Johannesburg — THE rush of listings by construction companies on the back of a construction boom is beginning to come under the spotlight, with questions being asked about their sustainability once the consolidation phase comes.

Out of 79 companies listed on the four-year-old small-cap AltX , 30% are construction companies and sceptics are beginning to sound warning bells, saying these companies are likely to fail once the boom subsides.

Rick Jackson, CE of AltX-listed civil engineering and construction group Sanyati Holdings, raised concerns yesterday about the quality of companies listing, saying some lacked the expertise to operate as public companies.

"I am very concerned about the number of construction companies listing on AltX recently, especially some of the smaller ones. I do not believe all of them are sustainable in the long term. It has led us to seriously consider listing on the JSE main board in the near future," Jackson said.

Francois Diedrechsen, financial director of JSE-listed road construction company Raubex, echoed the sentiment, saying a number of recently listed construction companies should not have been allowed to list.

"You need prerequisite skills to operate strategically as a public company. I am not convinced that these companies have justification to be public companies," Diedrechsen said.

However, Noah Greenhill, head of marketing and business development at the JSE, said it was unfair to tarnish companies listed on AltX just because they were a subset of the economy.

Newly listed construction companies had a history behind them, and failure for listed companies was a reality for JSE-listed companies and even global ones such as Enron, Greenhill said .

"Companies that list on AltX do not have a one-year history. These are companies with a history and the reality is that there is a construction boom and these companies are doing well to support the economy," he said.

Construction is playing a critical role in the economy, with the sector expanding a blistering 21,3% in the first quarter of this year, a 17-year record. Also boosting the sector is the government's R482bn infrastructure spending drive, which is beginning to have positive spin-offs coupled with residential and commercial buildings.

After a moderate decline in the third quarter, the First National Bank building confidence index rose one index point to a level of 86 in the fourth quarter as a result of renewed confidence in the sector.

The slight improvement in overall business confidence was the net result of a rise in confidence levels of quantity surveyors, manufacturers and retailers of building materials.

Greenhill said 30% of companies knocking at the door of the JSE, wanting to list, failed the test, and got a negative recommendation from listing advisers.