The R1.8 trillion goldmine that can save South Africa

Sustained economic growth in South Africa rests upon significantly increased gross fixed capital formation (GFCF), which has been declining since the end of 2023. 

Much of this investment comes from the private sector, which has been hesitant to invest in the local economy amid elevated policy uncertainty and poor economic growth. 

This has resulted in corporates leaving over R1.8 trillion to sit in the bank to accrue interest, while they wait for better opportunities. 

Unlocking this ‘goldmine’ will require significantly greater business confidence in South Africa. This is heavily reliant on a stable political and economic environment. 

Data from the Reserve Bank indicates some positivity in this regard, with it flagging growth in investment from private businesses over the past two quarters. 

In its most recent Quarterly Bulletin, the Reserve Bank noted that real GFCF increased by 1.6% in the third quarter of 2025. 

This reversed the decline seen in the second quarter, with the growth reflecting greater investment by both the public sector and private businesses. 

However, despite the modest increase in real GFCF in the third quarter of 2025, its overall level in the first three quarters of 2025 was 2.7% lower than in the same period of 2024.

This has largely been offset in overall GDP figures by increased consumer spending. However, GFCF is vital for sustained economic growth. 

Stanlib chief economist Kevin Lings has repeatedly warned that South Africa’s minor economic recovery is too narrow, with it being heavily dependent on consumer spending. 

Much of this is due to short-term cyclical factors, such as lower interest rates and early withdrawals from retirement funds. 

This is unlikely to last and drive faster economic growth over the long run, with this historically coming from increased investment in infrastructure, equipment, and machinery, which is measured by GFCF. 

Real capital spending by private business enterprises increased only slightly by 0.1% in the third quarter of 2025, following a 3.0% increase in the second quarter. 

This modest growth was mainly due to higher capital outlays on transport equipment and non-residential buildings. 

As a result, the private sector’s share of total nominal GFCF declined from 72.6% in the second quarter of 2025 to 71.4% in the third quarter.

Leaving trillions on the sidelines

With the private sector making up nearly three-quarters of GFCF, it is vital for business confidence to improve for investment to pick up and growth to accelerate. 

However, business confidence, while improving throughout 2025, remains in negative territory. The business confidence index has failed to be in positive territory for more than one month since 2015. 

The lack of business confidence and, consequently, investment has led to poor economic growth in South Africa since 2015, with the local economy growing at an average annual rate of 0.8%. 

While the state can make up for this by investing heavily in infrastructure and expanding the operations of public companies, it has run out of road due to a surging debt burden at the national level and at state-owned enterprises.

While companies have been investing, it has been largely limited to ‘subsistence investment’ to keep their doors open and not necessarily expand their operations. 

This investment is primarily in backup water supply, alternative energy sources, and increased security, rather than expanding operations and employing more people. 

“The current investment level is mainly maintenance capex and kind of treading water, with companies waiting for a better environment,” Lings said. 

“Instead of deploying capital into growth or hiring, corporates are parking it in money market funds or call accounts.”

Lings has explained that this is largely a function of declining confidence from corporates in the South African economy. 

“So generally it is a confidence thing. Confidence is a leading indicator of increased investment. Without it, funds do not flow into the local economy,” Lings said. 

“We find around the world that in order to inspire more private sector investment, you must first get the confidence.”

“What we really need in South Africa is what we call expansion capex, and that tends to be a function of confidence.”

“This type of capital is unlikely to suddenly and miraculously materialise overnight, despite trillions sitting in cash. You have to have policies in place that are going to lead to that outcome.”