CAPITAL spending by the government and private sector fell to its lowest level since 2005 last year as the contribution of the private sector waned, according to a report from Nedbank.
The figures cast doubt on whether the government can achieve its aim of spending R4-trillion on infrastructure over the next 15 years. They also highlight the need for the government to partner with the private sector to drive its investment programme.
Estimated capital expenditure on projects that have been announced fell to R148bn from R174bn in 2011, the third annual decline in a row, the Nedbank report, released on Thursday, said.
The value of new projects announced last year dropped to R88.1bn from R92.6bn.
The main reason for the decline was a scaling back of investment plans by the private sector, which more than offset gains in spending programmes by the government and public corporations, the report showed.
"This is worrying as the private sector accounts for the bulk of fixed investment activity undertaken in South Africa, making it a key driver of production and export capacity, and also the biggest employer," Nedbank economist Nicky Weimar said on Thursday.
"The fact that the private sector is not confident enough to raise the capital and undertake the expenditure for expansionary activity is not encouraging, as it caps the country’s ability to grow faster and employ more people over the medium term."
In the middle of last year, South African companies were believed to be hoarding more than R530bn in cash and low-yielding instruments, according to figures from Nedgroup Investments.
Analysts say businesses are unwilling to invest because of sluggish economic growth, the spread of strikes and concern over the likelihood of more state intervention in the economy.
"People are less likely to make a long-term capital investment when there’s a lot of uncertainty," electrical wholesaler ARB’s CEO, Byron Nichles, said on Thursday.
He said there has been little evidence of the massive infrastructure spending pledged by the government.
"What’s being said is not necessarily being implemented and that gives rise to uncertainty," Mr Nichles added.
The Nedbank report reflected problems in the mining sector, which was hard hit by widespread illegal strikes last year.
Last year, 11 mining projects worth R11.1bn were announced, down from 15 projects worth R42bn in 2011.
Conditions in the manufacturing sector, the economy’s second biggest, appeared to improve. It announced 19 new projects worth R15.1bn — accounting for about 17% of the projects announced last year.
The value of projects announced in the transport, storage and communication sector declined to R15.4bn from R19.8bn last year, the report said.
"The outlook for 2013 remains cloudy," Nedbank said, adding that a weak and vulnerable global economy would continue to undermine South Africa’s manufacturing and mining sectors.
"As a result, the private sector will remain wary to commit to large investment spending. However, fixed investment by the public sector could increase further as the government accelerates the roll-out of its infrastructure spending programme."
Nedbank expects growth in fixed capital formation by both the private and the public sectors to slow to just more than 5% this year from an estimated 6.5% last year.