Record local investment boom

24 November 2004

South African businesses are showing the money. Local corporate giants, capitalising on a favourable economic climate, have announced their intention to invest billions in the country over the coming years.

The latest company to commit to an expansive investment plan is South African Breweries (SAB), the local branch of global brewing giant SABMiller, which says it will invest R5-billion in South Africa over the next five years.

SAB’s announcement follows commitments by energy giant Sasol, cement and lime producer PPC and state companies Transnet and Eskom to multi-billion rand investments.

 

 

Analysts have predicted that the SAB move will catapault domestic fixed investment in the country to record-breaking levels.

Local businesses have in the past been scolded for under-investing, with critics pointing out that it is difficult to encourage foreign firms to invest in South Africa if local businesses fail to make the commitment themselves.

Buoyant economic forecasts
The SAB announcement follows weeks of buoyant economic forecasts for the country: interest rates are down, the rand is strong, consumer spending is up and business confidence is positive – an upswing that has been felt in most sectors.

Only the export sector has been widely reported as suffering from the strengthening rand.

SAB MD Tony van Kralingen told the Business Day that the breweries move was a “direct result of SAB’s confidence in SA’s economy and its future prospects”. It’s also a giant change of heart for the brewery, with its total spending in the country over the past decade being only R4-billion.

The paper reports that Sasol has pegged its capital spending at R15-billion, while PPC intends boosting its annual capacity by a million tons by investing R1-billion.

Transnet and Eskom have earmarked R165-billion for infrastructure development, and investments forecast for vehicle manufacturers total R3.5-billion – a five-year high, according to the Business Day.

Economists say the current investment push differs from investments in the last decade, many of which resulted in job losses as companies opted for automation to ensure global competitiveness.

Now, spending on infrastructure – or “bricks and mortar” investments – points to underlying growth in the economy and is likely to boost employment, Business Day reports.

A knock-on effect is expected for the country’s small, medium and micro enterprises.

The vote of conference in the local economy is only tempered by the possibility of growth running aground on skills shortages – a concern already expressed by the construction industry.

Skills development initiatives, such as some of the government-led Sector Education and Training Authorities (Setas), have come under fire recently for non-delivery.

SouthAfrica.info reporter