Factories going quiet: how industrial stagnation in South Africa erodes competitiveness

> South Africa’s competitiveness debate is often framed around short-term constraints: exchange-rate volatility, electricity shortages, or weak global demand. These factors matter. But they do not explain why periods of recovery fail to translate into sustained export growth or durable improvements in productivity. The deeper problem lies in industrial stagnation. Over the past three decades, the manufacturing sector has lost momentum, and with it, South Africa’s long-term competitiveness. This is not a story of collapse. It is a story of flattening production, rising import penetration, and constrained export capacity, whose effects accumulate slowly but persistently.   Why industry matters for competitiveness Manufacturing plays a central role in long-run economic development. It is the sector most closely associated with learning-by-doing, scale economies, technological upgrading, and export diversification [1]. Countries that sustain industrial growth tend to expand exports, improve cost competitiveness, and move into more complex products over time [2]. When industry stagnates, these channels weaken together.   In South Africa, manufacturing has not disappeared, but it is no longer a dynamic engine of competitiveness. This pattern is consistent with broader evidence on premature deindustrialisation, where industrial activity peaks and declines at relatively low income levels [3].   How the data shows industrial stagnation Industrial stagnation becomes visible when production, trade, and structure are examined jointly rather than in isolation.   Manufacturing output Real manufacturing gross value added (GVA) increased gradually from the mid-1990s to the mid-2000s. Since then, growth has been weak and uneven. Indexed to the mid-1990s, manufacturing output flattens after the global financial crisis and fails to establish a strong upward trajectory thereafter [4][5]. This pattern points to persistent underperformance, not a temporary downturn. &