South Africa’s Manufacturing Shift and the Push for Job‑Intensive Growth
Speaking at the Government Technical Advisory Centre’s annual public economic conference, Duncan Pieterse, Director‑General of the National Treasury, highlighted a structural change in South Africa’s manufacturing base. He noted that the sector’s four dominant pillars—automotive, petrochemicals, food and beverage, and basic iron & steel/metal products/machinery—are becoming progressively less labour‑intensive.
According to Pieterse, research from local academics points to two main drivers: China’s global manufacturing dominance and the accelerating adoption of automation technologies. These forces have lowered the employment intensity of manufacturing for countries like South Africa, meaning the sector can no longer be relied upon to generate the large‑scale job growth it once did.
Where Job Creation Still Exists
Pieterse argued that the economy still holds sectors capable of delivering labour‑intensive expansion. He singled out tourism and construction as areas where policy focus could yield significant employment gains, especially for young workers.
“The policy question for South Africa is how we orient our industrial and economic policies to capture the opportunities for employment growth that remain available,” he said.
Youth Unemployment: A Persistent Challenge
The conference, themed “Counting the Crisis: Data, Evidence and Solutions for Youth Unemployment in South Africa,” took place against a backdrop of stark labour‑market statistics.
- National unemployment rate (Q1 2026): 32.7 % (Statistics South Africa)
- Unemployment among 15‑24‑year‑olds: 60.9 %
- Unemployment among 25‑34‑year‑olds: 40.6 %
- More than four in ten young people aged 15‑34 are not in employment, education or training (NEET)
These figures underscore why the conference placed youth unemployment at the centre of its agenda.
Linking Growth to Job Creation
Finance Minister Enoch Godongwana, in a pre‑recorded opening address, warned that without faster, inclusive economic growth, large‑scale reductions in youth unemployment will remain out of reach. He stressed that growth does not occur spontaneously; it demands:
- Structural reform
- Effective implementation
- Capable institutions
- Credible public finances, underpinned by reliable data, accountability and fiscal discipline
Fiscal Discipline as a Growth Enabler
Pieterse emphasized that sustainable public finances are a prerequisite for the investment climate needed to spur growth. He pointed out that South Africa has recorded a primary surplus for three consecutive fiscal years—a rarity since the 2008‑09 period.
“Without stable, sustainable public finances, the chances of growth are very difficult because companies hesitate to invest when the government’s own finances are not managed responsibly,” he explained.
International Recognition of Fiscal Progress
The country’s fiscal improvements have been acknowledged by major rating agencies:
- S&P Global affirmed South Africa’s long‑term foreign currency rating at BB and local currency rating at BB+, maintaining a positive outlook (May 2026).
- Moody’s upgraded the outlook to positive, citing improving fiscal performance and structural reform progress (May 2026).
- Fitch raised the sovereign’s long‑term rating by one notch to BB from BB‑, noting prudent fiscal management despite weak growth and external shocks (June 2026).
Economic Outlook and External Pressures
The Treasury’s February 2026 forecast projected full‑year GDP growth of 1.6 %. However, actual performance has fallen short:
- Q1 2026 growth: 0.5 %
- 2025 annual growth: 1.1 % (below the Treasury’s 1.4 % estimate)
Pieterse noted that the subdued growth reflects weak manufacturing output and heightened vulnerability to external shocks. The recent US‑Iran tensions, which roiled global oil markets, have disproportionately affected net oil importers like South Africa.
Policy Path Forward
To translate fiscal stability into tangible job opportunities, Pieterse urged policymakers to:
- Redirect industrial incentives toward sectors with high labour‑absorption potential, notably tourism and construction.
- Strengthen data collection and evidence‑based planning to better target youth‑focused programmes.
- Ensure that reforms are implemented through capable institutions that uphold transparency and accountability.
By aligning economic strategy with the realities of a changing manufacturing landscape and leveraging the country’s fiscal credibility, South Africa can create a more inclusive growth trajectory that addresses its chronic youth unemployment challenge.
