* New * Public Sector Building Tender Values May 2024

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  • Create Date June 20, 2024
  • Last Updated June 20, 2024

* New * Public Sector Building Tender Values May 2024

The estimated value of public building tenders released during May 2024, plummeted by 58 percent y-y, as government departments hold back tenders during Election month. 

The value of building tenders released by the public sector declined to below R900 million in May 2024, compared to over R2 billion in April 2024 and May 2023. For May 2024, the Eastern Cape had the highest tender values, followed by KwaZulu-Natal. Despite robust growth in the preceding months, with tender values increasing by over 100 percent in the first quarter of 2024, the first five months of 2024 still show a 54 percent year-over-year nominal increase compared to the same period in 2023. This increase was widespread, except in the Northern Cape, where values declined by 80 percent (or R125 million) compared to last year. In rand terms, Limpopo demonstrated the strongest increase, with tender values reaching nearly R1 billion. KwaZulu-Natal had the highest tender values, with a 7 percent year-over-year increase, followed by the Eastern Cape with an 8 percent year-over-year increase.

The value of public sector building projects awarded during the same period increased by 59 percent year-over-year, with the Eastern Cape showing a robust 130 percent year-over-year increase (or R1.2 billion) to R2.2 billion. Award values declined notably in the Western Cape, with a moderate 8 percent decline in Limpopo. All other provinces showed improvement between January and May 2024.

The slowdown in tender activity during May 2024 is likely related to the election month, 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 down, 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.

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