The growth of the construction sector, one of South Africa’s largest employers, is being hampered by interest rates, crime, and poor governance.
The construction sector remains one of the most critical pillars of economic activity in South Africa.
According to a report published by the International Labour Organisation, South Africa’s construction sector employs approximately 1.2 million people across the country.
However, in an interview with Kaya Biz, economist Dr Roelof Botha stressed that the sector is facing mounting challenges.
He explained that while recent indicators point to some growth in the industry, it’s off a relatively low base, meaning the sector is seeing little growth.
Botha was critical of the current state of infrastructure in parts of South Africa. “If you travel on the roads in the Free State, North West, some parts of Limpopo, KZN, it is absolutely shocking,” he said.
He pointed out that farmers are often forced to spend heavily on maintaining roads and repairing vehicles just to keep supply chains moving.
He said this is one of the worst indictments of government, given that South Africa once had a road network “second to none in the developing world.”
Turning to the latest data, Botha said the Afrimat Construction Index does show that construction activity has been rising in the last few quarters. However, he warned that the pace of this growth is slow.
The index is currently only marginally above its four-quarter average, which places it roughly in line with levels seen in early 2019 before the pandemic.
He also noted that this is because the sector has endured significant volatility in recent years after plunging to its lowest level during Covid-19.
Following this, the index rebounded strongly to around 110 (from a base of 100), before being knocked again by global shocks, including surging oil prices and the after-effects of the pandemic.
According to Botha, the biggest obstacle to a stronger recovery is the high cost of capital, driven by the Reserve Bank’s tough monetary policy stance.
The situation is far from hopeless
He argued that interest rates remain “way too high for our economy” despite recent cuts. He added that, based on long-term bond yields, the country’s prime rate today should actually be 9%.
Botha suggested that overly restrictive rates have weighed heavily on growth. He further argued that South Africa should prioritise economic expansion and job creation over strict inflation targeting.
“We need employment creation in South Africa—it’s a much more important economic policy objective,” he said, warning that excessively high rates risk delivering “zero growth.”
Despite this, Botha believes the situation is far from hopeless. “Everything that is broken in this country can be fixed,” he said.
However, this is provided there are the right skills, a bit of fiscal assistance, and an abolition of all these regulations that make it difficult for people to do business.
Commenting on reforms needed to help the construction sector, Botha highlighted several structural constraints holding the sector back.
Chief among these is criminality, including the so-called construction mafia, which he described as “a huge problem” disrupting projects.
Additionally, he pointed to widespread dysfunction at the municipal level, noting that “almost half of this country’s municipalities are dysfunctional,” directly undermining service delivery and infrastructure rollout.
This also includes late payments by the government, which has put a heavy strain on the construction sector.
The National Treasury’s latest payment data points to a worsening late payment crisis across national and provincial government departments.
At the end of the second quarter of 2025, 95,399 invoices older than 30 days, totalling R12.4 billion, remained unpaid.
Botha believes that while the construction sector is beginning to recover, meaningful growth will depend on tackling these deep-rooted challenges.
Improving infrastructure governance, lowering borrowing costs, and restoring institutional capacity at the local government level are essential if the sector is to realise its full potential as a driver of growth and employment.