Pillar 1: Building and Construction Materials Retail and Supply

ABA members are assisted in procuring materials, tools and general hardware required for each project. This results in cost savings on materials and plant and assists members from a cash flow point of view. According to the CIDB, of the current building and construction investment of about R158.6 billion p.a., materials accounts for about R95 billion (60%) and labour for the rest.

 

An overview of the major product groups is given below. The major product groups represent about 49% of total building and construction materials.

The distribution of building materials is different for commodity products and for the more discretionary products. In the case of commodity products, the bulk is distributed direct to contractors or large users, whilst the smaller projects may, in some cases, involve a role for the distributor or hardware merchant. On the other hand, the discretionary products are distributed mainly via local hardware distributors, of which there are between 8 000 and 10 000 countrywide.

 

Because of the increasing importance of the residential market in the total building industry mix, the distribution of building materials has undergone structural change to cope with the increasing fragmentation of the market. The market is increasingly characterised by large numbers of individual units built countrywide by a large number of locally based small to medium sized contractors and subcontractors. Consequently, the building materials must be available at the right place, time and price to serve the widely dispersed market. This has led to the increasing importance of the building materials distributors in the system, and to the fact that some 60% of materials are now distributed via the distributor and merchant network and 40% direct to the end users, notably the larger contractors and projects. FABCOS has a formal relationship with Cashbuild through which members have access to its 150 stores network countrywide as well as discounted prices and deliveries to the door. Favourable payment terms have also been negotiated for members.

 

The large groups play an important role in distribution and, as illustrated in the adjacent table, they have about 884 outlets between them. Each of these major distribution chains has their own strategy and focus on specific market niches. In general, it can be accepted that all the distributors compete for market share but focus on specific market segments and location in specific geographic areas. Nevertheless, there is overlap both in terms of markets served and geographic areas served, and therefore competition takes place at the fringes.

 

In addition to the large distribution chains and independents, there are an estimated 8 000 to 10 000 retailers/merchants in the country. Many of them are small, with just over half having a turnover of less than R1 million per month. It is only the top 10% or so of retailers who have a monthly turnover exceeding R2 million.
The smaller retailers typically have stores less than 500 m² in size, but with a yard to store bulk materials. 60% of their turnover is to the home improvement market. Up to 80% of their business is cash, and their products are mainly locally produced.  

 

 

top