Some economists raise concerns about continued drop in gross fixed capital formation

JOHANNESBURG - Some economists have raised concerns about a continued drop in gross fixed capital formation, signalling weak investment into the country.

The worries follow the release of the quarter two GDP print, where the economy beat expectations to grow by 0.8% in the three months through June.

Mining and manufacturing boosted economic performance on the supply side, while household consumption spurred growth on the expenditure side.

Gross fixed capital formation decreased by 1,4%, pulling off 0.2 of a percentage point from overall growth.

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“It’s been a mix of things that have contributed to the decline in investments,” said the chief director for national accounts at Statistics South Africa (Stats SA), Bokang Vumbukani-Lepolesa.

In the period under preview, a drop in public corporation investment was prominent, even as private business investment rose.

Economists believe one of the weak links in the sluggish economic scenario going forward is the continued negative performance of fixed capital formation, which is the kingpin of sustained economic growth.

Meanwhile, government said South Africa remains a viable investment destination, welcoming the recent announcement that global retail giant Walmart will open its first local stores in 2025.