Why manufacturing must be at the centre of industrial strategy

South Africa’s manufacturing sector has always been a key contributor to industrial development, job creation, and economic transformation. Yet in recent years, its influence has waned, challenged by systemic issues including energy insecurity, infrastructure failures, global competition, and policy uncertainty.

Despite persistent headwinds, manufacturing remains one of the most powerful levers South Africa has to stimulate growth and strengthen long-term resilience.

With renewed investment and industrial alignment, the sector is beginning to show early signs of stabilisation and could again become a driving force in the country’s recovery.

From peak contribution levels of over 23% of GDP in the early 1990s, manufacturing’s share continues to erode, reaching around 12.8% of GDP by 2024, according to World Bank data.

According to Stats SA’s Economic Wrap-Up for September 2025, manufacturing activity fell 0.7% year on year, with seven of ten divisions recording lower output, underscoring how uneven the recovery remains.

This follows modest gains earlier in the year, including a 1.9% increase in June, and highlights the sector’s fragile recovery amid ongoing energy constraints, logistics bottlenecks, and rising input costs.

This decline isn’t due to a lack of capability or talent. Rather, it reflects underinvestment, outdated infrastructure, rising production costs, unreliable energy, and a complex regulatory environment. The result has been shrinking competitiveness and investor hesitancy.

Meanwhile, the operating context is growing more demanding. Manufacturers are contending with global supply chain disruptions, escalating input costs, logistics backlogs, and climate-related pressures. Infrastructure constraints, from ports to rail, inflate costs, while the persistent energy crisis disrupts production and delays projects.

And yet, in these challenges lies opportunity: to reposition South African manufacturing as a platform for value-added production, regional trade, and innovation-driven growth.

The African Continental Free Trade Area (AfCFTA) provides a catalytic framework. With access to over 1.3 billion consumers, it presents a compelling case for manufacturers to scale their operations, diversify, and improve regional value chains.

However, this opportunity must be matched by a clear strategy, sufficient capital, and the execution capacity to compete regionally and globally.

To realise this, four areas demand urgent focus:

1. Structural and policy reform

A competitive sector depends on consistent, industry-aligned policy and regulatory certainty. Investors need predictability. We need a streamlined industrial framework that supports localisation, drives competitiveness, and prioritises sectors aligned with the green and digital economy.

Following the May 2024 publication of the Industrial Policy and Strategy Review by the Department of Trade, Industry and Competition, and supported by the 2025 Investment Project Book under the broader South Africa Investment Strategy, a refreshed industrial framework is now taking shape.

These initiatives point to renewed policy intent, but faster implementation and measurable outcomes remain critical to restoring investor confidence and catalysing manufacturing growth.

2. Infrastructure modernisation

Reliable infrastructure, energy, water, ports, rail, and digital networks are essential. Without this foundation, the sector cannot thrive. Investment must be fast-tracked, especially via public-private partnerships that unlock funding and delivery capacity.

Energy tops the list. Although the intensity of load-shedding has eased compared to the 2023-2024 peak, high tariffs, grid bottlenecks, and unpredictable maintenance schedules continue to cost the industry billions of rand each year.

Manufacturers urgently need faster grid connections, streamlined approval processes for embedded generation, and access to affordable green power to sustain their production.

3. Manufacturing and innovation

Global manufacturing is embracing digitalisation, automation, and sustainability. South Africa must follow suit. Whether in steel, food processing, chemicals, or automotive components, Industry 4.0 is now a key driver of competitiveness.

Technologies such as smart sensors, robotics, additive manufacturing, and predictive maintenance can enhance quality, reduce costs, and increase productivity. Yet uptake remains patchy, often due to capital and skills constraints.

That’s where financial institutions play a vital role. At Nedbank Commercial Banking, we partner with manufacturers to unlock finance, enhance efficiency, and support digital upgrades. We also work with industry bodies to integrate best practices in climate resilience and sustainability.

4. Climate resilience and ESG

Manufacturing is becoming increasingly exposed to climate-related and regulatory risks, from water scarcity to the implementation of the Climate Change Act and the EU’s Carbon Border Adjustment Mechanism.

These frameworks are redefining export competitiveness and capital allocation across industries. At the same time, ESG standards are becoming non-negotiable, with growing pressure from customers, regulators, and funders.

This is no longer just a compliance issue. It’s strategic. Businesses that embed sustainability are better positioned to access green finance, meet export requirements, and maintain market relevance.

South African manufacturers must prioritise water reuse, energy efficiency, waste reduction, and low-carbon design. The payoff: lower costs, greater resilience, and long-term growth.

What now?

The road ahead requires more than hope. It calls for evidence-led, collaborative action between government, business, financiers, and labour.

We must manufacture our way to economic revival, not by clinging to past models, but by reimagining the sector as a driver of high-tech, export-led, and climate-smart development.

By investing in infrastructure, aligning policy, embracing innovation, and embedding resilience, manufacturing can reclaim its place as a national growth engine.

South Africa’s manufacturing sector has what it takes: skill, grit, and real potential. Unlocking that promise demands urgency, partnership, and ambition.

At Nedbank Commercial Banking, we view this as an opportunity to think bigger, to look beyond constraints and position manufacturing as the beating heart of an inclusive, competitive, and climate-resilient economy.

By Amith Singh, National Manager: Manufacturing, Nedbank Commercial Banking