Reserve Bank marks decline in capital spending

Fixed investments in the South African economy indicate the depressed investor confidence and constrained finances at State Owned companies.

The latest Quarterly Bulletin from the Reserve Bank shows real gross fixed capital formation decreased for a third successive quarter in the third quarter of this year. Capital spending by private business enterprises and public corporations contracted notably.

Capital investments in the economy are at the lowest in over 10 years. Private sector fixed investment was weighed down by reduced spending on transport equipment and non-residential buildings.

The Reserve Bank says the marked decline in capital spending by public corporations reflected the constrained financial position of many state-owned companies. South Africa’s foreign direct investment inflows fell by nearly R3-billion in the third quarter.

South Africa’s trade surplus with the rest of the world more than halved from the second to the third quarter. The value of merchandise imports increased more than that of merchandise and net gold exports. With the global economy expected to slow down, our ability to export will be negatively impacted.