The government’s inability to pay its bills on time is one of the key factors negatively affecting South Africa’s construction industry.
This industry is considered critical in the coming years, as South Africa must increase its levels of fixed investment to achieve sustainable economic growth.
Currently, South Africa’s levels of fixed investment are not close to where they need to be to drive economic growth closer to 3%.
Investec chief economist Annabel Bishop said South Africa’s fixed investment contracted by a hefty 2.2% in 2025. This comes after a 3.9% contraction in 2024.
2025’s contraction saw South Africa’s fixed investment return to levels last seen in 2021/22, with the ratio to GDP now standing at 13.9%.
Bishop said this 13.9% falls far short of the 25% needed to drive South Africa’s potential growth at 3% or more year-on-year.
The reason why fixed investment is considered such a crucial driver of economic growth was previously outlined by Stanlib chief economist Kevin Lings.
He explained that, currently, much of South Africa’s economic growth has been driven by consumption, like household spending, and cyclical factors, like commodity booms.
While also important growth drivers, these factors are considered highly fragile and fickle, making them less effective drivers of sustainable and high economic growth.
In contrast, fixed investment, which refers to spending on tangible assets like infrastructure and machinery, is considered a far more sustainable, long-term growth driver.
This is because it does not rely on cyclical factors like lower interest rates and inflation, which is the case with consumer spending.
Therefore, if South Africa wants to achieve sustainably higher growth and meaningfully reduce unemployment, it needs to increase its levels of fixed investment.
The graph below, courtesy of Investec and Bishop, shows how the decline in South Africa’s fixed investment has slowed down the country’s GDP growth over the past decade.
Government shooting itself in the foot
South Africa’s government has acknowledged the important role fixed investment plays in growing the economy.
President Cyril Ramaphosa noted in his 2026 State of the Nation Address that, “For many years, fixed investment has been declining. We are now changing that.”
He said the government has committed more than R1 trillion in public investment over three years to build and maintain infrastructure – the largest allocation of its kind in South African history.
The President said this allocation, along with new regulations for public-private partnerships, “will be transformative”.
Despite these efforts, Bishop pointed out that late payment by the government has been identified as a key factor negatively affecting the construction industry.
She said the National Treasury has shown that this occurs in both national and provincial government departments, contrary to legislation requirements.
In the Treasury’s 2024/25 Annual Report on Non-Compliance with Payments of Suppliers’ Invoices Within 30 Days, it noted this troubling trend of late payments by government departments.
The Treasury’s data showed that the number of invoices paid after 30 days by national and provincial departments during the 2024/25 financial year amounted to 464,188 invoices with a rand value of R43.6 billion.
This represents a regression of 28% or 102,120 invoices, when compared to the number of invoices paid after 30 days during the 2023/24 financial year.
Concerningly, the number of invoices older than 30 days and not paid by national and provincial departments at the end of March 2025 amounted to 142,801 invoices with a rand value of R18.2 billion.
This signals a 24% regression, or 27,893 invoices, compared to the number of invoices older than 30 days and not paid at the end of March 2024.
“The late and non-payment of suppliers’ invoices continues to negatively impact the financial well-being of small and medium enterprises,” the Treasury said in this report.
“When suppliers struggle to receive timely payments, they may face cash flow difficulties, which can reduce their ability to invest, maintain quality, or even stay operational.”
“Consequently, this can hinder economic growth, exacerbate unemployment, and deepen social disparities, creating a cycle of financial instability and social hardship across communities.”