Are South African companies on an investment strike? It’s a narrative some like to spread, declaring that corporate South Africa is acting against the country’s best interests. The greedy capitalists are hoarding their loot rather than spending it on growing the economy.

The problem with this narrative is that the data doesn’t back it up. Companies are investing, and the latest numbers show private investment has recovered strongly from its Covid-era lows, even if it remains below the peaks reached before the global financial crisis. The figures suggest corporate South Africa sees profitable opportunities to expand, even if investment levels remain insufficient for robust growth.

The “gotcha” statistic often cited is companies’ holdings of cash. Reserve Bank data shows cash held by nonfinancial corporations has grown from R1-trillion in 2021 to R1.5-trillion now, a 50% increase in four years. That sounds damning, doesn’t it?

But raw cash figures tell only part of the story. Stats SA’s annual financial statistics survey, published last week, provides crucial context by measuring cash as a proportion of total assets. Before Covid in 2019, cash represented 6.9% of total corporate assets, a two-decade low. This jumped to 8.6% in 2021 during pandemic uncertainty but by 2024 had moderated to 8.2%.

Cash holdings have grown in line with overall balance sheet expansion. Companies aren’t hoarding disproportionately; they’re simply larger than they were four years ago, and their cash balances reflect that. The 2021 spike was a pandemic-era anomaly that has largely normalised.

A better test for an investment strike is dividend behaviour. If companies genuinely saw no opportunities to invest, they wouldn’t sit on cash; they’d return it to shareholders. So what does the dividend data show?

South African companies have indeed been paying record absolute levels of dividends in recent years. But the payout ratio (the proportion of pre-tax profits distributed to shareholders) tells a different story. For the past two decades companies have averaged a 33% payout ratio. Over the last four years, that average has been 35%. This is hardly evidence of a fundamental shift away from investment.

The exception was 2020, when companies paid out 65% of profits. But this reflected two unusual factors: profits collapsed during Covid-19 (making the ratio’s denominator smaller), and shareholders demanded cash during uncertainty. Paradoxically, cash holdings also spiked that year, partly because many companies are themselves shareholders in other firms. By 2021 behaviour had normalised.

Regarding actual investment figures, the picture is more nuanced. Recent GDP data show gross fixed capital formation by the private sector has recovered from Covid-19 lows. In nominal rand terms, private sector fixed investment exceeds 2020 levels.

However, in real terms and as a share of GDP, investment remains below its peaks in the 2000s and 2010s. The Reserve Bank’s data shows that while private investment grew modestly in recent quarters, corporate fixed investment was essentially flat through 2024.

The sectoral breakdown reveals surprises. Mining and quarrying investment has spiked, contradicting the common narrative that miners simply pay out profits rather than invest. While exploration investment has indeed collapsed — reflecting regulatory uncertainty — companies are investing to maintain operations. Agriculture and manufacturing have also grown.

The disappointing sector is electricity, gas and water, despite extensive private sector commitments to power generation. It probably reflects the long lead times before generation projects translate into capitalised assets. The biggest investment categories overall are machinery & equipment, research & development, and computer software.

Perhaps the most revealing metric is investment as a percentage of profits. This ratio fell after 2008 but climbed steadily from 2010, reaching an extraordinary 140% of annual profits in 2020. This meant companies were investing 40% more than they earned that year, drawing on accumulated cash or borrowing to fund expansion.

Then came the collapse. Investment plummeted to just 61% of profits in 2022. This looks like a Covid-19 shock response: companies became deeply risk averse, curtailing investment plans and increasing cash distributions while also building cash buffers. The surge in profits in 2022 amplified the effect.

Since then recovery has been steady. By 2024 the investment-to-profits ratio had climbed back to 90%, approaching historical norms. This suggests corporate South Africa’s investment appetite is returning, though it hasn’t yet reached pre-pandemic levels of commitment.

Of course, none of this means investment levels are sufficient. At less than 15% of GDP, total fixed investment in South Africa is about half what it should be to support robust economic growth. But here’s the critical point: this is overwhelmingly a public sector story, not a private sector one.

Since 2008, private sector investment has doubled. Over the same period, investment by state-owned enterprises has grown just 49%, and general government investment 82%. In real terms public sector investment has stagnated or even fallen. Private business has consistently accounted for about two-thirds of total fixed investment since the 1990s, a remarkably stable share.

The arithmetic is simple: private investment has grown, but not fast enough to compensate for anaemic public sector investment. The result is inadequate overall investment levels that constrain economic growth.

The investment strike narrative is politically convenient but empirically wrong. Corporate South Africa is investing at levels about consistent with its profit generation and balance sheet capacity. Cash holdings are proportionate to company size. Dividends are within historical norms. Investment-to-profits ratios are recovering toward pre-pandemic levels.

The real constraint isn’t corporate unwillingness; it’s insufficient public sector investment with structural barriers that limit private sector returns. If the government wants higher overall investment, it has two levers: invest more itself, particularly in infrastructure that enables private sector activity, or create conditions that make private investment more attractive.

Blaming the private sector for an investment strike when the data shows otherwise is a distraction from the harder question: why has public sector investment capacity deteriorated so dramatically, and how can it be rebuilt? That is a complex question of government capacity rebuilding, particularly at the local government level. It is not an easy narrative to capture short attention spans.

• Dr Stuart Theobald is founder and chair of research-led consultancy Krutham. This article first appeared in Business Day.