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Provincial Construction Forecast Report September 2023

According to revised estimates released by Stats SA, Gross Fixed Capital Formation (GFCF) in construction declined by 0.5 percent y-y in real terms, to R245bn (2015 prices), following a 3.7 percent y-y decrease in 2021.  Growth in the estimated value of the aggregated provincial construction pipeline implies a higher probability of an improved investment outlook, pending the pace by which these projects will reach execution.  GFCF estimates for the first two quarters showed a 6.3 percent y-y increase, with the 3^rd quarter of 2022 showing the first positive y-y growth since 2015.  The outlook for 2023 has turned cautiously more optimistic, as current growth is still very much supported by increased levels of investment in the residential market, that is expected to taper off.   Given the current movement in the construction pipeline, with the annual rate of increase accelerating from 8 percent y-y since March 2023 to 15 percent, the outlook for 2024 has improved.  Western Cape and Eastern Cape have shown double digit increases in the value of their respective construction pipelines, with more moderate growth reported in Gauteng and Kwazulu Natal. Within the smaller provinces, the value of Limpopo's pipeline has shown robust growth followed by Northern Cape.

Click here to download the Provincial Construction Pipeline Dashboard (June 2023)

The key objective of the provincial forecast report is to provide a bottom-up forecast approach in terms of actual and projected investment estimates based on an assessment of current trends at a provincial level. Provincial information is scarce and not as readily available, making a bottom-up approach in terms of a national forecast more difficult.

The following main indicators were used in our provincial analysis:

1. Value of private sector buildings completed and approved.
2. Value of social infrastructure projects awarded by government.
3. Value of economic (civil) projects awarded by government.
4. Estimated value of social projects out to tender.
5. Estimated rand value of civil projects out to tender.
6. Provincial construction postponement rates.
7. Provincial construction labour force trends.
8. Provincial capital expenditure: Buildings and other fixed structures.
9. Provincial conditional grants transferred by National Treasury.
10. Capital expenditure by Metro's on selected key infrastructure departments related to housing, health, energy sources, road transport, water management and waste water management
11. Provincial Aggregated local capital expenditure on selected key infrastructure departments related to housing, health, energy sources, road transport, water management and waste water management.
12. Provincial construction labour force trends.
13. High Economic impact project announcements.

Through these selected and highly focused provincial indicators, subscribers can monitor movement in the provincial construction pipeline, based on potential investment of projects that have either been approved, out to tender or awarded.  Major project announcements are highlighted in the report but will only be included in the actual pipeline at such time that the project has filtered through some of the official centres (either as an approval, tender or award). This is to remove some of the propaganda around media announcements on projects that never materialise. However, these should be noted and is included in own assessment or sentiment regarding the outlook for a province. We unfortunately do not have the resources to follow up on each project and rely on what is publicly made available.

The purpose of the development of the Provincial Construction Pipeline Model is to offer a dynamic tool that is regularly updated to give stakeholders the best possible current view of developing trends at a provincial level that can have an impact on investment.

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