Factory jobs vanish as South Africa's manufacturing collapse deepens

South Africa’s manufacturing sector has shrunk from 21 percent of GDP in 1994 to just 12 percent by 2024, a collapse that cost the country nearly a full percentage point of productive capacity in the latest year alone, according to Statistics South Africa. Behind those numbers are real consequences: fewer factory jobs, narrower economic options, and communities that once depended on industrial employment left without a clear path forward.

Reversing this decline will not happen through policy statements alone. It requires sustained coordination among government agencies, development finance institutions, private investors and industry itself, working together to expand access to patient capital, strengthen smaller enterprises, deepen economic transformation and build competitiveness in emerging sectors.

Three concrete priorities emerge as essential to accelerating reindustrialisation.

The first addresses a fundamental market failure. Conventional commercial finance prioritises short-term returns and minimal risk, leaving little room for the patient, long-term capital that manufacturing renewal demands. The Industrial Development Corporation (IDC), mandated specifically to finance industrialisation, has worked to fill this gap through concessional finance models suited to sectors underserved by traditional banking. In the 2024/25 financial year, the IDC expanded targeted concessional finance to clothing and textiles (R459 million), manufacturing broadly (R974 million) and downstream steel (R157 million). These investments generate multiplier effects across employment creation, job preservation and non-financial business support, creating a blended finance approach that accommodates the risk profile and time horizons that reindustrialisation actually requires.

The second priority tackles ownership concentration. The Competition Commission’s 2025 Concentration Report identifies manufacturing as among the most highly concentrated sectors in the economy, and research shows that smaller enterprises survive more readily where ownership concentration is lower. Addressing this structural barrier means reducing market entry obstacles for Micro, Small and Medium Enterprises (MSMEs). During 2024/25, the IDC approved R3 billion in MSME funding and distributed R410 million to non-banking intermediaries to improve finance access. The National Empowerment Fund and Small Enterprise Development Fund Agency contributed R1 billion and R2 million respectively. These institutions address critical stumbling blocks for smaller firms: access to capital, formalisation support and business sustainability. The IDC also deployed R26.6 billion in transformation-targeted funding during the same period, empowering Black Industrialists, women and youth entrepreneurs while supporting over 12,000 jobs through strategic partnerships. These steps advance Broad-based Black Economic Empowerment and diversify ownership in key manufacturing subsectors, though sustained expansion of both financial and non-financial support from public and private institutions remains necessary.

By contrast, the third priority looks outward to global competitive pressures. Technological upgrading is no longer optional. Global evidence from rapid industrialisation in East Asia demonstrates the critical role of research and development and state support for building technological capability. South Africa’s Department of Trade, Industry and Competition Industrial Strategy 2025 reflects this approach by placing decarbonisation and digitisation at its core. Through investments that encourage decarbonisation, localisation and digitalisation, the IDC supports firms in adopting new technologies while strengthening domestic manufacturing capability. These efforts connect directly to localisation and employment creation priorities embedded in the country’s industrial strategy. More detail on this integrated approach appears at https://www.sabcnews.com/sabcnews/rebuilding-south-africas-industrial-base-through-finance-inclusion-and-technology/

South Africa’s long-standing deindustrialisation cannot be reversed by any single actor. The Industrial Policy Action Plan, introduced in the mid-2000s and refined through successive administrations, provides a framework, but execution remains uneven. The IDC is well positioned to lead implementation of the newly adopted industrial strategy, offering support that extends beyond finance to build enterprise capabilities and deploy capital effectively. Yet lasting impact depends on a wider ecosystem of public and private actors working with greater alignment, accountability and urgency.

Reindustrialisation requires coordinated investment, credible policy execution, stronger industrial partnerships and sustained support for firms that can expand productive capacity, deepen localisation, create employment and broaden ownership. The harder question, as South Africa charts its next phase of economic growth, is whether the institutions and actors now in place can move quickly enough to matter for the workers and communities still waiting for that industrial base to return.