The latest ‘Nedbank Capital Expenditure Project Listing’ report, published on February 13, shows the sharpest increase in fixed investment plans since 2021, reflecting a myriad of projects addressing infrastructure backlogs, particularly in road and water systems.

Last year, Nedbank reported a dramatic decline in fixed investment activity for 2023, with persistent power outages, rising interest rates and cost pressures weighing on profitability and eroding business confidence.

One year on, however, the picture is different, with a cautiously optimistic outlook among private-sector investors.

Wins through initiatives such as Operation Vulindlela have been bolstering interest in public-private partnerships (PPPs) as South Africa looks to plug infrastructure gaps in water and sanitation, road infrastructure and continues to focus on scaling energy sources.

The value of new projects announced since the last listing is R445.9-billion in 2024, up from R210.1-billion in 2023.

Also, the composition of new projects changed noticeably in 2024.

Government has replaced the private sector as the major driver, with plans totalling R199.8-billion, reflecting a 161% jump and accounting for 44.8% of all new projects announced.

At the same time, public corporations announced projects worth R150.5-billion, or 33.8% of the total, significantly up from R35.8-billion in the previous year.

The private sector announced plans valued at R95.6-billion, or about 21.4% of the total – a decline of 4.3% compared with 2023. This sluggishness can be attributed to weak economic growth, with the private sector largely opting to wait and see how the May general elections would evolve and whether structural reforms would improve underlying operating conditions.

Given the lag between project announcements and implementation, the pickup in investment plans bodes well for gross fixed capital formation this year, Nedbank group economic unit economist Crystal Huntley said at the report launch in Sandton.

Even so, the risks to the outlook remain tilted to the downside, she noted, dependent on the public sector’s ability to follow through on its plans and move decisively towards lifting the long-standing infrastructure constraints on faster economic growth and job creation.

Gauteng Cooperative Governance, Traditional Affairs and Infrastructure Development MEC Jacob Mamabolo noted that the key issue facing public sector infrastructure projects was delivery.

“There’s consensus in the country that infrastructure is quite critical to the economy, and government is putting money there. But I’d like to frame the problem differently, that in the delivery process, in the project pipeline, in how we deliver, that’s where the challenge is.

“The reason why we’re not getting positive spin-offs from the investments on infrastructure is precisely because the pipeline is not as clean as it’s supposed to be. It’s a bit blocked. Money can’t flow and we can’t get a multiplier effect on every rand that is spent or invested,” he said.

He cited the Gauteng government’s Infrastructure Delivery Platform as a digital solution to streamline projects and improve transparency. The platform aims to manage risks, ensure data-driven decision-making, and track project statuses in real time.

Mamabolo noted significant challenges, including fragmented governance and inefficient use of funds, which often result in unspent money.

“There will never be enough money for infrastructure, but with the little that we have, we’re not spending that money in the most efficient and effective manner. In actual fact, huge sums of money get returned back to the fiscus, not being spent by various departments, municipalities and provincial governments,” he said.

He stressed the need for a deliverable-based system with tangible evidence of project progress and outcomes to combat corruption and ensure accountability.

Meanwhile, despite the delivery risks, the improvement in fixed capital formation was welcomed by Nedbank executives and economists, who pointed out that the improvement was in large part a result of a significant jump in new projects announced by government and public corporations, accounting for 78.6% of the total.

General government announced projects worth R199.8-billion. These include a public housing and community development programme valued at R43.7-billion and Phase 2 of the Rooiwaal wastewater project worth R35.8-billion.

After two years of weak investment, public corporations plan to spend R150.5-billion in the years ahead on energy projects, water resource developments, refurbishments of health facilities, airport infrastructure, road rehabilitation and water and sanitation. This reflects a sharp increase from the R34.7-billion worth of projects announced in 2023.

However, private-sector plans declined to R95.6-billion from R99.9-billion. Accounting for a meagre 21.4% of total project announcements, the R18-billion Bankenveld District City development is the largest project planned by the private sector. It is an ambitious mixed-use development comprising residential, commercial, retail, industrial, educational and healthcare components and is situated between Woodmead and Marlboro in Johannesburg.

About R43-billion of the announcements by the private sector are energy-related, with the Risk Mitigation Independent Power Producer Procurement Programme accounting for 57% of this total. This indicates that the country’s shift to renewable energy continues and remains an integral driver of private fixed investment.

Additionally, gross fixed capital formation (GFCF) rose by 0.3% quarter-on-quarter in the third quarter of 2024 following four consecutive quarters of contraction. The improvement was driven by increased outlays by the general government and public corporations, while private-sector investment slipped deeper into contraction.

Nedbank’s Capital Expenditure Project Listing further highlights that while government capital expenditure has rebounded, the private sector remains hesitant, largely focusing on renewable energy. Structural inefficiencies, high costs and policy uncertainty continue to weigh on private-sector confidence.

Inflation containment and recent interest rate cuts by the South African Reserve Bank have provided a more favourable economic environment. However, structural constraints remain a significant obstacle to sustained investment growth.

The National Transmission Development Plan could attract private-sector participation if successfully implemented, mirroring the success of the Renewable Energy Independent Power Producer Procurement Programme.

Looking ahead, economic analysts expect modest growth in GFCF of 1.3% this year and average growth of 2.3% over the next three years.