Because of such softness in capital formation, as well as subdued productivity growth, the potential pace of GDP growth has slowed to an estimated 1.1% in both 2016 and 2017 from more than 3% at the start of the decade.
Weak private-sector investment, currently focusing mostly on replacing obsolete capital rather than creating new capacities, coupled with a shortage of skilled labour and, possibly, product market rigidities, appears to be weighing on external competitiveness and export performance. South African firms may be slow to adjust to changes in global demand patterns; they may lack the innovative edge to keep pace with foreign competitors.