Afrimat’s construction index for the first quarter of 2025 highlights persistent challenges in the sector, reporting a 2.6% year-on-year decline, driven by heavy rainfall and limited government investment in infrastructure.
Economist Roelof Botha, who compiles the index, said high interest rates had hindered the construction sector, with building plans in Gauteng, the Western Cape and KwaZulu-Natal declining over the past three years due to reduced affordability for homeowners and property developers.
“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,” Botha said.
Botha believes the fall in the index reflects the government’s reluctance to invest in economic assets, which should concern policymakers.
“After a sharp drop during the pandemic, the index quickly rebounded to near pre-Covid levels, but the recovery was hindered by insufficient infrastructure funding and the lingering effects of state capture. Over the past two years, these issues have been worsened by the Reserve Bank’s restrictive monetary policy, resulting in the highest lending rates in 15 years,” Botha said.
Despite marginal declines in the prime overdraft rate since September last year, these adjustments had not been enough to generate a significant positive effect on the index.
Above-average rainfall in several provinces further dampened construction activity and production, he said.
“KwaZulu-Natal had a noticeable increase over its historical average, consistent with reports of the province experiencing exceptionally heavy rain. Gauteng also experienced above-average rainfall, particularly in January 2025, while the North West saw a notable increase in rainfall compared to its historical average,” reads the index report.
In the first quarter of the year, two indicators in the index showed year-on-year growth. Employment in construction rose by 2.1%, signalling some resilience in the sector. Retail trade sales of hardware also experienced a modest 0.2% increase, suggesting steady demand for construction materials despite broader challenges.
Another factor that derailed the construction index was the rollout of new tenders, Botha told Business Day.
“It’s concerning that the tender pipeline has narrowed, partly due to the three-month delay in the government’s budget approval, which created uncertainty in the sector. The government and state-owned entities need to start spending to stimulate activity,” he said.
Botha suggested the recently published World Bank road map, developed at the government’s request, offered an opportunity to address barriers hindering the revival of the construction sector.
He highlighted the need for improving decision-making capabilities within public sector agencies. “Hopefully, the government will soon start to implement the recommendations of the World Bank road map, which, with a further significant lowering of interest rates, should pave the way for a revival of construction sector activity,” he said.
Afrimat CEO Andries van Heerden said if the government proceeded with its planned R1-trillion infrastructure investment over the next three years, his company was ready to support it.
“This investment will drive job creation and boost economic activity, particularly in logistics, with mineral and material exports playing a vital role. The renewed focus on rail maintenance is also increasing demand for construction materials like ballast stone,” he said.
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