SA’s construction sector recorded a recovery in the second quarter, with the Afrimat construction index reflecting a notable improvement in activity levels.
The rebound comes after a weak start to the year and was driven by slightly lower borrowing costs and increased demand for building materials. Compiled by economist Roelof Botha for mining and materials group Afrimat, the index showed broad-based gains across key indicators.
“A strong rebound occurred since the first quarter for several key indicators, most notably the value of buildings completed, up by 21.7%, the sales value of building materials, up 13%, and the volume of building materials produced, up 10%,” said Botha.
However, he cautioned the recovery was largely due to the sector coming off a low base, after subdued activity in the first quarter. A marginal cut in interest rates also contributed to the improved performance, helping to ease pressure on contractors and developers facing high financing costs.
Botha said he expected further improvement in construction sector activity, citing a sustained rise in the value of building plans passed, along with a year-on-year increase in the BetterBond Index of Home Loan Applications, which points to strengthening demand in the residential property market.
“The impact on the residential property market of the recent lowering of the country’s benchmark lending rate is reflected in the index increasing by 14% year on year during July and August. Home loan applications also reached their highest level since the third quarter of 2022, when high interest rates began to bite into the pockets of prospective homebuyers,” Botha said.
Botha said that while the residential property market was “slowly but surely building up steam,” the broader construction sector is still being held back by deeper structural issues.
“Real momentum will only return once the prime lending rate drops back to the 7% levels we saw just after the pandemic — and, more critically, when the government stops talking and starts breaking ground on long-overdue infrastructure projects,” he said.
On the operational side, Afrimat has remained largely unaffected by the year-on-year decline in the index. Afrimat CEO Andries van Heerden said the group’s resilience was due to the successful turnaround of the former Lafarge operations, alongside consistent contributions from its mining assets.
“Afrimat was able to counter the lack of infrastructure spending by the government. We are starting to see early progress, with the rebuilding of the country’s rail systems, and this, along with the expansion of the electricity distribution network, bodes well for the future of our construction materials business,” Van Heerden said.
The group said its construction materials segment delivered improved operational efficiencies and profitability in the second quarter, driven by the integration of the former Lafarge quarries.
The group said it addressed years of underinvestment, completed the integration of systems and management structures, and regained market share lost during Lafarge’s exit from SA.
Van Heerden said the group’s diversified operations, ownership of 50% of Transnet-approved quarries, and its national footprint positioned it to support major rail and infrastructure projects.
The group was adapting its cement strategy to reduce carbon intensity by using extenders and phasing out expensive, traditional inputs.
“We believe the traditional cement model is no longer viable in today’s market. By reducing reliance on costly and environmentally taxing components and incorporating extenders innovatively, we can supply compliant, cost-effective, and lower-carbon cement products to the market,” Van Heerden said.
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