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South Africa must urgently secure an affordable and reliable energy supply, particularly electricity, and address bottlenecks in its ports, rail and telecommunications networks to halt the economy’s de-industrialisation, the government concedes in a new strategy document.The revised industrial development strategy (IDS) approved by the cabinet last week and published on Monday acknowledges that since the advent of democracy in 1994, industrial policy has been heavily influenced by trade liberalisation. This has increased exposure to global competition, contributing to rising cost pressures, uncompetitive domestic industries, de-industrialisation and higher unemployment.It has also resulted in the decline of the manufacturing sector’s contribution to GDP, reducing production capacity, employment and competitiveness, compounded by low economic growth, weak local demand, ageing infrastructure and sub-optimal energy, logistics and transport services.“The IDS aims to respond to the country’s economic challenges, which include de-industrialisation, slow growth, declining industrial capacity, dwindling investments in the economy’s productive sectors, structural transformation and transition and backlogs in infrastructure,” says the document, which envisages 3% GDP growth per annum if implemented effectively.Critics have called for a review of South Africa’s industrial policy, arguing for instance that sector-based master plans run by various government departments have done little to revive struggling sectors. The strategy plan acknowledges that South Africa’s industrial policy experience “underscores the importance of a co-ordinated, whole-of-government approach to industrialisation”.“Policies implemented in isolation across departments often lack coherence, limiting their effectiveness. Collaboration between government, business and labour is critical.”It notes that the global and domestic context for industrial policy has shifted materially over the past decade, and South Africa’s industrial policy must adapt. Rising geopolitical tensions have accelerated the reconfiguration of global supply chains, with trade and industrial policy increasingly used to secure strategic capabilities, markets and critical inputs.South Africa’s exports remain anchored in resource-based, capital-intensive activities, while high-technology exports remain low, indicating limited capability for deepening and diversification, it says.Three key pillarsThe strategy identifies decarbonisation, digitalisation and diversification as the three key pillars to drive industrial growth and transformation. These entail transitioning industrial production toward low-carbon technologies and cleaner energy systems, expanding the productive base beyond traditional resource-intensive activities by deepening value addition and embedding digital technologies across industries to raise productivity.“The industrial development strategy represents a deliberate shift from fragmented interventions toward coherent, capability-driven industrial transformation,” it says.“By anchoring policy around decarbonisation, diversification, and digitalisation, and by prioritising implementation, co-ordination and credibility, the IDS seeks to stabilise industrial decline, unlock new growth pathways and place South Africa on a more inclusive, competitive and sustainable development trajectory.”Preferential electricity tariffs for the industrial sector, including mining, manufacturing and energy-intensive industries like smelters, are critical for competitiveness, job creation and industrial development, the plan says.While the country has undertaken to modernise and recapitalise its rail and logistics infrastructure, it says inefficiencies, governance failures and delays have undermined the availability, affordability and reliability of rail and port services.It calls for infrastructure investment in energy, logistics, water and digital networks, supported by public-private partnerships and localisation strategies. The financing of the strategy requires addressing trade‑offs and balancing competing priorities by the government, in partnership with the business sector.“The cost of not comprehensively addressing the role of public finance in funding industrial development in South Africa is one of the factors that are inhibiting economic growth,” it says.A key structural constraint to sustainable industrialisation in South Africa has been the absence of demand‑driven, sector‑specific skills strategies and programmes that are aligned with technological imperatives and will make South Africans more employable, the strategy notes.For example, science, technology, engineering and maths (STEM) graduates make up only 18% of the total in the country, whereas in leading innovative countries like India, the UAE and South Korea, this figure exceeds 30%.“Vocational education and training is crucial for skilling the workforce and addressing economic and social challenges, especially for students who cannot access higher educational institutions,” it says.
