{"id":92521,"date":"2025-11-07T18:35:46","date_gmt":"2025-11-07T18:35:46","guid":{"rendered":"https:\/\/www.africa-press.net\/south-africa\/all-news\/one-thing-blocking-south-africas-r1-8-trillion-goldmine"},"modified":"2025-11-07T18:52:21","modified_gmt":"2025-11-07T18:52:21","slug":"one-thing-blocking-south-africas-r1-8-trillion-goldmine","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/south-africa\/all-news\/one-thing-blocking-south-africas-r1-8-trillion-goldmine","title":{"rendered":"One thing blocking South Africa\u2019s R1.8 trillion goldmine"},"content":{"rendered":"

Africa-Press – South-Africa. <\/strong><\/span>South Africa\u2019s political environment remains a significant constraint on private sector investment, with companies hesitant to commit capital to new projects or expand their operations.<\/p>\n

Coupled with a stagnant economy, businesses have preferred to accumulate cash reserves rather than invest in South Africa.<\/p>\n

This has resulted in corporates having R1.8 trillion in cash sitting in call accounts or money market funds, waiting on the sidelines to deploy when conditions improve.<\/p>\n

In 2024, companies added R186.1 billion to this pile, the largest annual increase ever recorded, as they became increasingly uncertain about South Africa\u2019s future.<\/p>\n

Coronation\u2019s economics unit recently conducted a study of South Africa\u2019s unemployment crisis and its root causes, with declining investment being one of the key reasons.<\/p>\n

The asset manager explained that there is a close link between increased fixed investment in equipment, machinery, and infrastructure, and economic growth.<\/p>\n

It also found that there is a strong inverse relationship between the perceived political constraint in South Africa and fixed investment from companies.<\/p>\n

As the political environment is perceived to be more uncertain and less conducive to private businesses, and regulations become more onerous, private investment declines.<\/p>\n

From 1994 to 2008, South Africa\u2019s total capital investment ramped up steadily to reach a peak of 23.3% of GDP at the end of 2008.<\/p>\n

Over the period, there was steady growth across all economic sectors, but the private sector accounted for almost 16% of the total.<\/p>\n

Coronation said that since the peak, there has been a steady decline in private sector investment in South Africa, with it slowing to below 10%.<\/p>\n

The only time this picture of decline changed was when peak load-shedding resulted in generation restrictions on private energy projects being lifted.<\/p>\n

This resuscitated private investment to an extent, with the momentum since moderating as projects came online and load-shedding became a thing of the past.<\/p>\n

Coronation said a deterioration in the political environment from 2012 onwards has contributed to weaker business confidence and a reluctance to invest.<\/p>\n

This can be seen in the graph below, with the political constraint index shown on an inverse scale on the right hand side.<\/p>\n

Crisis of confidence<\/b><\/p>\n

The main limitation on South Africa\u2019s economic growth has been a lack of fixed capital formation, with the private sector being the largest contributor.<\/p>\n

In its latest Quarterly Bulletin, the Reserve Bank\u2019s data showed that the private sector\u2019s share of total gross fixed capital formation edged up to 73.7%.<\/p>\n

Thus, with private businesses unwilling to invest heavily in the local economy, it is unlikely to grow at a sustainably faster rate.<\/p>\n

South Africa\u2019s small amount of economic growth is largely driven by consumer spending, which is too narrow and fragile to drive a sustained recovery.<\/p>\n

This is because it is based on short-term cyclical factors, such as low inflation and interest rates, as well as early withdrawals from retirement savings.<\/p>\n

The difficulty lies in creating an environment where companies are willing to take cash out of money market funds or call accounts and invest it in growing their operations.<\/p>\n

Stanlib chief economist Kevin Lings explained that the current investment climate is made up of maintenance capex, with companies treading water and waiting for a better environment.<\/p>\n

