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IOL News
an hour ago
- Business
- IOL News
Construction activity declines in the first quarter due to high rainfall in four provinces
The Afrimat Construction Index for Q1 2025 indicates a 2.6% decline in construction activity, attributed to high interest rates and adverse weather conditions, highlighting the ongoing challenges faced by South Africa's construction sector. Image: Leon Sadiki/Bloomberg Construction industry activity in the first three declined due to high rainfall and no meaningful impact from the marginal drop in the prime overdraft rate since September, according to findings of the first quarter, Afrimat Construction Index (ACI). The ACI is an index of the level of activity within the building and construction sectors, compiled by economist Dr Roelof Botha and commissioned by the mid-tier mining company that produces and supplies construction materials, iron ore, anthracite, phosphate, and industrial minerals, Afrimat. The year-on–year comparison with the first quarter of last year in the ACI showed a decline of 2.6%. Dr Botha said he believes the reading is an accurate reflection of the government's lack of willingness to spend on economic assets. 'Following a sharp drop during the pandemic, the ACI recovered swiftly to within a whisker of its pre-COVID level, but the recovery was then stymied by inadequate fiscal support for infrastructure expansion and the hangover from the state capture era, where the effectiveness of key State-owned enterprises and public sector agencies was eroded. Over two years, these problems have been exacerbated by the South African Reserve Bank's restrictive monetary policy,' said Dr Botha. He said the sector had been hamstrung ever since the high interest rates started to bite into the pockets of prospective home-owners and property developers, as indicated by the decline in the real value of building plans passed by the metros and larger municipalities. These had declined in Gauteng, Western Cape and KwaZulu-Natal (KZN) over three years. He said in an interview interest rates were well above pre-Covid levels, a time when the government was already being criticized for an excessively stringent monetary policy. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ The value of construction activity by the public sector has fallen markedly since 2015, while the value of construction by the private sector has increased on slighltly since them. Image: Afrimat 'Construction is the most labour intensive sector in the economy, and the restrictive monetary policy has not only prevented this sector from recovering from the pandemic but has also contributed to the sector entering a deep recession,' he said. Above-average rainfall in some provinces in the first quarter also severely impacted construction activity. KZN had a noticeable increase over its historical average, Gauteng experienced above-average rainfall, particularly in January, while the North West saw a notable increase compared to its historical average. The high rainfall was a major factor to the decline of some of the indicators in the ACI, with only two indicators showing growth. Employment in construction was up 2.1% year-on-year and hardware retail trade up 0.2% on the same basis. High rainfall in some provinces and a continuing high interest rate contributed to a decline in construction activity in the first quarter on a year-on-year comparison basis. Image: Afrimat Dr Botha said the value of annual construction activity by state-owned enterprises had dropped by 61% since 2015, while the percentage decline for all government departments including municipalities for the same period came to 45%. He said the roadmap for higher and sustained economic growth in South Africa recently published by the World Bank at the request of the government, provided an opportunity to eliminate some of the impediments to a revival of the construction sector, especially in enhancing decision-making in relevant public sector agencies. Afrimat CEO Andries van Heerden said they were happy that their experience stood in contrast to the ACI's findings, in that both the group's cement kilns were running, and market demand was significantly stronger than originally anticipated.
IOL News
12 hours ago
- Business
- IOL News
Growth prospects shine in Zimbabwe and South Africa's construction markets
Construction markets in Zimbabwe and South Africa are on a growth trajectory, with PPC poised to capitalise on emerging opportunities despite challenges in liquidity and project execution Image: Leon Sadiki/Bloomberg Tawanda Karombo Construction markets in Zimbabwe and South Africa are expected to continue on a growth trajectory, providing a strong background for companies such as PPC that are ramping up competitiveness to stand better prospects against imports. Data from researchers on Tuesday showed that the South African cement market reached approximately 13.78 million metric tons in 2024 and 'is expected to grow steadily' over the coming 10 years, with an annual growth rate of 2.50% projected from 2025 to 2034. Zimbabwe has also seen a booming construction sector with government projects and the retail sector, as well as residential housing sector providing impetus. This was benefiting construction industry companies such as cement and brick manufacturers among others. Matias Cardarelli, the CEO of PPC, said the company was cautiously optimistic of the infrastructure plans under South Africa's government of national unity (GNU). He explained that the construction sector was a major driver of the economy through job creation and other activities. 'We believe that the administration is aware of that and that makes us optimistic we are going to see that (construction and infrastructure growth) happening in the short term,' said Cardarelli. Regarding Zimbabwe, where PPC is progressing with a solar power plant, Cardarelli said the construction market was growing on a yearly basis. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Construction companies in Zimbabwe are maintaining a stronger order book although they have to cherry-pick contracts in order to manage credit risks due to a liquidity crunch, especially in the public sector. For example, Masimba Holdings, formerly Murray and Roberts Zimbabwe, recently said its 'contracting order book remained robust, particularly in the roads' sector. 'However, a lack of liquidity within the market hampered effective execution, leading to cash flow challenges and an increasing debtors' book. This constrained the business' ability to fund ongoing projects and manage operational expenses, causing delays in project execution,' said the company. PPC has been flying high in Zimbabwe over the past few years, raking in the dividends. According to Cardarelli, the Zimbabwe construction market has continued to notch up steady growth. 'So in Zimbabwe, what we are seeing is also a market that is steadily growing year after year and we are not expecting to see any change to that,' he told Business Report. PPC has just recorded an improvement of 6% in Earnings Before Interest, Taxes, Depreciation, and Amortization (Ebitda) margins for Zimbabwe. A new solar power plant is being developed in Zimbabwe on an offtake basis to enable PPC to power up its operations in the midst of rolling power outages that are disrupting productivity.
