The construction industry is set to contract further in 2010, but the longer term picture is more rosy, Henk Langenhoven, economist at the South African Federation of Civil Engineering Contractors (SAFCEC), said on Wednesday.

Speaking at the Rode conference in Sandton, Langenhoven said that while contract awards were still declining over the short-term, "all companies we talk to say they are getting more inquiries for pricing of projects, but the value of projects has dropped."

Langenhoven said that government is committed to infrastructure spending, highlighting a budgeted 850 billion rand.

"Our economy has literally grown out of its boots, we have three times the population we had in 1965, but double the infrastructure, Langenhoven said.

He added the country had only recently caught up with stadiums, but had not addressed harbours, roads, rail, and electricity regeneration, among a long list.

"And yet we are still 60% reliant on imports, they all have to come through roads, rail, harbours, airports. The basis that supports this economy has been eroded. This infrastructure cannot support a 6% economic growth," he said.

He said the economy is recovering. The first and second economic crises did create uncertainty, with South Africa tracking developments in the USA and Europe, but lending is more available now "although it is more expensive," Langenhoven said.

The economist said that for months before and up to nine months after an election, almost no decisions are taken. "We are in that cycle as well. So we are in a domestic cycle, an international cycle and an election cycle," he said.

"Over the longer term, SAFCEC said the current economic infrastructure is not sufficient to facilitate 6% growth.

"Spending is inevitable. Water and sanitation spending has started. Road infrastructure spending is accelerating. Current power infrastructure will be reaching the end of its efficient life cycle by 2020-2025. Government is committed to infrastructure spending. If we don't invest, the lights will go off," said Langenhoven. - Gareth Vorster, I-Net Bridge

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