Out-of-Province Competitors Squeeze Western Cape Civil Construction as National Market Stagnates

A prolonged national slowdown in civil infrastructure project rollouts is impacting the relatively robust Western Cape construction ecosystem, as contractors from other provinces flock to tap into the region's more robust project pipeline.  

Commenting on the latest FNB/BER Civil Confidence Index released by Stellenbosch University’s Bureau for Economic Research (BER), Craig Lemboe said the influx is driving aggressive tendering price competition and squeezing local profit margins. 

"Contractors in the Western Cape are seeing increasing competition from firms trading outside the province," Lemboe explained. "While increased tendering competition is good in principle, it has had the negative effect of putting profit margins under severe pressure." 

Lemboe noted that this regional pressure stems from a lack of civil work nationally, rather than a surge in local startup firms. However, the resulting price undercutting creates risk for municipal and provincial infrastructure delivery. 

"From public officials, we hear that in some instances, contractors from outside the province misprice tenders, resulting in lower estimates than what otherwise would be the case," Lemboe warned. "The knock-on effect is that we see more incomplete projects and contractors going bust." 

"It is not to say that firms from outside the province are ill-equipped to do the work," Lemboe added. "It is simply a symptom of the pressure they face in regions where they traditionally operate. They undercut prices here where there is work, but it soon leads to unintended consequences." 

The City of Cape Town recently recorded a South African municipal record for capital expenditure, delivering R12.24 billion in infrastructure investment for the 2025/26 financial year. The expenditure was driven primarily by massive allocations to water and sanitation upgrades (including wastewater treatment and pipe replacements), electrical grid resilience, and public transit projects such as the MyCiTi Cape Flats expansion. Positioned as an economic engine, the capital drive is projected to support roughly 130,000 construction-related jobs over the current municipal term. 

Overall, the broader national trend detailed in the 3Q2026 FNB/BER barometer shows headline confidence index dropped three points to 40, leaving 60% of respondents dissatisfied with current national business conditions.  

The survey’s activity growth index fell to its lowest level since 2022, underscoring a sharp pullback in work across the country.  

"It is disappointing that despite all the noise around infrastructure investment, civil contractors have not yet seen much benefit," said Siphamandla Mkhwanazi, Senior Economist at FNB. "Meanwhile, renewable energy and mining projects that were a key source of work not too long ago seem to have lessened."  

While national sentiment was partially cushioned by upbeat order books and expectations of a fourth-quarter turnaround, Mkhwanazi warned that confidence could drop sharply if activity fails to recover in the final months of the year. 

Deon van Zyl, Chairperson of the Western Cape Property Development Forum (WCPDF), said the fact that more than 60% of BER respondents are dissatisfied with prevailing business conditions is a reflection of dissatisfaction with the public sector. "Simply put, government is not putting out enough work.  And where it is putting out tenders, these tenders are processes too slowly and unfortunately are too often cancelled.  The cost of tendering does not seem to have any impact on government." 

"Sadly, the state of and confidence by the Civil Contracting industry is therefore a lukewarm reflection on the performance of the public sector," Van Zyl said.