Research house Industry Insight noted in its newest 'Construction Monitor' report, issued on Wednesday, that it expected the public sector strike to have "a dire impact on the civil industry", as government would be forced to reallocate funding towards footing a higher wage bill.

The company said that this would inevitably include a portion of the funds which were allocated to infrastructure expenditure.

"Government's revised wage offer of 7,5% and an R800 housing allowance will make it almost impossible for government to reduce the budget deficit and cut State borrowing," noted the report.

Any fallout from the public sector strike would worsen a situation where the local construction industry was already under strain.

"Turnover in the civil industry, excluding spending on mechanical, electrical and engineering equipment, is expected to plummet by between 30% and 40% in 2010, despite government's elaborate budget of R846-billion expenditure on infrastructure in the next three years. While almost 50% of that amount is earmarked towards Eskom, it is unlikely that even a third of that will actually reach downstream suppliers," stated the report.

A major driver of the expected sharp drop in revenue for 2010 was a steady decline in tender flow over the last few months.

Industry Insight noted that tendering activity in the civil sector decreased by 17% in the first quarter of 2010, compared with the same period last year, and by a further 25,6% in the second quarter, "putting immense pressure on service providers and downstream suppliers in this sector".

Government is the biggest source of tenders in the civil construction industry.

Industry Insight added that the general outlook for government expenditure had weakened altogether in recent months, following the release of the 2010 Budget in February.

"While the slowdown in larger capital projects was expected, smaller-scale projects, channelled through provincial and municipal departments, are slow to reach implementation stages. Tender activity has slowed while the [project] postponement rate has increased. Information released by the National Treasury on municipal capital expenditure also reported concerning results for the first three quarters of the 2009/10 financial period, where several provinces had spent less than 15% of their housing budgets."

The specialist research house also reported that unofficial cementitious statistics, based on its own estimates, suggested that demand for cement fell 15% in the first quarter of 2010, compared with the same period last year, compared with a 13,8% drop in the last quarter of 2009.

"The outlook for cement demand is dim for 2010."