Tuesday, 13 October 2015 12:15

Economy Affects Building Industry

The building industry is an essential component of the South African economy as it contributes about 15% to the gross fixed investment that drives the economy. However, with the country's economy going through a tough time currently, this, in turn, reflects on the building industry.

Relating the economic status of the industry in the Master Builders South Africa (MBSA) 2015 annual report, economy analyst firm Medium-Term Forecasting Associates director Dr Johan Snyman notes that, together with civil works, the building industry makes up 45% of total investment, which is the most essential component of infrastructure development. Snyman points out that both international and domestic economic situations have affected the state of the economy in South Africa.

  • according to the South African Reserve Bank, the economic growth rate of the first quarter of 2015 is 2.1%, compared with the first quarter of last year, which shows that the cyclical performance is below par.
  • adding to the pressures experienced in the industry, low levels of business confidence, falling commodity prices, weak domestic demand, pressure on costs and profitability, uncertainty around labour regulation and a lack of clear direction from government on major initiatives such as the National Development Plan also affect the industry.
  • during 2014, the total building demand dropped by –3.6%, while investment in residential building declined by –5.8% and the non-residential sector also dropped by –1.5%.