KHWEZI MABASA | Top 3 things South Africa must do to resurrect industry

South Africa’s ambition to achieve inclusive economic growth depends, in large measure, on its ability to rebuild productive industrial capacity.

Yet the country’s manufacturing base has weakened over several decades, limiting diversification, job creation, technological upgrading and broader participation in the economy. This is reflected in the sector’s declining contribution to GDP, which fell from 21% in 1994 to 12% in 2024, as well as the latest StatsSA figures showing a 2.8 percentage-point decline in manufacturing over the past year.

Reversing this trend requires more than renewed policy intent; it calls for co-ordinated action across the government, development finance institutions, private capital and industries to expand access to patient finance, support smaller enterprises, deepen transformation and strengthen competitiveness in emerging sectors.

Three priorities would accelerate reindustrialisation.

First, provide access to concessional industrial finance that is suited for rebuilding the country’s industrial base. A significant barrier for expanding economy-wide reindustrialisation is the nature of conventional commercial finance, which prioritises short-term investment, quick returns and minimal risk.

The institution with a direct mandate to finance industrialisation (the Industrial Development Corp, or IDC) has attempted to address this market failure over the years through its business finance support models and provision of patient capital to entrepreneurs in sectors that are critical for industrial development, which have often been underserved by conventional finance.

Supporting industrial competitiveness means preparing businesses for the economy of the future

For example, in financial 2025 the organisation expanded concessional finance to targeted sectors that are essential for reindustrialisation. These interventions covered the clothing/textile (R459m), manufacturing (R974m) and downstream steel sectors (R157m).

The economic multiplier effects include employment creation, saving existing jobs and non-financial support. This blended finance approach is more conducive for accommodating the risk profile and long-term needs of reindustrialisation.

Second, address barriers for micro, small & medium enterprises (MSMEs) in manufacturing. One essential takeaway is lessening the highly concentrated ownership patterns across the sector. The latest Competition Commission Concentration Report (2025) identifies the manufacturing sector as one of the most highly concentrated and encourages stakeholders to address this trend. It provides evidence that MSMEs are more likely to survive in sectors with lower ownership concentration levels.

For instance, in financial 2025, the IDC approved R3bn in funding for MSMEs and R410m was distributed to non-banking intermediaries to improve access to finance for MSMEs. Similarly, the National Empowerment Fund and Small Enterprise Development & Finance Agency contributed R1bn and R2m respectively.

Entities such as the IDC and other development finance institutions that support MSMEs address some essential market entry stumbling blocks, particularly access to capital, formalisation and business sustainability, thereby enabling an MSME to grow, create employment, and contribute meaningfully to economic development.

Furthermore, the IDC has initiated selected beneficiary group programmes aimed at ameliorating racialised inequality in market structures.

These are salient steps in supporting broad-based BEE and diversifying ownership patterns in key manufacturing sub-sectors. However, more finance and non-financial support from both private and public sector institutions is required to deepen the positive policy interventions cited above.

The third priority is technological upgrading. Literature sources and evidence on successful rapid industrialisation case studies across the globe highlight the importance of research & development. A stark example is how East Asian economic structures were transformed during the 20^th century.

Reindustrialisation requires co-ordinated investment, credible policy execution, stronger industrial partnerships and sustained support for firms that can expand productive capacity, deepen localisation, create employment and broaden ownership

The department of trade, industry & competition’s industrial strategy, released last year, complements this approach by making decarbonisation and digitisation core pillars. Supporting industrial competitiveness means preparing businesses for the economy of the future.

Through investments that encourage decarbonisation, localisation and digitalisation, the IDC is helping firms adopt new technologies while strengthening domestic manufacturing capability. These interventions are linked to localisation and employment creation priorities that lie at the centre of the country’s industrial strategy.

Overall, South Africa’s reindustrialisation requires intentional policy reforms and a supportive development finance paradigm. The Industrial Policy Action Plan was first introduced in the mid-2000s, and different administrations have attempted to rebuild the country’s industrial base by upgrading this strategy over the years.

But emphasis should be placed on accessing finance and creating successful industrial policy execution programmes. The IDC is well positioned to carry out the latter function, as stated in the newly adopted industrial strategy. It provides support that extends beyond finance to build enterprise industrial capabilities that deploy finance effectively.

Reindustrialisation requires co-ordinated investment, credible policy execution, stronger industrial partnerships and sustained support for firms that can expand productive capacity, deepen localisation, create employment and broaden ownership.

Institutions such as the IDC have an important role to play in addressing market failures and crowding-in investment, but lasting impact will depend on a wider ecosystem of public and private actors working with greater alignment, accountability and urgency.

As South Africa charts its next phase of economic growth, rebuilding industrial capability must remain a shared national priority.

• Mabasa is a lecturer and researcher at the Centre for Researching Education & Labour