Nedbank has released its updated Capital Expenditure Project Listing for the entirety of 2023, showing a massive decline in fixed investment activity across the year.
The listing, done by Nedbank’s Crystal Huntley and Johannes Khosa, shows a sharp fall in fixed investment activity in 2023, with the value of new projects announced amounting to R148.8 billion. This is a sharp decline from the R392.7 billion and R259.9 billion in 2021 and 2022, respectively.
“The slowdown resulted from a moderation in new projects announced by the private sector and public corporations. Projects announced by the private sector fell to R56.1 billion from R203.3 billion, accounting for only 30% of the total,” Nedbank said.
The largest project announced by the private sector – a solar farm in the Northern Cape by Mulilo – Renewables is worth R11 billion.
Nearly half of the projects announced by the private sector involved the shift to renewable energy sources, with projects cumulatively valued at R27 billion, highlighting the need for self-generation capacity due to the nation’s energy crisis.
Six projects announced by public corporations during the year amounted to R27 billion – roughly R8 billion less than in 2022. The largest of these is the R18 billion from Lepelle Northern Water for the upgrade and refurbishment of the Olifantspoort and Ebenezer bulk water supply scheme.
Although the general government announced R101.6 billion worth of projects, 60% of these are projected by the City of Cape Town (CoCT), including R45 billion for upgrading wastewater works, sewers
and road infrastructure and R24 billion toward minimising load shedding.
The manufacturing industry announced R19 billion worth of planned projects, with the largest being the R4.2 billion investment that BMW is making to upgrade its Rosslyn plant. The upgrade will see manufacturers making more energy-efficient vehicles like the BMW X3 plug-in hybrid.
Projects announced by the finance, real estate, and business services sector amounted to R6.3 billion. This included three malls (one new and upgrades of the remaining two), a business park, and two residential lifestyle estates.
Gross fixed capital formation (GFCF) contracted 3.4% quarter on quarter in Q3 2023 – the first contraction in nearly two years, driven by a quick turnaround in private sector outlays on machinery equipment and drops in transport equipment and residential and non-residential buildings.
On aggregate, investment by the private sector (74% of investment by the private sector and 74% of GFCF) contracted by 3.1% quarter on quarter, public corporations by 4.1%, and government by 4.5%.
“This decline reflects higher interest rates, shrinking corporate profits and failure by public corporations to make significant progress in delivering on key infrastructure projects essential to supporting capital spending by the private sector.”
Unfortunately, the outlook for fixed investment remains cloudy, with the recovery in fixed investment struggling to gain momentum amid the challenging economic environment.
“Consumer spending is likely to remain subdued, particularly in the first half of the year, depressed by high interest rates, worries about job security and weak consumer confidence,” Nedbank said.
“On the production side, persistent load-shedding and a weak global economy will continue undermining activity in the mining and manufacturing sectors.”
“Business confidence is unlikely to improve significantly in 2024 due to persistent infrastructure constraints, slow economic reforms, and higher production costs.”
With this in mind, the private sector will be cautious when making large capital investment spending, even if the seventh window of the Renewable Energy Independent Power Producers Procurement Programme will continue to support investment in renewable energy.
Thus, GFCF is expected to grow only by a modest 0.5% in 2024 before rising to 3.9% in 2025, supported by renewable energy assets, more promising prospects for global growth and higher commodity prices.
The government will continue to spend on infrastructure programmes, but this will also be slow as the government contends with budget constraints.
“Faster growth in fixed investment can be achieved through resolving the energy crisis, accelerating structural reforms, restoring fiscal discipline, and tackling crime and corruption,” Nedbank said.
“All of which will lift business confidence, raise the country’s potential growth rate, and encourage investment by the private sector.”
The table below outlines the mega projects announced in 2023 and when they’re anticipated to be finished.
|Water infrastructure projects
|Lebalelo Water User Association
|Olifantspoort/Ebenezer upgrade project
|Lepelle Northern Water
|75 MW Northern Cape solar farm
|Air Products South Africa
|Urban Mobility Directorate projects
|Teraco expansion project
|Grootfontein solar projects
|Tygerberg Hospital redevelopment megaproject
|Western Cape Gov
|N3 Westville to Paradise Valley upgrade
|BMW X3 hybrid-electric
|AMSA renewable-energy project
|Rooiwal wastewater works repair and upgrade
|City of Tshwane
|Welisizwe Rural Bridges programme
|Ardagh Glass Packaging Africa
|Automotive manufacturing facility
|Volspruit North PGM project
|Residential development project
|Carnival East Village Property Company
|Shongweni Park lifestyle estate
|Solar power plant
|Square Kilometre Array project
|Tyre plant upgrade
|Lephalale solar project