According to a BusinessTech opinion piece, investment in South Africa fell to 13.6% of gross domestic product (GDP) in the second quarter, the lowest share in five years. The figure comes as the economy recorded its first contraction in six consecutive quarters.
Busiswe Mavuso, chief executive of Business Leadership South Africa (BLSA), said the low investment rate signals a lack of confidence from the private sector. She noted that the public-private partnership target of 20% of GDP is still far below the 30% she believes is needed for credible growth.
Investment as a percentage of GDP measures how much of a country’s output is being spent on new factories, infrastructure, equipment and other fixed assets. Fixed investment is the part of spending that adds lasting productive capacity, as opposed to consumable goods.
Frans Cronje, an economist with Frans Cronje Private Clients, has warned that emerging economies on average invest about 25% of GDP in fixed assets. He argued that reaching that level would lift South Africa’s growth to roughly 4% and help bring the unemployment rate, currently around 30%, down.
The public sector has traditionally supplied about one third of total investment. In the February budget, Finance Minister Enoch Godongwana announced a commitment to spend over R1 trillion on public projects over the next three years. Mavuso pointed out that the challenge lies in converting those plans into live projects.
Infrastructure SA (Infrastructure SA) reported that in 2025 only 433 of 2 549 advertised tenders were awarded, roughly one in six. Mavuso said that without a higher award rate the R1 trillion budget will not be fully spent.
She also highlighted a skills shortage in government departments, noting that many specialist staff have moved to the private sector. The president’s effort to professionalise the civil service, she said, is a step in the right direction, though progress is slow.
For small and medium-size enterprises, the investment shortfall translates into fewer infrastructure contracts, limited expansion of logistics networks and slower upgrades to power and transport systems. Those conditions can raise operating costs and reduce market opportunities for suppliers and service providers.
While the outlook appears bleak, Mavuso remains optimistic that public-private partnerships can address the bottlenecks. She cited successful collaborations that helped turn around the electricity and logistics sectors as examples of what can be achieved when business and government work together.
South Africa’s central bank has recently raised the policy rate, adding to the cost of borrowing for both large firms and SMEs. The combination of higher financing costs and a weak investment climate creates a challenging environment for any business looking to expand.
Analysts suggest that improving the tender award process, retaining skilled public-sector staff and meeting the medium-term investment target could restore confidence and stimulate the flow of capital needed for growth.
Read more about the macro-economic context in our Markets & Finance coverage.
The second-quarter slump unfolded against a backdrop of volatile oil prices and a recent interest-rate hike by the South African Reserve Bank, which together dampened demand and added pressure to an already contracting economy. Mavuso warned that “the economy must prove it is working better before businesses commit long-term investment capital”, underscoring the link between macro-stability and private-sector confidence. While the GDP contraction marked the first in six consecutive quarters, the investment share of 13.6% of GDP hit its lowest point in five years, highlighting how external shocks can quickly translate into reduced capital formation.
Public-private partnerships are framed as a vehicle to lift the investment ratio toward a medium-term goal of 20% of GDP, yet Mavuso has repeatedly argued that a 30% share is the level required for credible growth. She noted that the public sector has historically supplied roughly one-third of total investment, a proportion that could be expanded if the R1 trillion three-year commitment is fully mobilised. The gap between the current 13.6% share and the aspirational targets reflects both the scale of needed collaboration and the urgency of translating policy intent into tangible spending.
The tendering cycle begins with the advertisement of projects, followed by a bid-submission window, technical and financial evaluation, and finally the award decision. In 2025, Infrastructure SA recorded 2 549 advertised tenders but only 433 were awarded, meaning roughly one in six made it to contract. This low conversion rate stalls the flow of funds from the R1 trillion budget, as projects remain on paper rather than entering construction. The process typically spans several months, and each delay pushes back the commencement of infrastructure work, limiting the annual investment that can be recorded.
Addressing the skills shortage in government departments is seen as a prerequisite for improving project delivery. Mavuso highlighted the exodus of specialist staff to the private sector and praised the president’s initiative to professionalise the civil service, noting that incremental progress is already evident. Retaining experienced personnel should accelerate the evaluation and award phases of tenders, allowing more of the planned R1 trillion to be spent within the three-year horizon and, ultimately, narrowing the gap between actual and target investment levels.
