SA’s fixed investment crisis escalating

2 weeks ago written by

If you were hoping for economic recovery to grace South African shores soon, your hopes will be proven worthless, warns the Institute of Race Relations (IRR) in its latest evaluation of fixed investment levels in the country.

The IRR says levels of fixed investment are falling so far behind what is necessary to secure an economic recovery in South Africa that there is no hope of securing job creation or lowering the levels of poverty.

According to IRR research head, Thuthukani Ndebele, the South African government’s National Development Plan set a target for fixed investment levels to reach 30% of GDP. “However, the latest number is just 19.6%. This is much too low to drive an economic recovery capable of securing the jobs to address levels of poverty and inequality in South Africa.”

In it’s latest research report the IRR also found:

• Levels of fixed investment as a proportion of GDP have fallen since 2008.

• Levels of private sector fixed investment as a proportion of all fixed investment have fallen very sharply from 74.9% in 2005 to just over 60% today.

• There is a close correlation between levels of fixed investment and levels of economic growth. As fixed investment slows, so does the economic growth rate.

• There is a trend of investors seeking out relatively high skilled tertiary sectors of the economy instead of sectors such as mining, manufacturing, and agriculture. 

Ndebele added: “It will take structural reforms to turn fixed investment levels upwards again. To attract investment into the mining and manufacturing and agricultural sectors those reforms will require a fundamental reworking of the policy environment. Without such reforms the economic prospects of less skilled people in poorer areas of the country will remain bleak.”

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