The value of announced capital projects in South Africa saw a sharp increase last year, primarily driven by government and state-owned enterprises, signalling a potential rebound in the country’s fixed investment spending in the coming years, according to Nedbank’s capital expenditure survey.
However, speakers at the survey’s launch pointed out that investment spending would need to be significantly ramped up—by two or three times—to make a meaningful impact on economic growth.
The latest Nedbank Capital Expenditure Project Listing showed the largest increase in fixed investment plans since 2021, driven by various projects aimed at addressing infrastructure backlogs, particularly in roads and water systems.
The value of new projects announced in 2024 amounted to R445.9 billion, a significant rise from R210.1 billion in 2023.
The government has emerged as the primary driver, with plans worth R199.8 billion, marking a 161% increase and accounting for 44.8% of all new projects.
Public firms also saw a considerable increase in their contributions, with projects totalling R150.5 billion, or 33.8% of the total, up from R35.8 billion the previous year.
However, the private sector announced projects valued at R95.6 billion, a decrease of 4.3% compared to 2023.
This decline is largely due to the weak economic environment, with the private sector taking a wait-and-see approach.
Jacob Mamabolo, Gauteng’s MEC for Cooperative Governance, Traditional Affairs, and Infrastructure Development, said that that the main challenge for public sector infrastructure projects is effective delivery. He pointed out that while infrastructure is crucial for economic growth and the government is allocating funds, issues in the delivery process, including inefficiencies in the project pipeline, prevent optimal outcomes.
Despite the challenges in delivery, the uptick in fixed capital formation was welcomed by Nedbank executives and economists, who noted that the increase was driven mainly by government and public corporation projects, which now account for 78.6% of new project announcements.
Key government projects include a public housing and community development program worth R43.7 billion and Phase 2 of the Rooiwaal wastewater project, valued at R35.8 billion.
After a slow investment period, public corporations now plan to invest R150.5 billion in energy, water, health facilities, airport infrastructure, road rehabilitation, and sanitation projects.
The private sector’s contributions, however, have decreased, with announcements totalling R95.6 billion, down from R99.9 billion.
The largest private sector project is the R18 billion Bankenveld District City development in Johannesburg, a mixed-use project featuring residential, commercial, retail, industrial, educational, and healthcare components.
Notably, R43 billion of the private sector’s announced investments are energy-related, particularly in renewable energy, with the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP) accounting for 57% of this total.
Gross fixed capital formation (GFCF) rose by 0.3% quarter-on-quarter in the third quarter of 2024, reversing four consecutive quarters of contraction.
This growth was driven by increased spending from the general government and public corporations, while private-sector investment continued to contract.
Nedbank’s Capital Expenditure Project Listing further highlights that while government spending on capital projects has rebounded, the private sector remains cautious, largely focusing on renewable energy projects.
Structural inefficiencies, high costs, and policy uncertainty continue to affect private-sector confidence.
Recent interest rate cuts and efforts to control inflation have helped improve the economic environment, but structural challenges still pose a major barrier to sustained investment growth.
Looking ahead, analysts expect modest growth in GFCF, with a projected increase of 1.3% in 2025 and an average annual growth rate of 2.3% over the next three years.
