Good news for sector employing over a million South Africans

South Africa’s construction industry is bouncing back, with conditions in the sector improving for three quarters in a row.

Afrimat’s Construction Index (ACI) for the fourth quarter of 2025 is a composite index of the level of activity within the building and construction sectors and is compiled by economist Dr Roelof Botha on behalf of Afrimat.

Afrimat is a mid-tier mining and materials company that offers Bulk Commodities, Construction Materials, Industrial Minerals, and Future Materials and Metals. 

For the first time since the pandemic-related lockdowns, the ACI has now improved for three quarters in succession, re-establishing a familiar trend in the construction sector. 

Botha said the recent lowering of the repo rate has exerted a marginal positive impact on the ACI, with the 2.5% year-on-year increase outperforming the 0.5% year-on-year real GDP growth rate by a considerable margin.

However, he pointed out that for quarter-on-quarter growth rates, the ACI only increased by 0.5%, compared to 1.5% for the economy as a whole. 

“This discrepancy can be explained by withdrawals via the new two-pot retirement system, as well as the two interest rate cuts of 25 basis points each during the end of 2024, “ Botha said. 

Botha explained that household consumption expenditure represents almost 65% of GDP, whilst capital formation, which encompasses most construction activity, represents only 14.5% of total GDP. 

During the fourth quarter of 2024, five of the ten constituent indicators comprising the index grew year-on-year, with four of the top-five ranked indicators remaining amongst the previous quarter’s top five performers.

“However, it is a point of concern that the real value of construction works remains in the doldrums, with a year-on-year contraction of 3.4% in the fourth quarter in real terms,” Botha said. 

“The public sector’s contribution to overall capital formation in South Africa has diminished quite dramatically since the onset of state capture and, more recently, the restrictive monetary policy stance, which took interest rates to their highest level in one-and-a-half decades.”

High interest rate pain

Botha said there is no doubt about the negative effects that record-high interest rates have exerted on the economy and the construction industry, in particular. 

This is confirmed by several key economic indicators, most notably exceptionally high debt-servicing ratios and a persistent decline in the real value of credit extension. 

The S&P Global Purchasing Managers’ Index (PMI) for South Africa has been below the neutral 50-mark since the beginning of the year, and capital formation declined by 3.7% during 2024. 

On a positive note, inflation is well and truly under control, with the February reading of the CPI remaining at the bottom end of the inflation target range of 3% to 6%. 

Lower producer prices, combined with declines in the oil price and a resilient rand exchange rate, should secure further interest rate cuts in 2025.

Other good news is the welcome return to employment creation in the construction sector, with total employment returning to the pre-Covid level of 1.35 million. This figure is still well short of the 1.5 million recorded in the third quarter of 2018.

Afrimat CEO Andries van Heerden said the upswing in the ACI bodes well for the construction sector. 

“Afrimat remains poised for growth and has the capacity to supply any improvement in the sector,” he said. 

“We have bolstered our long-term growth strategy by expanding a well-chosen asset base in the mining, quarrying, cement, and related industries, with the integration of Lafarge South Africa now complete.”

He added that Afrimat, always in support of growth initiatives and job creation in South Africa, now has 3,875 employees, attributable to the Lafarge acquisition and 228 new employees hired in the past six months.