Business confidence remains a pressing concern in South Africa, with Consulting Engineers South Africa’s (CESA) Bi-Annual Economic and Capacity Survey (BECS), for the period for July – December 2023, revealing a 22% decline, reaching a low of 32, the weakest level since 2019. This drop, exacerbated by political uncertainty, corruption, and infrastructural constraints, has continued into the first quarter of 2024, falling to 30.
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The outlook for the first half of 2024 remains mixed. Larger firms expect earnings to stabilise, while medium-sized firms anticipate a modest increase of 5-7%. The order book to income ratio for larger firms has declined, indicating potential softness in future demand, while medium-sized firms have reported improvements.
The survey also indicates a promising increase in private sector investment, particularly in critical economic infrastructure such as electricity, water, rail, and ports. Fixed investment grew by 4.2% year-on-year in 2023, with the private sector contributing an average of 5% increase over the past two years. In contrast, investment by state-owned enterprises (SOEs) declined by 1.8%, following a significant 8.2% drop in 2022. Campbell highlights the growing role of the private sector: “The collapse of energy infrastructure, combined with a mounting water crisis, may serve as a catalyst for increased private sector investment. Government must create a more conducive environment for such investments.” This shift is evidenced by the private sector’s increasing involvement in construction works, now accounting for an average of 25% over the last two years, up from less than 10% in 2000. The findings of BECS underscore the need for sustained investment in South Africa’s critical economic infrastructure. The private sector’s growing involvement is a positive sign, but challenges such as low business confidence, high project cancellation rates, and uneven earnings growth persist. “The path forward requires a concerted effort from both the public and private sectors to ensure a steady pipeline of projects, fostering job creation and economic stability,” Campbell asserts. “Our improved outlook suggests increased activity in infrastructure design and planning, but the real challenge lies in executing these projects to drive sustained economic growth.”