[News] South Africa’s deindustrialisation dilemma

South Africa’s manufacturing and mining industries have been operating under pressure for decades. In 2000, manufacturing grew by 8.1%, compared to a contraction of 0.4% in 2024. 

South Africa’s deindustrialisation dilemma: steep manufacturing decline

The manufacturing business confidence index has more than halved from a high of 77 in the first quarter of 2007 to just 33 in the second quarter of 2025. In 1994, a quarter (25.8%) of the world’s gold production occurred in South Africa compared to just 3% in 2024. During that same period, the number of people formally employed in the mining industry dropped by 30%. 

A myriad of domestic issues have led to the deterioration of its mining and manufacturing sectors. The mining sector has been saddled with over-regulation of labour, environmental regulations and licensing requirements, and the effective nationalisation of mineral rights. 

Deindustrialisation impacts South Africa’s mining sector

The South African Mining Charter, aimed at transforming the mining sector by promoting Broad-Based Black Economic Empowerment, has faced criticism for hindering investment and operational efficiency. 

The Charter’s onerous requirements, frequent revisions, and lack of clarity have created uncertainty and increased costs for mining companies, making them globally less competitive. At an infrastructure level, the inconsistent and increasingly costly supply of electricity, underperforming ports and railways, and increasing water disruptions have made domestic mining and manufacturing operations inordinately inefficient and unnecessarily more expensive. 

Reindustrialisation requires policy and infrastructure reform

To pull South Africa out of its low-growth trap, policy reforms that will strengthen property rights and mineral rights need to be implemented. A higher level of investment in mining and manufacturing is also predicated on a sufficient level of investor confidence. The government will therefore have to refrain from using anti-investor rhetoric and should focus on introducing investment-friendly policies. Steps should also be taken to reverse infrastructure and municipal decay. 

If the government can achieve this, mining and manufacturing will once again become lucrative, growing sectors, putting the country on the path towards reindustrialisation. Growing mining and manufacturing sectors would help combat one of South Africa’s major social ills: unemployment. Historically, the manufacturing sector has been one of the largest employers of low-skilled workers. 

If South Africa can get its manufacturing sector to grow, kickstarting a second industrial revolution, the country would finally be able to provide opportunities for the 45.1% of young people (15-34 years) who are not in employment, education or training. In addition, the US tariff hikes have created major global trade volatility, providing South Africa with the opportunity to objectively assess its trade and investment policies. 

The disruptions in global trade, specifically of supply-and-value chains, coupled with heightened uncertainty that will persist throughout the second Trump administration, present an ideal opportunity for South Africa to up its manufacturing and mining game. Unless the government can address the domestic issues affecting the country’s industrial base, South Africa will continue to waste its trade potential and lose out on the opportunities emerging in 2025 – a moment of significant global trade upheaval.

Article originally appeared here.