{"id":91922,"date":"2025-10-23T17:18:05","date_gmt":"2025-10-23T17:18:05","guid":{"rendered":"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africas-weakest-link"},"modified":"2025-10-23T18:21:57","modified_gmt":"2025-10-23T18:21:57","slug":"south-africas-weakest-link","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africas-weakest-link","title":{"rendered":"South Africa\u2019s weakest link"},"content":{"rendered":"

Africa-Press – South-Africa. <\/strong><\/span>South Africa\u2019s economic revival hinges on increased Gross Fixed Capital Formation (GCFC), which is a key indicator of infrastructure investment and is vital to sustained economic growth.<\/p>\n

Currently, the local economy is driven by increased consumer spending, which is too narrow and fragile to drive sustained growth.<\/p>\n

Much of this spending is on imported goods and based on short-term cyclical factors, such as lower inflation and interest rates as well as two-pot withdrawals.<\/p>\n

Thus, while it may boost growth in the short term, over the long run it is unlikely to be sustained and drive sufficient increases in economic activity to reduce unemployment meaningfully.<\/p>\n

Melville Douglas senior domestic equity analyst Kgosi Rahube said it is clear that infrastructure investment is a matter of \u201cwhen\u201d and not \u201cif\u201d.<\/p>\n

While timing may remain uncertain, investment in infrastructure has to happen for the economy to grow meaningfully after a decade of stagnation.<\/p>\n

Crucially, for the first time, the private sector is set to play a far greater role in infrastructure development in South Africa as the government lacks the balance sheet.<\/p>\n

This makes public private partnerships central to the projected R1 trillion in infrastructure spending over the next three years.<\/p>\n

Furthermore, key reforms in the electricity and logistics sectors are set to result in private companies playing far larger roles in the economy, with sectors once reserved for state monopolies now opened up to competition.<\/p>\n

However, South Africa\u2019s infrastructure investment is coming off an extremely low base, with fixed investment having declined significantly over the past 15 years.<\/p>\n

Rahube explained that GFCF is a key indicator of infrastructure investment in South Africa, reflecting the extent to which the state and private sector are investing in assets such as land, machinery, equipment, and infrastructure.<\/p>\n

This investment is a major driver of long-term economic growth, with a clear correlation between increased fixed investment and economic growth.<\/p>\n

As a result, with GFCF declining as a share of GDP over the past 15 years, South Africa\u2019s economy has stagnated, averaging 0.8% annual growth.<\/p>\n

This can be seen in the graph below, courtesy of Rahube and Melville Douglas.<\/p>\n

South Africa is the odd one out<\/b><\/p>\n

South Africa\u2019s declining fixed investment is made worse when comparing it to faster-growing emerging markets, such as India, Indonesia, and China.<\/p>\n

These economies have enjoyed significant growth over the past decade, with emerging markets averaging annual GDP growth of 4.5%.<\/p>\n

In comparison, South Africa has languished below 1% as companies are unwilling to invest in the local economy due to a lack of confidence and policy uncertainty.<\/p>\n

Government-led investment has also declined as a decade of financial mismanagement has resulted in its balance sheet being effectively spent.<\/p>\n

Over the past 15 years, South Africa\u2019s government has preferred to spend increasing sums of money on consumption, particularly salaries, rather than infrastructure.<\/p>\n

This has resulted in deteriorating infrastructure across the country and a myriad of crises, from load-shedding to logistics to water.<\/p>\n

Now, the government has effectively run out of options due to this financial mismanagement and the need for trillions of rands in investment.<\/p>\n

It has to turn to the private sector, which has the capital and expertise to rescue South Africa\u2019s infrastructure and upgrade it to facilitate faster economic growth. Private companies are sitting on around R1.8 trillion in cash in the bank.<\/p>\n

Rahube pointed out that South Africa\u2019s GFCF as a share of GDP has remained flat at around 14% to 15% over the past two decades.<\/p>\n

This is well below historical highs and far lower than its peer countries, which typically have fixed investment of between 20% and 40% of GDP.<\/p>\n

South Africa\u2019s GFCF-to-GDP ratio has declined from around 30% in 1976 to 15% in 2024, reflecting subdued investment from private companies, utilities, and the government.<\/p>\n

To arrest this decline, the government has implemented extensive reforms across key sectors to try to increase private participation and investment.<\/p>\n

Coupled with government-led investment packages, this is set to result in around R1 trillion in infrastructure investment over the next three years.<\/p>\n

The newly-unveiled Integrated Resources Plan forecasts R2.23 trillion in investment for energy infrastructure alone until 2042.<\/p>\n

This makes infrastructure spending the fastest-growing line item in the government\u2019s budget over the next three years and, if executed, will result in faster economic growth.<\/p>\n

South Africa\u2019s GFCF as a share of GDP in comparison to its emerging market peers can be seen in the graph below.<\/p>\n

Note that \u201cPDP\u201d in the graph above should be \u201cGDP\u201d<\/p>\n

For More News And Analysis About South-Africa<\/span> Follow Africa-Press<\/span><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Africa-Press – South-Africa. South Africa\u2019s economic revival hinges on increased Gross Fixed Capital Formation (GCFC), which is a key indicator of infrastructure investment and is vital to sustained economic growth. Currently, the local economy is driven by increased consumer spending, which is too narrow and fragile to drive sustained growth. Much of this spending is […]<\/p>\n","protected":false},"author":84,"featured_media":91921,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,7,12],"tags":[275],"class_list":["post-91922","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-head-lines","category-policy","tag-south-africa-2"],"yoast_head":"\nSouth Africa\u2019s weakest link - South Africa<\/title>\n<meta name=\"description\" content=\"South Africa\u2019s economic revival hinges on increased Gross Fixed Capital Formation (GCFC), which is a key indicator of in ...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africas-weakest-link\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"South Africa\u2019s weakest link\" \/>\n<meta property=\"og:description\" content=\"South Africa\u2019s economic revival hinges on increased Gross Fixed Capital Formation (GCFC), which is a key indicator of in ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africas-weakest-link\" \/>\n<meta property=\"og:site_name\" content=\"South Africa\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/AfricaPressTunisiaa\" \/>\n<meta property=\"article:published_time\" content=\"2025-10-23T17:18:05+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-10-23T18:21:57+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/static.africa-press.net\/south-africa\/sites\/31\/2025\/10\/sm_1761230956.769527.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"675\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"cfeditoren\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"cfeditoren\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africas-weakest-link#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africas-weakest-link\"},\"author\":{\"name\":\"cfeditoren\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/#\/schema\/person\/068c7ab4e9634ae78ec5d54ec46598bb\"},\"headline\":\"South Africa\u2019s weakest link\",\"datePublished\":\"2025-10-23T17:18:05+00:00\",\"dateModified\":\"2025-10-23T18:21:57+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africas-weakest-link\"},\"wordCount\":754,\"commentCount\":0,\"image\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africas-weakest-link#primaryimage\"},\"thumbnailUrl\":\"https:\/\/static.africa-press.net\/south-africa\/sites\/31\/2025\/10\/sm_1761230956.769527.jpg\",\"keywords\":[\"South-Africa\"],\"articleSection\":[\"all news\",\"head lines\",\"policy\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africas-weakest-link#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africas-weakest-link\",\"url\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-africas-weakest-link\",\"name\":\"South Africa\u2019s weakest link - 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