\u201cWe would have to up the investment considerably more to result in capacity building or job creation in South Africa,\u201d Lings said.<\/p>\n

\u201cInstead of deploying capital into growth or hiring, corporates are parking it in money market funds or call accounts.\u201d<\/p>\n

To get this capital off the sidelines and invested in the economy, the government has to create an enabling environment for companies. This begins with deregulation.<\/p>\n

\u201cI would say that deregulation is your only option now. It is your only choice, and while you may not like it ideologically, it is your only option,\u201d Lings said.<\/p>\n

\u201cYou are out of options, and those options have been taken away because you took government debt from 26% to 76% of GDP. That increase meant you have taken away your option to use your own balance sheet.\u201d<\/p>\n

For Lings, tapping into private capital in South Africa is a far better alternative than looking towards international lenders such as the World Bank and the International Monetary Fund.<\/p>\n

\u201cYour only options are international agencies. Or, talk to the local private sector and ask them under what conditions they would begin to invest in local industry,\u201d Lings said.<\/p>\n

\u201cThat is happening. That discussion is happening, and it turns out that companies and asset managers are interested.\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 political environment remains a significant constraint on private sector investment, with companies hesitant to commit capital to new projects or expand their operations. Coupled with a stagnant economy, businesses have preferred to accumulate cash reserves rather than invest in South Africa. This has resulted in corporates having R1.8 trillion in […]<\/p>\n","protected":false},"author":84,"featured_media":92520,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,5],"tags":[275],"class_list":["post-92521","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-economy","tag-south-africa-2"],"yoast_head":"\nOne thing blocking South Africa\u2019s R1.8 trillion goldmine - South Africa<\/title>\n<meta name=\"description\" content=\"South Africa\u2019s political environment remains a significant constraint on private sector investment, with companies hesit ...\" \/>\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\/one-thing-blocking-south-africas-r1-8-trillion-goldmine\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"One thing blocking South Africa\u2019s R1.8 trillion goldmine\" \/>\n<meta property=\"og:description\" content=\"South Africa\u2019s political environment remains a significant constraint on private sector investment, with companies hesit ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.africa-press.net\/south-africa\/all-news\/one-thing-blocking-south-africas-r1-8-trillion-goldmine\" \/>\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=\"2025-11-07T18:35:46+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-11-07T18:52:21+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/static.africa-press.net\/south-africa\/sites\/31\/2025\/11\/sm_1762528894.656105.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"704\" \/>\n\t<meta property=\"og:image:height\" content=\"408\" \/>\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\/one-thing-blocking-south-africas-r1-8-trillion-goldmine#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/one-thing-blocking-south-africas-r1-8-trillion-goldmine\"},\"author\":{\"name\":\"cfeditoren\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/#\/schema\/person\/068c7ab4e9634ae78ec5d54ec46598bb\"},\"headline\":\"One thing blocking South Africa\u2019s R1.8 trillion goldmine\",\"datePublished\":\"2025-11-07T18:35:46+00:00\",\"dateModified\":\"2025-11-07T18:52:21+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/one-thing-blocking-south-africas-r1-8-trillion-goldmine\"},\"wordCount\":760,\"commentCount\":0,\"image\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/one-thing-blocking-south-africas-r1-8-trillion-goldmine#primaryimage\"},\"thumbnailUrl\":\"https:\/\/static.africa-press.net\/south-africa\/sites\/31\/2025\/11\/sm_1762528894.656105.jpg\",\"keywords\":[\"South-Africa\"],\"articleSection\":[\"all news\",\"economy\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.africa-press.net\/south-africa\/all-news\/one-thing-blocking-south-africas-r1-8-trillion-goldmine#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/one-thing-blocking-south-africas-r1-8-trillion-goldmine\",\"url\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/one-thing-blocking-south-africas-r1-8-trillion-goldmine\",\"name\":\"One thing blocking South Africa\u2019s R1.8 trillion goldmine - 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