If there was still any doubt, this week’s data from Stats SA confirms that there is still a lot to do to get the economy performing at the optimal levels needed to create jobs and slash unemployment.
That means weaning the country off a heavy reliance on the consumptive sectors and making a concerted effort to breathe life into the ailing industrial sector.
There is still not enough being done to cushion ourselves from the global volatility that invariably comes with having the erratic Donald Trump as the most powerful political figure in the world. His tariffs last year played havoc with economies around the world, with South Africa left scrambling to find export market alternatives after being slapped with 30% from August.
South Africa’s growth forecast for 2026 — nothing much to get excited about at 1.6% for a start — is under serious jeopardy after Trump and his Israeli counterpart Benjamin Netanyahu unleashed turmoil on global oil markets by launching a war against Iran. Higher oil prices for South Africa mean higher production costs for most industries, which already performed at subpar levels last year, leading to lacklustre growth of just 1.1%.
South Africa is not alone in feeling the heat from geopolitical tensions, but it is more vulnerable than most emerging market peers because of an economy still too reliant on consumption.
This week’s data shows that the biggest drivers of growth in 2025 were the finance, trade and personal services sectors while manufacturing, electricity, gas and water, and construction industries all shrank.
South Africa is not alone in feeling the heat from geopolitical tensions, but it is more vulnerable than most emerging market peers because of an economy still too reliant on consumption.
As one economist aptly put it, the growth that we’re getting is not the best type of growth. We have to have the infrastructure in places — such as reliable railway and port systems — that will encourage the manufacturing and mining industries that have traditionally been a cornerstone of growth.
Historical data shows that manufacturing’s share of GDP has fallen from 20%–24% in the 1980s to about 12%–13% now and the country has struggled to build a broad export-oriented industrial base due to a combination of structural, historical and policy factors.
It’s not for lack of planning. The government launched the Industrial Policy Action Plan (IPAP) in 2007–08 to try turning things around but, as is often the case, it fell short at implementation. While it has helped a handful of sectors such as automotive manufacturing and clothing and textiles, this has not filtered through to other sub-sectors.
And as the experts keep telling us, industrial policy cannot succeed if the broader economy is dysfunctional. We have gone some way towards fixing our electricity constraints, but we are not out of the woods and freight rail and port bottlenecks remain at Transnet.
Manufacturing firms need reliable infrastructure and energy to compete globally. Because these systems deteriorated in the 2010s, many IPAP-supported industries have struggled to expand production. Fixing infrastructure should have been prioritised alongside industrial policy from the start.
South Africa needs to start pouring the limited financial resources that it has into the sectors that will get the economy growing significantly.
Take Gauteng for instance. Political parties have roundly criticised MEC Lebogang Maile this week because they felt his budget for the country’s economic hub prioritised the wrong spending targets.
As the DA argued, the R4.6bn Maile set aside for e-toll debt would have been better used to fix water, electricity, roads and school infrastructure, which are in critical disrepair in cities such as Johannesburg.
Only once we turn focus on the industries that will push this economy forward can we hope to attain the annual growth levels ― 3%-5% ― needed to get millions out of unemployment and poverty. A mere 1.1% or even 1.6% will simply not cut it.
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