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Standard Bank Group
The SA Daily 06 July 2020

Construction up against a wall

  • In 1Q20, real private sector fixed investment contracted by a deep 25.3% q/q seasonally adjusted, after the 10.3% q/q contraction in 4Q19. This does not bode well for sustainable growth and job creation due to SA’s long-lasting poor economic conditions, now being exacerbated by the COVID-19 crisis.
  • Real public sector fixed investment too has been in contraction for long due to government’s poor fiscus and constrained public sector infrastructure expenditure. Capital expenditure of corporations in the public sector contracted on average 6.2% 2015-2018. Their capital expenditure of R110.7bn in 2018 was R33.2bn (23.1%) less than R143bn in 2014.
  • Reduced capital expenditure has a negative impact on the construction sector’s GDP, already in contraction since 2017. The construction sector accounts for 3.3% of SA’s GDP (2019) and employs circa 1,343,328 people (1Q20) – of which around 462,028 (34%) are in the informal construction sector. Construction plays a key role in SA’s informal sector jobs, and it is the second-largest employer of private informal sector workers after the trade sector which employs circa 1,161,102.
  • Private sector fixed investment and public economic infrastructure expenditure, key for the construction sector, now face the prevailing COVID-19 crisis, longstanding poor business confidence as well as government’s precarious fiscal situation, none of which bodes well for employment in the construction sector.

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