If economic reform is to succeed and South Africa manages to avoid permanent institutional failure, the government needs more than reactive coordination measures, urgent reconstruction is required, the authors argue.
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South Africa’s Gross Fixed Capital Formation (GFCF) is low at 14% of GDP, but it could “easily” rise up to 20% over a decade through better partnership between the government and the private sector.
This was according to renowned economist Dr Roelof Botha, who was questioned by BR about what it would take to increase the level of capital investment by both the government sector and the private sector. GFCF refers to spending on long-term assets like machinery, factories, transport infrastructure, and buildings—assets that typically help to generate economic growth and jobs.
The GFCF increased marginally in 2025, but remains well below the 20 percent plus levels in the mid-2000s in South Africa, and a current world average of 28% of GDP. The governments' National Development Plan has a target of 30%.
Dr Botha said GFCF never really recovered from the state capture years of nepotism and corruption in state organisations, but the figure could be raised in the future with greater private sector involvement in all levels of government, from national to municipal government structures, and in every level of the tender process right from the project identification stage.
Earlier this month, a list of fixed investment projects compiled by Nedbank showed that the value of new announced projects in 2025 had increased by 16% to R705,6 billion.
The improvement was driven by a rise in private sector investment announcements, with project loans more than tripling from R116,2 billion in 2024 to R382,5 billion. The largest of these was Vodacom's R85,2 billion Vision 2030 project to expand and modernise digital infrastructure. The second largest was a R50 billion inland port facility in Gauteng led by NT55 Investments.
“By contrast, project announcements by the general government declined noticeably, following sizable commitments in 2024,” Nedbank said. Renewable energy and the central role of energy security underpinned fixed investment activity.
Dr Botha said Operation Vulindlela, the initiative between the SA Reserve Bank and Treasury to unlock bottlenecks that suppress GFCF, was starting to result in tangible benefits for the economy.
Centre for Development and Enterprise executive director Ann Bernstein wrote on their website Wednesday that the government is treating systemic state failure with band-aid solutions such as task teams, commissions, and crisis committees, rather than confronting the root causes of institutional collapse and implementing the fundamental reforms needed to build a capable state.
“Yes, the picture is better than it was in 2019. Growth has ticked up, but this is not a country that has absorbed the lessons of its decline and chosen a convincingly new path. We are drifting, not reforming,” she wrote.
Investec chief economist Annabel Bishop said at the start of this year that the SA Reserve Bank quarterly bulletin had shown that fixed investment growth had contracted over 2025 in the available data (first three quarters of 2025) by -2.7% year-on-year, versus the same period in 2024—another contraction after 2024’s -3.9% year-on-year contraction. Areas of weakness were in general government and private sector GFCF, which fell by -1.4% and -3.6%.
“If reform is to succeed and South Africa is to avoid permanent institutional failure, we need more than reactive coordination. We need urgent reconstruction. That means confronting why the state has lost capability,” Bernstein wrote.
“It means ending cadre deployment. It means removing incompetence and corrupt officials. It means appointing leaders with the expertise, authority, and integrity to deliver results... You cannot restore credibility with speeches, commissions, and committees alone,” wrote Bernstein.
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