SA’s manufacturing sector has been on a downward trend for 16 years, eroding its contribution to GDP and leading to a big drop in jobs, a new Stats SA report showed on Monday.
The findings of the report, a valuable source of information for policymakers, businesses and researchers, could be seen as a sign that the sector lacked industrial policy support to withstand and thrive under global competitive pressures.
It is also the latest evidence of the economy’s deindustrialisation. The sector, which includes stalwarts such as Barloworld, Sasol and SA Breweries, contributed about 23% of GDP at its height in the early 1980s.
The R500bn-plus sector contributed 11.2% of the economy in the first quarter of 2023, making it the fourth-biggest sector in the economy.
Job losses
Another key trend captured in the data is the loss of manufacturing jobs.
The agency report shows employment in the manufacturing sector fell from 1.18-million in 2017 before Covid and 1.4-million in 2005 when the data series began to 1.09-million in 2021. It lost almost 309,000 jobs in 16 years, with 2021’s decline probably the result of the Covid-19 pandemic. The survey was first conducted in 2005, then again in 2008, 2011, 2014 and 2017. The 2021 results released on Monday are the most recent data series results.
Presenting the report findings, Stats SA DDG for economic statistics Joe de Beer said the findings also show that while income generated in the industry has grown over time, increasing R0.93-trillion in 2005 to R2.63-trillion in 2021, profit in the manufacturing industry declined.
"The profit margin for the manufacturing industry was 2% in 2021, the lowest since the start of this series in 2005 when they were at 7%," said De Beer.
He said that in terms of sub-sectors, the telecommunication, medical and optical equipment divisions had the highest profit margins, at 4.7% in 2021 compared with the furniture, other manufacturing and recycling divisions that had the lowest profit margin at 1%.
De Beer said that in 2021, the country’s small to medium enterprises accounted for 24% of income and 58% of employment in the manufacturing industry.
Regional disparities
The report provides detailed data at provincial and district levels, and highlights the regional disparities in the manufacturing industry. The industry is concentrated mainly in four metropolitan areas: the City of Johannesburg, Ekurhuleni, the City of Cape Town and eThekwini. In 2021, these four cities accounted for 60% of the national workforce and just more than half of sales of goods & services
De Beer said that while all other manufacturing subdivisions saw a fall in employment, petroleum & chemical products was the only division that experienced a rise in employment in the period.
The deterioration in manufacturing’s contribution to employment and overall GDP signifies SA’s deindustrialising, said Alex Mashilo, visiting researcher at Southern Centre for Inequality Studies at the University of the Witwatersrand.
"It is evident that manufacturing sectors that lacked adequate industrial policy support to withstand and thrive under global competitive pressures have been severely affected, leading to ongoing deindustrialisation," said Mashilo, who is also affiliated with the SACP, for which he serves as a spokes-person.
"Therefore, it is crucial to implement a comprehensive industrial policy, supported by fiscal measures and a supportive trade policy, to revitalise manufacturing and its employment prospects in SA."
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