Private sector doing its utmost

“The private sector has for long been the major contributor to Gross Fixed Capital Formation (GFCF) – or fixed investment. Only during 1975-79 did the state’s contribution to total GFCF exceed that of the private sector,” says Luke Doig, Senior Economist

“ In fact it was only the thrust towards the World Cup that saw

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Source: SA Reserve Bank; own calculations

the public sector’s share of total GFCF (in nominal terms) rise from the mid-20s to peak at 41.5% in 2009 before slipping to 36.5% last year. Certainly the 63.5% that the private sector contributed last year is substantially down on the 75%-level seen for 2000-07 but the welcome improvement seen in the last two years needs to be further built upon. The latest figure for the first quarter of 2012 reveals a private sector contribution level of 61.5%.”

The budget speech revealed that just 68.2% of budgeted public sector infrastructure spend was ultimately applied in 2010/11 – R178bn – with the outcome for 2011/12’s budgeted R226.6bn not yet available. It would seem that there is an urgent need for government to ensure that the R262.3bn, R284.5bn and R297.6bn budgeted for public sector infrastructure spend in 2012/13 through 2014/15 is applied to purpose.

Doig says it is concerning to note that current public sector wage negotiations will require a minimum of R30bn more than what was budgeted for; the worry is that this will be diverted from other earmarked operating and investment plans.

“The need for co-ordinated plans to increase fixed investment spending by all parties is all too apparent when considering that GFCF to GDP has only exceeded 20% three times since 1989; it was only in the 1970/80s that this ratio was consistently in the 25% region and that is what the country needs to be striving to achieve in order to build the capital stock that will prevent supply constraints,” concludes Doig.