Latest news with #NationalDevelopmentPlan
Daily Maverick
2 days ago
- Business
- Daily Maverick
We have an investment strike! Reviving SA's economy through domestic investment
Domestic investment, commonly known in economics as gross fixed capital formation (GFCF), is a critical driver of sustained and accelerated economic growth. It encompasses the total value of purchases made by the government, state-owned enterprises and the private sector of fixed assets, including infrastructure, machinery, equipment and buildings. At its core, domestic investment focuses on enhancing the economy's productive capacity, boosting competitiveness and creating a foundation for future job creation and income growth. Sustained high levels of investment at between 25% and 30% of GDP are needed in South Africa to get the economy to grow above 3%. Domestic investment plays a vital role in driving economic growth, enhancing productivity and generating employment opportunities. Consistently high levels of GFCF are often indicative of a nation on a positive growth trajectory, where increased capital investment leads to better living conditions, technological progress and stronger economic resilience. Moreover, GFCF is closely linked to investor confidence and future outlooks – when businesses and the government invest in long-term assets, it reflects a positive sentiment and a commitment to the country's development and prosperity. In emerging economies such as South Africa, where unemployment and inequality are deeply rooted, domestic investment – particularly in infrastructure – is crucial for fostering inclusive growth by boosting short-term economic activity and enhancing long-term productivity and access. Despite its vital role in economic growth, South Africa's GFCF as a proportion of GDP has been alarmingly low and on a downward trend for over a decade, falling from around 24% in 2008 to below 15% in recent years, significantly short of the National Development Plan's 30% target. This sharp decline signals deeper structural issues in the economy. South Africa has been trapped in a low-growth, low-investment environment where a lack of investor confidence, policy uncertainty and deteriorating public infrastructure deter both private and public sector capital expenditure. In 1993, at the dawn of the new democratic dispensation, the domestic investment to GDP ratio was as low as 11.2%. By 2010, with the Fifa World Cup in SA, investment peaked at 18.7%, and in 2024 it had dropped back to 14.2%. In the first quarter of 2025 the ratio was even lower at 13.5%. From 2010 to 2025, GDP annual average growth was only 0.3% while domestic investment was a very disappointing -0.12%. This sustained decline reflects waning investor confidence, policy uncertainty and weak economic fundamentals. Low investment undermines future productive capacity, employment creation and long-term economic growth potential. Figure 1 illustrates domestic investment at constant prices from 2010 to 2025, disaggregated by the government, state-owned enterprises (SOEs) and the private sector, revealing a clear trend of decline and stagnation. Government and SOE investment dropped from 6.3% of GDP in 2010 to 3.9% in 2025, while private sector investment decreased from 11.5% to 9.7% over the same period. Additionally, the ratio of private to public investment shifted significantly from 1.8:1 in 2010 to 2.3:1 by 2025. This indicates severe fiscal constraints, inefficiencies in public investment management and weakened state capacity to drive infrastructure development, which traditionally plays a catalytic role in crowding in private investment. The private sector is increasingly disengaged owing to uncertainty, infrastructure bottlenecks, regulatory issues and energy challenges. The rising ratio does not reflect strength in private investment, but rather relative collapse of public sector investment. Table 1 presents a summary of investment by type from the first quarter of 2010 to the first quarter of 2025, highlighting a clear structural shift. Most categories have seen a decline in their contribution to overall investment, apart from machinery and related equipment (including computers), which increased by 23.8%, the only category showing positive growth over the period. This suggests a structural shift towards more capital-efficient, tech-based investment likely driven by cost-cutting, automation and digital transformation. However, the decline in construction-related investments reflects stalled infrastructure and housing development, further hampering job creation and urban development. Table 2 indicates the contribution of the various sectors to investment from 1995 to 2024. Over the 30-year period, only three sectors had positive growth rates namely trade (with catering and accommodation), agriculture and manufacturing. All the other sectors had negative