South Africa losing one of its most important sectors
South Africa is becoming increasingly more deindustrialised, with the industrial sector contributing less and less to the economy.
Investec chief economist Annabel Bishop revealed that the industrial sector contributed 28% of GDP in 1993. In 2024, it contributed 18% of GDP.
The industrial sector comprises manufacturing, mining, and electricity production.
From 1993 to 2024, the mining sector fell in real terms by 11.8%. The other two industrial production sectors expanded, electricity by 19.4% and manufacturing by 55.0%.
However, Bishop said these growth rates were less than the 100.8% climb in GDP and over 200% for some other sectors.
General business services, which include real estate, accountancy, marketing, insurance, legal, IT, security, financial, printing, landscaping, maintenance, medical and other services, rose by 225%, and transport services by 209.5%.
“Both the decline noted by Stats SA in the size of the mining sector, and slower growth in the other two areas of the industrial sector versus other components of GDP, saw the industrial sector shrink in relative size to GDP over the near thirty-year period,” Bishop said.
“That is, the industrial sector only grew by 26.8% over the thirty-year period under review.”
“South Africa’s deindustrialisation of the economy has been a trend over the period, with mining still under pressure from the substantial freight constraints at Transnet.”
Transnet’s struggles have been one of the largest drags on industrialisation in South Africa over the past few years.
The country’s logistics challenges have placed severe pressure on the mining sector in particular.
Metals and minerals commodities prices rose by over 200% between 1993 and 2024.
Despite this, the mining sector continues to struggle, faced with regulatory hurdles and complexities and severely insufficient freight capacity, which reduces its export potential.

“The substantial work being done to turn Transnet and its freight delivery capacity around is happening too late to have prevented its part in the decline in the mining sector, adding to the deterioration in state finances as revenue was missed out on,” Bishop said.
In 2022, the Minerals Council of South Africa reported that mining exports missed their target by R50 billion due to Transnet’s inefficiencies.
The poor performance of the country’s freight rail system has led to increased iron ore stockpiles at mines and reduced coal railings to a 30-year low. This has forced producers to rely on trucks, congesting roads and ports.
In addition, the lacklustre performance of Transnet’s ports across South Africa is also increasingly resulting in shortages in the supply of goods critical to the functioning of local businesses.
This hampers their ability to operate effectively, resulting in reduced income and, in some cases, job cuts.
Earlier this year, Claire Bisseker of the Bureau for Economic Research’s Impumelelo Economic Growth Lab said that while Transnet’s turnaround plan is on track, progress is far too slow.
In particular, she said there is an urgent need for fresh investment in the country’s port infrastructure.
One way to do this, and that forms part of Transnet’s turnaround plan, is opening some operations to private players.
Transnet entered into a significant partnership with International Container Terminal Services Inc. (ICTSI), a Philippines-based port operator, as part of its strategy to improve port operations and attract private investment.
However, legal challenges have stalled the deal, and Transnet’s process of securing a private port operator to manage Durban’s Pier 2 Container Terminal is now in limbo, preventing the utility from progressing with its plans.
While Transnet Freight Rail volumes have increased slightly, Bisseker warns that at this “glacial rate of improvement, Transnet will fall far short of its whole-year freight rail target”.
“The Recovery Plan’s goal is for rail volumes to recover to 226 Mt by the end of 2026, restoring Transnet’s performance to the level of five years ago. Anything less will threaten jobs along the supply chain,” she said.
“The bottom line is that Transnet is performing below the government’s Recovery Plan and well below the volumes required to support an economic recovery.”
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