On Friday, AltX-listed construction group Erbacon Investment Holdings (ERB) announced a 14.6% rise in group revenue from continuing operations to R553.2 million for the half year ended August.

"Satisfactory private sector contract awards, in particular from the mining industry and Eskom, offset weak order intake from the public sector.

Revenue growth was also inhibited by difficulties in successfully negotiating numerous, and material, claims to certification stage," Erbacon said.

The group announced an operating loss of R29.887 million, from a loss of R3.811 million before.

Looking ahead, the group said the civil, commercial and industrial construction markets were expected to remain competitive for the remainder of this financial year.

"Notwithstanding the above, opportunities exist within the mining sector of SA and elsewhere in Africa."

"If the road to success is sizeable infrastructure projects, this leaves less room for mid-market players with global players required to handle large-scale infrastructure projects, including program management," Dhorat said.

Credit insurance group Coface SA highlighted the latest figures from Statistics SA which showed an increase of 17% in buildings completed for June in comparison to June 2010.

This figure however, was still 30% lower in 2011 than the June 2009 figures.

"The reason for the 2011 increase is due to government spending as infrastructure projects continue to be rolled out in the forms of roads, hospitals and schools," said Paul Jooste, senior manager for business portfolio at Coface.

For the construction sector composition, Coface SA said it had seen that smaller entities specialising in the residential market had consolidated and there had been a reduction in the number of companies trading.

There was also a refocus in the core strategies of medium and bigger business to areas showing growth.

"There is also currently a major clean-out with many of the smaller companies liquidating or being absorbed into medium or large corporates.

"These larger companies often have the resources to sustain slow growth periods longer than the smaller companies," Jooste said.

The new normal

According to E&Y, the new normal in the industry would include lower returns and closer monitoring of the capital agenda.

But, Dhorat opined that there were more reasons to be optimistic than many realised, especially in the areas of infrastructure and sustainability.

"The infrastructure gap continues to grow in most countries and needs to be seen as a long term growth market.

"Companies in the industry must look to expand their products and services offered and target higher growth markets.

Last month, the South African National Roads Agency Limited (SANRAL) selected the Protea Parkways Consortium as the preferred bidder for the R10 billion Winelands Toll Road project in the Western Cape.

The lead construction partners of the Protea Parkways consortium included Group Five, Basil Read and French firm Bouygues TP.

"The biggest challenge is to finance projects in the current environment, public private partnerships (PPP's) are a definite focus area however balanced risk sharing is key requiring government spending and policy to be more long-term and strategic, government needs to guarantee more of the infrastructure risks as that would lower the cost of equity.

It will take time for the market to understand them and receive them favourably," Dhorat said.

E&Y said that it expected the market to show a recovery within 24 months, "timing will be linked to local infrastructure spend coupled with future pipelines in the foreign markets that these companies are targeting," Dhorat said.

Olof Bergh, analyst at Sanlam Private Investments noted that the construction industry had been in far worse a position at the turn of the century.

He said that the larger companies in the sector might expect to see a slight uptick in earnings in 2012.

Aveng said it anticipated that infrastructure investment by the public sector over the next two years would remain under pressure given the current environment of global economic uncertainty.

Private sector growth will continue to be driven primarily by the demand for commodities and energy fuelled largely by China, it said.

It said that the Australian infrastructure market continued to maintain its resilience in the global economic slowdown, supported by its ongoing growth in both public and private sector spend.

But the group said it expected a difficult trading environment in the coming year.