The gross fixed capital formation (GFCF) is used to measure the net additions the (physical) capital stock. Capital is needed in any industry to improve productivity and increase competitiveness. It is also an indicator of long term commitment and a supply driven component in the economy to secure long-term economic growth.
Figure shows the GFCF for the manufacturing industry in SA in constant 2005 prices (at an annualised rate). The data shows that the GFCF increased from around R36 billion in 1990 to around R65.7 billion in 2011, an average increase of less the 1.5% per year over the period. Although the manufacturing GFCF increased at a low rate in rant terms, it decreased as a percentage of total GFCF in SA (from 23.7% in 1990Q1 to 17.2% in 2011Q3) although it recovered slightly from a low of 14.6% at the high of the international financial crisis in 2009Q3).
Figure : Gross fixed capital formation in the manufacturing sector (1990 to 2011) Source: Data from the SA Resbank
The future growth of manufacturing sub-sectors will depend on the amount of current and historic investment. Table shows the gross capital formation in selected manufacturing sectors for the period 2007 to 2010. Motor vehicles and parts received the highest capital investment (R84 billion in 2010 or almost 32% of manufacturing gross capital formation), followed by special machinery at R57.5 billion in 2010 (or 21.8%). Other sectors that also received relatively high investments are electrical machinery (R25.5 billion in 2010 or 9.7%), office machinery (R22.6 billion or 8.6%) and medical appliances (RR18 billion or 6.9%).
Table : Gross capital formation in manufacturing for 2007 – 2010 (nominal values)