CONSTRUCTION INDUSTRY IN CAPE TOWN

The Construction Sector in Cape Town: An Overview

South Africa’s multi-billion Rand construction industry provides employment for over 420 000 people across the country, with 148 000 of these employees based in Cape Town. 

The city is home to a thriving construction sector, which contributes more than R20 billion to the Cape Town economy every year. 

Construction and Employment Growth

In Cape Town:

How does construction sector contribute to the economy of Cape Town? Our EPIC Report for Q3 of 2020 highlights the sector’s strong performance.

In the third quarter of 2020, construction was the second-largest contributor to quarter-on-quarter employment growth in Cape Town. During this time, the construction industry added 15 363 jobs, second only to the finance sector, which added 19 635 jobs.

Construction was also the only sector to add positively to employment at a year-on-year level. 

These statistics make a compelling case for local and international investors looking to get involved in upcoming Cape Town construction projects.

In South Africa:

According to the South Africa Construction Industry Report 2020, the sector is a major driver of employment and socio-economic development on a national level as well. 

For instance, in 2019, the construction industry accounted for around 4% of South Africa’s GDP, and also employed more than 1.3 million people.

How to Obtain Construction Permits in Cape Town

Cape Town is well-known for the ease of doing business across multiple sectors, and construction is no exception. In fact, Cape Town was ranked as the best city in South Africa when it comes to dealing with construction permits. This ranking puts the Mother City in the top 25% of city economies worldwide. 

The City’s Development Management Department has improved the turnaround time for issuing building permits, reducing the waiting period from 45 days to an average of just 17 days. 

This means a new business can obtain all the licences and permits they need within 88 days. The process is much faster and more convenient than in Johannesburg, where the same processes would take up to 155 days.

Obtaining construction approvals in Cape Town requires a total of: 

• 17 procedures,
• 88 days,
• 2.4% of the warehouse value, and
• 12 points on the building quality control index. 

While the cost of obtaining approvals is slightly cheaper in Johannesburg and Tshwane (an average of 2.1%), the process requires 3 additional procedures and adds months to the timeframe. 

Local Construction Documentation and Guidelines

It’s important that you know which official documents to complete and submit when undertaking a construction project in Cape Town, to ensure that the process is carried out legally.

For example, building plans are a prerequisite for the construction of houses, flats, hotels, hospitals, industrial buildings, recreational buildings and more. They are also required for minor works, like building a carport, a swimming pool or a boundary wall. Note that building plan and land use applications can only be submitted online via e-Services.

The City of Cape Town website provides more details about the types of construction applications forms, certificates and permits you may need while working on construction projects in the city.

How Did the Construction Sector Weather the Events of 2020?

During the lockdown beginning in March 2020, the construction industry was not classified as an essential service. Work on residential and corporate construction sites in South Africa was suspended, although construction services within the health sector continued, as did urgent repairs and maintenance.

The impact of COVID-19 in South Africa was felt throughout all business sectors, but some have proved more resilient than others. The construction industry in particular has shown strong post-lockdown performance.

The Afrimat Construction Index experienced a sharp decline in the second quarter of 2020, following the nationwide lockdown regulations. However, economists reported a remarkable recovery in the third quarter of the year.  Between July and September, the quarter-on-quarter change in the Index reached a high of 69.1%, a little higher than the GDP recovery of 66.1%.

Understanding the Construction Sector: What are the Five Primary Sectors of the Construction Industry in Cape Town? 

How many sectors are involved in the construction industry? 

The local construction sector is multi-faceted and extensive. The activities within the sector aren’t limited to building, but also include manufacturing, maintenance, renovation or repairs. 

The Construction Education and Training Authority (CETA) defines five sub-sectors within the construction industry, each of which deals with different aspects and activities in the construction space. 

1) Building construction:

The largest construction sub-sector. Includes contractors in civil engineering, steel, structural and mechanical contract work, and residential and non-residential contract work.

2) Roads and civil construction:

Includes all activities that may be involved in the construction of a building, while falling outside the category of ‘building construction’. This includes constructing, maintaining and repairing roads, bridges, tunnels, runways and similar structures.

3) Built environment profession:

A sub-sector that encompasses the professionals governed by the Built Environment Professions Act, such as architects, landscapers, quantity and land surveyors, engineers, town and regional planners, property valuers, project and construction managers. 

4) Materials manufacturing: 

Covers any activities that include the manufacturing of fixtures for a building or structure. Examples include tiles, sanitary ware, ceramic products, wooden fixtures, concrete or cement products, and roof trusses.

5) Electrical construction: 

Includes the assembly, installation and wiring of electrical systems in new homes and other buildings, as well as the installation of electrical equipment and signal communication systems.

What Constraints does the Construction Sector Face in South Africa? 

The economic downturn as a result of the COVID-19 pandemic has made things challenging for the local construction sector. Issues like labour shortages, load shedding, lower infrastructure spending and higher materials costs cannot be ignored. 

However, despite these constraints, industry insiders are predicting a positive growth of 1% for the construction industry between 2021 and 2024. Investment in electricity and transport infrastructure projects are expected to be the biggest drivers of medium- and long-term growth for the sector.

Future Trends for the Construction Industry

The top predicted trends for the construction sector in Cape Town – and South Africa as a whole – include:  

• More automation,
• Heightened health and safety measures,
• A focus on sustainable materials, 
• More prefabricated and modular construction to lower costs,
• More diversified supply chains, with a greater focus on local suppliers,
• New technologies like improved architectural software, 3D printing innovations and drone-enabled aerial inspections.

During the past 9 years, over 299 direct investments with a value of more than US$7.6 billion of FDI have flowed into Cape Town and the Western Cape region. An investment in one of Cape Town’s strongest sectors presents a wealth of opportunities for local and international companies alike. 

Connect with our Investment Facilitation Team for more information on the outlook for the Cape Town construction industry.