Nedbank: S.Africa seeing sharpest jump in fixed investment plans since 2021

South Africa is experiencing a significant increase in planned fixed investment projects, with the value skyrocketing to R445.9 billion in 2024 compared to the previous year, according to Nedbank’s Capital Expenditure Project Listing. This surge in investments is largely attributed to the government and state-owned enterprises (SOEs), which have stepped up their spending to compensate for the downturn in private sector investments. Crystal Huntley, Specialist Economist at Nedbank Group Economic Unit, provided insights into the investment trends and the potential impact on economic growth in a recent interview with CNBC Africa. Huntley highlighted that the majority of the project announcements in 2024 were led by the public sector, specifically the general government and public corporations. These entities accounted for nearly 80% of the total project announcements, while the private sector's contribution dropped to only 21.4%. The focus of the projects varied across sectors, with significant investments in community services, infrastructure development, and renewable energy projects. The rise in government and SOE spending has overshadowed the private sector's efforts in fixed investments. Huntley acknowledged the challenges faced by the private sector, such as high electricity tariffs and logistical issues, which have hindered their investment activities. While there is hope for the private sector to catch up, Huntley suggested that timely and efficient implementation of project plans is crucial to boost private sector confidence and stimulate expansion. Looking ahead, Huntley discussed the potential impact of the planned expenditure on economic growth in the medium term. While she didn't provide a specific growth forecast, she indicated that the increase in fixed investments is expected to drive economic growth, with forecasts showing a growth rate of around 1.3% in 2025. Over the next two to three years, an average growth rate of 2.3% in fixed investments is anticipated, contributing significantly to overall economic expansion. With the national budget announcement looming, Huntley anticipates a continued focus on infrastructure development and increased government spending in line with previous commitments. The government's pledge of R940 billion over the next three years towards infrastructure projects is expected to fuel ongoing investment momentum. Many of the projects earmarked for funding in the budget have already been included in the project listing, aligning with the government's strategic integrated project plan. The surge in fixed investment plans signifies a positive turn for South Africa's economy, with government and SOEs taking the lead in driving growth and development. As the country navigates through these investment trends, the timely execution and successful implementation of projects will be crucial in maximizing the potential economic benefits. Private sector participation remains a key factor in sustaining the investment momentum and fostering a conducive environment for long-term growth and prosperity.