South Africa

Businesses not interested in weak South African economy 

Businesses are not interested in investing in South Africa’s weak economy, which is plagued by structural issues such as load-shedding and logistics backlogs. 

This is feedback from Nedbank, which released its updated Capital Expenditure Project Listing for 2023, showing a massive decline in fixed investment activity across the year.

The value of new projects announced amounted to R148.8 billion. This is a sharp decline from the R392.7 billion and R259.9 billion in 2021 and 2022, respectively.

Nedbank economist Crystal Huntley explained that they track the value of projects announced in the previous year to give some indication of the level of infrastructure buildout for the coming years. 

The massive decline in both the value and number of projects, from 67 in 2022 to 51 in 2023, highlights the difficult operating environment in South Africa for businesses and the uncertainty created by the upcoming elections. 

“The slowdown resulted from a moderation in new projects announced by the private sector and public corporations. Projects announced by the private sector fell to R56.1 billion from R203.3 billion, accounting for only 30% of the total,” Nedbank said.

“This is shocking, really. It will have a tremendous impact on the economy,” Huntley told CNBC Africa

Nearly half of the projects announced by the private sector involved the shift to renewable energy sources, with projects cumulatively valued at R27 billion.

This forms part of what Standard Bank chief economist Goolam Ballim refers to as ‘subsistence investment’. 

Subsistence investment from businesses is capital expenditure used merely to keep the business running and not for growth and expansion. 

“What it reflects is the context of a very weak domestic economy. What is being seen is the effect of struggles experienced structurally within the economy,” Huntley said. 

These struggles have resulted in declining confidence from businesses and households in the South African economy, making them hesitant to invest locally. 

“You are going to see businesses step back and be unwilling to invest in South Africa’s weak economy.”

Huntley added that Nedbank forecasts fixed investment in South Africa to continue to slow in 2024. 

However, investment should pick up again in 2024 due to spending on renewable energy projects from the private sector and the end of uncertainty surrounding the national elections. 


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