Important South African employer collapsing in front of everyone’s eyes

The output from South Africa’s manufacturing sector has steadily declined over the past five years, with it showing no signs of recovery despite improved sentiment in the country’s economy. 

South Africa’s manufacturing output remains more than 6% lower than the level of output reached just before the start of the pandemic in 2020. 

Worryingly, it is only expected to get worse as sentiment among manufacturers has also declined to a six-year low in December, according to Absa’s Purchasing Managers’ Index. 

Absa noted that this is primarily due to constantly weak demand amid slow economic growth and a lack of fixed investment in machinery, equipment, and infrastructure. 

“Weak demand and activity in the sector have not presented a strong case for employment growth,” Absa said. “Only strong economic growth and recovery will lead to better employment outcomes.”

This follows data from Stats SA showing that South Africa’s manufacturing production declined by 1.1% month-on-month in November 2025. Year-on-year, the sector’s output has declined by over 1%. 

Stanlib chief economist Kevin Lings said this shows that the sector has struggled to gain any momentum in recent years and is feeling the pressure from unstable electricity and water supply, rising costs, and a lack of demand. 

Lings said the declining output from the sector is despite the government spending a lot of time and resources to come up with extensive industrial policies and emphasising the need to improve competitiveness. 

“There is a lot of talk about improving competitiveness, lifting South Africa’s export base, and improving manufacturing, but we are just not able to do that,” Lings said. 

“Understanding why that is, I think, is fairly obvious because we just do not have the supportive policy agenda to improve manufacturing. We also do not have the infrastructure in place.”

Lings explained that if a company is worried about electricity supply, water shortages, rail capacity, and security, it is highly unlikely to invest in new or additional capacity. 

These challenges are compounded by others that receive less attention in South Africa, such as the lack of a skilled workforce and a significant regulatory burden that stifles competitiveness. 

Lings said the condition of South Africa’s manufacturing sector is vital for the broader economy as it remains of a reasonable size and is a major employer. 

Alongside mining and agriculture, it is one of the few sectors that could rapidly absorb some of South Africa’s unemployed individuals who lack specialised skills. 

“It would be very beneficial if we could boost manufacturing, particularly if some of that expansion led to improved exports. There is no doubt that it could provide a massive benefit for South Africa,” Lings said. 

Continued decline

There are very few signs that the fortunes of South Africa’s manufacturing sector are set to change in the coming months and years, with its improvement requiring significant reform. 

Furthermore, the sector is coming under increasing pressure from factors outside of South Africa’s control, with it being the most exposed to geopolitical tension and tariffs from the United States. 

Manufacturing employment is heavily tied to export revenues, with around 490,000 jobs in the sector sustained by these earnings. 

This is around a quarter of the 1.7 million jobs sustained by exports in South Africa and double the share of mining, which is traditionally seen as the most important export sector.

South Africa is a small, highly open economy, which makes it highly vulnerable to external shocks such as changing political relationships. 

An added layer of vulnerability is the country’s dependence on trade and foreign investment for economic growth, both of which have come under immense pressure in recent years.

The combination of global and local factors that constrain South Africa’s manufacturing sector has resulted in it being one of the least investable industries in the country. 

The local manufacturing sector is one of the biggest casualties of this unwillingness to invest, with current levels of capital expenditure insufficient to even maintain existing equipment and machinery. 

This means the capital stock of the sector is going backwards after years of declining output amid load-shedding and logistical inefficiencies.

“There is substantial underinvestment in the ‘productive sector’, as economists call it. In manufacturing, investment levels are terrible,” Lings said. 

“The capital stock is going backwards. In other words, in the manufacturing sector, corporates are not investing enough to maintain the machinery and equipment they already have in place.”

This points to an industry in significant decline, with companies barely investing enough to keep their doors open.

BDO South Africa Automotive Sector Leader Siyabonga Mthembu said that South Africa has failed to effectively address the basics that are critical to ensuring a conducive investment climate for the automotive manufacturing sector.