Addressing the social impact of deindustrialisation in South Africa
SOUTH Africa’s metals and engineering sector is facing a crisis of historic proportions, as years of low capital expenditure, declining demand, and policy gaps have accelerated deindustrialisation, eroding the country’s productive base.
The consequences are stark, with ArcelorMittal’s retrenchment of nearly 4,000 workers – half its local workforce – illustrating the scale of the challenge. According to the Steel and Engineering Industries Federation of Southern Africa (Seifsa), projections indicate up to 293,000 direct and indirect job losses over the next five years if current trends persist.
This is not simply an economic issue. The persistently high unemployment rate of 31.9% translates into hardship for workers, families and entire communities. Poverty deepens, inequality widens, and the burden on state resources grows heavier. Reversing deindustrialisation is both an economic necessity and a social imperative.
The social consequences of industrial decline
Mervyn Naidoo, CEO of ACTOM, explains that deindustrialisation has a cascading effect on society. Job losses in the metals and engineering sector ripple outward, affecting suppliers, service providers and local economies. Communities built around industrial hubs face declining living standards, reduced tax bases and weakened social cohesion.
“When people are unemployed, the social burden falls back on the state. We need to take away from that burden by creating jobs through industry revitalisation. The projections are alarming. If we don’t act, nearly 300,000 jobs could be lost. That is not just an economic statistic; it’s families, communities and futures at stake,” he says.
Learning from global examples
China’s experience offers a powerful counterpoint. Over the past 30 years, China has increased its GDP per capita tenfold, largely through sustained infrastructure investment and deliberate industrial policy. By contrast, Africa’s GDP per capita has barely doubled over the same period.
“China used infrastructure spending to maximise industrialisation, and that’s what created jobs. If we want to replicate that success, we need policies that support capital spend and localisation,” says Naidoo.
Policy reforms for sustainable job creation
“There is a policy void that allows imports to bypass obligations. If companies fail to meet their local content commitments, they should face consequences, up to blacklisting. Without enforcement, policy intent is meaningless,” notes Tafadzwa Chibanguza, CEO of Seifsa.
To reverse deindustrialisation, South Africa must realign its policies with industrial priorities. Key reforms include:
- Enforcing localisation regulations: ensuring that steel, transformers and other critical inputs are manufactured domestically
- Tightening import duties: preventing the dumping of surplus foreign stock that undermines local producers
- Strengthening NIPP enforcement: holding contractors accountable for local investment obligations
- Providing targeted incentives: grants and subsidies, similar to China’s approach, to support local manufacturers and encourage automation and efficiency
Partnerships for inclusive growth
Reindustrialisation cannot be achieved by the government alone. Partnerships between government, industry and labour are essential to rebuild competitiveness and ensure social inclusion.
“If projects are happening in the country, we have to enforce that the steel or products are manufactured here. That’s how you increase employment, grow the tax base and reduce the social burden,” says Chibanguza.
Building local capacity and infrastructure
Investment in local capacity is central to restoring competitiveness. ACTOM’s initiatives in Pretoria and Wadeville demonstrate how building domestic production capability can meet the demands of large-scale projects such as the Transmission Development Plan (TDP) and independent power producers (IPPs).
“As we ramp up on the TDP and IPP, we need to build capacity so the local industry can fulfil these needs. Economies of scale and automation are critical to achieving social stability,” says Naidoo.
However, reindustrialisation must also be inclusive. Subsidising companies to expand capacity, even at a premium, can reduce unemployment and ease the state’s social burden. The economic multiplier effect of this intervention far exceeds the premium, yielding a net positive outcome for the country.
“At the end of the day, investing in local industry is investing in people. It’s about dignity, opportunity and building a future where growth is shared,” adds Chibanguza.
A social and economic imperative
The decline of South Africa’s metals and engineering sector is not inevitable. With targeted policy reforms, investment in local capacity and strong partnerships, the country can reverse deindustrialisation.
The stakes are high. Without action, hundreds of thousands of jobs will be lost, deepening poverty and inequality. With action, South Africa can rebuild competitiveness, increase GDP per capita and lay the foundation for inclusive growth.
“Reindustrialisation is not just about economics; it is about improving lives. We must act now. Reindustrialisation is the only path to sustainable growth and social stability,” concludes Naidoo.
