Construction in South Africa - Key Trends and Opportunities to 2023
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South Africa's construction industry suffered a downturn during 2017-2018, contracting by 0.6% and 1.2% in real terms in 2017 and 2018 respectively, following an average annual growth of 2.2% during the preceding three years. The industry's output value - measured at constant 2017 US dollar exchange rates - declined from US$39.8 billion in 2016 to US$39.1 billion in 2018. This decline can be attributed to economic slowdown, coupled with weak consumer and investor confidence, which in turn reduced public and private sector investments in construction projects.
According to Statistics South Africa (Stats SA), the country's gross fixed capital formation at 2010 constant prices declined by 1.4% in 2018 compared to 2017; it decreased from ZAR618.5 billion (US$46.4 billion) in 2017 to ZAR609.6 billion (US$46.0 billion) in 2018. This was preceded by annual growth of 1% in 2017 and an annual contraction of 3.5% in 2016. The industry's output value in real terms is expected to rise at a compound annual growth rate (CAGR) of 1.68% over the forecast period, compared to 0.30% during the review period. The industry is consequently expected to rise from a value of US$39.1 billion in 2018 to US$42.5 billion in 2023, measured at constant 2017 US dollar exchange rates.
The government's efforts to enhance transport, residential and industrial infrastructure will support the growth of the industry over the forecast period (2019-2023). The industry's output is expected to be supported by improvements in business confidence over the forecast period, which will drive investment in infrastructure, commercial, residential projects and energy infrastructure. The total construction project pipeline in South Africa including all mega projects with a value above US$25 million - stands at ZAR2.6 trillion (US$194 billion). The pipeline, which includes all projects from pre-planning to execution, is skewed towards early-stage projects, with 65.1% of the pipeline value being in projects in the pre-planning and planning stages as of April 2019.
Infrastructure construction was the largest market in the South African construction industry during the review period, accounting for 34.2% of the industry's total value in 2018. The market is expected to follow a similar trend over the forecast period, with infrastructure construction accounting for 35.3% of the industry's total value in 2023. Market output over the forecast period is expected to be supported by the government's plan to improve the country's transport infrastructure. Residential construction accounted for 31.5% of the industry's total output in 2018, followed by energy and utilities construction with 15.4%, commercial construction with 11.5%, industrial construction with 4.5% and institutional construction with 2.9%.
The report "Construction in South Africa - Key Trends and Opportunities to 2023", provides detailed market analysis, information and insights into the South African construction industry, including -