Boston, MA -- (SBWIRE) -- 02/18/2013 -- BMI View: World Cup excesses, heavy bureaucracy and continuing political wrangles have weighed heavy on South Africa's previous glories. Though the country can still boast with the continent's most advanced infrastructure, we are now highlighting a significant relative regional decline. Despite a slow return to positive territory, with a real construction industry growth of 3.6% for 2013, the risks are still plentiful: policy uncertainty, cumbersome bureaucracy, intense credit rating pressure and violent clashes in relation to several strikes at mines across the country. Hence, even the announcement of Zuma's new US$462bn infrastructure plan does little to change our outlook for the country's construction sector.

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Though we are seeing a slow return to growth, South Africa's construction industry is still lagging behind many of its neighbours, registering a strong average growth of 6% for the same time period.

Following the 2010 World Cup government finances were pushed to the limit in order to complete projects on time. Hence, a drawback in funding and subsequent activity was noticed almost immediately after the tournament. Real growth decelerated from 7.8% year-on-year (y-o-y) in 2009 to 0.9% y-o-y in 2010, and continued to weigh heavily on domestic construction companies in 2011, which resulted in falling share prices. That said, growth levels are unlikely to ever return to those seen before the World Cup, as they were driven by an artificial stimulus and a front-loading of the project pipeline.

However, with economic growth slowly ticking up, we are seeing a gradual improvement within the wider South African construction sector. This has been underscored by the measured improvements seen in the performances of numerous construction companies.

Our medium-term outlook for the country's construction sector is one of cautious and modest growth. Statistics South Africa registered a weak 2.4% real growth for the first six months of 2012, in line with our full year 2012 estimate of 2.5%. On the back of this we maintain our 3.6% real growth outlook for 2013. That despite President Zuma's announcement of a new infrastructure plan, which does little to alter our view. In fact, the 15year, US$462bn, plan contains little detail of how to overcome both the regulatory and the funding constraints which continue to block South Africa's infrastructure potential.

Furthermore, it remains unclear how this new scheme aligns with previous infrastructure plans, such as the ZAR3.2tr announced in a budget speech in February 2012, where five geographically focussed infrastructure development programmes were identified:

- Develop and integrate rail, road and water infrastructure centred around the Waterberg and Steelpoort areas of Limpopo, to unlock coal, platinum, palladium, chrome and other minerals.

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