South Africa’s construction sector has seen its contribution to the country’s economy decline by 33.7% over the past eight years.
This decline has primarily been driven by the rise of the construction mafia in the key economic hubs of Gauteng and KwaZulu-Natal, as well as limited government spending on infrastructure.
South Africa’s construction industry’s fortunes are also closely tied to those of the country’s mining industry, which has experienced steadily declining output.
Stanlib chief economist Kevin Lings revealed this in a recent research note on the impact of the trade war between the United States and China.
Lings explained that there are very few winners in a global trade war between the world’s two largest economies, with trade likely to decline.
Crucially for South Africa, this is likely to result in declining demand for its exports as the economic growth of its largest trading partners slows.
This negative impact is coming at a time when the South African economy is extremely vulnerable to external shocks due to its lacklustre growth and deteriorating public finances.
South Africa’s economy grew by a paltry 0.6% in 2024, well below the country’s population growth of 1.3%. This means South Africans got poorer on average throughout the year.
This continued the trend of the past decade, where the country’s economy had an average annual growth rate of 0.8%.
A breakdown of South Africa’s economic performance revealed that only three sectors made a positive contribution over the past year: agriculture, finance, and retail.
The finance and retail sectors were boosted by the two-pot retirement funds withdrawal scheme that started in September 2024.
On the other hand, South Africa’s crucial employment sectors of mining, construction, and manufacturing continued to languish.
These sectors are vital for employment in South Africa, as they are labour-intensive and can relatively easily absorb low-skilled workers, who make up the majority of the country’s unemployed population.
Lings said the performance of these sectors, particularly construction, was dismal considering the need for economic growth and employment.
The South African construction sector has declined in each of the past eight years, contracting by a total of 33.7% in that period.
This is likely to have translated into thousands of South Africans losing out on employment opportunities in this sector, exacerbating the country’s unemployment crisis.