South Africa's construction sector is entering a R1tn infrastructure boom and is creating approximately 130,000 jobs each quarter, yet many of the SMEs running projects are unable to access the working capital needed to raise contracts.
Source:Supplied. Clinton Thomas, Head of Product at Lula.
Speaking at the 14th edition of Big 5 Construct South Africa, Lula Head of Product Clinton Thomas said delayed payments and limited access to construction finance are creating a significant cash-flow gap that jeopardizes project delivery, business development and the country's infrastructure ambitions.
“The cash flow problems faced by construction SMEs are not a symptom of poor management; it is inherent in the project cycle itself. The business wins the tender, orders the materials and starts the work, but payment comes only months later.
“This is the reality of construction financing in South Africa, where contractors often need access to working capital before they can invoice or receive payment. Timing is everything. Instead of barriers, SMEs need finance that gets them to site with the right materials at the right time.”
One of the construction sector's most persistent problems in development and delivery comes down to funding. For many SMEs, access to tender finance in the weeks between award and mobilization is the difference between delivering on time and losing the contract altogether. Small contractors are being left behind because the funds they require come after the costs they have to cover, impacting service delivery, timelines and liquidity.
Funding promotes development
With the South African construction market expected to reach R160.65bn in 2026 at a 4.8% annual growth rate, and public sector infrastructure spending projected to reach R1.06tn in the medium-term expenditure framework of 2026-2029, SMEs need better cash-flow support.
The data that Lula brought to the Big 5 Construct South Africa platform also challenged widespread perceptions about the sector. Construction SMEs are not in crisis – they are in demand, but their growth depends on financing the gap between the amount a project is awarded and the income it ultimately generates.
Lula serves SMEs across a range of sectors, with construction accounting for 15% of its total book exposure. The company has issued over 16,000 advances to over 4,000 businesses, with an average advance value of R370,000. In the construction sector, 37% of advances exceed R250,000, while around 10% exceed R1m.
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At the end of Q2 2025, around 96,000 government invoices older than 30 days – worth a combined value of R12.4bn – remained unpaid, while private sector payment cycles could rise above 150 days.
This limited flow of cash has been hampering project delivery for years and, with construction firms making up a significant portion of South Africa's SME base, it is easy to see how liquidity has become a systemic bottleneck. Currently, more than two-thirds of SMEs are expected to need additional financing within six months to finance working capital, and 40% rely primarily on self-financing.
mobilizing projects faster
Within this gap are several cost categories: advance materials, weekly salaries and subcontractor fees, equipment, fuel and transportation, supplier deposits, retention periods, and the complex pressure of running multiple live projects simultaneously.
For many businesses, access to building-materials loans or other forms of short-term construction finance can determine whether a project starts on time or falls behind schedule, with consequences that spill over to other contracts, supplier relationships, reputation, and the ability to bid competitively for the next opportunity.
When capital is structured around the friction points experienced by SMEs, it ensures they have the liquidity needed to keep materials on site before invoicing. This ensures that companies can act promptly and deliver on time, despite payment delays. Modern solutions are more sensitive to the needs and problems of the sector, accelerating by providing frictionless access to the right resources.
Thomas explains, “SMEs need construction working capital that moves at the pace of a project, not the bank's credit committee. They need to be supported by a different approach to underwriting that moves beyond traditional credit assessments built around static financial snapshots and instead focuses on real-time transaction data.”
“Lula's model makes funding decisions that reflect how SMEs actually do business, considering the frequency, consistency and pattern of their flows.”
capital opens up infrastructure
South Africa's infrastructure ambitions will only be sustainably realized if the SME contractors doing the work can fund their mobilization from day one. When funding recognizes where SMEs are today, this time constraint does not need to be a hindrance or inhibit growth and employment.
Thomas concluded, “Growth fails when companies can't access capital when they need it.”