Government’s fixed investment disaster costs South Africa billions

South Africa’s planned investment in capital projects almost halved in the first six months of 2025 after the government and state-owned companies failed to announce any new ones. 

The value of new projects announced dipped to an annualised R316.2 billion from R592.2 billion a year earlier, with all of them coming from the private sector, according to a report by Nedbank’s latest Capital Expenditure Project Listing report. Almost 63% were energy-related, it said. 

“The rise in private-sector activity reflects the structural shift to renewable energy and the central role of energy security in investment decisions, and improved macroeconomic conditions,” the unit said. 

Years of underinvestment and mismanagement have left Africa’s largest economy with a massive infrastructure backlog that’s contributed to a stagnant economy.

President Cyril Ramaphosa has previously estimated that the country needs as much as R1.6 trillion in public-sector infrastructure investment and a further R3.2 trillion from the private sector for it to achieve its infrastructure goals by 2030. 

The National Treasury has allocated R1.03 trillion over the next three years for public infrastructure with the hope of drawing in the private sector. 

The main drivers of investment activity in the six months were electricity, gas, and water, with projects including Earth & Wire’s large-scale EnergyFields facility as well as the Overberg and Ishwati Emoyeni wind farms.

“This underscores the structural shift toward renewable energy and the central role of energy security in driving fixed investment activity,” the bank said.

The value of projects from the private sector this year is the highest recorded since at least 2008, according to Nedbank data.

Still, it expects gross fixed-capital formation to contract for a second consecutive year in 2025, falling by 1.5% before growing at a sub-par average of 2.2% over the next three years.

“Despite pockets of improvement, which will support a modest uptick in GFCF during the remainder of the year, underlying conditions remain unsupportive of a broad-based upturn in fixed investment activity,” the unit said, citing constraints such as US tariffs, weaker external demand, lower commodity prices and elevated public debt.