The construction industry in South Africa is expected to rebound in 2022, and expand by 9.1% in real terms. The industry will then stabilize at an annual average growth of 3.1% between 2023-2025, although output will not return per-pandemic levels during the entire forecast period.
South Africa’s construction industry has been on rocky ground for the last few years even before the pandemic came along and made things significantly worse.
Some of the major challenges in 2021 included:
- Supply chain reliability
- Lack of order book pipeline
- Margin pressure
- Lack of productivity growth
- A depressed economy
- Less foreign investment
- The rising costs of materials
2022 trends for the construction industry
Trends from former years such as automation, modular construction and new technologies will continue to make positive changes to the construction industry in 2022.
However, with the impact of the pandemic and the lock downs, other trends are also emerging that may be harder to predict in terms of their positive or negative impact.
Economic pressures
Global and local economic downturns due to the pandemic will continue to affect the construction industry negatively in 2022.
Low markups
The downward trend in markups may continue due to less work on the market but the same number of contractors which leads to increased competition.
Skills shortages
Senior management and specialised trades will continue to see a shortage while contractors can’t afford to train or up skill their staff in the current economic climate.
COVID-19
Recovery may start soon but the effects of COVID-19 on the construction industry in 2020 and 2021 will linger as we go into 2022.
Vaccinations and safety protocols
Vaccination requirements will be a major issue for 2022 with companies considering whether to mandate vaccinations or not. However, safety protocols may have a positive effect as more staff can return to work.
Green building
Sustainable building methods remain a strong trend with environmentally conscious multinational clients and corporate opting for this type of construction. This trend is also accelerating the up skilling of staff in those construction firms that pursue it.
Alternative methodologies
More off-site prefabrication methods and lightweight structures, such as those used to construct temporary COVID wards, have emerged since 2020.
Supply chain
The supply chain is still feeling the effects of lock downs and the many COVID-19 waves with inconsistency and procurement delays being major issues.
Uplifting SMMEs
In light of skills shortages and supply chain issues, partnering with and uplifting SMMEs will help larger firms with project delivery. It will also facilitate job creation and entrepreneurship in the construction industry.
COVID-19 losses are temporary
The impact of the pandemic and the lock down on the construction industry will linger, at least for a year or two. However, the pandemic will end.
With gradual national and global recovery will come new investment – and construction projects that generate jobs and boost the industry.
Basic drivers for the industry are strong
Despite the country’s economic standing, the fundamental need for infrastructure remains.
Demand is high for better and more roads and other transport options, housing, power and other utilities and so on.
Government has already committed to using infrastructure projects to drive post-COVID-19 economic recovery.
Urban residential projects continue to be lucrative
Private construction projects will forge ahead post-lock down.
Urban residential projects remain a lucrative source of income. They’re backed by private or foreign investors. So they aren’t hobbled by a lack of government funding.
Smaller firms keep on “finding a way”
The construction industry news that makes headlines tends to focus on huge construction firms and conglomerates. Over the past few years, a number of massive construction firms have gone belly up or departed South Africa.
However, this ignores the on-going contribution made by smaller construction firms.
Small firms, many of them family-run, must and will find ways to survive.
A mix of temporary belt tightening, greater initiative in finding new work and diversification may all be involved.
With competition from large, multinational firms thinning out, there may even be increased opportunities for mid-sized South African construction businesses.
