South Africa's struggle with industrial decline

South Africa's struggle with industrial decline

South Africa Seeks Multi-Faceted Reforms for Reindustrialisation

South Africa, once a powerhouse in the global mining and manufacturing sectors, has been grappling with deindustrialisation for decades. The country's manufacturing industry, a significant employer of low-skilled workers, has faced numerous challenges that have led to inefficiencies and increased costs.

In the year 2000, the manufacturing industry grew by a robust 8.1%, contrasting sharply with a contraction of 0.4% in 2024. However, the business confidence index has more than halved from a high of 77 in the first quarter of 2007 to just 33 in the second quarter of 2025.

One of the key issues hampering the mining and manufacturing sectors is over-regulation. This includes labor regulations, environmental regulations, and licensing requirements. The South African Mining Charter, designed to promote Broad-Based Black Economic Empowerment, has faced criticism for hindering investment and operational efficiency.

To address these challenges, South Africa needs comprehensive policy and infrastructure reforms. These reforms include strategic industrial policies, regulatory easing, infrastructure upgrades, workforce development, and socially inclusive measures.

Industrial Policy and Trade Reforms

The country needs policies that encourage local manufacturing, reduce dependence on imports, and improve competitiveness. This includes fiscal incentives, subsidies, tariff adjustments, and trade policies that protect and promote domestic industries while integrating into global value chains. Reforming trade policies to reverse trade deficits and support export-oriented manufacturing can be vital.

Regulatory and Permitting Reform

Simplifying regulations and streamlining permitting processes can help reduce the bureaucratic obstacles that hinder new investments and factory setups.

Infrastructure Investment

Upgrading and expanding infrastructure – including reliable energy supply, transport networks, and digital connectivity – is essential to support modern industrial activity. South Africa’s energy challenges, if not addressed, will limit reindustrialisation efforts, highlighting the need for resilient and sustainable energy infrastructure.

Skills Development and Labor Market Reforms

Developing the workforce with technical skills and manufacturing competencies through targeted education and training programs is critical. Aligning skills development with industry needs ensures that new factories and technologies have the human capital required.

Just Transition and Inclusive Industrialisation

Implementing a Just Transition approach that assists workers currently employed in declining industries to move into new, sustainable industrial jobs is key to social stability and equitable growth. This requires social dialogue, stakeholder engagement, support for retraining, and creation of decent, inclusive work opportunities across the supply chain.

Local Manufacturing Promotion and Regional Integration

Initiatives like the Manufacturing Indaba illustrate Africa-wide efforts to foster local manufacturing, connect leaders, and empower businesses for job creation and sustainability. South Africa can benefit from increased regional collaboration and leveraging Africa’s resource base for industrialisation.

The deterioration of South Africa’s mining and manufacturing sectors has been largely due to domestic issues. Inconsistent and increasingly costly supply of electricity, underperforming ports and railways, and increasing water disruptions have made domestic operations inordinately inefficient and unnecessarily more expensive. During the same period, the number of people formally employed in the mining industry dropped by 30%.

Heightened tariffs on South Africa’s vehicle manufacturing sector, as a result of US President Donald Trump’s policies, pose a major risk to the local automotive sector. The United States is one of South Africa's main vehicle export markets.

Policy reforms that strengthen property rights and mineral rights, along with investment-friendly policies, are necessary to attract higher levels of investment in mining and manufacturing. The effective nationalization of mineral rights has also impacted South Africa’s mining sector.

If South Africa can grow its manufacturing sector, it could provide opportunities for the 45.1% of young people (15-34 years) who are not in employment, education or training. The reindustrialisation of South Africa requires multi-faceted reforms to ensure sustainable growth and employment amid the deindustrialisation challenges it faces.

[1] - https://www.brookings.edu/research/reindustrialization-in-the-united-states/ [2] - https://www.manufacturingindaba.co.za/ [3] - https://www.statista.com/statistics/263006/gold-mining-production-in-south-africa/ [4] - https://www.statista.com/statistics/263006/gold-mining-production-in-south-africa/ [5] - https://www.brookings.edu/research/reindustrialization-in-the-united-states/

1. South Africa's manufacturing sector could provide employment opportunities for the 45.1% of young people who are not in employment, education or training, if reindustrialisation efforts are successful.
2. Property rights and mineral rights reforms, along with investment-friendly policies, are essential to attract higher levels of investment in South Africa's mining and manufacturing sectors.
3. The effective streamlining of regulations and permitting processes can help reduce the bureaucratic obstacles that hinder new investments and factory setups in the manufacturing industry.
4. Developing a workforce with technical skills and manufacturing competencies through targeted education and training programs is critical for the manufacturing sector, ensuring that new factories have the human capital required.

Read also: