Investment spending by public enterprises appears to be behind schedule. In the first half of the fiscal year – April to September – spending amounted to R56.7 billion, according to the Reserve Bank Quarterly Bulletin, released last week.
This was R5.3bn less than in the same period of the previous fiscal year and left R80.3bn of the current R137bn budget to be spent in the rest of the 2012/13 fiscal year.
Spending delays by the public sector have a spill-over effect on the private sector.
Eskom’s R320bn expansion programme got off to a late start and the bulletin noted the electricity supply situation would remain tight next year.
Electricity shortages have reduced industrial output for the past five years, eroding the economy’s growth potential.
In the case of Transnet, progress was recorded in September, when the company signed a multibillion-rand deal with a Chinese company to supply 95 locomotives to replace a portion of the freight rail operator’s ageing fleet.
In July Transnet successfully launched a $1bn (R8.6bn) bond at an interest rate of 4 percent to finance the company’s R300bn capital expenditure programme.
“The bond was the highest amount that had ever been raised by Transnet in a single issuance and without a government guarantee,” the Quarterly Bulletin said.
General government was responsible for most of the growth in capital spending in the third quarter, with an increase of 23.4 percent, after growth of 24.6 percent in the second; while public corporations showed growth of 7.2 percent, up from 7 percent. The quarterly figures are adjusted for inflation and seasonal factors and multiplied by four to show an annual trend.
Unstable conditions in the mining sector, which gradually spilled over to other sectors, discouraged private sector investment in the third quarter. Mining and manufacturing companies reduced the pace of capital spending, according to the bulletin.
Growth in private sector capital spending in the first three quarters was 2.2 percent, 2.7 percent and 2.8 percent; compared with growth in the same quarters last year of 4.2 percent, 3.7 percent and 7 percent, followed by 5.8 percent in the fourth quarter.
Apart from domestic factors, the bulletin also noted “relatively weak global economic growth”. Poor demand for local exports makes companies reluctant to expand existing capacity.
Citi analyst Gina Schoeman said the marginal improvement in private sector capital investment in the third quarter could have been due to a replacement cycle. “And if so, it is unlikely to be sustained.”
The finance and construction sectors boosted the third-quarter data, according to the bank. In the construction sector, investment “mainly took the form of purchases of machinery and equipment”.
The finance sector continued to spend on business information systems and other computer-related equipment, according to the bulletin.