Progress with capital formation in first quarter
A welcome year-on-year increase in capital expenditure by selected private sector industries was recorded in the first quarter of 2024, with the asset category for plant and equipment once again in pole position. Between January and March, this asset group witnessed capital expenditure of almost R52 billion, a slight increase over the figure of R51 billion recorded in the first quarter of 2023.
The asset class for vehicles and other transport equipment maintained its hold on second place with capital expenditure of R8.6 billion, followed by construction works, which more than doubled its capital expenditure from the first quarter of last year to a level of R6.8 billion.
Statistics S.A. conducts a quarterly survey amongst selected businesses in key sectors of the South African economy (excluding agriculture, financial intermediation, and sundry business services), which provides information that assists the benchmarking of the country’s infrastructure balance sheet.
An encouraging feature of the data in the survey for the first quarter of the year is the exceptionally strong capital formation growth in the sectors of electricity, gas and water; manufacturing; and mining and quarrying, which recorded year-on-year growth rates of 29%, 20%, and 13%, respectively.
Exhibit 1 | Private sector capital formation in key industries – first quarter
Source: Statistics S.A. Data as at the first quarter of 2024. Past performance is not a reliable guide to future performance. For illustrative purposes only and not indicative of any investment.
In recognition of the dire state of much of South Africa’s energy and logistics infrastructure, the government recently established the National Logistics Crisis Committee (NLCC), which, in partnership with the private sector, has been tasked with preparing a thorough overhaul of the efficiency and capacity of roads, railways and harbours. Although progress has already been made in restoring the ability of the country’s logistics infrastructure to handle the demand from the private sector to transport products to domestic and global markets, many challenges still lie ahead.
Infrastructure meets the fundamental needs of communities in all countries. The construction of water, sewerage, roads, rail, and ports represents one of the most significant drivers of economic growth and, if provided with sufficient scale, such development projects can provide employment for people in virtually all skill categories.
According to Andries van Heerden, the Group CEO of Afrimat, logistics and energy networks are such fundamental assets that, if they are built and maintained, businesses will use them. In a recent article published by Engineering News, he stresses that economic growth is dependent on adequate and efficient infrastructure.
In its reaction to the formation of the new government of national unity (GNU), the Centre for Development and Enterprise (CDE) has advised that the centre of government needs to be streamlined with more effective processes feeding into Cabinet to ensure better decision-making.
In a recent overview by Engineering News of the requirements that should underpin the advancement of the country’s infrastructure, it was pointed out that implementing organisations, such as municipalities and state-owned enterprises, should possess the required project management and engineering skills to implement such projects. Hopefully, the GNU will take note of these and other key requirements for the huge task that lies ahead for the NLCC.
