Fuel and funding costs squeeze South African construction as project pipeline thins

South African contractors surveyed in October were working on 38 projects worth R2.70 billion, down from 52 projects worth R5.28 billion in September, according to Industry Insight's Preferred Supplier and Competitor Survey. The October survey covered 16 material categories across six provinces, with most of the projects awarded in March 2026.

Elsie Snyman, a construction analyst at Industry Insight, said the Eastern Cape and KwaZulu-Natal each had 10 projects, while Gauteng's six projects (R841 million) were almost as valuable as the Eastern Cape's ten (R851 million). The professional team was the deciding factor in 61.1% of recorded producer choices, well above its 12-month average of 52.9%, while price accounted for 15.1% of choices against a 12-month average of 8.9%.

Contractors faced fuel-related increases affecting bricks and concrete of between 1.5% and 9.5%, with some public-sector contractors switching to cheaper products. At the beginning of October, petrol 95 increased by R3.33 a litre and diesel by R3.24 a litre. The South African Reserve Bank's October 2026 Monetary Policy Review recorded that the Gauteng diesel price rose from R18.53 a litre in March to R31.95 in October, while 95-octane petrol increased from R20.30 to R30.25.

Mthobisi Dlamini, founder of Aethex Strategy Group, said diesel mattered to construction beyond vehicles because it affected the movement of cement, steel, equipment and plant, as well as machinery and logistics. "The bigger issue, in my view, is project economics," he said, adding that sharp fuel increases move through contractor operating costs, logistics, subcontractor pricing and ultimately the cost of delivering the asset.

Much of the market is still being driven by older projects, many awarded in 2024 and slowed by funding gaps, late payments and community disruptions, according to Industry Insight. About R3 billion in large water projects is reportedly still awaiting funding and permits before construction can begin in 2027.

Public-sector infrastructure spending is expected to reach R1.07 trillion over the next three years, including about R205.7 billion by municipalities through the Medium-Term Expenditure Framework. Developers have warned that costly municipal approval delays and rising input costs can threaten projects before construction begins and compress margins where higher costs cannot be passed on to buyers.