government-funded building activities. Similar to the method used to monitor activity in the civil industry by estimating the value of published tenders, tender activity is now monitored in terms of building tenders released by the public sector. This approach provides a provincial view, as in some provinces, the public sector may be a more important client compared to the officially recorded private sector. Therefore, relying solely on provincial building statistics released by Stats SA can be misleading.
