The fall was driven largely by a sharp slump in the automotive sector. Auto output declined by 12% in value terms and by 10% in volume during the fourth quarter alone, reversing modest gains seen earlier in the year.
Image: Simphiwe Mbokazi/Independent Newspapers
South Africa’s fragile economic recovery in 2025 was significantly undermined by a contraction in the manufacturing sector, with steep declines in key industries dragging on overall growth and highlighting persistent structural weaknesses in the economy.
According to data released by Statistics South Africa (StatsSA) this week, the economy expanded by just 1.1% in 2025, a modest improvement from the 0.5% recorded in 2024 but still well below the pace required to meaningfully reduce unemployment and ease fiscal pressures.
The figures underline the limited momentum in the country’s economic recovery, with growth largely driven by consumer spending and services while industrial sectors such as manufacturing, mining and construction struggled.
StatsSA said eight of the 10 manufacturing divisions recorded falling production, pointing to a broad-based downturn across the sector. Manufacturing output declined by 0.6% quarter-on-quarter in the fourth quarter of 2025 after posting modest growth of 0.2% in the previous quarter.
Economists at Nedbank Group said the weak industrial performance reflected the broader structural challenges facing the economy. While growth could improve to about 1.5% in 2026, they warned that persistent supply constraints and global risks could continue to limit the pace of recovery.
Minister of Employment and Labour Nomakhosazana Meth acknowledged the pressure facing labour-intensive industries despite the modest improvement in overall economic growth.
“We cannot ignore the pressures facing manufacturing and transport, the very sectors that historically absorbed large numbers of skilled and semi-skilled workers,” she said.
The largest declines in the manufacturing sector were recorded in the motor vehicles, parts and accessories and other transport equipment division — one of South Africa’s most important manufacturing industries.
The sector’s weakness was also reflected in sharp drops in the wood and wood products, paper, publishing and printing division as well as the food and beverages industry.
Economists from Trade & Industrial Policy Strategies said manufacturing sales fell by 4% in the final quarter of 2025 in constant, seasonally adjusted terms, although the decline in production volumes was more modest at 0.5%.
The fall was driven largely by a sharp slump in the automotive sector. Auto output declined by 12% in value terms and by 10% in volume during the fourth quarter alone, reversing modest gains seen earlier in the year.
The sector has been under pressure for some time. In constant rand terms, automotive production stood at R118 billion in the final quarter of 2025 — about 30% lower than two years earlier — while production volumes were roughly 20% lower over the same period.
Other manufacturing industries also recorded declining sales and production volumes during the quarter and across the year. Petroleum refineries saw sales fall by 10% while production volumes declined by 7%, and the metals sector contracted by about 9% in sales even though output was reported as broadly flat.
One of the most severe declines occurred in the ferroalloys industry, which proved to be a major drag on the overall performance of manufacturing. Output within the broader basic metals category plunged by roughly a third in value terms and a quarter in volume over the year, reflecting the collapse of ferroalloy production.
Exports of ferroalloys fell by more than half by weight, wiping nearly R9bn off export earnings. Analysts attributed the downturn largely to persistently high ore prices combined with soaring electricity costs, which have severely squeezed margins in energy-intensive industries.
Chifipa Mhango, chief economist at Don Consultancy Group, said the contraction across manufacturing and other productive sectors reflected deeper structural problems in the economy.
“The contraction in these sectors is particularly concerning given their importance for employment and industrial development,” Mhlango said.
“The continued weakness in manufacturing, electricity production and construction is a clear indication that the South African economy is struggling to expand its productive capacity.”
The downturn in manufacturing has also extended into 2026, raising concerns that the sector could remain a drag on growth this year.
Manufacturing production declined by 0.7% in January 2026 compared with the same month a year earlier, according to StatsSA.
Professor Waldo Krugell, an economist at North-West University said manufacturers were battling a combination of rising imports, weak demand and domestic infrastructure constraints.
“I think one big reason is a flood of cheap imports that they have to compete with. The second big reason is localised supply-side barriers, such as local power interruptions, local water interruptions, and still relatively high-cost logistics,” Krugell said.
“Additionally, weak demand on both the domestic and export sides means that the sector has faced ongoing challenges.”
BUSINESS REPORT