While some provinces such as Gauteng have made strides in infrastructure planning, budget underspending and project cancellation rates remain a pressing concern nationally.

In opening the Construction Industry Development Board’s (CIDB’s) State of the Construction Industry event, CIDB board member Sibusiso Makhanya lamented how underspent budgets led to the delay of critical, high-impact projects, as well as missed transformation opportunities and stalled job creation.

“It also dents confidence in public sector capacity to deliver. Underspending is not just a missed financial target, but a missed development opportunity,” he said.

Gauteng has an estimated construction pipeline value of R42-billion, while there is a national estimated construction pipeline of R180-billion. Gauteng typically accounts for 23% of the national estimated construction pipeline value.

Of this, Gauteng’s public sector construction pipeline is R12-billion, and R78-billion on a national level. The public and private sector contribution split for construction pipeline value in Gauteng is 30:70, and 45:55 nationally.

Consultancy Industry Insight founder and CEO Elsie Snyman explained that, even though public sector construction activity accounted for only 30% of Gauteng’s pipeline, it impacted significantly on private-sector demand.

“Good governance attracts more investment; the performance of metros in Gauteng is therefore critical to determine the future outlook for investment in the province,” she said.

Gauteng had R9.7-billion of foreign direct investment (FDI) inflows in 2023, while all provinces combined had FDI inflows of R96.5-billion.

In respect of underspending, CIDB monitoring and evaluation specialist Ntando Skosana found that municipal capital expenditure for 2023/24 amounted to R61-billion, or 77% of budgets spent, with an underspending of R18-billion in the year.

District municipalities spent 83% of their budgets, metros spent 78% of their budgets and local municipalities spent 74% of their budgets in 2023/24. Gauteng, in particular, spent 84% of its budget – with R11.5-billion in total capital expenditure and R2.5-billion having been underspent.

Only four out of 11 Gauteng municipalities spent above 80% of their budget allocations in 2023/24.

Municipalities nationally also had R12-billion in missed opportunities to use infrastructure grants in the year, by only spending 67% of infrastructure grants. This underspending impairs demand for contractors of all sizes and hinders job creation.

Skosana said State-owned enterprises were also underspending culprits. Despite accounting for 30% of the national infrastructure budget, they only spend 89% of these budgets. For example, in 2023/24, SOEs were allocated R85-billion, but only spent R75-billion. This had a ripple effect on demand in the construction sector.

Skosana estimated that for every R1-million not spent in government expenditure, it led to a lost output of R3-million across the economy owing to multiplier effects.

She argued that many municipalities lacked internal engineering and contract oversight skills, with execution capacity also varying among municipalities. “Building institutional muscle at the local level is imperative to stabilise the construction industry and integrate emerging contractors.”

LOWER CAPITAL SPEND

Snyman pointed out that in Gauteng metros, in particular, political instability was high and persistent, with a high turnaround of mayors and a lack of accountability, which had direct impacts on capital budgets and expenditure rates.

Tshwane, for example, has had four mayors over the last five years, all less than 18 months in office at a time, while the City of Johannesburg (CoJ) had seven mayors and Ekurhuleni four over the same period.

Snyman said there was a high disconnect in what the metros should be spending relative to their population. Gauteng’s metros typically fail to reach 10% of total expenditure. Ekurhuleni’s capital spend as a percentage of the total budget had decreased from 14% in 2016/17 to less than 5% in 2025/26.

Tshwane’s capital spend has decreased from 18% in 2012/13 to 4.5% in 2025/26. The CoJ’s capital spend has decreased from 20% in 2014/15 to 9.7% in 2025/26.

In contrast, the City of Cape Town, which has had one mayor over the last five years, has managed to maintain capital spend at 15% in 2025/26, compared with 19% in 2012/2013.

The projected increase of the Gauteng metros’ capital budgets to a combined R15-billion by 2026/27 was positive, Snyman said; however, when accounting for inflation and higher construction costs, realised spend on infrastructure may well be less.

Another worrying trend for Snyman is that infrastructure is often the main feature of pre-election speeches, with bold promises to improve service delivery, infrastructure expenditure and improved maintenance. Tenders tend to increase on a national level in the run-up to elections, but almost immediately decline in the following month after election.

Public sector construction tenders decreased by 10% year-on-year in the first five months of the year, compared with a 33% drop nationally and a 22% drop in the Western Cape.

Looking over a longer term, tender activity in Gauteng has decreased by nearly 70% since 2004 from more than 700 tenders released a year to less than 300 released a year. The amount of sizeable, high-impact (Grade 9) projects has also decreased to about 20 a year, compared with 35 a year before 2020.

Worryingly, Snyman pointed out that construction industry profitability remained under significant strain, having averaged just 1.4% in the first quarter of the year. This compares with a profit margin average of 5.2% in 2023 and 2.4% in 2024.

“The smaller profit margin means smaller room for error and delicate cashflows, which makes on-time payment ever more imperative,” she stated.

Amid an environment of weaker tender releases and tender awards in Gauteng, postponements also show a concerning increase. The average project cancellation rate in Gauteng is at 24% and 7% in the Western Cape, compared with 33% in KwaZulu-Natal and 22% nationally, in the year-to-date.

Nationally, about 173 public sector projects have been cancelled between January and May, which is a very high rate.

COLLABORATION IS KEY

Makhanya urged local governments in particular to embrace private-sector participation and ensure technical expertise is embedded into procurement personnel teams to better package projects, manage timelines and support procurement readiness.

He suggested that more systemic action was needed, including better monitoring frameworks, faster payments to contractors and stronger accountability and transparency around infrastructure spend.

Makhanya cited an example in eThekwini whereby internal policies specified that officials were not allowed to plan bid specification before the budget was approved, which was strange, he said, since identifying and planning projects is not a one-month process and can be done well in advance. “Once the budget is approved, you start implementing projects, not the planning process.”

He questioned whether this was a result of financial teams within municipalities not being versed in the technicalities of projects – to which he urged that stakeholders start educating each other and collaborating more.

Makhanya summarised his address by stating that while many individuals did not directly contribute to or cause the challenges in the construction industry, it was the collective responsibility of all stakeholders to remedy these challenges and hand the industry over to the next generation in a better state. 

“Only through engagement can we bridge those gaps, learn from our mistakes and learn from international organisations that have gone through similar situations.”