South Africa spent 13.9% of its national income on new buildings, machinery and equipment (gross fixed capital formation as a percentage of GDP) in 2025. In 2008 the figure was 21.6%. The National Development Plan set a target of 30%.
These numbers from the South African Reserve sit at the heart of the Centre for Risk Analysis’s (CRA) Macro Review for September 2026, which examines where South Africa’s investment has gone.
Other emerging economies invest far more. China is at 40.5%, India at 32.9% and Indonesia at 31.4%. Developing countries that grow fast and create jobs usually sit between 25% and 30%. South Africa is twelve to seventeen percentage points below that range. At 14%, the country cannot lift growth and struggles to maintain the infrastructure it has.
The consequences are felt by every business, household, and citizen in the country. Real GDP shrank by 0.2% in the second quarter of 2026, ending six quarters of growth. The population grows by 1.4% to 1.6% a year. When output grows more slowly than the number of people, each South African becomes poorer.
The government has spent two years announcing reforms. The Bureau for Economic Research (BER) reports real progress on electricity, visas and digital services. But investors have not responded. The RMB/BER Business Confidence Index reached 47 in the first quarter of 2026, a near five-year high. By the third quarter it was back at 38.
Flow of money
Looking at the flow of money helps to understand why.
In 2005, foreigners held R3.12 in lasting stakes in South African companies for every rand South Africans held in companies abroad. By 2024 that figure was 75 cents. Foreign investors have also sold more South African shares than they bought on the JSE in each of the past ten years. Net sales came to R217.5 billion in 2025 and R108.2 billion between January and 26 September this year. The Macro Review calls this a dual wave of capital flight: foreign money is staying away and local money is leaving.
The state has cut its own investment too. Public spending on roads, dams, electricity and water supply was R216.8 billion in 2015. In 2025 it was R114.8 billion, in 2015 prices. All public investment, at R189.7 billion, is now below the R205.1 billion recorded in 1980. Private companies supply about 71% of total investment, but their spending fell by 3.0% in 2025. They cannot fill the gap left by a state that has stopped building the power lines, ports and water systems upon which their projects depend.
Some provinces are performing better than others. The Western Cape overtook Gauteng in 2025 as the top destination for commercial property investment, taking close to half the national total. KwaZulu-Natal announced more than R75.8 billion in projects in 2024. These gains mostly move existing capital from one province to another. They add little new money to the economy.
Investors also read the statute book. The law permits expropriation without compensation. Foreign investors face a requirement to cede 30% of the equity in their South African businesses under B-BBEE.
Fell out
In early 2026, Business Leadership South Africa and the Eskom chair, Mteto Nyati, fell out in public over who should own the transmission grid. The National Water Amendment Bill proposes to ban private water trading and to tighten use-it-or-lose-it water allocations. A company weighing a new mine or factory has to price in all of this before it commits.
South Africa competes for the same pool of global capital as the United States, the European Union and China – and especially its emerging market peers. A medium-sized economy can still win a larger share. That requires the government to drop its state-driven and anti-investment policies. Announcements will not do it, and neither will a rise in confidence that lasts one quarter. Investors will return when the rules they face change.
[Image: by Rawpixel]
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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