LUNGILE MASHELE | Construction mafia forces SA to critical crossroad

South Africa’s construction industry is in trouble, and the cracks are widening.

Once a pillar of economic growth and a major employer, the industry is facing deepening structural and financial distress.

Despite pockets of opportunity linked to infrastructure investment, the sector remains hamstrung by fragmented order books, mounting project delays, rising costs and an alarming number of company failures.

Industry data, government reports and market analyses all point to an industry in urgent need of reform and stabilisation.

The sector’s financial performance continues to deteriorate.

According to the SA Construction Industry Report 2025, industry output was expected to shrink by 0.5% last year, driven largely by rising material costs, declining private investment and sustained weakness in residential construction.

Construction material price indices rose 1.8% year on year in early 2025, further squeezing margins on already thinly priced projects.

Weak demand over the past decade has translated into shrinking order books for major contractors.

While a pipeline of R230bn in fully funded infrastructure projects exists, as reported in the 2025 Construction Book, these opportunities have not yet translated into a broad‑based recovery across large firms, many of which continue to battle liquidity challenges and underperformance on existing projects.

Chronic delays and cost overruns remain a hallmark of the industry.

>xhd<Seemingly unstoppable skid

A National Construction Summit report highlighted widespread governance failures, persistent skills shortages and project management inefficiencies, all of which contribute to time and cost overruns and stalled infrastructure delivery nationwide.

The government and industry stakeholders have acknowledged the severity of the issue, signing the 2025 National Construction Summit Declaration — a reform pact aimed at tackling poor performance, blacklisting non-performing contractors and improving accountability across public and private infrastructure clients.

Despite these interventions, real‑world challenges persist.

Infrastructure SA routinely cites inadequate project preparation and misaligned budgets as reasons why projects fail to move efficiently from the planning to the execution stage, despite improvements in approval timelines.

Major contractors continue to struggle with liquidity constraints as payment delays, cost escalations and prolonged project cycles drain cash flow.

Industry insiders note increasing instances of contractors abandoning sites, entering business rescue or liquidating assets to stay afloat.

>xhd<Halting the vicious spiral

The sector has been hit by construction mafia–related disruptions, which have led to the halting of projects such as the R550m Golden Highway upgrade, stalled in June 2025 due to threats to contractor personnel.

Such disruptions drive up costs, extend timelines and increase risk premiums, making large projects increasingly unattractive to contractors.

The industry’s profitability is drained by rising costs of imported materials, currency volatility and global freight pressures.

The 2026 construction outlook warns that imported materials have become more expensive, forcing firms to rethink procurement strategies and prioritise local manufacturing capacity wherever possible.

These cost pressures are particularly damaging for long‑duration projects where fixed‑price contracts expose contractors to unrecoverable losses.

The result is a vicious spiral: contractors become more risk‑averse, order books thin out and fewer bidders compete for large projects.

The implications for SA’s infrastructure ambitions are severe.

The construction sector is a major contributor to fixed capital formation, accounting for 35% of gross fixed capital formation and 2.5% of GDP since 2025.

Yet the persistent project delays, contractor failures and budget misalignment undermine the state’s ability to deliver energy, transport, housing and logistics infrastructure.

The construction industry stands at a critical juncture.

While opportunities exist, structural weaknesses across governance, skills, financial resilience and supply chains continue to inhibit recovery.

We can bring a steady pipeline of infrastructure projects to the market, but there is a difference between capability and capacity, and our construction industry lacks capacity.