One of South Africa’s most important employers is collapsing

South Africa’s manufacturing sector, once a vital part of the country’s economy, is steadily collapsing, with significant job losses and a decline in production over the past few decades.

Between 2008 and 2024, the manufacturing sector has shed around 448,000 jobs, driven in part by South Africa’s deindustrialisation over this period.

The sector has been hit particularly hard in 2025, with United States tariffs and the closure of ArcelorMittal South Africa’s long steel plants dealing double blows to the struggling industry.

In a recent economic publication from Coface, economists Aroni Chauduri and Noémi David outlined the decline in South Africa’s manufacturing sector over the past few decades.

They pointed out that, between 2008 and 2024, employment gains have mostly been concentrated in service industries, which have seen a compound annual growth rate of 1.4%, or 2.4 million jobs added over this period.

In contrast, manufacturing employment fell significantly over the same period, with a compound annual growth rate of -1.5%, or 448,000 jobs lost.

Chaudri and David said manufacturing’s steep decline has been consistent with South Africa’s poor economic performance and low levels of investment.

South Africa’s economy has gone from an average annual growth rate of 4% in 2008 to 0.8% less than two decades later.

The economists said these trends in employment are partly due to South Africa’s deindustrialisation, which has been continuous after the Global Financial Crisis.

South Africa’s deindustrialisation can be attributed to both structural and cyclical factors, like supply-side constraints on energy and transport, lower industrial demand due to the end of the supercycle and China’s emergence as the world’s main manufacturer.

“Deindustrialisation can be aggravated by an economic downturn and even be premature (for emerging and developing economies) when the industrial decline starts at lower levels of investment and income,” they said.

South Africa has experienced very low rates of fixed investment over the past decade, with gross fixed capital formation now accounting for only 14.5% of GDP.

This is considered very low, even compared to South Africa’s emerging market peers, which can be seen in the graph below.

The big labour problem

Chaudri and David explained that South Africa’s low levels of fixed investment are compounded by mismatches between labour supply and demand. 

“Indeed, a large portion of South Africa’s labour force is low-skilled (around 42% still lack a secondary degree), while most employment gains have been for positions that are of medium or high skill,” they explained. 

“Thus, one of the long-term challenges to reduce unemployment is to upskill the workforce (through education and training), considering the main drivers of employment.”

The manufacturing sector’s decline has meant fewer job opportunities for lower-skilled workers, contributing to the country’s high unemployment rate.

Job cuts across the industry are expected to worsen in the coming years, as the closure of ArcelorMittal’s long steel plant in South Africa will lead to thousands of job losses.

The closure of these operations will lead to mass retrenchments involving more than 4,000 direct jobs and an estimated 100,000 indirect jobs.

The Reserve Bank’s latest Monetary Policy review explained that the United States tariffs imposed on South African goods in 2025 are set to deal another significant blow to the industry.

US President Donald Trump imposed a 30% import tariff on South African goods in 2025, with nearly two-thirds of the country’s exports to the US now subject to tariffs.

South Africa’s exports to the United States are dominated by mining (about 60%), manufacturing (30%) and agriculture (5%).

However, the mining sector is partially protected from the impact of these tariffs as some commodities like platinum group metals, which account for the lion’s share of South Africa’s mining export basket to the US, are exempt.

In contrast, the bulk of locally manufactured goods exported to the US is subject to import tariffs.

The US is South Africa’s third-largest export market for vehicles and parts, with exports worth R35 billion in 2024. 

Therefore, the 25% tariff levied on South Africa’s auto and parts exports is higher than that for most competitors and will sharply reduce South Africa’s competitiveness in the US market.

The Reserve Bank said this threatens output and jobs “in a sector that anchors the broader manufacturing base”. 

In addition, other manufactured goods, which are already under strain from low competitiveness and other structural impediments, face a 30% import duty.

The decline in employment and production in South Africa’s manufacturing sector can be seen in the graphs below.