South Africa’s state-owned companies have seen serious declines in fixed investment over the last decade, with public-private partnerships seen as the only way of increasing investment. <\/p>\n\n\n\n
STANLIB Economist Ndivhuho Netshitenze said that fixed investment in South Africa has fallen by an average of 1.3% over the last 10 years. <\/p>\n\n\n\n
Although South Africa has a good core national economic infrastructure network, this infrastructure has deteriorated massively over the last few years, and new networks have not been adequately developed and expanded.<\/p>\n\n\n\n
The National Development Plan, created in 2012, looked to address the issue by setting an ambitious target of increasing fixed investment spending to 30% of GDP by 2030. <\/p>\n\n\n\n
However, in Q3 2024, fixed investment in SA was a mere 14.8% of GDP, with the private sector making up the bulk of this investment, at 10.6% of GDP<\/p>\n\n\n\n
This is not only below the policy target but also low by historical standards. <\/p>\n\n\n\n
“In effect, SA has missed a generation of capital investment in roads, rail, ports, electricity, water, sanitation, public transport, and housing,” said Netshitenze. <\/p>\n\n\n\n
“To ensure sustained economic growth and improved services, public sector infrastructure investment needs to increase significantly from its current levels.: <\/p>\n\n\n\n
“Given that SOEs are tasked with providing economic infrastructure, at least half of this responsibility rests on companies like Eskom, Transnet, Trans Caledon Tunnel Authority (TCTA), and SANRAL.”<\/p>\n\n\n\n
However, significant constraints under SOEs from achieving their target. <\/p>\n\n\n\n
The investment shortfall is far too large, and SOEs lack the funds and capacity to meaningfully ramp up infrastructure spending. <\/p>\n\n\n\n
From its post-democracy peak in Q4 2013, fixed investment by SOEs has fallen by almost 50%. <\/p>\n\n\n\n
To get investments back to their peak levels, SOEs would need to increase their current investment spending by R134 billion (based on 2023 GDP levels). <\/p>\n\n\n\n
That said, SOEs would still be well below the R240 billion increase to reach the required 5% of GDP target. <\/p>\n\n\n\n
“This level of investment would have to be maintained for about five years to ensure sustainable economic growth,” said Netshitenze. <\/p>\n\n\n\n
“This means SOEs alone would need to spend R1.75 trillion over five years to address SA\u2019s infrastructure problems.” <\/p>\n\n\n\n
This is further complicated by the fact that the balance sheets of the country’s important SOEs have deteriorated over time, with many in serious financial distress. <\/p>\n\n\n\n
Many are unprofitable, leading to a rise in unsustainable debt accumulation followed by a need for major government bailouts. <\/p>\n\n\n\n
The debt levels for the 10 biggest SOEs increased by R313.6 billion between 2012\/13 and 2022\/23, with the government having to fork out a similar figure in bailouts. <\/p>\n\n\n\n
Thus, there is little room for additional debt or government help to close the fixed investment expenditure gap.<\/p>\n\n\n\n