To help turn around the trajectory of our economy and country, BLSA contributes to debates on important public policy issues facing South Africans. We cover a wide range of topics - from general economics to social policy issues such as gender rights and education.
BLSA commissions research from senior economists, policy analysts and academics to support the development of policy ideas. Opinion pieces and research reports are published and we welcome engagement via social media and other forums to advance these debates.
Content reflects the views of senior staff members or researchers, as well as board members, but should be seen as the work of the authors cited.
Make sure you don't miss any posts by subscribing to email alerts below.
04/10/2026 | By Busisiwe Mavuso
• Investment fell to 13.6% of GDP in the second quarter, its weakest level in five years and far below the 30% needed for credible growth.
• The state has budgeted more than R1tn for infrastructure over three years, but only one in six government tenders was awarded in 2025.
• The main constraint is skills. Private-sector expertise can speed up project preparation, bid evaluation and delivery, as the renewable energy programme showed.
• Business stands ready to help the state turn its infrastructure budget into live projects.
The GDP figures for the second quarter were disappointing, with the economy shrinking by 0.2%. But among the numbers, I was struck by how weak investment still is. Gross fixed capital formation (GFCF) was 13.6% of GDP. That was the weakest number in five years, despite the very positive work done since 2021 to turn around the performance of electricity and logistics systems. We have always known there is a lag effect – the economy must prove it is working better before businesses commit long-term investment capital. The business-government partnership has targeted 20% of GDP as a medium-term goal, though we have long seen 30% as the level needed to support credible economic growth. I know we are taking the right steps to get investment flowing.
But this is not a private-sector story alone – the public sector is a major investor, historically responsible for about one third of investment. In the February budget, finance minister Enoch Godongwana highlighted more than R1trn of infrastructure investment that the public sector is committed to over the three-year budget horizon. That would be material to the overall figures, given we currently see about R1trn of investment per year.
The problem is that those public-sector budgets are just not translating into live projects. Infrastructure SA, which sits within the Department of Public Works and Infrastructure, gave Parliament stark figures in June on just how difficult it is to get projects going. It reported that 2,549 government tenders were advertised in 2025, but only 433 (17%) had been awarded. Another 279 were cancelled before closing, while 1,837 had closed but had either not yet been awarded or had been abandoned after evaluation. With only one in six tenders being awarded, the R1trn budget is never going to be spent.
These constraints are solvable. Business has worked successfully with the public sector on many fronts, including turning around the performance of the electricity sector and the logistics system (though it is worth noting that while operating performance has improved, capital expenditure in Eskom, Prasa and Transnet is also a major challenge, with many of the cancelled tenders falling under those three entities). I believe we are well positioned to support the public sector to accelerate the procurement of infrastructure projects.
The constraints stem primarily from a resourcing problem. As I have written about several times, government delivery has been hampered by the exodus of skilled staff from the public sector. The president’s efforts to professionalise the civil service and turn around its capabilities are the right approach, and progress is slowly becoming evident. But while that process unfolds, there is little alternative but to draw on the skills of the private sector.
Effective infrastructure procurement processes require extensive expertise. To properly assess tenders, you need legal skills, economists and many engineering skills like geotechnical and civil. The private sector has these skills in relative abundance. To get tenders to work effectively, you need to start with good tenders based on well-assessed opportunities and proven feasibility that make sense for contractors to actually bid on. Then you need good technical evaluators to judge bids properly, with bid committees confident enough to make awards. You then need contract management and delivery, which includes good security plans to deal with construction risks.
There are good examples of where private skills have been used effectively to support public procurement. When the Renewable Energy Independent Power Producer Procurement Programme got going in 2010, the Independent Power Producer Office pulled in the best legal and engineering skills from across the world, assembling a crack team to prepare the requests for proposals and evaluate bids. Of course, one has to be conscious of conflicts of interest, but these are manageable. The public sector always determines the policy priorities. But to get the graft done on feasibility studies, document preparation and evaluating bids, private-sector experts can be contracted appropriately to deliver fast and high-quality programmes.
Business for South Africa has infrastructure as a critical growth pillar. We are ready to support government to facilitate a step change in the ability of the state to successfully develop and conclude infrastructure projects. We have demonstrated our ability to bring high-quality skills to the table to work on difficult public-sector challenges. We can do the same to accelerate successful infrastructure procurement. The GFCF figure is the magic number for the economy – we will not get growth happening without investment happening. We are aligned with the ambitions of the Department of Public Works and Infrastructure and Minister Dean Macpherson, and we can work together to achieve them.
There were, though, positive indicators last week that are worth highlighting. The business-government partnership is working on several strategic economic sectors where growth can be driven. Tourism is one of them, and it was good to see figures from Stats SA last week showing international tourist arrivals grew 7.4% year on year in August. Tourism Minister Patricia de Lille pointed to UN Tourism figures that show South Africa was the strongest-performing African destination during the first half of the year, and among the 20 best-performing destinations globally. This kind of demand has great potential to drive investment, and the minister was highlighting the figures at a Tourism Infrastructure Investment Summit. The sector is proving to be a real strength in our growth outlook. It provides a model for how we should be driving growth in other key sectors, including agriculture and mining. Investment is the key.
+++
BLSA is a business organisation that believes in South Africa’s future and shares the values set out in the Constitution. BLSA is committed to playing its part in creating a South Africa of increasing prosperity for all by harnessing the resources and capabilities of business in partnership with government and civil society to deliver economic growth, transformation and inclusion.
+++
Last year, BLSA launched the BLSA Reform Tracker, an innovative online platform designed to monitor and evaluate the progress of key government reforms affecting the business environment and economic growth. The fourth BLSA Reform Tracker Quarterly Review, covering April to June 2026, shows that South Africa’s overall reform completion index fell to 71.5 from 71.7 in the previous quarter, though it is still 26% above the March 2024 baseline. Read the Quarterly review for 1 April to 30 June here.