growth rates. The economic base sectors (agri, mining, manufacturing and tourism) did well with a combined contribution to investment in 1995 of 37.5%, which increased to 41.3%. These gains suggest potential green shoots in export-linked or value-added sectors, but broader deindustrialisation and disinvestment remain a concern: Electricity, water, finance and transport, which are critical for economic infrastructure, all saw sharp declines. Mining investment (-15.5%) declined despite being a traditional backbone, likely owing to policy and regulatory uncertainty. Several key factors contribute to South Africa's weak investment performance: Low economic growth and business confidence: Investors, as rational decision-makers, allocate capital where they anticipate future returns. However, South Africa's weak economic performance, averaging below 1% annual growth over the past decade, has diminished these expectations. Adding to this, political instability, corruption scandals and governance shortcomings have significantly weakened business confidence; Energy, infrastructure and supply-chain constraints: The persistent electricity crisis has severely hindered production and heightened operational risks for businesses. Load shedding deters investment, particularly in energy-intensive sectors such as mining and manufacturing. When combined with inadequate infrastructure investment and maintenance, the overall appeal and value of investing have been significantly diminished; Policy uncertainty, lack of a strategic plan and regulatory complexity: South Africa's record of shifting policies, ranging from land expropriation without compensation debates to unclear mining regulations, has created uncertainty that inhibits new investment; Government fiscal constraints: Government debt has reached a fiscal cliff of 75% to GDP. This growing debt weak financial management with ineffective expenditure have significantly reduced capital budgets and investment in especially infrastructure; and Poor governance, weak leadership, poor institutional capacity and ongoing corruption: Poor governance and corruption are deeply entrenched in all spheres of government, and transgression has no consequences. The data indicates entrenched structural weaknesses such as poor governance, limited strategic planning and weak leadership, and a lack of investor trust. If South Africa is to break free from the current cycle of stagnation, decisive action is needed to revive domestic investment. The following policy interventions are essential: Build infrastructure capacity and well-functioning supply-chain systems; Implement a plan, create policy certainty, and reduce regulatory complexity; Restore good governance at all levels including municipal and SOE capacity; Boost business confidence and support SMEs; Leverage the green economy potential and digital transitions; Crowd in private investment, simplify investment processes and provide targeted incentives for manufacturing and technology upgrades; Sectoral investment strategy: Leverage growth in agriculture, manufacturing and trade to drive reindustrialisation and rural development; and Improve investment efficiency: Use public-private partnerships (PPPs) and performance-based budgeting to ensure quality and accountability. Conclusion: A time for good governance and new bold leadership The South African economic ship needs to change direction through various structural change strategies. Domestic investment is a critical driver of economic growth and development. We need to escape the downward spiral of stagnant growth and increasing unemployment. Restoring investor confidence is one of the strategies through good governance, clear policy guidelines and by reducing regulations. Achieving this will require strong political leadership and a firm commitment to long-term national development over short-term political interests. DM
Daily Maverick
3 days ago
- Business
- Daily Maverick
SA needs structural reform and moral courage, not more fiscal tinkering
At the third time of asking, on Wednesday, 11 June, Parliament considered, debated and voted for the 2025 Fiscal Framework, the basis for the Government of National Unity's (GNU) very first budget. To paraphrase former US congressman and economist Phil Gramm, passing a pro-growth budget is like going to heaven – everybody wants to do it, but nobody wants to do what you have to do to get there. Unfortunately, the GNU was not willing to do what it takes, and instead pushed through a budget that will not produce the rapid investment and growth required to begin our journey out of the economic doldrums. Growth flat, investment dried up, and taxes on the rise. We will be back here next year, facing another round of tax increases, because there will have been little to no investment. A budget ought to be a blueprint for progress. A reflection of