Current Government and Private Investment in the South African Economy

SOUTH AFRICA - Report 29 Apr 2016 by Iraj Abedian

​South Africa needs more investment spending than is currently taking place in order for the economy to grow at a rate that is necessary to pull millions of people out of poverty, generate employment opportunities and address the pressing challenge of high income inequality. Of more pressing current urgency, the country needs to escape being downgraded into speculative investment territory by the world’s leading credit rating agencies, all of which have expressed concern over the country’s economic state, particularly the prevailing low growth environment. The National Development Plan (NDP), a policy plan that was released in 2011 and has once again received attention as a guide for reviving the economy (particularly earlier this year during the Finance Minister’s budget speech), states that South Africa need to reach investment spending equal to about 30% of GDP, with public sector investment making up 10% of this. The Reserve Bank, however, indicates that investment as a share of GDP has dropped to approximately 20% of GDP since the financial crisis, and this goes a long way to explain the lackluster growth of the past years.

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