Deindustrialisation has become a buzzword in Europe. A sharp rise in energy, labour and other costs, demographic shifts that are significantly affecting the labour market, overregulation, and, above all, China flooding European markets with growing volumes of lower-priced products are forcing numerous European countries – particularly Germany, Europe’s largest economy – to scale back their production capacity.

German companies are either shifting production to countries where goods can be manufactured more cheaply or refocusing on design, technology, and more advanced, higher-value specialist and niche products.

Deindustrialisation is nothing new in the developed world. The decline of American manufacturing has been a staple of political debate in the US for three decades.

However, concern has recently grown in Germany and other wealthy European countries about the accelerating pace of deindustrialisation.

In South Africa, we have even greater cause for concern. Germany is a wealthy nation with higher skill levels, a shrinking pool of young people entering the labour market, low unemployment, and established industries capable of adapting to lower production volumes while occupying specialised economic niches. South Africa, by contrast, faces one of the highest unemployment rates in the world, has millions of low-skilled workers, sees about a million young people enter the labour market annually, and has an economy built over decades largely around manufacturing and exports.

South Africa also has many advantages that could help it become a much larger and stronger manufacturing nation. These include abundant natural resources, relatively low labour costs, a market-oriented economy, a robust financial sector, access to the growing African market, and universities and other institutions that provide the expertise needed to innovate and develop products for the future.

Manufacturing

Three decades ago, South Africa’s manufacturing sector accounted for about 25% of GDP. Today, that figure stands at 12%. Industrial and manufacturing output continues to suffer sharp declines, including the 4.3% year-on-year drop that Statistics South Africa reported for August 2026.

Manufacturing employment has declined at a compound annual rate of approximately 1.5% since 2008, resulting in thousands of job losses across sectors such as steel, automotive, and chemicals. The unfortunate reality is that, although South Africa has immense manufacturing capacity, current capacity utilisation stands at just 76.9%. This means that nearly a quarter of the country’s industrial assets are idle or mothballed.

South Africa is Not Germany

Germany’s industrial production is about 10% below its 2018 level, while output in energy-intensive industries is roughly 15% below its level in early 2022. The industrial sector has been shedding about 15 000 jobs a month. Volkswagen has agreed to cut more than 35 000 jobs in Germany by 2030. Thyssenkrupp is closing blast furnaces, while BASF has shut down plants in Ludwigshafen.

Industrial electricity prices in Europe are twice those in the United States (US). The main drivers include the loss of cheap Russian gas, the cost of the Energiewende – which is Germany’s strategy for transitioning from fossil fuels to renewable energy – Chinese overcapacity in steel, chemicals, and cars, and a thicket of regulations.

This is all bad news for Europe’s largest economy, but for now, deindustrialisation is a shock that a wealthy country can absorb if it adapts and makes the right changes. German manufacturing still accounts for close to a fifth of GDP, far more than in Britain or France. Unemployment is low by South African standards. The workforce is ageing, highly educated, and already concentrated in capital-intensive production.

When a German plant closes, the typical worker is not a 22-year-old without a matric certificate entering a labour market where almost half of young people are already unemployed. Germany’s social insurance system, apprenticeship pathways, and substantial household wealth help cushion the blow. Structural change towards services, design, and higher-value niches is painful, but it does not necessarily amount to a social catastrophe in countries such as Germany and Japan.

Opposite

South Africa faces the opposite situation. Our country has a young population, a vast pool of low- and semi-skilled labour, and an official unemployment rate of 33.6% in the second quarter of 2026. Among 15-to-34-year-olds, the rate is 47.4%, leaving about five million young people unemployed. More than a third of 15-to-24-year-olds are not participating in employment, education, or training. In this context, factories are not a nostalgic relic.

Manufacturing is one of the few sectors capable of creating jobs on a large scale and turning school-leavers into wage earners. Given the massive underutilisation of manufacturing capacity, we must find ways to turn our large pool of unemployed people into one of our greatest assets: an affordable workforce. Increased production would mean more exports, greater foreign-exchange earnings, and more investment in our economy. Meanwhile, foreign investment in Africa appears to be shifting away from South Africa towards countries such as Angola, Zambia, Tanzania, Kenya, and numerous others.

