South Africa Construction Market to Shrink in 2025 but Show Signs of Recovery by 2026

Strategic Insights -

The construction industry in South Africa is expected to contract by 0.5% in real terms in 2025 due to rising construction costs, declining private investment, and a weak residential construction sector. However, the industry is expected to show signs of recovery, with an annual growth rate of 3.5% between 2026 and 2029. The growth will be supported by government allocations and plans to increase the share of renewable energy in the total energy mix.

Key Takeaways:

  • The construction industry in South Africa is expected to shrink by 0.5% in real terms in 2025 due to rising construction costs, declining private investment, and a weak residential construction sector.
  • The industry faces added pressure from US tariffs disrupting supply chains, leading to material shortages and higher import costs.
  • The ZAR550 million ($29.4 million) Golden Highway upgrade project was stalled in June 2025 due to attacks by construction mafias and local interference.
  • The government's plan to increase the share of renewable energy in the total energy mix from 22% in 2024 to 42% by 2030 will support the industry's growth over the forecast period.
  • The Construction in South Africa - Key Trends and Opportunities to 2029 (Q2 2025) report provides detailed market analysis, information, and insights into the South African construction industry, including growth prospects by market, project type, and construction activity.
  • The report also analyzes the mega-project pipeline, focusing on development stages and participants, in addition to listings of major projects in the pipeline.
  • The South African construction industry's growth prospects by market, project type, and construction activity will be critical in understanding the industry's performance.

Statistics:

  • The construction industry in South Africa is expected to contract by 0.5% in real terms in 2025.
  • The US tariffs have disrupted supply chains, leading to material shortages and higher import costs.
  • The average construction material price index (CMPI) rose by 1.8% year-on-year (YoY) in January-April 2025.
  • The value of residential building plans passed in the country declined by 9.9% YoY in January-March 2025.
  • The South African construction industry is expected to register an annual growth rate of 3.5% between 2026 and 2029.
  • The government is estimated to spend ZAR2.6 trillion ($137.7 billion) in the current financial year.
  • The program to develop over 14,000km of new power lines and 53GW of generation capacity over the next decade will support the industry's growth.

Sources:

  • "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 (Stats SA).
  • The Department of Electricity and Energy and National Treasury.
  • The Construction in South Africa - Key Trends and Opportunities to 2029 (Q2 2025) report.