Industrialisation sliding

Many sectors struggle to compete because of the costs of doing business in SA.

- Ciaran Ryan

The story of SA's deindustrialisation over the past 50 years is alarming, and reversing it should be a priority for our lawmakers.

The chart below shows manufacturing's contribution to GDP has halved from a peak of 25% in the 1980s to under 13%.

Employment in manufacturing is also down - from 1.8 million in 2007 to less than 1.6 million in 2023.

SA's policy framers appear to be stuck in an apartheid-era protectionist mindset, with favoured industries such as automotive manufacturing held aloft by tariff barriers.

Other sectors struggle to compete internationally because of the costs of doing business in SA, such as BEE and rapidly increasing energy and logistics costs.

This helps to explain SA's flaccid growth in the last decade.

"Countries that are good at manufacturing grow more quickly and for longer periods than countries that are not," says a new report by the Centre for Development and Enterprise (CDE) titled Rethink growth, jobs and the department of trade, industry and competition.

Only 20% of SA manufacturers export, and of these more than half export less than 5% of output.

In 2015, some 42,000 firms exported manufactured goods.

In 2022, the figure was under 36,000.

Another factor is manufacturing's dependence for survival on the mining sector, which has been in decline since the 1980s.

The quality of SA's infrastructure has been another stake in the heart of manufacturing, with Eskom unable to meet energy demands, while Transnet's diminished rail capacity has cost the economy R150 billion a year.

That's pushed freight onto roads and raised logistics costs across the economy.