By Dr Khwezi Mabasa
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 structural challenge is reflected in the manufacturing sector’s declining contribution to Gross Domestic Product (GDP), which fell from 21 per cent in 1994 to 12 per cent in 2024, as well as the latest Statistics South Africa 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 coordinated action across 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 should be introduced in South Africa to accelerate reindustrialisation. The first one is providing 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 development funding institution with a direct mandate to finance industrialisation (The Industrial Development Corporation: IDC) has attempted to address this market failure over the years through its varied 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. For example, in the 2024/25 financial year, the organisation expanded concessional finance to targeted sectors that are essential for reindustrialisation.
These interventions covered the clothing/textile (R459 million), manufacturing (R974 million) and downstream steel sectors (R157 million). The economic multiplier effects include employment creation, saving existing jobs and non-financial support. This blended finance approach is more conducive to accommodating the risk profile and long-term needs of reindustrialisation.
The second priority is the importance of addressing Micro, Small, and Medium Enterprises (MSMEs) barriers 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 which illuminates that MSMEs are more likely to survive in sectors which have lower ownership concentration levels.
This informs the emphasis on inclusion and eradicating MSMEs’ market structure impediments in manufacturing. For instance, during the 2024/25 financial year, the IDC approved R3 billion in funding for MSMEs and R410 million was distributed to non-banking intermediaries to improve access to finance for MSMEs. Similarly, the NEF and SEDFA contributed R1 billion and R 2 million, respectively.
Entities like the IDC and other DFIs that support MSMEs with financial and non-financial support interventions address some essential market entry stumbling blocks, particularly access to capital, formalisation, and business sustainability, thereby enabling MSMEs 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. Notably, for the same reporting period, IDC deployed R26.6 billion in transformation-targeted funding, empowering Black Industrialists, women and youth entrepreneurs while supporting over 12,000 jobs through strategic partnerships.
These are salient steps taken in supporting Broad-based Black Economic Empowerment 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 for strengthening reindustrialisation in South Africa is emphasising technological upgrading. Literature sources and evidence on successful rapid industrialisation case studies across the globe highlight the importance of research and development. A stark example is the use of technology in transforming East Asian developmental states’ economic structures during the 20th century. Ha Joon Chang and Alice Amsden’s seminal research on these countries amplifies the need for state assistance in developing technological capabilities in markets. The recent Department of Trade, Industry and Competition (DTIC) Industrial Strategy 2025 complements this approach through centring decarbonisation and digitisation as core pillars.
Supporting industrial competitiveness also 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 long-standing deindustrialisation requires intentional policy reforms and a supportive development finance paradigm. The Industrial Policy Action Plan (IPAP) 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. Yet, the evidence highlights that the lessons and interventions discussed in this article deserve attention from all policy stakeholders. 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 cannot be achieved by government, development finance institutions or the private sector acting alone. It requires coordinated 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.
Dr Khwezi Mabasa is a lecturer and researcher at the Centre for Researching Education and Labour (REAL). He is also a member of the DTIC Ministerial ITAT Advisory Committee and serves as Special Adviser to the Minister of Trade, Industry and Competition (DTIC). Khwezi has served as Economic and Social Policy Lead and Programme Manager at the Friedrich Ebert Stiftung (FES); as a part-time Sociology lecturer at the University of Pretoria and at Wits; as a Senior Researcher at the Mapungubwe Institute for Strategic Reflection (MISTRA) on political economy; and as the National Social Policy Coordinator of the Congress of South African Trade Unions (COSATU).
