Dark clouds gather for one of South Africa’s oldest companies
Cement maker PPC has noted that it faces a tough operating environment in South Africa due to high interest rates and strained household income, which have put pressure on residential building plans.
PPC is one of South Africa’s oldest companies. It was incorporated in 1892 as the first cement manufacturer in the country.
PPC has long been part of the country’s development, supplying cement for major projects such as the Union Buildings, Cape Town Stadium, and the original concrete stands at Loftus Versfeld.
Today, the company produces around 11.5 million tonnes of cement annually across sub-Saharan Africa, but its legacy status hasn’t shielded it from the current economic headwinds.
The cement giant’s latest annual report painted a concerning picture. South Africa’s private construction sector is grappling with high interest rates, sluggish household income growth, and limited public infrastructure spending.
“These macroeconomic headwinds were especially pronounced in South Africa, where the formal construction sector continues to face big structural and financial challenges,” said PPC.
The company highlighted that South Africa remains far below the global average of cement use, consuming just 228kg per capita compared to the worldwide average of 540kg.
The company noted that this is a sign that there is room for growth if infrastructure investment gains momentum.
The company is also contending with unfair competition from cheap cement imports and a carbon tax regime that disadvantages local producers.
“The disparity in carbon tax enforcement between domestic manufacturers and importers remains a source of unfair competition that warrants urgent policy attention,” PPC said.
Despite these pressures, the company is trying to focus on performance and capital discipline.
PPC added that informal building activity, industrial developments, and possible public-private partnerships have emerged as bright spots.
PPC noted that these segments provide small but meaningful opportunities in regions like South Africa, Zimbabwe, and Botswana.
Building confidence has taken a hit in South Africa
PPC chairman Jabu Moleketi added that logistics inefficiencies and electricity supply issues have further burdened the company’s operations.
“Elevated interest rates for most of the year constrained construction activity and weakened consumer demand,” he said.
“Ongoing logistics inefficiencies, particularly along key rail corridors, forced greater reliance on road transport. This increased operating costs and added pressure to already strained road infrastructure.”
Although the electricity supply showed signs of stabilisation, the consistency and predictability of energy access remain essential for uninterrupted operations. Looking forward, Moleketi pointed to potential tailwinds.
“The start of a downward interest rate cycle, combined with growing private sector participation and renewed public infrastructure commitments, including those outlined in the 2024 State of the Nation Address, suggests a more supportive outlook for the construction sector,” he said.
However, recovery may not be immediate, as evidenced by the latest FNB/BER Building Confidence Index.
After a slight gain in the first quarter of 2025, the index fell five points to 36 in the second quarter, meaning nearly two-thirds of respondents remain dissatisfied with prevailing conditions.
Building sub-contractors, main contractors, and hardware retailers reported the steepest drops in sentiment.
Main contractor confidence fell to its lowest level since the third quarter of 2022, primarily due to further weakness in the residential sector.
According to Stats SA, the real value of spending on residential buildings dropped by 8.4% year-on-year in the first quarter.
“The residential building sector is under pressure. Respondents noted a deterioration in activity and overall profitability,” said Siphamandla Mkhwanazi, Senior Economist at FNB.
Mkhwanazi also noted that order books are thinning, indicating that the strain may persist in the short term.
Non-residential construction, however, is faring better. “The non-residential building sector is now outperforming the residential building market significantly in growth,” he said.
He attributed this performance to both a low base and increased demand for office and industrial space.
Early-stage activity indicators were more encouraging. Quantity surveyors saw business confidence climb to 50, its highest since 2017, on the back of increased activity.
“Work at the start of the building pipeline is clearly gaining momentum,” Mkhwanazi said. “However, like with current activity, it seems as if it is largely focused on the non-residential sector.”
However, Mkhwanazi cautioned that even upbeat sales forecasts for the next quarter may fall short.
“Some of the factors that contributed to better sales in the preceding quarters, particularly the consumer income windfall from the two-pot retirement system, will likely be less pronounced going forward.”
“These developments point to the potential for long-term sectoral recovery, although their impact will depend on consistency,” said Moleketi.
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