{"id":2021,"date":"2025-06-19T12:28:45","date_gmt":"2025-06-19T12:28:45","guid":{"rendered":"https:\/\/www.innov8fs.co.za\/blog\/?p=2021"},"modified":"2026-03-18T11:46:05","modified_gmt":"2026-03-18T11:46:05","slug":"collapse-of-one-of-south-africas-most-important-employers","status":"publish","type":"post","link":"https:\/\/www.innov8fs.co.za\/blog\/2025\/06\/19\/collapse-of-one-of-south-africas-most-important-employers\/","title":{"rendered":"Collapse of one of South Africa\u2019s most important employers"},"content":{"rendered":"

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The decline in South Africa\u2019s manufacturing sector output over the past decade has accelerated in recent years, with the industry now producing 8% less than it did before the pandemic.<\/p>\n

This decline over the past few years is primarily due to the collapse of South Africa\u2019s state-owned enterprises (SOEs), whose services are vital to the functioning of a healthy manufacturing sector.<\/p>\n

Stanlib chief economist Kevin Lings explained why the continued decline of this sector is particularly worrying, considering vast improvements at key SOEs.<\/p>\n

In March 2025, SA\u2019s manufacturing production declined by a substantial 2.2% month-on-month, after growing by 0.7% in February.<\/p>\n

Lings said that the sector\u2019s performance in March was far worse than market expectations for an increase of 0.5%.<\/p>\n

This continued decline will hamper GDP growth as the manufacturing sector is one of the largest contributors to the country\u2019s economy.<\/p>\n

In Q1 2025, manufacturing activity contracted by an extremely disappointing 2.3% quarter-on-quarter. This will heavily undermine GDP growth performance in the quarter.<\/p>\n

South African manufacturing is currently more than 8% below the level of output achieved before the start of COVID-19 in 2020.<\/p>\n

The performance of the manufacturing sector is disappointing, given the significant increase in electricity production over the past 12 months.<\/p>\n

It was hoped that the scaling back of load-shedding would boost industrial production, easing pressure on producers to invest in alternative sources of energy.<\/p>\n

With load-shedding being significantly reduced, it was also hoped that companies would have additional capital to invest in growing their businesses.<\/p>\n

However, this problem appears to have been replaced by an equally severe shortage of water in parts of the country, which also impacts manufacturing output.<\/p>\n

Lings said the weakness appears to reflect a combination of factors, including increased import penetration, weaker export performance and a lack of domestic fixed investment spending.<\/p>\n

Long-term decline<\/h3>\n

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South Africa\u2019s manufacturing sector is one of the victims of the country\u2019s ongoing confidence crisis, with local and global investors increasingly uninterested in investing in the country.<\/p>\n

This crisis is mainly due to declining trust in local political institutions and the country\u2019s policies, which have failed to drive economic growth.<\/p>\n

Over the past decade, the country has achieved an annual economic growth rate of only 0.8%, while its population has grown at a rate of around 1.6%. This means that, on average, South Africans have gotten poorer over the past decade.<\/p>\n

The Government of National Unity (GNU) does provide some opportunity for this narrative to shift, but this can only come with concrete evidence of reform and economic growth.<\/p>\n

Old Mutual\u2019s chief economist, Johann Els, explained that one of the most overlooked issues in South Africa is the lack of investor confidence in the country, largely due to its deteriorating political climate.<\/p>\n

The primary driver of this deterioration is policy uncertainty and questions surrounding the country\u2019s future, given some of the legislation enacted in the past decade.<\/p>\n

This decline in confidence has led to a significant reduction in fixed investment in the country, negatively impacting economic growth.<\/p>\n

Fixed investment refers to investments in long-lasting assets that are used to produce goods and services.<\/p>\n

These assets, like machinery, equipment, and buildings, are intended for long-term use, not for resale, and contribute to the company\u2019s ability to generate profits.<\/p>\n

Many companies operating in South Africa have been investing primarily to maintain their operations over the past decade and have not committed capital to growth.<\/p>\n

For example, many have invested millions in backup or alternative energy sources and backup water storage, rather than expanding their operations.<\/p>\n

This means that the meagre growth the country has experienced in terms of investment has not translated into a meaningful improvement in employment.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/article>\n

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Credit: Shaun Jacobs<\/h6>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

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