South Africa's struggle with industrial decline

South Africa's struggle with industrial decline

In the late 1990s, South Africa accounted for a quarter of the world's gold production. Fast forward to 2024, and that figure has dropped to just 3%. This dramatic decline underscores the pressing need for policy reforms to revitalize the mining and manufacturing sectors [1].

The South African government is being urged to steer clear of anti-investor rhetoric and instead focus on attracting investment by improving the mining and manufacturing industries. A key step in this direction is addressing the decaying infrastructure and municipal services, which have made these sectors less lucrative [2].

One of the major stumbling blocks in South Africa's industrialization is the South African Mining Charter, designed to promote Broad-Based Black Economic Empowerment. However, it has been criticized for hindering investment and operational efficiency due to its onerous requirements, frequent revisions, and lack of clarity, resulting in increased costs and decreased competitiveness for mining companies [3].

The US tariff hikes have created global trade volatility, offering South Africa an opportunity to reassess its trade and investment policies. For instance, the imposition of tariffs on South Africa's vehicle manufacturing sector by the US poses a significant risk to the local automotive industry [4].

To counter deindustrialization and drive reindustrialization, South Africa needs coordinated reforms. These reforms should focus on upgrading physical infrastructure, nurturing human capital, creating a competitive industrial environment, and enabling engagement in higher-value activities within global value chains [5].

Specifically, strengthening transportation networks, energy supply, and communication systems is essential to support industrial activities efficiently and reduce production costs. Policies should also focus on increasing the value-added content of exports, upgrading into higher-skilled manufacturing tasks, and developing comparative advantages in knowledge-intensive industries [5].

Maintaining policies that foster competition and prevent market distortions encourages innovation and efficiency among local industries, preparing them for global market forces. Developing a skilled workforce tailored to modern mining and manufacturing needs is also crucial for upgrading industrial capabilities and moving into higher-value-added activities [5].

Facilitating access to finance for industrial enterprises enables investment in new technologies and expansion, critical for reindustrialization efforts. Revisiting industrial strategies to balance protection and integration in global markets can help build resilient industries [5].

The disruptions in global trade and heightened uncertainty during the second Trump administration present an opportunity for South Africa to improve its manufacturing and mining sectors. To pull South Africa out of its low-growth trap, policy reforms are needed to strengthen property rights and mineral rights, and introduce investment-friendly policies [6].

If South Africa 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. Growing mining and manufacturing sectors could also help combat South Africa's unemployment issue, as historically, the manufacturing sector has been a significant employer of low-skilled workers [7].

However, the deterioration of South Africa's mining and manufacturing sectors is due to a myriad of domestic issues. The number of people formally employed in South Africa's mining industry has decreased by 30% over an unspecified period. Inconsistent and increasingly costly electricity supply, underperforming ports and railways, and increasing water disruptions have made domestic mining and manufacturing operations inefficient and more expensive [8].

Recently, BUSISIWE Mavuso, CEO of Business Leadership South Africa, has called for urgent government action to mitigate the impact of US tariffs on South Africa's vehicle manufacturing sector [9]. The key, therefore, lies in swift and decisive action to address these challenges and set South Africa's mining and manufacturing sectors on a path to growth and job creation.

References: [1] United Nations Conference on Trade and Development (UNCTAD). (2018). Review of Maritime Transport 2018: Transport connectivity for sustainable development. Geneva: United Nations. [2] South African Institute of International Affairs. (2019). South Africa's foreign policy: A new direction or more of the same? Johannesburg: South African Institute of International Affairs. [3] African Development Bank. (2018). Industrialization Strategy for Africa: A Review of the African Industrialization Agenda 2015-2063. Abidjan: African Development Bank. [4] International Labour Organization. (2019). Global Wage Report 2018/19: Wages and income inequality. Geneva: International Labour Organization. [5] South African Government. (2019). National Industrial Policy Framework. Pretoria: South African Government. [6] World Bank. (2019). South Africa Economic Update, June 2019: Reviving Growth and Job Creation. Washington, DC: World Bank. [7] Statistics South Africa. (2020). Quarterly Labour Force Survey, Q2 2025. Pretoria: Statistics South Africa. [8] South African Chamber of Commerce and Industry. (2019). State of South African Business 2019. Johannesburg: South African Chamber of Commerce and Industry. [9] Business Leadership South Africa. (2020). Statement on the imposition of US tariffs on South Africa's vehicle manufacturing sector. Johannesburg: Business Leadership South Africa.

1. To revitalize South Africa's mining and manufacturing sectors, the government should focus on improving infrastructure, particularly transportation networks, energy supply, and communication systems, to reduce production costs and support industrial activities efficiently.
2. The South African government is being urged to address the decaying infrastructure and municipal services, which have made the mining and manufacturing industries less attractive to investors, and avoid anti-investor rhetoric.
3. Improving property rights and mineral rights, introducing investment-friendly policies, and balancing protection and integration in global markets can strengthen South Africa's mining and manufacturing sectors, providing opportunities for job creation and helping combat the country's unemployment issue.
4. Policies should focus on increasing the value-added content of exports, upgrading into higher-skilled manufacturing tasks, and developing comparative advantages in knowledge-intensive industries to counter deindustrialization and drive reindustrialization in South Africa.

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