South Africa: Confidence Key to Spreading Green Shoots Emerging in Fixed Investment

opinion

It's getting difficult to find any positive news flow in South Africa at this point. The frustration around the stasis in policymaking is apparent in many conversations that happen every day. With sentiment this bleak, it is important for us to take note of the positive developments.

Improving fixed investment is going to be key to any longer-term improvement in South African growth prospects. The dearth of private sector investment since 2013 explains a great deal of the decline in the country's potential growth rate in recent years. This has been compounded by the virtual halt in investment spending by state-owned enterprises in the last three years, as stretched balance sheets and deteriorating access to debt markets constrained them. In turn, this lack of investment has resulted in significant financial distress in the construction space.

In the last two years, construction companies Basil Read and Group Five have been forced into business rescue due to the lack of major projects in South Africa. Aveng sold its construction arm, Grinaker-LTA, to a consortium in August 2019. All these companies have retrenched staff to cut costs.

The good news is that after a 4.1% seasonally adjusted quarter-on-quarter contraction in the first quarter...

See What Everyone is Watching

More From: Daily Maverick

Don't Miss

AllAfrica publishes around 700 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.