South Africa’s projected investment in capital projects nearly halved in the first six months of 2025, after the government and state-owned companies failed to announce any new proposals.
According to Bloomberg, the value of newly announced projects fell to an annualized $17.5 billion, compared to $32.7 billion the previous year, with all of it coming from the private sector, according to the latest report by Nedbank Group Ltd. on the capital expenditure project list. Nearly 63% of the investments were energy-related, the report noted.
“The increase in private sector activity reflects the structural shift towards renewable energy and the central role of energy security in investment decisions, as well as improved macroeconomic conditions,” the note stated.
Years of underinvestment and poor management have left Africa’s largest economy with a significant infrastructure backlog, contributing to economic stagnation.
President Cyril Ramaphosa previously estimated that the country needs up to $88.5 million in public sector infrastructure investment and another $177.1 million from the private sector to meet its infrastructure targets by 2030. The National Treasury has allocated $57 million over the next three years for public infrastructure, hoping to attract private sector participation.
The main drivers of investment activity in the first half of the year were electricity, gas, and water, with projects including Earth & Wire’s EnergyFields energy facility, as well as the Overberg and Ishwati Emoyeni wind farms. “This underscores the structural shift toward renewables and the central role of energy security in promoting fixed investment activity,” Nedbank stated.
The value of private sector projects this year is the highest recorded since at least 2008, according to the institution’s data.
Still, Gross Fixed Capital Formation (GFCF) is expected to contract for the second consecutive year in 2025, falling by 1.5% before growing at a below-average rate of 2.2% over the next three years.
“Despite some isolated improvements that will support a slight uptick in GFCF for the remainder of the year, underlying conditions remain unfavorable for a broad-based recovery in fixed investment activity,” the unit stated, citing constraints such as U.S. tariffs, weaker external demand, lower commodity prices, and high public debt.
Source: Diário Económico
