Nedbank has recently unveiled its updated Capital Expenditure Project Listing for the entirety of 2023, indicating a substantial downturn in fixed investment activity throughout the year. The report, compiled by Nedbank’s Crystal Huntley and Johannes Khosa, highlights a notable decrease in fixed investment activity, with the value of new projects announced totaling R148.8 billion. This figure reflects a stark decline compared to the R392.7 billion and R259.9 billion recorded in 2021 and 2022, respectively.
According to Nedbank, the deceleration can be attributed to a moderation in new projects announced by both the private sector and public corporations. Projects announced by the private sector plummeted to R56.1 billion from R203.3 billion, constituting only 30% of the total investments.
Noteworthy among the private sector’s projects is a substantial R11 billion solar farm project in the Northern Cape by Mulilo Renewables, representing the largest investment. Moreover, nearly half of the private sector projects revolved around renewable energy sources, amounting to a cumulative value of R27 billion. This underscores the imperative for self-generation capacity in light of the nation’s energy crisis.
Public corporations announced six projects amounting to R27 billion during the year, marking a decrease of approximately R8 billion compared to 2022. The most significant among these is the R18 billion allocation from Lepelle Northern Water for the upgrade and refurbishment of the Olifantspoort and Ebenezer bulk water supply scheme.
On the governmental front, projects worth R101.6 billion were announced, with 60% attributed to the City of Cape Town (CoCT). These include substantial investments aimed at upgrading wastewater works, sewers, road infrastructure, and mitigating load shedding, with R45 billion allocated to the former and R24 billion to the latter.
The manufacturing sector disclosed projects valued at R19 billion, with BMW’s R4.2 billion investment in upgrading its Rosslyn plant being the largest. This initiative is expected to enhance energy efficiency, particularly in the production of vehicles like the BMW X3 plug-in hybrid.
Additionally, projects announced by the finance, real estate, and business services sector totaled R6.3 billion, encompassing the development of malls, business parks, and residential estates.
However, the Gross Fixed Capital Formation (GFCF) contracted by 3.4% quarter on quarter in Q3 2023, marking the first contraction in nearly two years. This decline was driven by reduced private sector outlays on machinery equipment and drops in transport and residential/non-residential buildings.
Aggregate investment by the private sector, public corporations, and government contracted by 3.1%, 4.1%, and 4.5% quarter on quarter, respectively. Factors contributing to this decline include higher interest rates, shrinking corporate profits, and delays in key infrastructure projects by public corporations.
Looking ahead, the outlook for fixed investment remains uncertain, with challenges persisting in the economic landscape. Consumer spending is expected to remain subdued, exacerbated by high interest rates and weak consumer confidence. Additionally, factors such as load shedding and a weak global economy will continue to hamper activity in key sectors like mining and manufacturing.
Despite the challenges, the private sector is anticipated to maintain cautious investment strategies. The Renewable Energy Independent Power Producers Procurement Programme’s seventh window is expected to bolster investment in renewable energy, albeit moderately.
Overall, GFCF is projected to grow modestly by 0.5% in 2024, with a more substantial increase to 3.9% anticipated in 2025. This growth will be supported by investments in renewable energy assets, improved global economic prospects, and higher commodity prices.
While the government is committed to infrastructure spending, progress may be slow due to budget constraints. Addressing the energy crisis, accelerating structural reforms, restoring fiscal discipline, and combating crime and corruption are identified as crucial steps to stimulate faster growth in fixed investment and enhance business confidence.
Below is a table outlining the mega projects announced in 2023 along with their anticipated completion dates and estimated values:
|Water Infrastructure Projects
|Glencore, Anglo American, Lebaelo, SA Gov
|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
This comprehensive overview provides insights into the current state of South Africa’s capital expenditure landscape and its projected trajectory, crucial for stakeholders navigating the economic environment.