10 mega-projects on the way for South Africa – including a major upgrade for BMW and a huge push for solar

 ·25 Jul 2023

Nedbank has released its updated Capital Expenditure Project Listing for the first half of 2023, providing details of major capital projects that are currently underway in South Africa.

The listing, which was complied by Johannes Khosa, Crystal Huntley and Busisiwe Nkonki, shows that there has been a dramatic decline in fixed investment activity in South Africa in the first half of the year, as load shedding, high-interest rates and cost pressures have weighed heavily on profitability and business confidence.

The value of new projects announced declined during the first half of the year and dropped from an annualised R248.5 billion in 2022 to R173.1 billion.

Nedbank added that the government replaced the private sector as the primary driver, accounting for 60% (R103.4 billion) of the total value of new projects announced in the first six months of the year.

That said, public corporations made no new announcements, following a barrage of announcements in previous years.

While the private sector funding of capital projects dropped to an annualised R69.8 billion.

The community, social and personal services industry had the highest levels of investment, with projects worth R45.3 billion, with 99.8% falling in the City of Cape Town’s (CoCT) infrastructure portfolio.

The CoCt has announced plans for a R36.4 billion wastewater upgrade and dedicated R8.6 billion to major upgrades to bulk sewers.

The manufacturing industry saw the second largest investment, with R24 billion worth of planned projects.

The biggest of which is the R15 billion planned expansion project at Ardagh Glass Packaging (AGP) Africa.

BMW is also investing R4.2 billion to upgrade its Rosslyn plant as it shifts to producing more energy-efficient vehicles, such as the new BMW X3 plugin hybrid.

ArcelorMittal South Africa (AMSA) is also investing R4 billion in constructing a 200 MW solar photovoltaic plant.

The electricity, gas and water industries also announced projects valued at R9.3 billion

Scatec will invest R5.1 billion into constructing three solar power plants with a total capacity of just under 300 MW, while the CoCT will also spend R2.5 billion on solar at Paardevlei and hydroelectricity at Steenbras.

However, Nedbank said that underlying investment activity remained subdued and well below pre-covid levels, which was mainly due to decreased sentiment.

The RMB/BER Business Confidence Index has remained below the neutral level of 50 for the past two years, which has been weighed down by power outages, surging operating costs, failing logistical infrastructure, tighter financial constraints and slow implementation of economic reforms.

“Consequently, the private sector has been hesitant to expand production capacity. Instead, capital expenditure over the past few years has been driven primarily by the energy crisis and resultant investment into renewable energy projects.”

Outlook

Gross fixed capital formation (GFCF) is predicted to decline from 4.7% in 2022 to 3% in 2023. The only growth will come from investment and public sector infrastructure spending, the group said.

It also stated that fixed investment growth is facing difficulties in gaining traction, causing private companies to postpone major investment initiatives due to the problematic economic environment.

It added, however, that companies in several industries already have sufficient capacity and do not need to expand their operations until demand improves dramatically.

The significant drop in proposed investment projects also indicates a more severe decline in economic growth in the future, specifically in 2024 and possibly even further ahead.

“The electricity shortage and its impact on domestic economic activity, combined with the evolving downturn in global demand, will keep business confidence subdued,” it said. .

“A sustained increase in fixed investment by the private sector will occur only when the energy crisis has been resolved and structural reforms are accelerated.”

The table below outlines the 10 mega projects announced in 2023 so far and when they’re anticipated to be finished.

Project CompanyEst. CompletionEst. Value
CoCT water infrastructure projectsCoCTDec-30R45 billion
Expansion at AGP AfricaAGP AfricaJan-27R15 billion
Grootfontein solar projectsScatecDec-25R5.1 billion
BMW X3 hybrid-electricBMWDec-26R4.2 billion
AMSA renewable-energyAMSADec-25R4 billion
Welisizwe Rural Bridges programmePublic Works Dept and othersDec-27R3.8 billion
Volspruit North PGM projectSylvania PlatinumDec-27R2.5 billion
Lephalale solar projectExxaroFeb-25R1.5 billion
Steenbras Hydro Pumped Storage CoCTDec-29R1.2 billion
Paardevlei solar and battery storageCoCTAug-26R1.2 billion

Read: Ramaphosa sounds the alarm on South Africa’s collapsing infrastructure

Show comments
Subscribe to our daily newsletter