our values, our priorities and our path forward as a country. The 2025 Fiscal Framework was preceded by the GNU's 31 priorities in its Medium-Term Development Plan, a bold promise of reform and delivery. Yet the Fiscal Framework tabled in Parliament offers no clear roadmap for achieving those priorities. There is no strategic alignment between what the government says it wants to do and what it is willing to fund. Without that alignment, these priorities are reduced to political rhetoric. We've seen this playbook before. The National Development Plan (NDP), hailed over a decade ago as the blueprint for South Africa's long-term development, now serves more as a reminder of broken promises than a source of policy coherence. Most of its targets on jobs, education, crime reduction and infrastructure remain unmet. Over the past 10 years, our economy has grown at an anaemic average of less than 1% per year. In the most recent quarter, growth was a paltry 0.1%. The only sector showing sustained growth is financial services. Meanwhile, real economy, labour-absorbing sectors such as agriculture, mining, manufacturing, construction, trade and transport have all declined in their contribution to GDP. These are precisely the sectors that should be powering inclusive growth and job creation. Gross fixed-capital formation, which is the clearest indicator of future growth and productivity, remains stagnant at 4.2%. These numbers are warnings. And they are being ignored. The diplomatic disaster last month at the White House only confirmed what many investors already suspect: South Africa is becoming uninvestable. And we are seeing the consequences. I recently visited Accra, the capital of Ghana, and you can feel the difference in the air. Cranes fill the skyline, a clear signal of construction, investment and progress. How many cranes are visible in Johannesburg, Cape Town or Durban today? We cannot tax our way out of this crisis. We must invest our way out. And that means fundamentally rethinking how we use the public purse. We must prioritise investments that unlock growth – in infrastructure, digital connectivity and efficient public transport systems. We need to fast-track the rollout of modern special economic zones, backed by genuine incentives. Instead of bold reforms or pro-growth investments, the Budget leans on familiar and increasingly regressive tactics: raising taxes on the already-overburdened middle class and borrowing more from international lenders without a clear plan for debt repayment or structural reform. This year's tax increase comes disguised as 'bracket creep' in personal income taxes, effectively taxing South Africans more without explicitly changing the rates. Next year, there are already whispers of additional taxes on the horizon. The government is milking a shrinking base instead of expanding the economic pie. Years ago, when VAT was raised, we were promised serious spending reforms and a leaner, more effective state. That promise, too, has faded. The state remains bloated, with an oversized Cabinet and a civil service often rewarded more for loyalty than for performance. There are still no performance scorecards linked to Cabinet roles. There has been no movement on taxing high-turnover, high-risk sectors such as online gambling. And crucial functions such as policing and justice remain underfunded and underperforming. The human cost of this drift is staggering. Education budgets in key provinces such as Free State, KwaZulu-Natal and North West are taking a hit, on track to run out of funds to support teachers. Our doctor-to-patient ratio now stands at 1 to 3,000, a clear sign of a healthcare system under collapse. The National Prosecuting Authority continues to buckle under the weight of its mandate, unable to bring criminals to justice in a country overrun by corruption and violent crime. There are small signs of momentum. Minister Barbara Creecy's commitment to rail and transport reform is welcome. Fixing our logistics network is essential for reigniting growth in key sectors such as agriculture and manufacturing. But isolated reforms are not enough. We need a coherent, national strategy backed by real budgetary commitments. I reject the idea that this is the best we can do. South Africa does not need more fiscal tinkering. We need structural reform and moral courage. I am proposing three immediate steps to be pursued in round two and three of the budget process , asParliament considers the Appropriations Bill and the Division of Revenue Bill. First, cut wasteful spending. Initiate independent, sector-wide spending reviews to reduce inefficiencies, and reallocate funds to frontline services. Second, legislate for investment. Pass laws that make South Africa the easiest place in Africa to do business. Prioritise local businesses with the same urgency we show global ones such as Starlink.
