SA fixed investment slides amid private sector’s lack of confidence

A lack of confidence by the private sector has been blamed for the sharp drop in fixed investment activity, with the value of new projects announced in 2023 slumping by almost 29% (to R184.8 billion from R259.9 billion in 2022) – and by 53% since 2021, when it came in at R392.7 billion.

The 2023 Nedbank Capital Expenditure Project Listing report released on Tuesday attributes this to the slowdown in new projects announced by the private sector and public corporations.


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Projects announced by the private sector fell by 147% to R56.1 billion from R203.3 billion in 2022, and in 2023 accounted for only 30% of the total value of projects announced.

Capital expenditure projects announced by public corporations or state-owned enterprises (SOEs) slumped for the second consecutive year by 22% to R27.1 billion from R34.9 billion in 2022 and 88.6% compared to R236.9 billion in 2021.

Private sector ‘forced to look after itself’

Rowan Goeller, an analyst at Chronux Research, said the slump in the value of private sector projects announced indicates a lack of confidence in the economy, which does not bode well for economic growth and employment creation.

Goeller added that 2023 was a year after the riots in KwaZulu-Natal and Gauteng and the worst load-shedding year ever.

However, he said the project listing numbers are always “quite funny” in that they are projects announced and not projects that have actually been constructed.

“A fair amount of them don’t even happen, especially those announced by government.”

Goeller also said he believes many of the projects announced are to allow companies to remain sustainable rather than them investing in new capacity.

He said the private sector has now been forced to look after itself in terms of infrastructure provision where government has failed. He pointed to the meaningful number of companies investing in their own power, particularly solar energy, because of load shedding.

“Load shedding distracts them, and they cannot really invest in growth because if they are worried about power, they need to make a plan for their existing business.

“It [the investment] possibly provides a base from which they can grow into the future, but in general, corporate South Africa is in survival mode and trying to remain sustainable without any thought of growth because the economy is not growing and consumers are not spending,” he said.

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Goeller added that there isn’t any major capital expenditure going on with SOEs because they are getting bailouts “and can’t spend on anything”.

“Sanral will be the one shining light and maybe account for more than half or about R20 billion of that expenditure,” he said.

Sectors cashing in

Electricity, gas and water dominated in 2023, with projects worth R66.9 billion announced.

Two of the projects account for 67% of the total and are associated with water distribution.

The largest project is a R27 billion undertaking between the South African government and large mining companies aimed at improving the country’s dilapidated water infrastructure, while R18 billion is for a project for the upgrade and refurbishment of the Olifantspoort and Ebenezer Bulk Water Supply Scheme.

The remaining R21.9 billion will be invested into green energy, R20.5 billion into solar photovoltaic plants, R1.2 billion for hydro pump storage and R277 million towards a green hydrogen project.

Community, social and personal services announced projects to the tune of R58.2 billion – 87% of which falls within the realm of the City of Cape Town’s infrastructure portfolio.

Of these, R45 billion will go towards major wastewater upgrades and refurbishments at Potsdam, Zandvliet, Athlone, Macassar and Bellville, major upgrades on bulk sewers in the Cape Flats, Milnerton, Phillipi and Gordon’s Bay and R5 billion towards the redevelopment of Tygerberg Hospital.

The transport, storage, and communications industries announced new projects worth R27 billion, with 68% of the total value of projects geared toward road development, upgrades and maintenance.

It is dominated by the Urban Mobility Directorate projects, which are worth R8.3 billion and involve the maintenance of a road network spanning 10 700km under the jurisdiction of the City of Cape Town.

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The manufacturing industry announced R19 billion worth of planned projects.

The most significant announcement is BMW’s R4.2 billion investment in upgrading its Rosslyn plant for a shift toward producing more energy-efficient vehicles, including the new BMW X3 plug-in hybrid.

ArcelorMittal South Africa will spend R4 billion on building a 200-megawatt solar photovoltaic plant.

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Project announcements by the finance, real estate, and business services sector amounted to R6.3 billion and the mining and quarrying sector to R5.9 billion.

Fixed investment recovery struggling to gain momentum

Nedbank said its latest research confirms that the recovery in fixed investment is struggling to gain momentum, with the challenging economic environment “convincing more private companies to delay or postpone major investment plans”.

It said the outlook for fixed investment remains cloudy, with consumer spending likely to remain subdued, particularly in the first half of the year, depressed by high interest rates, worries about job security, and weak consumer confidence.

On the production side, persistent load shedding and a weak global economy will continue undermining activity in the mining and manufacturing sectors, it said.

Nedbank expects the weakness in capital spending to continue into 2024, with gross fixed capital formation (GFCF) forecast to grow by only around 0.5%, down from a forecast 4.2% in 2023.

It said business confidence is unlikely to improve significantly in 2024 due to persistent infrastructure constraints, slow economic reforms, and higher production costs.

“Consequently, the private sector will remain wary of large capital investment spending,” it said.

Ray of hope

The only boost will come from investment in renewable energy generation, including the seventh window of the Renewable Energy Independent Power Producers Procurement Programme and public sector infrastructure spending.

However, Nedbank expects GFCF growth to accelerate to 3.9% in 2025, supported by renewable energy investments, better prospects for global growth and firmer commodity prices.

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It said government infrastructure programmes will continue as government attempts to create employment and address some of the social and infrastructure backlogs, but the pace will be slow and limited by budget constraints.

“Faster growth in fixed investment can be achieved through resolving the energy crisis, accelerating structural reforms, restoring fiscal discipline, and tackling crime and corruption – all of which will lift business confidence, raise the country’s potential growth rate, and encourage investment by the private sector,” it said.

Listen to Jimmy Moyaha speaking to Nedbank economist Crystal Huntley about the latest report: 

You can also listen to this podcast on here.