China’s zero-tariff policy, announced gleefully by trade, industry & competition minister Parks Tau last week, won’t save South Africa’s declining manufacturing sector, says Philippa Rodseth, executive director of the Manufacturing Circle.
“What we need urgently is an industrial policy that reflects the reality that our economy is not growing and that investment in our manufacturing sector, which we cannot afford to lose, is declining.”
Instead, what local manufacturers are getting is yet more policy uncertainty in the form of more onerous broad-based BEE (BBBEE) rules. And exclusion from the government’s R400bn electricity transmission development programme, which could be a game-changer for industrialisation, economic growth and job creation, she says.
“There is no adequate understanding from the government that manufacturing needs to be front and centre of any strategy of economic transformation if we want to break with the zero-growth path we’re on.”
Policy uncertainty has a major impact on investment, she says. It makes decisions about capital investment in tangible things like factories based on what the outlook may be five or 10 years down the line almost impossible.
“If investment decisions have been made on the back of what the state may or may not procure as a result of your BBBEE status, and those goalposts are changed, or if the policy is made more onerous or specific, it has a significant impact on those decisions. That’s the bottom line.”
Policy uncertainty, such as recently gazetted draft changes to BBBEE rules, has unintended consequences, in this case for local supplier networks that were built in line with previous policy, she says.
“In the end we don’t want unintended consequences in terms of our industrialisation or deindustrialisation, and that is what is happening.”
Those in industry tend to assume that the government is a homogeneous whole and there’s complete alignment. But “unfortunately” this is not the case, she says. There are silos in the department of trade, industry & competition (DTIC) itself, and between departments.
“And from a manufacturing and industry perspective, those nuances and implications in terms of different policy changes need to be understood holistically. They’re not understood in terms of the overall implications for industry.”
Another “utter frustration” that industry has been facing is over the execution of the government’s 10-year 14,000km transmission development programme.
In short, it looks like local manufacturers are going to be largely excluded.
At the request for proposal stage, industry representatives met with electricity & energy minister Kgosientsho Ramokgopa, who gave them verbal commitments.
“Where we’d like to see those commitments is in the bid documents,” says Rodseth. “When the final bid documents come out, we very much hope to see those words in action with explicit provision for what is to be procured from a local content point of view.”
As things stand, however, the intention seems to be to exclude the local manufacturing sector from any involvement in the transmission development programme.
The request for pre-qualification that has been put out — which Rodseth notes leaves the way open for tenderpreneurs by requiring that successful bidders hold 49% local equity but don’t need manufacturing, construction or engineering capacity or experience — “does not bode well for local industry to participate”.
She says: “The transmission development plan is a wish list. It’s everything we want to do. But in terms of executing, the utter frustration is the lack of understanding of local industry in terms of our capabilities and capacity.”
As she sees it, the government is finally waking up to how little has been done since the programme was announced and believes that the deadline can be met only by bringing in outsiders.
“If you look at South Africa having delivered only 76km of transmission lines in the past five years, and then extrapolate going forward, of course you’re going to be concerned about what it is that South Africa Inc can deliver,” says Rodseth.
Infrastructure builds need to get going with local manufacturers as the government’s first port of call, otherwise we’re going to perpetuate this downward cycle
— Philippa Rodseth
But five years ago, industry was putting its capabilities and capacity, a function of demand, on the table and saying to the government: “Give us a sense of what you do want to build because we’ve built thousands of kilometres of line in the past quite capably. So what is it looking like, what is it going to ramp up to be, what is it that we can do as South Africa Inc, and what is it that we can’t do? Where do we need to rely on broader value chains?
“That is the approach that should have been taken and has not been. And it is the utter, sheer frustration as industry that we are experiencing.”
One of the arguments presented by the government is time constraints, she says.
“[It argues] that there’s an urgency in terms of needing to build the new transmission infrastructure quickly and therefore it needs to import the entire rollout as far as EPC [engineering, procurement and construction] and manufacturers are concerned.
“However, that is not applying a logical thought process. Capacity and capabilities can be ramped up. We’ve got more than enough supply across the value chain from upstream all the way down.”
For “naysayers” in the DTIC, the department of electricity & energy, the National Treasury and the Industrial Development Corporation who may not understand the intricacies and complexity of what installed production capacity local manufacturers have, how they are manufacturing below capacity and what they need to do to ramp up, “it’s much easier to present a graph on the basis of what was done five years ago and say: ‘Oh gosh, we can never do it, therefore we must just tick the box in terms of getting this thing done quickly.’
“If you do an analysis of importing an entire installation vs what can be done locally here at the outset, it’s a very different picture.”
She finds the government’s failure to appreciate what a game-changer this would be in terms of job creation and economic growth hard to fathom.
“It’s the lack of a holistic, systemic understanding of what local manufacturing can bring to this economy. Infrastructure builds need to get going with local manufacturers as the government’s first port of call, otherwise we’re going to perpetuate this downward cycle.”
This was the intention of the steel master plan supported by the Manufacturing Circle, which includes 50 of the country’s biggest industrial hitters. But it “singularly failed”, under the auspices of the DTIC and its previous minister Ebrahim Patel, to achieve its goals of protecting local industry, boosting demand and driving localisation.
“That was what we, South Africa Inc, wanted. What was the outcome? Diminished capacity, plant closures, lost jobs.”
The latest numbers from Stats SA support that: manufacturing output down 1.3% in 2025, the second consecutive year of contraction, and 61,000 manufacturing jobs lost in the last quarter of 2025.
“Industry has been doing a little bit of soul-searching as to why and what the problems were,” says Rodseth.
The first was weak demand, and imports by state-owned enterprises.
“The expected infrastructure pipeline never materialised. There was no pipeline. That talks to Eskom and transmission, it talks to Transnet, and it also talks to local municipalities importing lots of items like transformers that are also manufactured locally and should be supplied locally.”
The second issue was cost escalations caused by “broader macroeconomic stuff” such as unreliable energy supply and the impact of electricity tariffs on their operations and logistics.
Also, she adds, government inertia, fragmented implementation, unenforced localisation and lack of alignment.
Rodseth says China’s tariff-free door for South Africa won’t necessarily lead to more beneficiation.
“The commercial case for more beneficiation still needs to be made. We don’t yet know what opportunities there will be for our beneficiated products in the Chinese market. But certainly, exporting raw minerals to China and then importing back beneficiated stuff is not where we want to be.”
From an industry, business and economic perspective, it will be “absolutely critical” to consider the quid pro quos.
“We’ve seen at a detailed level where reciprocity was supposed to take place as far as the Transnet 1,064 locomotives process was concerned, where China North Rail and China South Rail made all sorts of commitments in terms of building here, investing and skills transfer, which did not happen.
“It’s got to be understood what that reciprocity is, whether it’s actually beneficial to us as an economy and South Africa Inc, and whether it’s actually going to be monitored.”
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