Expansion of infrastructure roll out in the South African economy is expected to fuel the rising demand for building materials. Opportunities are also present for South Africa to export building materials to other sub-Saharan African countries. Although there is currently a slowdown in the country's construction sector, projects by the Government to decrease the housing backlog are anticipated to stimulate the uptake of building materials.
New analysis from Frost & Sullivan (chemicals.frost.com), South African Building Material Market, finds that the market earned revenues of $3.4 billion in 2010 and estimates this to reach $4.2 billion in 2017.
"Developments in the construction industry have a significant bearing on the uptake of building materials," notes Frost & Sullivan Research Analyst Tatenda Zingoni. "The drive for infrastructure development in the South Africa economy is expected to go a long way in boosting demand growth for building materials."
In the run up to the 2010 FIFA World Cup, a lot of construction activity took place in South Africa. The building of stadia and related infrastructure, along with renovations and remodelling of residential and commercial buildings, contributed to the large-scale uptake of building materials.
Building materials such as roofing and cladding, flooring, steel reinforcements and roof trusses are used in both commercial and residential buildings. The massive infrastructure backlog in South Africa is set to provide significant growth potential for suppliers of building materials. The Government's drive to increase the roll out of low–cost or economic housing will also contribute to market growth.
Most of the products supplied by building material manufacturers cannot be used in alternative industries. Therefore, these product suppliers are heavily dependent on the functioning of the construction sector.
Following the global economic slowdown, the construction sector has been experiencing a slowdown in South Africa. Lower disposable incomes have led to a reduction in reconstructions or remodelling of individuals' properties.
"The lack of alternative markets for building materials results in suppliers being heavily reliant on the health of the construction sector," adds Zingoni. "Construction activity in South Africa, post the global economic slowdown and FIFA 2010 World Cup, has been low. Competition among suppliers of building materials has therefore increased due to the lower number of new buildings and renovations in the market."
Market participants can shield themselves from the challenge of a slowdown in South Africa by expanding their distribution footprint. Inasmuch as South Africa has an infrastructure backlog, other sub-Saharan African countries have a higher infrastructure deficit.
"Suppliers need to focus on emerging sub-Saharan African countries and look at expanding into these markets," advises Zingoni. "As an example, Zimbabwe's recent adoption of multiple currencies has opened up opportunities for firms wanting to supply into the development of infrastructure."
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South African Building Material Market / M669