Nedbank’s listing shows a dramatic decline in fixed investment activity in the first half of 2023 as persistent power outages, rising interest rates and cost pressures weigh on profitability and erode business confidence.
The value of new projects announced during the first half of the year fell to an annualised R173.1 billion from R248.5 billion in 2022.
The government replaced the private sector as the major driver, with planned new projects rising to R103.4 billion, accounting for 60% of the total value of new projects announced in the first half of 2023. In sharp contrast, no new projects were announced by public corporations following a flurry of announcements in previous years.
Capital projects by the private sector dropped to an annualised R697.8 billion, amounting to around 40% of the total value of new projects announced.
Nedbank expects the slowdown in capital spending to continue during the remainder of 2023 and into 2024. Gross fixed capital formation (GFCF) is forecast to grow by about 3%, down from 4.7% in 2022. The only boost will come from investment in renewable-energy generation and public sector infrastructure spending.
The sharp drop in new investment plans point to a deeper slowdown in 2024 and possibly beyond. The electricity shortage and its impact on domestic economic activity, combined the evolving downturn in global demand will keep business confidence subdued.