The manufacturing sector remains a significant and important contributor to the country’s gross domestic product (GDP). The sector has, however, underperformed and has been adversely affected by almost no GDP growth, rising unemployment and an unpredictable electricity supply. This has been exacerbated by an increase in consumer preference for imported goods, largely due to cheap imports. With all these pressures, it is not surprising the sector is struggling.

Many factors influence competitiveness in the manufacturing sector: cost and availability of labour and materials; reliability and cost of energy supplies; economic and trade protectionism; financial and tax incentives; physical infrastructure; access to supplier networks; innovation; government investments; and the legal and regulatory environment, to name but a few. There is constant pressure to find innovative ways to tackle each of these drivers so that businesses can thrive.

The formation of a Government of National Unity (GNU) following the 2024 national elections has breathed new life into the sector, with a number of initiatives aimed at stimulating this industry. Business confidence in the South African manufacturing sector has jumped to its highest level since February 2022, due to an easing of political uncertainty and expectations of improving demand. 

Incoming Trade, Industry and Competition Minister Parks Tau has said industrialisation and local manufacturing will be the government’s focus to improve economic growth. With the new GNU set to focus on developing policies to stimulate economic growth, the recovery plan will support local manufacturing and target green industries, such as the development of new-energy vehicles. 

The plan is also looking to increase investment in the country’s special economic zones (SEZs) and industrial parks. It also aims to make South African exports much more competitive. The plan envisages goods that are currently imported being manufactured locally through various stimulus measures, significantly increasing the export of locally manufactured goods to the rest of the African continent.

Industry analysts expect the emerging economies to dominate the manufacturing sector in the coming years, due principally to their low cost of labour, based on the stated policies of emerging market governments to drive the sector. Leading these economies are China, India and Brazil. However, South Africa is also poised to benefit from increased and sustainable growth in the sector.

Through our work with clients in these sectors over many years, BDO’s audit, advisory and tax partners understand that you need an adviser who understands the complexities of your business and your operating environment – and what is needed to elevate your success.

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