How Far the Decline Has Already Gone

Premature deindustrialisation in South Africa is already fuelling a jobs crisis the effects of which could last for decades. Our manufacturing decline is not simply a relative decline of a maturing, wealthy economy. Output growth has been weak for decades, import penetration has increased and capital intensity has risen while employment has fallen. In effect, machines are replacing people in a country with a surplus of people.

The employment figures are stark. Between 2008 and 2024, the manufacturing sector shed about 448 000 jobs. From 2010 to 2026, manufacturing employment shrank by 13%. In the year to the second quarter of 2026, the Quarterly Labour Force Survey recorded a loss of 100 000 manufacturing jobs( decline of 6%) leaving the sector with just under 10% of total employment, down from 13% in 2010.

Formal employment data tell a similar story over a shorter period: another 35 000 manufacturing jobs were lost in the year to mid-2026, across food, textiles, chemicals, metals, and transport equipment. Companies are cutting full-time positions first, followed by part-time capacity. This pattern usually indicates that production itself is being scaled back, rather than merely trimmed.

The energy-intensive core of manufacturing is faring even worse. The number of operating ferrochrome smelters fell from about 50 in 2008 to fewer than 25 by 2024 and about 11 in early 2026. Output dropped from more than four million tonnes to about 1.6 million tonnes, returning to levels last seen in the mid-1990s. ArcelorMittal’s long-steel closures, idled manganese furnaces, and curtailed aluminium and ferroalloy production lines should be a major concern for all of us. Once these plants close, downstream workshops, foundries, and logistics jobs disappear with them.

Why the Factories Left

Electricity is the single biggest factor, and we all know that the crisis was caused by governance failures rather than technical problems alone. Industrial and household electricity tariffs have risen by more than 800% since 2007 and by more than 1 100% since 2003. From 2008 to early 2026, Eskom’s tariffs roughly quadrupled in real terms. Eskom’s revenue as a share of GDP climbed from 1.8% in 2008 to nearly 5%. Mining and industrial customers paid Eskom R115 billion in 2025/26, almost R50 billion more than in 2021, even as industrial demand plunged. Industrial electricity sales have fallen by about 40% from their mid-2000s peak. For ferroalloys, steel, and chemicals, electricity accounts for 40% to 60% of production costs. Under these conditions, plants do not simply restructure. They close, and South Africa exports ore instead of metal.

We all know what happened at Eskom. Medupi and Kusile were delayed, ran over budget, and were plagued by design faults. Maintenance was deferred while procurement was looted. Load-shedding then destroyed the reliability premium that had once been Eskom’s only competitive advantage. The state utility passed the costs of corruption and incompetence on to every furnace, factory, and household in the country, then congratulated itself when the lights stayed on at prices that industry and ordinary families could no longer afford.

South Africa’s deindustrialisation has also been accelerated by Transnet’s rail and port failures. Here, too, our country has a geographic advantage: minerals are located relatively close to the coast, and factories are within reach of African markets. Coal, chrome, and manufactured exports are routinely transported by truck to ports, while the country’s rail network remains vastly underutilised and parts of it have, unfortunately, already fallen into disrepair.

Crime also contributes to the manufacturing crisis. Cable theft, extortion at construction sites by mafia-style groups, hijacked freight contracts, and the cost of private security drive up input costs for factories across the country. A factory that must insure and guard every shipment, and arrange security escorts for its goods, cannot compete on equal terms with a plant in Vietnam or Poland. It is competing with one hand tied behind its back.

Government policy over the past 32 years has failed to transform a protected industrial base into one capable of competing in a changing global market. An ever-growing array of rules, regulations, laws, and master plans has simply raised the barriers entrepreneurs must overcome to produce goods. Ownership rules, preferential procurement, and empowerment compliance requirements have increased the fixed costs of operating a plant and entering into new partnerships or contracts, while doing little for the unemployed 22-year-old who was supposedly at the centre of these policies. Corruption has turned procurement and licensing into business opportunities in their own right. Cadre deployment has prioritised political loyalty over engineering competence at Eskom, Transnet, and municipalities.

Labour-market rules and a failing education system have further tightened the trap. Bargaining councils and dismissal procedures protect established employees in large firms while making it harder for outsiders to enter formal employment. The schooling system produces large numbers of matriculants who lack the numeracy skills required for modern factory work, while employers have little confidence in the technical and vocational training system.

