Manufacturing predicament in South Africa
South Africa Seeks to Revitalize Manufacturing and Mining Sectors
South Africa, a country rich in resources yet facing challenges in its manufacturing and mining industries, is looking to reindustrialize and combat high unemployment rates. The recent US tariff hikes have created global trade volatility, providing an opportunity for South Africa to objectively assess its trade and investment policies.
The deterioration of these sectors is due to a variety of domestic issues, including over-regulation, inconsistent electricity supply, underperforming ports and railways, and increasing water disruptions. These factors have made domestic mining and manufacturing operations inordinately inefficient and unnecessarily more expensive.
In the past, South Africa's manufacturing industry saw growth. In 2000, it expanded by 8.1%, compared to a contraction of 0.4% in 2024. If the country can grow its manufacturing sector, it could provide opportunities for the 45.1% of young people (15-34 years) who are not in employment, education or training.
Similarly, the mining sector has been affected by onerous requirements, frequent revisions, and lack of clarity in the Mining Charter, which has created uncertainty and increased costs for mining companies, making them globally less competitive. In 1994, a quarter of the world's gold production occurred in South Africa, compared to just 3% in 2024.
Policy reforms are needed to strengthen property rights and mineral rights to attract higher levels of investment in mining and manufacturing. BUSISIWE Mavuso, CEO of Business Leadership South Africa, has called for urgent government action to mitigate the impact of US tariffs on the vehicle manufacturing sector. The government should refrain from anti-investor rhetoric and focus on introducing investment-friendly policies.
Steps should be taken to reverse infrastructure and municipal decay to boost investor confidence. Addressing structural economic challenges, such as managing resource dependence and the "Dutch disease" effect, is also crucial to avoid negative impacts of commodity cycles on the manufacturing sector.
To reindustrialize, South Africa needs a combination of key policy reforms and infrastructure investments focused on productivity, competitiveness, and skills development. Enhancing productivity and technology adoption, improving integration into global value chains, building enabling infrastructure and finance, developing skills, creating a competitive and supportive policy environment, and addressing structural economic challenges are all essential components of this strategy.
Growing mining and manufacturing sectors could help combat unemployment, historically being one of the largest employers of low-skilled workers. The US, one of South Africa's main vehicle export markets, is a significant risk to the local automotive sector due to heightened tariffs.
The effective nationalization of mineral rights has also negatively impacted South Africa's mining sector. Achieving policy and infrastructure reform could make mining and manufacturing lucrative, growing sectors, leading to reindustrialisation.
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