Capital investment in South Africa hinges on policy certainty
By Tarryn-Leigh Solomons
BUSINESSES planning major capital investment projects in South Africa are looking well beyond the current economic cycle, placing greater emphasis on policy certainty, infrastructure and the long-term operating environment before deploying capital.
That is according to Frank Blackmore, lead economist at KPMG, who says major investment decisions are rarely driven by short-term movements in economic growth or business confidence.
“Capital investments are generally planned over many months or even years,” Blackmore told Cape Business News.
“What investors need most is certainty and predictability.”
He said businesses need confidence that the regulatory, policy and macroeconomic environment will remain stable enough over the life of a project to deliver an acceptable return.
For many companies, investment decisions now extend beyond financing costs. Boards are increasingly assessing whether South Africa’s operating environment can support long-term growth.
Infrastructure remains a key factor in investment decisions
The country’s infrastructure challenges weigh heavily on capital investment decisions across several sectors.
Blackmore said businesses are assessing how unreliable electricity and water supply, transport costs linked to rail inefficiencies and deteriorating municipal infrastructure could affect long-term competitiveness.
“These factors can materially affect long-term competitiveness and profitability.”
Businesses are also evaluating whether municipalities are investing in infrastructure or allowing existing assets to deteriorate. Those assessments increasingly form part of the due diligence process before capital is committed.
Alongside operational risks, boards continue to monitor policy and macroeconomic developments as they assess whether South Africa’s investment environment is becoming more supportive.
Companies are deploying capital more selectively
While financing conditions have improved, businesses remain disciplined in how they allocate capital.
Blackmore said many companies are prioritising investment that strengthens existing operations instead of pursuing large expansion projects.
That includes replacing ageing assets, maintaining productive capacity and investing in projects that improve resilience through alternative energy, water security and logistics.
Companies are also favouring phased investment programmes and funding structures that preserve balance-sheet flexibility while allowing them to respond to changing market conditions.
The approach signals a growing focus on disciplined capital allocation as businesses balance growth opportunities with execution risk.
Energy and technology continue to attract investment
Investment continues in sectors where long-term demand and structural reforms support growth.
Blackmore identified energy, digital infrastructure, technology-enabled services and logistics as areas continuing to attract investment.
Energy security remains a key driver, while automation and digital transformation are increasingly viewed as essential investments that improve productivity, strengthen supply chains and enhance operational efficiency.
Blackmore said government infrastructure programmes and reforms in network industries could provide additional support for capital investment in South Africa over the medium term if implementation continues.
Strong execution will determine long-term returns
Blackmore said businesses often underestimate implementation risks while overestimating how quickly projects will generate returns.
Organisations should look beyond upfront capital costs and factor in lifecycle costs, operational readiness and changing market conditions before committing funds, he said.
Robust scenario planning and strong governance remain essential for projects expected to deliver returns over many years.
Artificial intelligence, automation, sustainability and supply-chain resilience are expected to remain key drivers of corporate investment over the next 12 to 24 months.
“Business leaders should recognise that capital investment is increasingly a strategic decision rather than simply a financial one,” he said.
“The most successful investments will be those that enhance adaptability, support workforce transformation and position organisations to compete in a rapidly evolving economy.”
Blackmore said South Africa continues to attract investment, but delivery will determine its long-term value.
