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Fixed investment in South Africa and Afghanistan is at the same level, according to the World Bank.

According to the body, the level of gross fixed capital formation (GFCF), also known as fixed investment, as a proportion of GDP in both countries is 15%.

GFCF refers to how much is being spent on fixed assets, including buildings, machinery, and infrastructure, and includes both private and public investment. GFCF is vital because it expands productive capacity, creates jobs, and drives long-term economic growth.

According to the World Bank, when a country has a fixed investment rate of around 15% it means that a large portion of the capital being invested is likely going merely to repair or replace existing, depreciating assets rather than building new, productive capabilities. Effectively, most money going into fixed investment in South Africa is for care and maintenance – maintaining existing roads rather than building new roads, for example.

For South Africa to grow at a rate that begins to tackle our very high rates of poverty and unemployment, the fixed investment rate needs to be at least 25%, preferably 30%. Without a much higher rate of GFCF South Africa will continue to struggle to achieve economic growth higher than the rate at which its population is growing.

The average rate of GFCF in sub-Saharan Africa as a whole (one of the fastest-growing regions in the world ) is 24%.

The fact that South Africa’s rate of fixed investment is the same as that of Afghanistan is an indictment. A country run by a backward theocratic regime, which treats women like cattle, and has been ravaged by war for half a century, receives the same levels of fixed investment, as a proportion of GDP, as South Africa.

Reasons for South Africa’s low levels of fixed investment include regulatory hurdles and mafia groups trying to muscle in on construction projects. In 2019, Sean Flanagan, the CEO of construction company Aveng, referring to the phenomenon of local armed groups demanding a cut of local construction projects, said: “Our German partners said they have worked in 80 countries, including Afghanistan and Iraq, but have never experienced anything like this.”

Given how low South Africa’s rate of fixed investment remains there is no evidence that anything has changed since Flanagan’s comments.