Capital expenditure remains robust

26 August 2008

South Africa’s economy remains in good health despite a slowdown in consumer spending, with the latest Nedbank capital expenditure report showing that 80 new investments, to the value of R336.1-billion, were announced for the first half of 2008.

“The sharp rise in the value of new projects announced is mainly due to major extensions to Eskom’s capacity expansion programme announced in this year’s National Budget,” Nedbank senior economist Nicky Weimar said in a statement this week.

“However, excluding Eskom’s programme, capital expenditure plans remained strong.”

According to Weimar, there were 64 new private sector projects, worth R72-billion, announced in the first half of the year.

The finance and real estate sector accounted for R38-billion of these projects, mostly consisting of housing developments, as well as the construction of new and expansion of existing retail facilities.

Likewise, the manufacturing sector featured strongly, with new projects of R25-billion, compared to R15-billion announced over the same period last year.

“For the year as a whole, manufacturing may show a decline because a large number of projects were announced in the second half of last year,” Weimar said.

“In contrast to the private and manufacturing sectors, new projects announced by the mining sector dropped sharply off high levels, as continued uncertainty over the future electricity supply possibly also contained expansion plans.”

As a result, only R6.5-billion of new projects were announced in the first half of this year, compared with R27-billion over the same period last year.

General government projects were also down from last year, with only 13 projects, worth R34-billion, being announced. The largest project in this category is the Moloto rail corridor development, which will provide an integrated transport link between Gauteng and Mpumalanga.

“While new capex plans by public corporations increased sharply, this was entirely due to the revisions to Eskom’s capacity expansion programme.”

Weimar concluded that capital expenditure would remain robust in the short term, with key threats being weaker-than-expected domestic and global economic growth and a worsening electricity supply constraint.

SAinfo reporter

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