Companies and government to spend big in South Africa in 2025

South Africa is expected to see the private sector, state-owned enterprises (SOEs) and the government increase fixed investment in 2025.

According to Investec Chief Economist Annabel Bishop, South Africa is expected to see fixed investment growth jump this year by 5.0% y/y after a contraction in 2024.

The first three quarters of 2024 saw the private sector reduce capital investment, primarily in transport equipment and residential buildings.

The cutback on transportation expenses comes after Transnet’s rail capacity increased, while port congestion also eased.

Bishop noted that the latest port congestion in South Africa is around 4 days on average, which is below that of the UK and France’s 8 days, the US and India’s 6 days and China’s 5.5 days.

South Africa’s SOEs increased capital spending by a notable 3.1% qqsa by Q3.24 to meet large infrastructure commitments, while the general government accelerated spend by 6.4% qqsa.

This follows increased investment in construction works and non-residential buildings by national departments about water infrastructure and the refurbishment of government-owned buildings, as well as the infrastructure of provincial governments.

The government noted that “untreated or ‘raw’ water supply availability is currently roughly in balance with existing demands on a national scale. That said, there are localised deficits and surpluses.

There are also factors that could lead to a decrease in supply, such as physical water losses in municipal distribution, degradation of wetlands and the impact of climate change.

Bishop noted that water and freight infrastructure are expected to see a significant rise in capital expenditure this year, and over the foreseeable future until 2030, with freight transportation having seen a trend of volumes declining since 2022.

The Bureau for Economic Research (BER) recently said that South Africa must invest R200 billion into rail infrastructure, and R100 billion into its water infrastructure to hit its ambitious growth target of 3% this year.

Unfortunately, for those in Gauteng, water constraints are expected to continue until at least 2028.

South Africa is a water-scarce country, with half of the world’s average rainfall and a very high evaporation rate.

Bishop noted that the potential to further develop surface water resources is limited, as 75% of exploitable surface water resources are already used.

The Department of Water Sanitation (DWS) said that a Gauteng Water Security Dashboard has been released every Friday since October 2024, which will continue until Phase Two of the Lesotho Highlands Water Project is finished in 2028

eThekwini has also experienced widespread outages and water outages in recent years, with the imbalance likely to continue until several major projects in the uMkhomazi Water System are completed over the next decade.

“For the next couple of years, both systems will remain strained with little redundancy and no reserve supply capacity. Municipal water losses (both non-revenue and revenue water) are excessive, accelerating rapid demand growth due to population increase,” said the DWS.

Two multi-stakeholder platforms have been established for Gauteng and eThekwini water issues and will draw the public and private sectors, as well as civil society to strengthen water security in the areas.

“The dashboard will enable all sectors to get a common understanding of the state of the water system and progress in strengthening the system. The intention is to host the dashboards on the DWS website and to develop them over time.”

South Africa dam levels stood at 90.7% capacity at the start of 2024, but it is now down to 74.5%.

“More than half of South Africa’s water supply comes from Lesotho and Swaziland, but the distribution of water via bulk infrastructure has experienced severe strain from higher demand, and insufficient maintenance and is the critical area,” said Bishop.

South Africa has been load-shedding-free for ten months, but there are still warning signs that it could come back this year.

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