The decision to review the six phases of the GFIP was prompted by the national fallout from the implementation of open road tolling in Gauteng, as well as an acknowledgement that government had failed to develop an integrated approach to transport

Sanral spent R20bn on freeway upgrades in the first phase, giving high- margin work to local construction firms. But the presidency’s newly announced infrastructure commission will assess each of government’s large projects, including future phases of the GFIP, for cost-effectiveness, necessity and priority.

The decision to review the six phases of the GFIP was prompted by the national fallout from the implementation of open road tolling in Gauteng, as well as an acknowledgement that government had failed to develop an integrated approach to transport.

Deputy transport minister Jeremy Cronin acknowledges, however, that the commission’s scrutiny could delay the pipeline of large capital projects even further. It could also affect other toll road projects or even projects in the water and power sectors.

Though the commission is a positive step towards better integrated planning, any delay in the announcement of new capital projects adds to the construction industry’s woes.

The recession, and its lagged effect on the industry, has caused margins to plummet, taking profits with them . The reporting season for the sector’s big firms began this week with Group Five’s results for the year to June, and shows the extent of the damage. The firm has reported revenue of R9,2bn, which is 19% lower than last year. Headline earnings per share are 44% down, which the company says is in part a result of project delays.

CEO Mike Upton says the company has steered away from chasing higher revenues at the expense of margins.

Weak margins, however, are likely to persist in the short term, and Upton says Group Five has focused its strategy on medium-term growth.

Market conditions and order books are likely to improve from 2012. But a recovery, he says, is expected only from the 2013 financial year.

The group’s investments & concessions division is invested in a number of SA toll roads. Group Five is also part of a joint venture bidding for the N1-N2 Winelands toll road contract. The tender is at “best and final offer” stage and a winning contractor is expected to be announced next year. It is unclear whether the commission will also reassess the viability of projects like the Winelands upgrade.

Trading updates from Basil Read and WBHO, a pair that have fared better than some of their peers, are also weak. Basil Read expects headline earnings for the six months to June to be between 20% and 30% lower compared to the previous corresponding period.

WBHO says earnings for the year to June will be between 15% and 25% lower than a year ago.