Fixing the business environment to arrest manufacturing contraction

If you create one new retail trading job, most likely you took one retail trading job away from a competitor in South Africa. It is called job displacement. If the country's overall demand for retail did not increase, the revenue and jobs simply moved from one retail trader to another. The net job gain for South Africa is therefore nil. Government and CSI programmes laud themselves for creating jobs, but if we do not increase exports or reduce imports, we fool ourselves. 

Hence the importance of focusing our development efforts on tradables. "Tradables" refers to goods, services, or financial assets that can be bought, sold, or exchanged across markets. 

South Africa’s official unemployment rate reached 33.6% in the second quarter of 2026, representing 8.5 million people. The expanded unemployment rate, which accounts for discouraged job seekers, stands at 43.8%. A service- or digital-oriented economy alone cannot absorb the volume of low- and semi-skilled workers currently excluded from formal employment. Addressing structural unemployment of this magnitude requires a sustained focus on industrial sectors capable of absorbing semi-skilled labour at scale. Historically, manufacturing served as the primary employer of semi-skilled labor, with the Western Cape operating as a core regional industrial hub. 

Manufacturing’s contribution to national GDP has plummeted from a historical peak of 25% to just 11.5%—a consequence of increased foreign competition, aggravated by an unnecessarily taxing business environment. The latter can be improved. This decline is due neither to our wage rates nor to inability within the South African private sector to compete. 

If the manufacturing sector in South Africa continues to decline at its current annual contraction rate of approximately 1.77%, the economy is projected to lose an estimated 22,400 direct jobs annually. Because manufacturing has a high employment multiplier effect, these losses trigger a massive domino effect across the broader economy, resulting in an estimated 67,200 to 112,000 indirect job losses each year. What is worse is that manufacturing may soon reach a catastrophic tipping point due to our inability to respond quickly enough. The inter-dependency within manufacturing supply chains could accelerate this decline even faster than before; as one value chain role player closes, demand for downstream suppliers drops below a viable level—as seen in the automotive industry when an OEM with five tiers of suppliers disinvests. 

But can manufacturing in South Africa compete? Yes, certainly. However, we must seize what remains a limited window of opportunity to drive through critically necessary reforms. The Cape Chamber recently completed its 34-page Scaled Labour-Intensive Manufacturing (SLIM) blueprint, outlining an optimised industrial park model designed to restore cost-competitiveness to light manufacturing. The study indicates that straightforward reforms can lead to massive reductions in manufactured product costs. 

Today, local manufacturers face a modernised iteration of foreign competition: the influx of low-value micro-parcels from overseas e-commerce platforms like Temu and Shein. Historically, loopholes in import tax regulations allowed small parcels valued under R500 to enter the country under a reduced flat duty. This created an uneven playing field that directly undercuts domestic production. While regulatory adjustments by SARS are attempting to close these tax breaks and apply full duties, enforcement gaps and under-declaration continue to squeeze local factories already struggling against high operational costs. 

What is clear is that the sector needs urgent help. Individual sub-sector lobbies do not carry as much weight on their own as when all are combined. Most major regional Chambers of Commerce and Industry have pledged their support to the manufacturing sector, and collectively we are embarking on a survey to build the empirical evidence necessary to lobby more assertively for required changes in the business environment. 

Following the Cape Chamber of Commerce and Industry Business Environment Survey launched in July—which garnered nearly 400 responses across sectors—we are now reopening the survey specifically for manufacturers nationwide through 23 October. While about 55 manufacturing enterprises responded in the first round, expanding this dataset is critical. Firm-level data from local manufacturers provides the objective backing needed to push government for targeted regulatory and structural relief. 

We urge all manufacturing enterprises to participate in the reopened survey before the 23 October deadline.  Complete the survey HERE. 

John Lawson, CEO of the Cape Chamber of Commerce and Industry