Trying to Understand What Happened to SA Manufacturing

I’ve been hearing a lot about South Africa’s manufacturing sector lately, some saying it’s in crisis, others claiming it’s making a comeback. Working in IT support, I see the operational side of various industries, including a couple of manufacturers. But I realized I didn’t really understand the bigger picture of what’s happening to manufacturing in South Africa. So, I decided to dig into the numbers and see what’s actually going on. What I found was more complicated than I expected.

What I Thought I Knew

My assumption was simple: manufacturing used to be bigger, globalization made it smaller, and now maybe it’s recovering. Like most simple assumptions about economics, this turned out to be partly right and mostly incomplete.

From our clients, I see manufacturing companies that are definitely making things and employing people. MCG Industries manufactures injection moulded crates and containers. Refractory and Metallurgical Solutions produces shaped and unshaped refractory products. Both seem to be functioning businesses serving real markets. But when I started looking at the broader data, I realized these might be exceptions rather than the rule.

The Numbers That Surprised Me

Today, manufacturing accounts for 13.0% of GDP and employs more than 1.6 million people. That sounds substantial until you start comparing it to other countries or looking at historical trends. What caught my attention was this: deindustrialization in South Africa began in the early 2000s as the share of services to GDP increased in relation to manufacturing. We didn’t gradually evolve into a service economy; we actively became less industrial.

The employment numbers were even more stark. The biggest decline in employment was recorded in the manufacturing industry, which lost 53,000 jobs in a single quarter. That’s not gradual change, that’s systematic dismantling.

Trying to Piece Together the History

This is where my knowledge gets fuzzy, but here’s what I’ve been able to piece together:

South Africa had continuing economic problems initially because apartheid policies led many countries to withhold investment, with crippling sanctions placed against the country in the 1980s. But those sanctions might have actually forced some domestic industrial development through import substitution.

When the sanctions ended and markets opened in the 1990s, much of that protected industrial capacity apparently couldn’t compete globally. The timing seems significant, rapid market opening coinciding with manufacturing decline.

What’s Actually Being Made

The current manufacturing landscape is dominated by a few key sectors: food and beverage (22.3% of sales), basic iron and steel, non-ferrous metals and machinery (20.9%), and petroleum, chemicals, rubber and plastics (20.1%).

Looking at our clients, they fit into niches within these broader categories. MCG’s injection moulding serves packaging and logistics needs. Refractory products are essential for steel and other metal production. Both are serving real demand, but they’re also competing with imports and dealing with cost pressures, I presume.

The Challenges Everyone Talks About

The problems seem well-documented:

Load-shedding: This hit manufacturing especially hard. You can’t run efficient production lines when you don’t know if the power will be on.

Skills gaps: I see this in the technology side, finding people who can maintain and operate increasingly sophisticated equipment is challenging.

Infrastructure bottlenecks: Poor logistics add costs that make local manufacturing less competitive against imports.

Worrying Global Context

What concerns me most is the timing. Manufacturing is apparently having a global renaissance, supply chain disruptions, automation advances, and the push for resilience are creating opportunities. We should be well-positioned for this. But the economy only grew 0.4% in the first two quarters of 2024, which suggests we’re not capturing these opportunities. Countries like Vietnam and Mexico seem to be attracting manufacturing investment that could theoretically come here.

Some Bright Spots

It’s not all decline. The automotive sector seems stable, though heavily dependent on government incentives. Food and beverage manufacturing remains strong, which makes sense given domestic demand. Some companies have found profitable niches in specialized products. Our clients are examples of this, serving specific markets where they can compete on quality, service, or specialized knowledge rather than pure cost. But these seem to be exceptions rather than systematic successes.

Where This Seems to Be Heading

Based on current trends, it looks like our manufacturing sector might stabilize at roughly its current size, serving primarily domestic and regional markets where transportation costs provide natural protection. This isn’t necessarily catastrophic, many successful economies have strong service sectors. But it probably means manufacturing won’t be the job-creation engine it is in countries like Vietnam. The alternative, rebuilding genuine manufacturing competitiveness, seems to require sustained focus and investment that I’m not sure we’ve demonstrated we can maintain.

The Bottom Line

I’m still learning about the specifics, but the broad pattern seems clear: we had manufacturing capabilities, we lost many of them and rebuilding them requires different approaches than we’ve been taking. If you’re involved in manufacturing, whether as a business owner, policy maker, or industry expert, I’d genuinely appreciate your perspective on where I’m getting this right or wrong.

Till next time, Mpho 🫡