(Photo: Pixabay)
South Africa’s manufacturing industry, which has long been considered a cornerstone of the economy, is rapidly declining – and without urgent intervention the country could suffer irreparable damage.
This is the serious warning of Busisiwe Mavuso, CEO of Business Leadership South Africa (BLSA), who in her latest weekly newsletter urges the government to take urgent action.
“Any ambition that South Africa has to rebuild its industrial base is disappearing before our eyes,” says Mavuso.
“If the Department of Trade, Industry and Competition does not change course, a whole generation of South Africans will pay the price.”
Manufacturing under pressure
According to Mavuso, manufacturing contributes about 12% to the gross domestic product (GDP) and supports more than 1.5 million direct jobs, with many more in the supply chain.
Busisiwe Mavuso, head of BLSA. (Photo: Business Leadership South Africa)
“However, we are seeing this foundation crumbling. In the last two years alone, Bridgestone and 13 other auto parts manufacturers have ceased operations and now Nissan has also ended its manufacturing in South Africa.”
Nissan has sold its Rosslyn plant – where vans have been manufactured for more than 60 years – and is now focusing solely on marketing and sales in South Africa.
“The problems extend far beyond just the car industry. British American Tobacco (BATSA) closed its last factory in South Africa last year. This is part of a worrying trend that cannot be ignored.”
Mavuso says international competition for investments is fierce and South Africa is losing ground.
“Nissan last week announced an investment of $45 million (about R810 million) to expand its manufacturing capacity in Egypt – not in South Africa. This decision speaks volumes about where we currently stand in the global race for manufacturing investment.”
She warns that boards worldwide are increasingly choosing other destinations.
“Every month without real action leads to more decisions in boardrooms in Detroit, Tokyo, Stuttgart and Shanghai to invest in Egypt, Vietnam and Mexico rather than South Africa. This means more factories closing, more jobs being lost and supply chains crumbling.”
BBEEE amendments raise concerns
According to Mavuso, one of the biggest obstacles for the industry is the proposed amendments to broad-based black economic empowerment (BBEEE).
She is also critical of the role of the Department of Trade, Industry and Competition (DTIC) led by Minister Parks Tau.
Parks Tau, Minister of Trade, Industry and Competition. (Photo: X)
“The DTIC is supposed to be the government institution that welcomes manufacturers and helps them succeed. Instead, Min Tau’s department is becoming a source of policy uncertainty that actively drives away investment.
“The proposed amendments to the BBEEE regulations are a recent example of this,” she says.
Mavuso says that over the years original equipment manufacturers have deliberately built local supply chains that include black-owned businesses as part of their commitment to transformation.
“Now these amendments threaten to strip them of their BBEEE status because many of their suppliers are not 100% black-owned. This could undo years of work to build sustainable transformation.”
She says the situation raises serious questions about the success of existing development initiatives.
“Where are the black suppliers that had to be systematically developed over years? Where is the pipeline of businesses that institutions such as the Small Enterprise Financing Agency (SEFA), the National Empowerment Fund (NEF) and the Industrial Development Corporation (IDC) were supposed to build? What happened to the Black Industrialization Program? And what tangible outcomes did the localization fund produce?”
According to Mavuso, new policy directions cannot be meaningfully considered without honest answers to these questions.
“We need thoughtful, coherent solutions – not sudden policy changes that put major employers at risk.”
Realities of operation
Mavuso further emphasized that manufacturing chains cannot be changed overnight. “Car parts for specific models cannot simply be exchanged when BBEEE rules change. It takes years to develop new suppliers – with testing, certification and integration into production lines.”
She says the proposed amendments could have serious consequences.
“Under the new rules, manufacturers can lose their BBEEE status immediately. That status is essential to access tax incentives and various support programs. No one knows how this will be managed in practice.”
However, the challenges for manufacturers extend far beyond policy alone.
“With high logistics costs, expensive energy, safety issues, the influx of cheap imported products from Asia, as well as regulatory uncertainty, manufacturers are making rational decisions to invest elsewhere,” says Mavuso.
Moreover, countries such as Egypt are becoming more and more attractive to investors.
“Egypt offers proximity to North African and European markets, policy stability and governments that actively solicit investment.”
Solutions urgently needed
The government must therefore urgently develop a coherent strategy to save the industrial base.
“The department must withdraw the proposed BBEEE amendments and commit to regulatory stability. Transformation remains essential, but policy changes cannot happen overnight in sectors where supply chains take years to build.”
She suggests that a manufacturing task force should be set up that reports directly to the president on a monthly basis. “This cannot be resolved through bilateral discussions with individual companies – we need a macro review and coordinated action.”
Manufacturing must also be a national priority.
“The entire cabinet must realize that manufacturing is everyone’s responsibility. Energy reliability, logistics, ports, crime – it all affects manufacturers’ ability to compete globally. When a factory closes, it’s not just the department’s problem.”
Mavuso says the business sector is willing to work together, but there is no more room for delay.
“We cannot passively watch deindustrialization take place while government departments exacerbate manufacturers’ challenges.”
However, there are still manufacturers in South Africa who want to succeed.
“The question is whether the government is going to be their partner – or their obstacle. The department must become the advocate for manufacturing that it is supposed to be. The industrial foundation we still have depends on it.”