Sector Overview -Manufacturing

A Major Contributor To South Africa's Economy and Job Creation

By Shumirai Chimombe

Following a challenging 2023, South Africa’s manufacturing sector must prioritise digital transformation, cost reduction and reskilling to drive growth.

Significant future growth opportunities available through localisation and workforce up-skilling will boost the country’s competitive advantage and attract new investment and needed employment opportunities.

PwC South Africa Manufacturing Analysis 2024

South Africa boasts a well-developed manufacturing sector. The PwC’s South Africa Manufacturing Analysis 2024 reports that in 2023, the sector in its entirety provided more than 1.6 million jobs and accounted for 13% of South Africa’s gross domestic product (GDP). The sector will continue to play a major role in the economy with a nominal GDP forecast to grow by an average of 5.7% per annum over the next decade.

South Africa’s manufacturing sector also carries weight globally. In 2022, the country ranked 51st out of 153 countries in the United Nations Industrial Development Organisation (UNIDO) Competitive Industrial Performance (CIP) Index. This measurement evaluates 153 countries’ capacity to produce and export manufactured goods, their technological progress, and their global influence on manufacturing activity. It placed South Africa within the top third of manufacturing economies globally.

Exports drive the sector’s significant contribution to the economy. South Africa exported R403billion worth of machinery and complex manufactured products including medical and transport equipment in 2023, accounting for 19.7% of total goods exports. This reflects the country’s industrialised and advanced factory environment that produces high-tech and precision equipment for domestic and international use.

The sector has consistently represented a sizeable part of the country’s labour market, contributing more than 11.0% of total employment for many decades, and providing a large volume of semiskilled and skilled jobs.

Manufacturing is often skills-intensive. In its Manufacturing Workforce 2023 publication, PwC highlights the importance of upskilling workers in new technologies and the need to create a digitally-enabled and connected workforce. Technologies such as virtual reality (VR) and augmented reality (AR) are becoming popular tools in workforce training and development by enabling workers to simulate real-world scenarios in a controlled environment, providing them with hands-on experience.

According to data from Statistics South Africa, the food and beverage sub-sector was the largest contributor to sales (22.3%) in the last quarter of 2023 (October-December), followed by basic iron and steel, non-ferrous metal products, metal products and machinery (20.9%) and petroleum, chemical products, rubber and plastic products (20.1%).

Manufacturing production increased by 2,6% in January 2024 compared with January 2023. The largest positive contributions were made by the following divisions:

• petroleum, chemical products, rubber and plastic products (13,6% and contributing 2,9 percentage points)

• wood and wood products, paper, publishing and printing (5,0% and contributing 0,5 of a percentage point)

• textiles, clothing, leather and footwear (6,6% and contributing 0,2 of a percentage point)

• glass and non-metallic mineral products (5,2% and contributing 0,2 of a percentage point)

Seasonally adjusted manufacturing production increased by 0,8% in January 2024 compared with December 2023. This followed month-on-month changes of -1,3% in December 2023 and 0,9% in November 2023.

Seasonally adjusted manufacturing production increased by 0,2% in the three months ended January 2024 compared with the previous three months. Seven of the ten manufacturing divisions reported positive growth rates over this period. The largest positive contribution was made by the food and beverages division (3,3% and contributing 0,7 of a percentage point).

Sector Highlights In 2023

• Ranked 51st out of 153 COUNTRIES in the UNIDO Competitive Industrial Performance (CIP) Index

• Manufacturing workers earned R614 BILLION in salaries and wages

• Factories employed 1.6 MILLION workers

• Exporting a wide variety of vehicles to 148 COUNTRIES

• Exported R403 BILLION worth of machinery and complex manufactured products, accounting for 19.7% of total goods exports

• Manufacturing contributed 13,0% of gross domestic product (GDP)

Source: PwC South Africa Manufacturing Analysis 2024

Manufacturing Contribution To Sales Of Each Sub-sector , October To December 2023

• 22.3% - Food and beverages

• 20.9% - Basic iron & steel, non ferrous metal products, metal products & machinery

• 20.1% - Petroleum, chemical products, rubber and plastic products

• 17.8% - Motor vehicles, parts and accessories and other transport equipment

• 18.8% - Other

Source: Stats SA

The food processing industry is significant in its contribution to economic growth, job creation and international trade. Employment in the food industry increased by 1,9% in 2022 from a 0,8% growth in 2021 according to the Department of Agriculture, Land reform and Rural Development. As a result, a further 4 160 jobs were created in 2022 compared to 1 635 jobs created in 2021. Agro-processing is one of the sectors that is included in the government’s National Development Plan 2030 strategies to enable inclusive and efficient agricultural and food systems to increase employment and growth.

Sources: PwC South Africa Manufacturing Analysis 2024 | StatsSA |Department of Agriculture,Land Reform and Rural Development