Addressing the social impact of industrial hollowing out in South Africa
South Africa’s metals and engineering sector is facing a crisis of historic proportions, with years of low levels of capital investment, declining demand and policy gaps accelerating deindustrialization and eroding the country’s production base.
The scale of the challenge is illustrated by the fact that ArcelorMittal has cut nearly 4,000 jobs, half of its local workforce. If current trends continue, up to 293,000 direct and indirect jobs are expected to be lost over the next five years, according to the Confederation of Southern African Steel and Engineering Industries (Seifsa).
This is not just an economic issue. The persistently high unemployment rate of 31.9% is creating hardship for workers, families, and entire communities. Poverty will deepen, inequality will widen, and national resources will be strained. Reversing industrialization is both an economic necessity and a social imperative.
Social impact of industrial decline
ACTOM CEO Marvin Naidoo explains that deindustrialization has cascading effects on society. Job losses in the metals and engineering sector have a ripple effect outward, impacting suppliers, service providers and local economies. Communities built around industrial hubs face declining living standards, shrinking tax bases, and weakening social cohesion.
“When people lose their jobs, the social burden spills back onto the nation. We need to create jobs and lift that burden through industrial revitalization. The projections are alarming. If we don’t act, nearly 300,000 jobs could be lost. This is not just an economic statistic. It’s our families, our communities and our futures that are at stake,” he says.
Learn from global examples
China’s experience provides a powerful counterargument. Over the past three decades, China has increased its per capita GDP tenfold, primarily through sustained infrastructure investment and deliberate industrial policy. In contrast, Africa’s GDP per capita has barely doubled over the same period.
“China used infrastructure spending to maximize industrialization, which created jobs. If we want to replicate that success, we need policies that support capital spending and localization,” Naidu said.
Policy reforms for sustainable job creation
“There is a policy vacuum that allows importing companies to evade their obligations. If companies fail to meet their local content commitments, they will face consequences up to and including being blacklisted. Without enforcement, policy intentions are meaningless,” said Tafadzwa Chibangza, CEO of Safsa.
To reverse deindustrialization, South Africa needs to realign its policies with industrial priorities. Key reforms include:
Strengthening localization regulations: ensuring that steel, transformers, and other critical raw materials are manufactured domestically
Increased import duties: Prevent dumping of surplus foreign inventory to the detriment of local producers
Strengthening NIPP enforcement: Holding contractors accountable for local investment obligations
Providing targeted incentives: Support local manufacturers and encourage automation and efficiency with grants and subsidies similar to the Chinese approach
Partnership for inclusive growth
Reindustrialization cannot be achieved by governments alone. Partnerships between government, industry and workers are essential to rebuilding competitiveness and ensuring social inclusion.
“If we have projects going on in the country, we have to force the steel and products to be manufactured in this country, so we can create more jobs, widen the tax base and reduce the social burden,” Chibangza says.
Building local capacity and infrastructure
Investing in regional production capacity is central to restoring competitiveness. ACTOM’s work in Pretoria and Wadeville demonstrates how building domestic production capacity can meet the demands of large-scale projects such as Transmission Development Plans (TDPs) and Independent Power Producers (IPPs).
“As we strengthen TDP and IPP, we need to build capacity so that local industry can meet these needs. Economies of scale and automation are essential to achieving social stability,” Naidoo says.
But reindustrialization must also be comprehensive. Providing subsidies to businesses to expand capacity, even at a premium, could lower unemployment and ease the social burden on states. The economic multiplier effect of this intervention far exceeds the premium and has a net positive outcome for the country.
“At the end of the day, investing in local industry is investing in people. It’s about building a future of shared dignity, opportunity and growth,” Chibangza added.
social and economic obligations
The decline of South Africa’s metals and engineering sector is inevitable. With targeted policy reforms, investment in local capacity, and strong partnerships, the country can reverse deindustrialization.
The stakes are high. Without action, hundreds of thousands of jobs will be lost and poverty and inequality will deepen. If we take action, South Africa can rebuild its competitiveness, increase GDP per capita and lay the foundations for inclusive growth.
“Reindustrialization is not just an economic issue; it is about improving lives. We must act now. Reindustrialization is the only path to sustainable growth and social stability,” Naidoo concludes.
