The South African construction sector is set to double over the next five years as the industry moves from a period of "managed decline" over the last two decades of the twentieth century to a period of "managed recovery" in the first two decades of the 21st century, independent equities analyst Mark Ingham told a media briefing hosted by construction company Group Five.

"What we have seen is that the real value of building plans passed has risen by 85% since 2000, while completions increased by 55% over the same period on the back of sharp reduction in interest rates. This fed a boom in residential construction, with the share of residential in total construction capital formation rising to an estimated 35% this year from only 23% in 1999.

"I expect a slowing in residential activity with low cost housing taking over from the upper end. What is happening now is that construction companies are shifting resources into civils, as they gear for 200 billion rand investment in big-ticket items such as the 2010 Soccer World Cup stadiums, power stations, railways and highways," Ingham said.

Boosting fixed investment is one of the main policy planks of the South African government and Ingham expects fixed capital formation as a percentage of gross domestic product to rise back to the 20% level seen in the 1980s before it collapsed to the 15% level in the late 1990s.

"I believe we do not need to get back to the 25% level of the 1970s, as a fair amount of that investment spending was made in the context of a 'total onslaught' and was relatively unproductive. The investment that is going in now is far more productive and with more linkages to the rest of the economy, so from that point of view we do not need as high a level of fixed investment," he said.

Ingham expects construction activity to average 7% per year growth over the next few years from growth around 2.5% per year average in the 1990s.