South Africa’s economic growth potential is being sharply curtailed by chronically low fixed investment levels, locking the country into a cycle of weak job creation and poor productivity. Over the past decade, fixed investment as a share of GDP has slid to under 15%, well below the 25%+ range associated with rapid emerging market growth. This decline coincides with a period in which GDP growth has stagnated to under 1%.

Frans Cronje told The Common Sense that “the link between investment and growth is direct. When firms and the state invest less in infrastructure, factories, equipment, and technology, there is less capacity to produce goods, fewer opportunities for new jobs, and weaker future tax revenues. South Africa’s fixed investment rate was last above 20% of GDP in 2008, and since then, it has fallen almost every year, undermining the foundations for sustainable economic expansion”.

The knock-on effects are visible throughout the economy. Ageing roads, ports, and energy infrastructure choke off private sector growth. New business formation has slowed as confidence wanes and red tape rises. Investors remain wary, citing policy uncertainty, unreliable electricity, and the lack of credible structural reform as reasons to hold back. As a result, South Africa continues to underperform its peers, with fixed investment data in countries like Vietnam, India, and China consistently outpacing the local numbers.

Frans Cronje indicated that “it is not necessary for South Africa to remain in this low growth rut and that with sensible empowerment policies, refitment of existing energy infrastructure, a sound foreign policy, and secure property rights, it will be a simple matter for South Africa to triple its current economic growth rate into the medium-term. The challenge to South African analysts is to remain aware that relatively simple policy changes can put the country on a markedly different growth track”.