While there are green shoots for South Africa’s construction materials sector, the landscape remains complex and uneven - leading AfriSam to focus on resilience, agility, long-term investment and strong customer partnerships.
According to Eric Diack, AfriSam’s Executive Chairman and CEO, the most important signal the company is watching is the pace and direction of infrastructure investment across the country. The sector has been characterised by constrained infrastructure spending, rising input costs and shifting demand patterns.
“The obvious and urgent need for our business and our sector is higher levels of infrastructure spend,” Diack says. “That is still the key concern, although we are beginning to see some green shoots. There are some significant projects underway - particularly in road infrastructure - which demonstrate what can happen when investment begins to flow.”
With a view to conditions improving, AfriSam has positioned itself for the recovery that many in the industry believe is beginning to take shape. Its operational resilience has depended on ongoing investment in production facilities, Diack says, emphasising the company’s continued capital expenditure on plant maintenance and upgrades despite the challenging market.
“We have a very clear directive from our board not to compromise on investment in our plants,” he says. “Our plants are therefore in good condition and capable of delivering consistent product to customers.”
Diack points to several large road projects as examples of construction activity currently supporting demand for aggregates and readymix concrete. While these projects remain modest in the context of South Africa’s national infrastructure backlog, they illustrate the scale of opportunity if infrastructure investment begins to accelerate.
“We have seen some sizeable road projects including work on the N3 and N2 in KwaZulu-Natal and the N7 in the Western Cape,” Diack notes. “They are benefiting our aggregates and readymix businesses, as our wide footprint of quarries and plants is well positioned geographically to support those projects.”
Regional variation remains a strong feature of the current market. The Western Cape, in particular, is showing stronger momentum than other parts of the country, supported by both public and private sector developments.
“There is clearly more confidence in the Western Cape at the moment,” he says. “Cranes on the skyline bear testimony to this, with several large developments under way in areas such as the Cape Town city bowl and Granger Bay. Those projects will eventually translate into cement demand as well.”
Despite these positive signals, the industry continues to operate in an environment where overall cement volumes remain largely stagnant, Richard Tomes, AfriSam’s Sales and Marketing Executive, says. At the same time, a range of cost pressures continues to impact the sector.
Energy costs - including electricity, diesel and coal - weigh heavily on energy-intensive activities such as cement manufacturing, Tomes explains. Diack concurs, noting that electricity represents the company’s largest cost pressure.
“Even when the national increase exceeds double digits, the structure of tariffs means large industrial users like ourselves could face even higher increases,” he says. “In a market with limited growth that is not sustainable.”
Despite these pressures, AfriSam’s commitment to quality standards remains non-negotiable, Tomes emphasises.
“The consequences of poor quality can be severe and we have seen examples of infrastructure failures where standards were not maintained,” he says. “Our approach is to ensure that our products meet or exceed the required standards despite of the cost pressures we face.”
Sustainability considerations are also foundational to the company’s strategic approach, he continues. AfriSam continues to focus on reducing its carbon footprint and aligning operations with environmental standards, while also advocating for stronger enforcement of product quality regulations across the industry.
Tomes notes that declining compliance with regulatory standards in certain parts of the market is a concern, particularly when imports are involved.
“The industry must ensure that when we embark on major infrastructure investment, the materials used meet the right standards and are durable,” he says. “Infrastructure should last for decades and that requires consistent quality across the supply chain.”
Maintaining reliable supply to customers is another priority for AfriSam in a period marked by logistical disruptions and infrastructure challenges. South Africa’s deteriorating rail network has forced greater reliance on road transport, increasing both costs and supply chain complexity.
“We have had to spend a lot of time managing our logistics partnerships to ensure that we can still deliver products to customers reliably,” Tomes explains. “With rail capacity declining, more material has to move by road and that places additional strain on both logistics planning and road infrastructure.”
Diack also highlights the institutional knowledge and experience that AfriSam has developed over its more than 90 years in business.
“We operate massive industrial facilities that require specialised skills,” he says. “Retaining those capabilities while continuing to develop people has been essential to our success - and remains critical for the future of the business.”
Looking ahead, he notes that the company is well positioned to support customers when construction activity begins to accelerate in response to improved economic conditions.
“Our cement business remains the core of our operations and our integrated plants are in good shape,” Diack says. “When growth returns to the market, we are ready to respond.”
At AfriSam’s recent annual Budget Breakdown Breakfast event in Sandton, a cautiously optimistic view of the construction sector’s prospects was presented by Dr Azar Jammine, Chief Economist at Econometrix. While noting that construction activity remains roughly 30% lower than in 2010, he highlighted early indicators suggesting that economic conditions may be improving.
“There are initial signs that South Africa’s economic growth is beginning to turn upward again,” Dr Jammine says. “Although the improvement is modest, it represents the first positive trend we have seen in several years.”
He pointed to a stronger rand, relatively low inflation and declining long-term interest rates as factors that could support future infrastructure investment.
“The government has committed to fiscal discipline and maintaining a primary budget surplus,” he explains. “That has strengthened investor confidence and helped stabilise financial markets.”
Rising prices for precious metals such as gold and platinum could also inject substantial new revenue into the country, potentially translating into stronger demand across multiple sectors, including infrastructure and building.