RTÉ News
3 days ago
- Politics
- RTÉ News
Government hopes pace of housing announcements increases output
There may be no silver bullet to magically boost housing output, but the Government has certainly accelerated its own output on housing decisions. After a slow start, Minister for Housing James Browne has been making a raft of announcements in an effort to unblock problems and speed up delivery. There is no big bang, but the message now is on a constant flow of weekly actions. All this emphasises the pledge from Mr Browne that the housing crisis is an emergency and is being treated as one. Today brought three changes. Firstly, more powers and a broader remit for the Land Development Agency. Also, emergency legislation to quickly extend rent pressure zones nationwide. And the appointment of the former HSE boss Paul Reid to chair the new planning body, An Coimisiún Pleanála which replaces An Bord Pleanála. This comes on top of extensions to planning permissions, rental reforms, the establishment of the Housing Activation Office and the revised National Planning Framework. Also, there is a push to encourage local authorities to rezone much more land for housing. And there is more to come, with big announcements next month on the National Development Plan and a revamp of the current housing blueprint, Housing for All. In addition, it is clear that a downgrading of apartment standards is being examined to address the viability impasse. No surprise that the Opposition are underwhelmed with this spate of new measures. Social Democrats TD Jennifer Whitmore told the Dáil that the Government may be taking decisions, but she said they were "the wrong ones". Opposition parties have slammed the rental reforms with Sinn Féin leader Mary Lou McDonald labelling it the "Fianna Fáil rent hike bill". In particular, they have focused on the lack of protection for short-term renters like students who could face repeated rent hikes every time they move. For Mr Browne, it's clear that after a difficult start in the job, he seems to be on surer ground. But all acknowledge that any uptick in supply is some way off. What does success look like? Housing delivery takes years but before then, the direction of travel will be signalled by several strands of data. A Government source suggests that commencement figures are part of this, but they are not the only important piece of data. First up, ministers will be hoping to see a rise in planning permission applications, especially for large developments. Another important measure is how quickly these applications pass through the system. And if they end up in An Coimisiún Pleanála, how quickly are they dealt with. But trickier decisions loom, namely on potential tax breaks to stimulate private sector development. Builders have walked away from big projects citing the impossibility of delivering at a price buyers are willing to pay. Their solution is a tax incentive, perhaps on VAT. The political battlelines on such a measure are clear; Labour leader Ivana Bacik calling them "Bertienomics tax breaks". And there is already resistance within Government with Minster for Finance Paschal Donohoe publicly opposing them. Proponents of the measure in Government, claim these tax incentives would be different - narrowly drawn, time limited and targeted. Ministers know they will be a tough sell, but some believe they are necessary to deliver the big bang to scale up delivery.
IOL News
3 days ago
- Politics
- IOL News
Cabinet to decide on Israeli embassy closure in South Africa by year-end
International Relations Minister Ronald Lamola says consultations have taken place within the relevant government cluster system to prepare a memorandum for submission to Cabinet for the closure of the Israeli embassy in South Africa. Image: Leon Lestrade / Independent Newspapers The Cabinet is expected to decide by the end of the year on the potential closure of the Israeli embassy in Pretoria. This was revealed by International Relations and Cooperation Minister Ronald Lamola during a question-and-answer session in the National Council of Provinces on Tuesday. Responding to a question from EFF MP Virgill Gericke about the steps he has taken in honouring and executing the November 2023 resolution of the National Assembly to close down the Israeli embassy, Lamola said consultations have taken place within the relevant government cluster system to prepare a memorandum for submission to the Cabinet. 'In accordance with the constitutional principle of the separation of powers, the authority to decide on the possible closure of the Israeli embassy in South Africa rests solely with the Cabinet. 'Once Cabinet has deliberated and reached a final destination, the Department of International Relations and Cooperation will act in accordance with these directives,' he said. Lamola indicated that the Israeli embassy remained downgraded. 'The downgraded embassy only just facilitates the normal processes of visa and travelling of civilians between the two countries, with no full operation of a full embassy in terms of liaising on political, diplomatic, and also economic relations between the two countries.' He also said since the matter was processed through the Cabinet process, he was unable to specify the date it will be resolved. 