South Africa’s construction sector is entering a period of significant growth, driven by major public infrastructure investment and increasing demand for contractors. However, many small and medium-sized construction businesses continue to face a critical challenge: securing the working capital needed to deliver projects after winning contracts.
Speaking at the 14th edition of Big 5 Construct South Africa, Clinton Thomas, Head of Product at Lula, highlighted that the biggest obstacle for many construction SMEs is not a lack of work, but limited access to finance during the crucial mobilisation phase.
According to Thomas, construction companies often secure contracts, purchase materials, hire labour and mobilise equipment weeks or months before receiving their first payment. This creates a significant cash flow gap that can delay projects and place pressure on business operations.
The challenge comes at a time when South Africa’s construction industry is expected to benefit from substantial infrastructure investment. The construction market is forecast to reach R160.65 billion in 2026, while government infrastructure spending is expected to total approximately R1.06 trillion over the 2026–2029 Medium-Term Expenditure Framework (MTEF).
Despite these opportunities, delayed payments remain a major concern. Government payment backlogs and lengthy private-sector payment cycles continue to restrict cash flow for contractors, making it difficult for many SMEs to finance materials, labour, equipment, transport and subcontractor costs before invoices are settled.
Lula’s data indicates that construction businesses remain among the country’s most active borrowers rather than distressed enterprises. Construction accounts for approximately 15% of the company’s lending portfolio, with more than 16,000 funding advances issued to over 4,000 businesses. Many of these funding facilities exceed R250,000, while a growing number are valued at more than R1 million.
Industry analysts note that funding delays can have far-reaching consequences beyond individual projects. Limited liquidity can affect supplier relationships, delay project completion, reduce competitiveness during tender processes and restrict the ability of contractors to take on multiple projects simultaneously.
To address these challenges, alternative lenders are increasingly adopting data-driven underwriting models that assess businesses using real-time transaction activity instead of relying solely on traditional financial statements. This approach enables faster funding decisions that better reflect how construction SMEs operate in practice.
As South Africa prepares for one of its largest infrastructure investment programmes in recent years, ensuring contractors have timely access to working capital will be essential to maintaining project delivery, supporting employment and strengthening the country’s construction value chain. Improved access to mobilisation finance could play a significant role in helping SMEs convert contract awards into successfully completed infrastructure projects.
