The large projects likely to drive investment in South Africa

In the first half of 2024, South Africa saw a significant increase in capital expenditure, with joint announcements from the government and private sector totalling over R790 billion.

This marks a substantial rise from R193.2 billion for the entire year of 2023, according to the Nedbank Capital Expenditure Monitor.

Nedbank's data highlights a surge in fixed investment plans, driven by improvements in addressing power shortages, easing logistical constraints, and ongoing disinflation.

Government projects became the main driver, with plans totalling R393.3 billion, or 50% of all new projects. Public corporations announced R194.4 billion in projects, while the private sector accounted for R206 billion.

Notable sectors seeing investments include community services, electricity and water, manufacturing, finance, mining, and transport.

For example, major government projects focus on housing, infrastructure upgrades, and public services, while the electricity sector received R106.7 billion for energy crisis mitigation projects.

Despite this uptick, Nedbank expects gross fixed capital formation (GFCF) to decline by 2.5% in 2024, with the impact of these new investments likely materialising in 2025.

Risks include global economic fragility and delays in local reforms, which could lead to the postponement or cancellation of some projects.

In the first half of 2024, government projects dominated the community, social, and personal services sector, focusing on housing, infrastructure, and public service improvements, including an R8.4 billion special economic zone in Mpumalanga.

The electricity, gas, and water sector saw R106.7 billion in new projects aimed at addressing the energy crisis, including Eskom's hydro-storage scheme and several renewable energy projects.

Manufacturing investments totalled R16.9 billion, led by a R10 billion hybrid renewables project and Volkswagen’s R4 billion plant upgrade.

The finance, real estate, and business services sector announced R18.6 billion in projects, while the mining sector planned R18.7 billion in investments, including the extension of the Mponeng mine.

Airports Company South Africa led transport sector investments with R22.4 billion in projects, including a new airport and solar plant.

In retail, Clicks announced a R920 million expansion to open 55 new stores in 2024.