South Africa Infrastructure Report Q1 2008

The South African construction industry has displayed impressive growth in the last few years and holds immense scope for future expansion. The forthcoming 2010 FIFA Football World Cup is expected to provide a tremendous boost to infrastructure development in the country. BMI expects the industry to grow at 6.14% during 2008-2012.

State-led projects in the areas of energy and transport infrastructure currently form the bulk of ventures in the construction industry. The government is also committed to the development of low-cost housing infrastructure. High levels of economic growth in South Africa and other emerging nations such as China and Russia are expected to boost activity at the country's ports. Furthermore, the 2010 World Cup has spurred hotel construction in South Africa. Major projects planned or currently under way include the construction of the Medupi and Matimba B power stations, the Coega Aluminium smelter in Eastern Cape, the Gautrain rapid rail link and the Ngqura deep-water port.

The South African construction industry is dominated by a few large players, which account for as much as 75% of the total output in the industry. The rest of the industry is rather fragmented. The country suffers from an acute shortage of skilled labour, limited access to power and inadequate financial and legal infrastructures, which have much scope for improvement. The industry is also excessively dependent on government contracts. Furthermore, the country may be under prepared for high growth, which may result in a shortage of building materials, including cement, in the coming years.

With less than 3% contribution to the country's gross domestic product (GDP), there is immense scope for growth in the South African construction industry. Despite all the risks, the industry is expected to be valued at ZAR94.80bn (US$9.97bn) by 2012, making up 3.31% of that year's GDP.