Alarm bells for South Africa’s largest employers

The output of South Africa’s mining and manufacturing sectors has stagnated and declined over the past five years, significantly impacting the local economy and employment. 

These sectors are the two most important employers in South Africa as they can relatively quickly absorb low-skilled labour, 

They also contribute meaningfully to foreign exchange earnings through their exports, supporting the local currency and boosting economic growth. 

Despite the substantial reduction in load-shedding since 2024, these sectors have not seen their economic output improve due to inefficient logistics and faltering demand. 

The South African Reserve Bank (SARB) recently outlined the performance of these two sectors in its latest Quarterly Bulletin. 

The bank laid out South Africa’s poor economic growth over the past few years, saying that it has continuously underperformed expectations. 

Economic activity in South Africa expanded marginally in the first quarter of 2025 as real GDP increased by only 0.1%, following a revised increase of 0.4% in the fourth quarter of 2024. 

The country’s economic growth was severely impacted by poor performance in the mining and manufacturing sectors. 

In particular, the mining sector’s output declined significantly, with it decreasing by 4.1% in the first quarter of 2025. This subtracted 0.2 percentage points from overall GDP growth. 

Production volumes declined in 8 of the 12 mineral groups, particularly in platinum group metals (PGMs), coal, chromium ore, building materials and gold. 

The production of PGMs was weighed down by the suspension of operations at a large platinum mine due to severe flooding caused by heavy rains. 

Meanwhile, the decline in steel-making coal mining activity constrained coal production, while inefficiencies in one of the coal lines adversely affected coal exports.

The level of real mining output in the first quarter of 2025 was 4.7% lower than in the corresponding period of 2024 due to high operating costs, ongoing logistical constraints, and generally depressed commodity prices. 

Furthermore, limited investment in expanding production capacity continued to weigh on mining output. The graphs below show the mining sector’s continued poor economic output. 

Manufacturing blues

In the first quarter of 2025, South Africa’s manufacturing sector did not fare much better than its mining counterpart. 

Real economic activity in the secondary sector, dominated by manufacturing, fell by 2.4% in the first quarter of the year. This follows a 1% decline in the final quarter of 2024. 

This decrease was broad-based, with it marking the second successive quarter in which all three industries in the secondary sector saw their output decline. 

The real output of the manufacturing sector declined by 2% in the first quarter of 2025 and subtracted 0.2 percentage points from overall GDP. 

Manufacturing was hit hard by the decline in the utilisation of production capacity to 76.3% in February 2025, from 78.0% in November 2024. 

This means only three-quarters of South Africa’s manufacturing capacity is actually used and shows that there is a lack of demand for products in South Africa’s weak economy. 

Reduced activity was particularly evident in the subsectors supplying petroleum, chemical products, rubber and plastic products, food and beverages, motor vehicles, parts and accessories and other transport equipment. 

Metal products and machinery also saw notable declines. By contrast, the production of wood and wood products increased in the first quarter. 

Manufacturing output as a whole was 2.1% lower in the first quarter of 2025 compared with the corresponding period of 2024. 

Activity continued to be impacted by weak domestic demand, high operating costs, infrastructure constraints, and logistical inefficiencies. 

Stanlib chief economist Kevin Lings explained that the longer-term decline cannot be attributed solely to load-shedding and infrastructure challenges. 

The mining and manufacturing sectors are amidst a two-decade decline, which points to a more fundamental reason – a lack of confidence in the South African economy. 

Declining business confidence in the country since 2006 has resulted in many companies preferring to keep their cash in the bank rather than invest in manufacturing capacity. 

Around 80% of respondents to the RMB/BER Business Confidence Index (BCI) survey reported being satisfied with prevailing business conditions in 2006, compared to only 32% last year.

The graph below shows the stagnation and decline of South Africa’s manufacturing sector over the past five years.