In 2024, annual SA investment was down 17% from 2015, with a further fall in the first half of 2025. As a result, the investment rate — the share of gross fixed capital formation in the GDP — dropped to 14% in June, compared with 18% a decade earlier. Most economists agree that the investment rate should reach 20% for sustained economic growth to take place.
The fall in investment is mostly due to a sharp drop at the height of the Covid-19 pandemic in 2020, followed by a weak recovery. But public investment began falling well before the pandemic. The public sector contributes under a third of national investment but accounts for three-quarters of its total decline since 2015.
However, in the past two years private investment has also seen a significant fall, reversing its recovery from the pandemic downturn. The decline in investment over the past decade occurred in four phases.
First, 2015-19 saw a marked fall in public investment. State-owned company (SOC) investment plummeted 37%, and general government investment by 19%. In the same period private investment climbed by 5%.
Eskom dominates
The decline in public sector investment in this period reversed an extraordinary surge in growth from 2005-15. At the start of that period high mining prices buoyed government revenues, while pressure grew to upgrade public infrastructure, especially Eskom.
In the decade to 2015, SOC investment more than tripled. General government and private investment more or less doubled in the same period.
By 2015, Eskom dominated SOC investment. Its capital expenditure jumped from 2% of national fixed capital spending in 2005 to 11% in 2013. Then its share began to fall. By 2019, it had plummeted to 4%.
In 2020 it slipped to 3%, where it has more or less levelled off. In constant rand, Eskom’s investment dropped from more than R100bn in 2014 to less than R40bn a decade later.
Pandemic halts progress
Second, the pandemic in 2020 saw an investment collapse. Again, SOC investment declined most sharply, by about 22%. For general government, the figure was 10%; for the private sector, it was 15%.
Third, for three years after the pandemic, investment experienced a modest and incomplete recovery. SOC investment was again the most volatile, regaining 15% of its lost ground, compared to 9% for private business and 5% for general government.
Finally, from mid-2023 to mid-2025 a renewed fall in investment across the board reversed the recovery from the pandemic. Capital formation shrank 10% over these two years, pushing the total back down to levels last seen at the end of 2021. SOCs saw the steepest fall, reporting an extraordinary 27% contraction. Both general government and private business investment dropped 8%.
Smarter investment
In the private sector the latest drop presumably results in large part because producers reconsidered investment plans as load-shedding mounted in 2023. Moreover, both public and private investment has been squeezed by tight fiscal and monetary policies, with real cuts to government spending as well as persistently high interest rates.
The data suggests that the government has been unable to keep its promise of sustaining capital spending while shrinking its total spending. This is a standard commitment but also the usual outcome. In any case, the experience of the past 20 years points to the fact that bolstering spending on public investment isn’t enough.
Critically, more effort has to be put into picking worthwhile projects and ensuring they are delivered on time and at cost, without excessive looting or inefficiency. Otherwise, as Eskom’s experience shows we risk ending up with higher tariffs for at best limited improvements in infrastructure.
• Makgetla is a senior researcher with Trade & Industrial Policy Strategies.
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