Employment in South Africa is almost back to pre-pandemic levels, but the manufacturing sector, faced with load-shedding, weak demand, rising costs and poor municipal services, continues to shed jobs.
Thami Moatshe, executive head of the Localisation Support Fund (LSF), said this week that output growth had been weak in several sectors, including manufacturing, because of challenging operating and trading conditions, including rising input costs, power outages and industrial action.
“Competitiveness has been affected because of rising inflation and interest rates. Although the number of manufacturing sub-sectors that reported growth in production volumes outnumbered those reporting declines, with a marginal growth of 0.6%, some sub-sectors reported substantial contractions and, therefore, dragged down the overall sector’s performance,” she said.
The LSF prioritises local production of goods by supporting localisation through industry research, specialist expertise and technical resources.
Statistics South Africa reported this week that in the second quarter, the unemployment rate was 32.6%, from 32.9% in the first quarter.
According to the Quarterly Labour Force survey, 16.3-million people were employed in the second quarter, the highest number since the first quarter of 2020, when 16.4-million were in employment.
However, manufacturing lost jobs in the second quarter, shedding 96,000 quarter on quarter. The last time the sector grew employment was in the fourth quarter of last year.
Gauteng, which employs a third of the 1.5-million people in manufacturing, lost 40,000 jobs compared with the first quarter of 2023.
In the Western Cape, the second-biggest employer in manufacturing, 14,000 jobs were shed, with 345,000 now employed. In KwaZulu-Natal, 17,000 people were cut.
Limpopo was the only province to grow manufacturing jobs in the second quarter, from 56,000 in the first quarter to 76,000.
The job losses are part of a longer-term decline in the sector, which has struggled in the face of global competition. Moatshe said the sector's contribution to GDP dropped from 24% in 1981 to 13.7% in 2022.
Manufacturing's contribution to GDP has not recovered since the global economic crisis of 2008, when its contribution was 16%. It now contributed 13% on average, she said.
The challenge now is to provide local players and new entrants with the support they need to scale up and modernise production so they can meet local demand and be globally competitive
— Thami Moatshe, executive head, Localisation Support Fund
“The challenge now is to provide local players and new entrants with the support they need to scale up and modernise production so they can meet local demand and be globally competitive.”
Moatshe said post-pandemic recovery will come with increased activity in the manufacturing sector as global supply chains return to normal. However, she said, the cost of alternatives to supply power for production puts added pressure on margins for manufacturers.
Additional opportunities across the sector will come with the rollout of the energy projects in generation, transmission and distribution, and with increased activity in the sector, jobs will recover, she added.
“Construction’s increased contribution to jobs [by 104,000 to 1.3-million] could be because of the renewable energy projects being rolled out and this upward trend should continue as transmission and distribution network projects get on stream. Without any other infrastructure spent, this sector could see a downward trend again.
Philippa Rodseth, Manufacturing Circle executive director, said from a demand side, near-zero GDP growth and an uncertain global economic climate negatively affected demand for manufactured products.
Manufacturing's contribution to GDP.
— IN NUMBERS: 13%
“On the supply side, heavy and prolonged load-shedding and lack of municipal service delivery from an electricity and water supply perspective have impacted on the output of the sector and, in turn, the ability to sustain jobs.”
The Manufacturing Circle was concerned to see the steady decline in the number of manufacturing jobs from 2.1-million in 2008, she added.
Investec economist Lara Hodes said the manufacturing sector’s loss in the second quarter of the year points to structural challenges, including persistent load-shedding, subdued local demand and a fragile global environment.
Casey Delport, investment analyst at Anchor Capital, said the official headline unemployment numbers did not fully reflect the country’s unemployment crisis.
“Informal and underemployed workers are not adequately captured in official statistics. Furthermore, the official unemployment rate might not fully account for the quality of jobs available or the degree of job security.”
Many South Africans remained trapped in low-skilled, insecure employment conditions, leading to underemployment and persistent poverty, Delport added.
“Tackling this multifaceted problem requires comprehensive and sustainable strategies that encompass education reform, job creation, and inclusive economic growth.”
Free Market Foundation CEO David Ansara said low investment levels in the government’s labour laws deterred employers from taking a risk on new hires. At the same time, trade unionists continued to protect unions’ jobs “at the expense of the poor”.
“To encourage new investment, the government must abandon hostile policies like expropriation [of land] without compensation, National Health Insurance and race-based employment equity laws.”
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