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South Africa Construction Market Faces Challenges Amid Rising Costs and Weak Residential Sector

Strategic Insights

— 2 min read

The South African construction market is facing significant challenges, including rising construction costs, declining private investment, and a weak residential construction sector. According to Statistics South Africa, the average construction material price index (CMPI) rose by 1.8 percent year-on-year (YoY) in January-April 2025, while the value of residential building plans passed in the country declined by 9.9 percent YoY in January-March 2025. The industry also faces added pressure from US tariffs disrupting supply chains, leading to material shortages and higher import costs.

Key Takeaways:

  • The construction industry in South Africa is expected to shrink by 0.5 percent in real terms in 2025 due to rising construction costs and declining private investment.
  • The average construction material price index (CMPI) rose by 1.8 percent year-on-year (YoY) in January-April 2025.
  • The value of residential building plans passed in the country declined by 9.9 percent YoY in January-March 2025.
  • US tariffs are disrupting supply chains, leading to material shortages and higher import costs.
  • Attacks by construction mafias and local interference have staled key projects, such as the ZAR550 million ($29.4 million) Golden Highway upgrade project.
  • The South African construction industry is expected to register an annual growth of 3.5 percent between 2026 and 2029.
  • The government's plan to increase the share of renewable energy in the total energy mix from 22 percent in 2024 to 42 percent by 2030 is expected to support the industry's growth.
  • The government will spend ZAR2.6 trillion ($137.7 billion) in the current financial year (FY 2025-26).
  • The Department of Electricity and Energy and National Treasury announced a plan to advance towards Independent Transmission Projects (ITP) Program to modernize and expand the country's power grid.

Statistics:

  • The construction industry in South Africa is expected to shrink by 0.5 percent in real terms in 2025.
  • The average construction material price index (CMPI) rose by 1.8 percent year-on-year (YoY) in January-April 2025.
  • The value of residential building plans passed in the country declined by 9.9 percent YoY in January-March 2025.
  • The South African construction industry is expected to register an annual growth of 3.5 percent between 2026 and 2029.
  • The government will spend ZAR2.6 trillion ($137.7 billion) in the current financial year (FY 2025-26).
  • The Department of Electricity and Energy and National Treasury announced a plan to advance towards Independent Transmission Projects (ITP) Program to modernize and expand the country's power grid.

Sources:

  • "The South Africa Construction Market Size, Trends, and Forecasts by Sector - Commercial, Industrial, Infrastructure, Energy and Utilities, Institutional and Residential Market Analysis to 2029 (Q2 2025)" report by ResearchAndMarkets.com.
  • Statistics South Africa.
  • Department of Electricity and Energy and National Treasury.
  • ResearchAndMarkets.com's "The Construction in South Africa - Key Trends and Opportunities to 2029 (Q2 2025)" report.

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