Germany’s deindustrialisation debate is partly about a shortage of skilled workers. South Africa’s is about a shortage of factories willing to employ the workers we have, compounded by an education system that has failed to turn a young population into an industrial workforce.

Ideology

The ideological dimension is also important. South African economic policy has become so ideologically driven that ideology often takes precedence over tangible results. For years, the governing party has treated private investment as a concession to be negotiated rather than as the mechanism through which jobs are created.

Energy policy has combined genuine grid constraints with a preference for state control. Foreign firms have been welcomed in speeches but faced with obstacles in practice. An anti-Western posture, including through BRICS and the current dispute with the US, has not built a single competitive smelter.

China did not industrialise by denouncing its customers. It industrialised by making electricity affordable, ensuring that ports worked, and making contracts enforceable.

What Would Reverse It?

The binding constraint is governance, not another White Paper or presidential commission. A government that ranks ideological continuity above economic growth will keep producing masterplans while furnaces go cold and factories close. The shift required is narrower and harder to achieve: measurable competence in the institutions that determine the cost of production.

Electricity must once again be priced competitively for industry, rather than primarily to meet Eskom’s revenue targets. That means a cost-reflective but competitive tariff path for industries exposed to international competition, faster expansion of private generation and electricity wheeling, and an end to the cross-subsidies that conceal distribution failures in industrial electricity bills. Investment in the grid and municipal reform are urgent. Without them, every other intervention amounts to little more than theatre.

Logistics present the same problem in a different state-owned enterprise. Rail access, better port performance, and private operation of freight corridors are good industrial policy. So is effective policing of cable theft and extortion, which are currently treated as background noise. Crime is not merely a social problem adjacent to the economy. It is also a direct input cost.

Skills policy has to be judged by whether employers hire people, not by enrolment figures. Artisan training, employer-led apprenticeships, and a school system that teaches mathematics effectively are worth more than another sector charter. Germany’s dual system is more than a policy: it is an arrangement between firms and the state in which employers trust the qualifications being awarded. South Africa lacks that trust, and no amount of rhetoric about the “Fourth Industrial Revolution” can compensate for a failure to teach basic numeracy.

Macroeconomic and regulatory predictability matter as much as electricity tariffs. Investors who anticipate expropriation disputes, shifting empowerment rules, and procurement corruption demand a risk premium that labour-intensive plants cannot afford. Simplifying rules, speeding up permits, and prosecuting theft even when politically connected individuals are involved would help reduce that risk premium.

The Harder Problem

Policy will not change while a large part of the South African electorate sees the state as the primary source of livelihoods and views Western markets, firms, and standards as sources of harm. That mindset is understandable. Apartheid was real. Unemployment is real. For many communities, patronage has been the only ladder that appears to work. But it is a ladder that leads nowhere in the long term.

Public-service jobs and social grants cannot absorb five million unemployed young people. A state that consumes an increasing share of GDP through Eskom tariffs and an expanding public-sector wage bill is not solving its underlying problems.

The alternative is not to express gratitude towards foreign capital regardless of its conduct. It is to apply a more objective test: does this rule, tariff, appointment, or school make it more likely that a business will hire people? How did late-industrialising countries such as South Korea, Vietnam, Mauritius, and Poland achieve industrial growth? They did so by making export competitiveness, affordable and reliable electricity, and practical skills non-negotiable, while abandoning ideologies that failed to deliver results. Anti-Western sentiment fails this test, as does the habit of waiting for the next government programme.

Looking ahead, in practice, means judging parties and policies by employment levels and the number of operating factories, rather than by the symbolism of political speeches. It means parents recognising artisan training as a worthwhile option for their children, companies treating apprenticeships as investment rather than a compliance exercise, and voters recognising cable theft, potholes, and poor management of ports and railways for what they are: government failures.

South Africa’s young population is an advantage only if factories exist for young people to work in. Germany can debate how to manage industrial contraction. South Africa does not have that luxury. The risk is not that the country will become Germany. The risk is that it will become a resource exporter with a permanent underclass, governed by people who believe that this underclass can be managed rather than employed.

This poses a serious threat to South Africa's potential future prosperity. For this reason, and especially now, ahead of another municipal election, each of us has a duty to speak clearly and forcefully about our country’s real problems and the solutions needed to address them. We simply cannot afford deindustrialisation.

Jaco Kleynhans is head of public liaison with Solidarity.