SA SEES SURGE IN INFRASTRUCTURE INVESTMENT AS POWER ISSUES SUBSIDE

By Eamonn Ryan

The value of announced new projects jumped to an annualised R793.7bn in the first six months.

The recent surge in infrastructure investment in South Africa, driven by improvements in electricity supply and reduced logistical challenges, presents promising prospects for the HVAC&R (Heating, Ventilation, Air Conditioning, and Refrigeration) sector. As the country ramps up its public and private construction projects, including those focused on energy infrastructure, healthcare, and airport development, the demand for advanced HVAC&R systems is likely to rise. This increased investment could lead to a boost in projects requiring sophisticated climate control solutions, opening new opportunities for HVAC&R companies to expand their market presence and contribute to the country’s growing infrastructure needs.

In the first half of 2024, South Africa saw a significant surge in the value of its planned investment projects, thanks to consistent electricity supply, reduced logistical challenges, and a deceleration in inflation, as reported by Nedbank Group.

The total value of newly announced projects soared to an annualised R793.7 billion ($43.6 billion) during this period, far exceeding the R193.2 billion reported for all of 2023, according to Nedbank’s Capital Expenditure Project Listing report published on Monday.

Most of these projects were finalised prior to the May 29 elections. Since then, business confidence has improved following the formation of a coalition government between the African National Congress and centrist parties like the Democratic Alliance, after the ANC failed to secure an outright majority for the first time since 1994.

Nedbank noted that the “government of national unity is anticipated to expedite structural reforms,” which should enhance business confidence and encourage companies to continue expanding their operations.

Most of the new projects are being driven by government and public corporations, with the private sector responsible for about a quarter of them. Public sector initiatives are primarily focused on the energy sector, healthcare, airport infrastructure, special economic zones, road rehabilitation, and water desalination, according to the report.

This increase in investment projects aligns with President Cyril Ramaphosa’s commitment to transforming South Africa into a hub of construction to stimulate economic growth, which has been sluggish at under 1% annually over the past decade due to logistical issues, crime, corruption, and mismanagement.

Recent improvements in electricity supply have been noticeable, with enhanced performance from state power utility Eskom leading to the elimination of planned power outages, known locally as load shedding, since late March. These outages had previously been a major deterrent for investment.

However, ongoing weak growth has strained South Africa’s public finances, and Nedbank anticipates that efforts to consolidate fiscal policy may slow the pace of project implementation.