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We take a look at the latest household consumption expenditure and gross fixed capital formation numbers in South Africa up the end of 2018 and find that both household expenditure and gross fixed capital formation is in decline, which is not good news for South Africa's economic prospects over the long term as gross fixed capital formation is the investment by companies in new plants, buildings and machinery and equipment that is meant to boost future growth. If no such spending takes place, little to no growth is expected to come by companies.
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Both household consumption expenditure and GFCF in decline
The chart below shows the total value of household consumption expenditure per quarter (annualised) as well as total Gross fixed capital formation each quarter (annualised). Both these are represented by the solid lines. The dashed lines shows the year on year growth rates of household consumption expenditure and gross fixed capital formation. The household expenditure and gross fixed capital formation values are shown on the left hand axis and the growth rates are shown on the right hand axis.
Note constant prices seasonally adjusted annualised numbers are used on the graphic below.
Note constant prices seasonally adjusted annualised numbers are used on the graphic below.
While the solid lines tells a story of growth, all be it slow and slowing growth, the year on year percentage changes shows how both household consumption expenditure and gross fixed capital formation numbers have declined in recent quarters and years. While the latest results from Statistics South Africa (Stats SA) GDP release shows that households spends an estimated R1.95 trillion a year, gross fixed capital formation came in at R604 billion.
So household consumption expenditure grew a mere 1.4% year on year while gross fixed capital formation declined by -4.1% compared to last year when it measured over R630 billion. A clear sign that businesses are not investing in South Africa, despite the ANC's best attempts to lure foreign investors and to push local companies to invest in South Africa. The numbers clearly show that businesses are committing less money than they did a year ago to replace equipment, build new buildings and the likes. Perhaps this will make the ANC and the EFF see the light that their policy of expropriation of land without compensation will just chase investment capital away from South Africa, instead of into South Africa, which needs businesses to invest and grow here in order to be able to address the unemployment problem the country is sitting with. While the economy keeps stumbling along at 1.4% (see our GDP page), the unemployment rate remains near record levels (see our Unemployment page).
If we do not reverse the trend of declining gross fixed capital formation quickly, the economic recovery of South Africa, if there is to be one will take a lot longer to achieve.
So household consumption expenditure grew a mere 1.4% year on year while gross fixed capital formation declined by -4.1% compared to last year when it measured over R630 billion. A clear sign that businesses are not investing in South Africa, despite the ANC's best attempts to lure foreign investors and to push local companies to invest in South Africa. The numbers clearly show that businesses are committing less money than they did a year ago to replace equipment, build new buildings and the likes. Perhaps this will make the ANC and the EFF see the light that their policy of expropriation of land without compensation will just chase investment capital away from South Africa, instead of into South Africa, which needs businesses to invest and grow here in order to be able to address the unemployment problem the country is sitting with. While the economy keeps stumbling along at 1.4% (see our GDP page), the unemployment rate remains near record levels (see our Unemployment page).
If we do not reverse the trend of declining gross fixed capital formation quickly, the economic recovery of South Africa, if there is to be one will take a lot longer to achieve.