Upgrades boost SA

Money directed at easing the power crisis, upgrading long-neglected railways and expanding ports saw the total value of new projects announced in the first six months of the year leaping to R336billion compared with R194billion for the whole of last year, the Nedbank Capital Expenditure survey showed yesterday.

Money directed at easing the power crisis, upgrading long-neglected railways and expanding ports saw the total value of new projects announced in the first six months of the year leaping to R336billion compared with R194billion for the whole of last year, the Nedbank Capital Expenditure survey showed yesterday.

This should be enough to help offset slowing consumer demand and prop up growth, according to the survey.

While the bulk of this - R243billion - was to boost utility Eskom's waning power capacity, private sector investment was also strong.

The survey showed planned private sector projects of R72billion compared to R104,6billion for last year, despite tough economic conditions. "This seems to suggest that we will have strong growth in fixed investment activity, particularly over the next two years," Nedbank economist Nicky Weimar said.

The planned spending will help support the economy and should ensure growth remains clear of recession levels, counteracting the dampening effect of slower household demand.

"It looks like it is a factor that will do the trick for us ... the fact that we have this infrastructure spending, that we have this private sector spending is going to keep us out of recession," she said.

Nedbank has forecast growth of 3,5percent this year and 2,8percent next year.

An electricity crisis in the first quarter of this year did not seem to deter companies from investing, although the survey could not quantify if plans were scrapped before being announced because of the energy constraints.

Government has proposed massive projects to upgrade infrastructure and to prepare for the 2010 Soccer World Cup.

Most of the money is directed to ease the power crisis, with Eskom battling to meet demand, and to upgrade long-neglected railways, and expand ports.

But other sectors are also adding to capacity, the survey showed.

Finance and real estate announced R38billion in projects, more than double the level for the whole of last year, thanks to a pick-up in low-cost housing plans.

Mining saw a fall, though, with first-half plans of R6,5billion from R49,7billion last year.

Growth for real estate was particularly surprising, given a series of interest rate hikes and strain on the property sector from stretched household budgets. - Reuters

X