South African Chamber of Commerce and Industry CEO Alan Mukoki. Picture: FREDDY MAVUNDA
South African Chamber of Commerce and Industry CEO Alan Mukoki. Picture: FREDDY MAVUNDA

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INVESTMENT will be muted this year, particularly from the private sector — another reason the economy is likely to grow below 1% this year.

Investment growth will decelerate to just 0.3% this year, according to the Treasury. Investment growth data for last year have not yet been released.

Exchange rate depreciation and higher risk premiums have increased the cost of borrowing as well as the cost of imported capital equipment, slowing public and private investment growth more than expected in October last year.

Investment growth is expected to improve only gradually to 2.7% by 2018, supported by a moderate increase in global demand and easing domestic constraints. "If current collaborative efforts by government and business successfully boost confidence, a stronger investment recovery can be expected," the Treasury said.

property

Senior government officials — including President Jacob Zuma and Finance Minister Pravin Gordhan — have recently held marathon talks with private sector leaders.

Business welcomed the budget, particularly the reaffirmation to work with the private sector and labour, South African Chamber of Commerce and Industry (Sacci) CEO Alan Mukoki said on Wednesday. Moves to reduce the regulatory burden on business and reduce the administrative costs of starting a business were reassuring, he said.

Sacci also welcomed what it said was government’s response to appeals from business for greater certainty in policies that affect investment decisions.

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The public and private sectors are launching Invest SA this year, aimed at helping investors clear the hurdles to start and run a business, the Treasury said.

Although the Treasury expected many businesses to delay capital expansion until conditions improved, it hoped its infrastructure spending would entice more private sector companies to participate, including in sectors such as energy.

The government and the private sector’s partnership in the energy sector has procured an estimated 6,377MW of electricity through the Renewable Energy Independent Power Producer programme.

Although electricity availability improved last year, the Treasury noted that the lack of new connections and uncertainty about future supply continued to hamper investment.

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Public sector infrastructure investment of R865bn over the next three years should support economic growth.

The government intended to "markedly increase active collaboration" with business, labour and civil society to boost the resilience of the economy, Mr Gordhan said yesterday.

"We need to ensure that as government, but also as SA more generally and particularly with the business sector, we ensure that we do whatever we can to avoid a downgrade," he said.