Thabang Mokopanele
22 January 2008
Johannesburg — ELECTRICITY, transport, communications and mining were expected to be the main drivers of real fixed-investment growth this year, First National Bank chief economist Cees Bruggemans said yesterday.
He expected real fixed-investment growth of 13%-16%. In a quarterly report that tracks confidence in the construction sector in the run-up to the 2010 Soccer World Cup, Bruggemans said public corporations would show the fastest increases, but government and private business should continue to expand steadily as well.
Strong investment growth trends in various sectors of the economy are expected to see the fixed investment ratio to gross domestic product ( GDP) easily top 25% by 2010.
According to last month's Reserve Bank quarterly bulletin, after increasing 9% in 2005, and nearly 14% in 2006, real fixed-investment spending rose 16% in the first three quarters of last year compared with 2006.
Fixed investment reached 21,2% of GDP in the third quarter of last year. Real fixed investment should grow another 13% to 16% this year, especially when future revisions became available, Bruggemans said.
He said fixed investment started last year at a more vigorous pace, with annualised growth of more than 19% in the first quarter, but this turned out to be an exception -- also in comparison with previous years -- with the annualised growth easing off to a more sustainable 13% in the second quarter of last year and again in the third quarter.
This pattern was observed in various sectors such as mining, government and asset classes of residential buildings, machinery and equipment. "For last year as a whole, fixed investment probably achieved 15% to 16% growth, once we allow for revisions later this year.
"With fixed investment now having reached 21% of GDP, the outlook remains for further steady gains in this ratio," Bruggemans said.
The great achiever last year turned out to be public corporations, which increased their real fixed investment 32%, a pace they sustained throughout the year, as compared with the 15% increase in 2006.
"Clearly, the bulk of this effort went into infrastructure creation," he said.
For public corporations, more than 50% of investment spending is in construction works, 35% in machinery and equipment, 10% in transport equipment and only 2% is in nonresidential buildings.
In contrast, general government was much slower, with fixed investment growth of 13% last year, but this was a great improvement over 2006, when a decline of 0,5% occurred.
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