ERRATUM: The value for government borrowing requirement quoted on page 9 of the report was omitted.

• The Covid-19 pandemic had a devastating impact on investment plans in 2020.

• The Nedbank's Capital Expenditure Project Listing shows that there were fewer new projects announcement in the second half of the year compared with the same period in 2019. During the period the number of projects fell by 60%, while the value dropped by 24%. For the year as a whole, a total of 32 new projects were recorded, the lowest since the listing started in 1993, while the value of the projects amounted to R66.2 billion, the smallest since 2004.

• The private sector continued to dominate, with a total of 24 projects worth R60.2 billion announced, which accounted for 75% of the total value of projects captured in 2020. The government’s and public corporations’ projects are usually highly volatile, but so far this year few new projects have been observed.

• The outlook for fixed investment in 2021 remains highly uncertain. Fixed investment activity is likely to remain depressed in the first half of the year, with confidence undermined by the resurgence in Covid-19 infections, the move from level 1 to adjusted level 3 lockdown in January, persistent power outages and general uncertainty about future growth prospects. The return to more stringent lockdowns in many of SA’s major trading partners will also dampen sentiment and hurt export volumes.

• The underlying investment environment is expected to improve in the second half of this year, with the vaccination drive in advanced countries likely to gain momentum, increasing the chances of some acceleration in global demand off a low base. The domestic economy should also fare moderately better in the quarters ahead, supported by benign inflation, low interest rates and the gradual nomalisation in economic activity as the domestic inoculation drive is expected to start, albeit with delays and hiccups along the way. This will result in some pickup in fixed investment spending towards year-end, but is not likely to be enough to offset the weak conditions in the first half of the year. As a result, we expect fixed investment to contract by a further 2.6% in 2021, which is at least a much slower rate of decline than the projected 18.2% for 2020. Capital formation is only expected to return to growth next year, clocking around 2.8% per annum in 2002 and 2023 respectively.