Above-average rainfall severely impacted the construction industry in Q1 2025

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26-06-2025
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Property Wheel
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Findings in the Afrimat Construction Index (ACI) for Q1 2025 are an accurate reflection of the government’s lack of willingness to spend on economic assets, says Dr Roelof Botha, compiler of the index.

“It should be a point of concern for South African policymakers. Following a sharp drop during the pandemic, the ACI recovered swiftly to within a whisker of its pre-Covid-19 level, but the recovery was them stymied by a combination of inadequate fiscal support for infrastructure expansion and the hangover from the state capture era, during which, the effectiveness of several key state-owned enterprises, and other public sector agencies, was eroded,” he says. “Over the past two years, these problems have been exacerbated by SARB’s restrictive monetary policy, leading to the highest lending rates in 15 years.”

The marginal declines in the prime overdraft rate since September 2024 have not been sufficient to exert a meaningful positive impact on the ACI with the seasonality of the construction industry implying that the index values should only be compared with corresponding quarters of previous years. The year-on-year comparison with Q1 2024 shows a decline of 2.6%.

The sector has been hamstrung ever since the high interest rates started to bite into the pockets of prospective homeowners and property developers as witnessed by the decline in the real value of building plans passed by the metros and larger municipalities. Over the past three years, these have declined for Gauteng, the Western Cape, and KwaZulu-Natal.

“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.”

In addition, parts of the country experienced above-average rainfall during Q1 2025, severely impacting construction activity and production in several provinces. KwaZulu-Natal had a noticeable increase over its historical average, consistent with reports of the province experiencing exceptionally heavy rain while Gauteng also experienced above-average rainfall, particularly in January 2025 with the North West also witnessing an increase in rainfall compared to its historical average.

The exceptionally high rainfall was a major contributing factor to the decline of some of the indicators comprising the ACI during Q1 2025, with only two indicators showing growth on a year-on-year basis.

Dr Botha says the roadmap to higher and sustained economic growth in South Africa that was published recently by the World Bank at the request of government, provides ample opportunity for eliminating some of the impediments to a revival of the construction sector especially in enhancing the competence of decision-making within public sector agencies.