'But I can state that before the end of the year, Cabinet will have processed the matter.' Asked what outside forces were exerting pressure on the Cabinet or the government to relent on its initial resolve to close the Israeli embassy, Lamola said the authority to decide on the possible closure of the Israeli embassy in South Africa rests solely with the Cabinet. 'Cabinet has to undergo its internal processes, which it will be undergoing to deal with this matter, and it is being processed. 'It will be processed objectively, in line with the South African constitution, with no external pressure to be exerted on the South African government by any forces or anyone. The South African government will act within its sovereignty to make decisions informed by facts, policies, the Constitution, the National Development Plan, and national interests,' he said. Asked whether his department has considered other measures like economic sanctions against Israel as part of intensifying pressure against the continued Israeli attacks and aggression against Palestine, Lamola said the matter will require the Cabinet to deliberate on whether to exert economic sanctions and any other pressures that may need to be executed. 'But the South African government will continue to support the work that has been done by other countries. The European Union, its member states, have also begun to sanction some of the leaders of the Israeli regime in terms of economic sanctions, and also some countries like those in the G-7 have announced this type of measures.' He explained that the existing decision that has been taken relates to taking the Israeli government to the International Court of Justice. Lamola also said economic sanctions against Israel will require all countries to play a role through various instruments. 'The wheel is coming to a full cycle with all member countries of the UN, either putting economic sanctions, political pressure through diplomatic channels, and we are leading the legal route of the process. So there is a contribution by many member states of the UN to continue to exert the necessary pressure to stop the ongoing genocide by the Israel Defense Force.' Pressed on whether cutting diplomatic ties with Israel effectively disqualified South Africa from playing any mediating role in the much-needed peace process, Lamola said that as the Cabinet was processing the matter, all factors would be considered. 'But the resolution we are talking about is because it is a parliamentary resolution which the Cabinet is duty-bound to consider within the principle, obviously, of the separation of powers. 'We will look into all the facts and all the prevailing circumstances and present a way forward.'
3yon News
4 days ago
- Business
- 3yon News
ترامب من قمة السبع: إيران لن تنتصر ويجب أن تتفاوض قبل فوات الأوان
DMO Patience Oniha Dr Patience Oniha, Director-General, Debt Management Office, DMO, says Nigeria is on a steady path of economic recovery, driven by fiscal reforms, improved credit ratings, and targeted investments in infrastructure and environmental sustainability. Mrs Oniha said this at an investors meeting for the Series III Sovereign Green Bond issuance on Monday in Lagos. She said that Nigeria had recorded notable improvements in its macroeconomic fundamentals, including stabilising inflation, gradual Gross Domestic Product, GDP, growth, and a rebound in crude oil production. According to her, global credit rating agencies, including Moody's and Fitch, had upgraded Nigeria's outlook, reflecting growing investor confidence in the country's economic trajectory. 'We have seen improvements in our ratings. There is clearly a difference from where we were before. 'This suggests that the reforms are working, even if the results are gradual,' she said. On inflation, Mrs Oniha said that while it initially spiked to 30 per cent, it has since stabilised between 23 per cent and 24 per cent. 'That stabilisation is an indication that the economy is responding to monetary and fiscal policies,' she said. She stressed the importance of GDP growth and infrastructure investments. 'We have seen post-COVID growth, though we acknowledge it should be higher. 'That is why there is a strong focus on infrastructure through the three-year National Development Plan. 'It is private sector-led, and once infrastructure improves, growth will accelerate,' she said. She highlighted the recovery in oil production, noting that Nigeria had increased output from below one million barrels per day to between 1.5 and 1.6 million barrels. She said that reforms in the oil sector, which include the unbundling of the NNPC into a limited liability company, were yielding results. Turning attention to Nigeria's growing commitment to climate financing, Mrs Oniha announced plans to issue a N50 billion Sovereign Green Bond. According to her, the bond, which follows earlier issuances in 2017 and 2019 totaling about N25.69 billion, is part of the country's broader strategy to tackle climate change and support environmental sustainability. NAN
