CNBC Africa is joined by Philippa Rodseth, Executive Director, Manufacturing Circle, Sachin Chanderdhev, Sector Specialist: Manufacturing, Absa Business Banking, and Markus Thill, President: Africa, Bosch for this discussion.
Wed, 22 Jul 2026 12:09:28 GMT
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Key Points:
- South Africa is still deindustrializing, with manufacturing contributing just under 12% to GDP compared with more than 20% in earlier years.
- Manufacturing employment stands at about 1.6 million jobs, according to Manufacturing Circle, underscoring the sector’s importance to growth and employment.
- Installed manufacturing capacity is operating at roughly 60% of maximum production capacity on average, suggesting room to lift output before major expansion.
- Industry leaders said gross fixed capital formation of around 15% of GDP is too low and should move closer to 17% to 20% over time.
- The AfCFTA was described as a key catalyst for expanding demand, particularly in sectors such as automotive manufacturing and related regional value chains.
- Executives said energy reliability, affordable power, ports, rail, skills development and reduced non-tariff barriers are essential to improving competitiveness.
Topics
South Africa manufacturingdeindustrializationAfCFTAManufacturing CircleAbsa Business BankingBosch Africaindustrial policyautomotive industrygross fixed capital formationenergy infrastructureregional value chainsCNBC Africa
- South Africa is still deindustrializing, with manufacturing contributing just under 12% to GDP, down from more than 20% in earlier years, according to industry participants on CNBC Africa.
- Executives from Manufacturing Circle, Absa Business Banking and Bosch said the immediate priority is to arrest the decline, lift plant utilization from about 60% and use African demand to support new investment.
- The African Continental Free Trade Area could help expand market access, but speakers said energy stability, logistics, policy alignment, skills development and regional value chains remain critical.
South Africa is still deindustrializing, and reversing that trend will require stronger demand, better energy and logistics infrastructure, and fuller use of the African Continental Free Trade Area, industry leaders told CNBC Africa in a discussion on the country’s manufacturing future.
Philippa Rodseth, executive director of Manufacturing Circle, said the sector’s contribution to gross domestic product has fallen to just under 12%, extending a long-running decline from levels above 20% in earlier decades.
“We are still in the situation where we are deindustrializing and what we would suggest is prematurely so,” Rodseth said.
She said manufacturing employment is now sitting at about 1.6 million jobs, well below levels seen in the early 2000s. In her view, the first priority is not yet reindustrialization, but stopping the erosion of capacity that has been underway for years.
Rodseth said the decline became particularly visible from around 2008, when South Africa began losing more of its local manufacturing base to imports. While manufacturing’s share of GDP has stabilized near 12% for some time, she said that level still reflects a structurally weaker industrial base.
From a banking perspective, Sachin Chanderdhev, sector specialist for manufacturing at Absa Business Banking, said the sector remains economically important despite the shrinkage. He described manufacturing as a significant contributor to GDP with an outsized jobs and multiplier effect across the broader economy.
Chanderdhev said a return to 15% to 20% of GDP would represent a more comfortable range for the sector, though he cautioned that getting there would take time and require South Africa to work through structural constraints and weak demand.
“Manufacturing jobs are quality jobs,” he said in substance, adding that the industry has a ripple effect well beyond factory output itself.
The discussion pointed repeatedly to investment as a central constraint. Rodseth said gross fixed capital formation is currently around 15% of GDP, which she described as too low for a country trying to rebuild industrial depth.
She said South Africa ideally needs to move that level closer to 17% or even 20% over time, because higher long-term investment would help drive what Manufacturing Circle calls a “virtuous manufacturing cycle” of demand, production, hiring and reinvestment.
Rodseth also pointed to underused capacity already in the system. She said installed manufacturing capacity is operating at roughly 60% of maximum production capacity on average, suggesting there is room to raise output before large new build-outs are required.
That creates a two-step challenge. The first is to increase utilization of existing plants. The second is to identify catalytic demand pools that justify fresh capital spending.
Rodseth cited the automotive value chain, transmission infrastructure and renewable energy build-outs as potential demand anchors. As wind and solar projects come on stream, she said, they will need to be connected through transmission infrastructure, creating an opportunity for domestic and regional manufacturers.
Bosch Africa President Markus Thill said the opportunity should be viewed not only through a South African lens, but also through a continental one.
Thill, who also serves as vice president of the African Association of Automotive Manufacturers, said Africa currently produces about 1 million vehicles a year while importing roughly 6 million used vehicles annually from the rest of the world. He said a meaningful share of that used vehicle market could be replaced by new vehicles manufactured on the continent.
South Africa currently produces roughly 500,000 to 600,000 vehicles a year, he said, with local value addition at just below 40%. Given the availability of raw materials in South Africa and neighboring countries, he argued that the country is well placed to deepen local sourcing and become a bigger part of an African automotive value chain.
“If we look at Africa as our home continent and manufacture on the home continent, first and foremost to deliver to the demand of an ever-increasing middle class on the African continent, I’m very confident that we can reverse the deindustrialization,” Thill said.
He described the AfCFTA as a “game changer” that could expand addressable markets far beyond any single country. He also pointed to a recent African Union decision to implement rules of origin for the automotive industry, saying that framework is an important first step in building cross-border supply chains.
Thill said no single country can cover the full automotive value chain on its own, echoing models seen in Europe, North America and Asia. That means regional specialization and collaboration will be essential if Africa is to capture more manufacturing value.
The weakness in South Africa’s industrial base is not only about trade and demand. Executives also highlighted energy reliability, infrastructure and skills as core production constraints.
Thill said South Africa needs energy stability, affordable energy prices and improved rail and port infrastructure if it is to produce more competitively. He added that Africa’s energy future should not be framed solely around wind and solar, arguing the continent also has hydropower, geothermal and gas re
Chanderdhev said manufacturers have already spent years adapting to pressure by becoming more efficient, cutting waste and building operational resilience. In many cases, he said, the technical capability to manufacture still exists.
The bigger commercial questions now are whether firms are still producing goods that match shifting consumer demand, and whether they can identify the right export markets across Africa.
“So when we want to be funding these organizations, we want to first understand you have the technical capability to manufacture,” Chanderdhev said. “And then the next piece is, is there a market for your product?”
He said the AfCFTA can help answer part of that market-access problem, but companies still need a much deeper understanding of consumers across Africa’s 54 countries. In some cases, that may require adapting products for different markets rather than assuming one offering will fit the whole continent.
Rodseth said logistics and non-tariff barriers remain a major obstacle to making continental trade work in practice. Intra-African trade remains low, she said, and from a South African perspective a large share of easier cross-border activity still happens within neighboring countries because logistics are more manageable there.
She argued that more coherent industrial policy is urgently needed to support regional value chains, including clearer alignment on what South Africa should export, what it should import from other African countries and where each part of the value chain is best located.
Chanderdhev also called for more beneficiation atr own minerals and industrial inputs rather than exporting raw materials and re-importing finished goods at higher value
He said that strategy will also require skills development, especially as manufacturers adopt smarter production systems involving automation, artificial intelligence and human-machine collaboration.
The broad message from the panel was that South Africa still has industrial capability, but needs the right enabling conditions to scale it. Those conditions include stronger domestic and regional demand, more investment, better infrastructure, policy coordination and deeper continental cooperation.
For now, the immediate task is to stop the slide. But with capacity still in place and African demand expected to grow over time, executives said the building blocks for a manufacturing recovery are already on the table.
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