This was reported yesterday by Bureau for Economic Research (BER) senior economist Charles Martin, when was presenting the bureau's third-quarter building and construction report

He said nonresidential building activity in Gauteng was particularly weak as a result of overdevelopment in Sandton in recent years by developers who had misread the property cycle.

If there was another one or two percentage point increase in interest rates, some of those developers could become insolvent.

Several spokesmen from Western Cape building and property industries in Martin's audience said they believed Western Cape was in a particularly bad position because of staff disruptions that had followed the creation of the unicity about two years ago.

One building industry spokesman said he knew of at least two major projects that were under way without having building plans passed because the developers had waited two and a half years for approval.

A representative of the SA Property Owners' Association said the organisation had made representations to local authorities about the problem in the past two years but 'it has not gone well'.

Martin said growth in building activity in the residential sector was expected to continue next year but not at the same pace as this year, as the lag effect of interest rate increases would start to appear.

Within the nonresidential sector, a gradual improvement in activity could emerge next year.

As a whole, the local building industry would continue to grow next year, albeit slowly. The depreciation of the rand had severely affected building material prices, he said. The BER's building cost index showed a 20% increase in the second quarter compared with the corresponding period last year.

For the year as a whole it was estimated to rise 15%.

Building material prices were forecast to rise 8,5% next year.

The SA economy was showing more resilience than a number of other economies at present, Martin said, the main reasons being resilient household spending and increasing capital formation.

Government had the available funds to embark on capital spending projects and it was critical that it do so. About half of SA's unemployed population had never worked before, and the only way to address the problem of skills shortages was through a combination of a public works programmes and spending on education.