South Africa’s New Industrial Development Strategy Aims to Reverse De‑industrialization
The South African government has released a revised Industrial Development Strategy (IDS) that acknowledges the country’s widening industrial gaps and sets out a roadmap for renewed growth. Approved by Cabinet last week and published on Monday, the strategy stresses the need for affordable, reliable electricity, modernised ports and rail links, and stronger telecommunications networks to halt the ongoing de‑industrialisation of the economy.
Why the Strategy Was Needed
Since the advent of democracy in 1994, South Africa’s industrial policy has been heavily shaped by trade liberalisation. While opening markets brought certain benefits, it also increased exposure to global competition, intensified cost pressures, and weakened domestic industries. As a result:
- The contribution of manufacturing to GDP has fallen from roughly 20 % in the mid‑1990s to about 13 % in 2022 (World Bank, 2023).
- Productive capacity, employment, and overall competitiveness have deteriorated, compounded by sluggish economic growth, weak local demand, ageing infrastructure, and sub‑optimal energy, logistics, and transport services.
The IDS document states that its aim is to respond to these challenges — de‑industrialisation, slow growth, declining industrial capacity, dwindling investment in productive sectors, structural transitions, and infrastructure backlogs. If fully implemented, the strategy projects an average GDP growth of 3 % per year.
Three Pillars Driving the Industrial Transformation
The strategy centres on three interconnected pillars that are intended to guide industrial policy toward a more sustainable and inclusive path:
- Decarbonisation – shifting industrial production to low‑carbon technologies and cleaner energy systems.
- Digitalisation – embedding digital technologies across sectors to raise productivity and enable new business models.
- Diversification – expanding the production base beyond traditional resource‑intensive activities by deepening value creation and moving into higher‑technology, higher‑value‑added goods.
By anchoring policies around these pillars, the IDS seeks to move away from fragmented, department‑specific interventions toward a coordinated, capability‑led transformation.
Preferential Energy Tariffs and Infrastructure Priorities
Affordable and reliable electricity is highlighted as a cornerstone for competitiveness, job creation, and industrial development. The plan calls for preferential tariffs for energy‑intensive industries such as mining, manufacturing, and smelters. At the same time, it recognises that inefficiencies, governance gaps, and delivery delays have undermined the availability and reliability of rail, port, and telecommunications services.
To address these bottlenecks, the strategy recommends:
- Targeted investments in energy generation, transmission, and distribution.
- Modernisation and recapitalisation of rail and logistics networks.
- Upgrades to water and digital communications infrastructure.
- Leveraging public‑private partnerships (PPPs) and localisation strategies to maximise impact and ensure fiscal sustainability.
Financing the Strategy and Balancing Trade‑offs
The IDS stresses that financing industrial development cannot be left to market forces alone. It warns that neglecting the role of public finance is a key factor inhibiting economic growth. The government will need to weigh competing priorities — such as social spending, debt sustainability, and infrastructure renewal — while collaborating with business to mobilise both domestic and international capital.
Building a Future‑Ready Workforce
A structural barrier identified in the strategy is the shortage of demand‑driven, sector‑specific skills programmes aligned with technological needs. The document points out that:
- Only about 18 % of South African graduates hold qualifications in science, technology, engineering, and mathematics (STEM) (Department of Higher Education and Training, 2023).
- In leading innovative economies such as India, the United Arab Emirates, and South Korea, STEM graduates exceed 30 % of the total graduate pool.
To close this gap, the IDS advocates for expanded vocational education and training (VET) programmes, particularly for youths who lack access to university education. By aligning VET curricula with emerging industrial demands — such as renewable energy technology, advanced manufacturing, and digital services — the country can improve employability and support the diversification agenda.
Conclusion
The revised Industrial Development Strategy represents a candid acknowledgment of South Africa’s industrial challenges and a deliberate attempt to steer the economy toward a more competitive, inclusive, and sustainable future. Its success will hinge on coherent implementation across government tiers, effective collaboration with the private sector and labour, and a steadfast focus on the three pillars of decarbonisation, digitalisation, and diversification. If these elements are realised, the strategy could help reverse the trend of de‑industrialisation and lay the groundwork for resilient, high‑value‑added growth.
