Boston, MA -- (SBWIRE) -- 09/23/2013 -- The South African construction industry recorded a CAGR of 13.72% during the review period. The construction industry output slowed following the 2010 FIFA World Cup, but has started to recover. Under the National Infrastructure Plan (NIP) that was adopted in 2012, the government will invest ZAR827 billion (US$100.8 billion) in infrastructure development over the forecast period. The country faces a substantial housing deficit and will need government support to develop public housing and drive the residential construction market. The industrial sector, which had benefitted from low wages, now faces labor unrest and will have to focus on increasing productivity to remain competitive. While the large number of projects announced provides hope for the construction industry, corruption, mismanagement and price fixing threaten to undermine the proper implementation of these developments. Timetric expects the South African construction industry to record a CAGR of 10.87% over the forecast period.

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Key Highlights

- South Africa's real GDP expanded at 2.5% in 2012, lower than the 3.5% recorded in 2011. Private consumption, which accounts for 60% of GDP, moderated from 4.8% in 2011 to 3.5% in 2012 due to rising inflation, which eroded household purchasing power. However, gross fixed capital formation growth accelerated from 4.5% in 2011 to 5.7% in 2012, as business sentiment improved in the second half of 2012. South Africa's GDP growth is expected to moderate further to 1.9% in 2013, due to prevailing unrest in the mining and agricultural sectors, and a weaker export outlook.
- South Africa's construction industry underwent a period of weak performance during the review period as profit margins continued to decline. According to Statistics South Africa, the construction industry's average profit margin plunged from 5% in 2009 to 2.8% in 2011.
- Gauteng generated the most revenue for the construction industry in 2011, followed by the Western Cape. All other provinces increased their share of the total revenue generated.
- While the demand for prime office space remains strong, overall demand for office space has declined. Developers are wary of speculative construction and the majority of projects are based on pre-let contracts. Retail sales growth also slowed over 2012, as consumer confidence dropped to its lowest mark during the review period.
- Retail space development has largely been concentrated on upgrading existing properties, while the development pipeline for larger properties has slowed. Electricity price rises and expected increases in transport costs are likely to impact overall consumer spending. High unemployment rates, rising inflation and a slowdown in real income growth are affecting consumer confidence.
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Companies Mentioned in this Report: Aveng Ltd, Basil Read Holdings Ltd, Group Five Ltd, Murray & Roberts Holdings Ltd, Wilson Bayly Holmes-Ovcon Ltd

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