Integrating human capital into South Africa's industrial policies

 “The national wealth of our country, the heritage of all South Africans, shall be restored to the people.”- Freedom Charter, 1955

It’s a timeless promise, etched into South Africa’s moral and political imagination: that the wealth of this nation would one day be returned to its rightful owners: the people. But fast-forward nearly 70 years from the adoption of the Freedom Charter, and one has to ask: are we any closer to achieving that vision?

We’ve got policies, plans, and pages upon pages of industrial strategies. From the National Industrial Policy Framework (NIPF) to the more recent localisation and sector masterplans, South Africa has no shortage of ambition when it comes to rebuilding its productive economy. The Department of Trade, Industry and Competition (DTIC) has been busy crafting incentive schemes, nurturing Special Economic Zones (SEZs), and waving the flag for local procurement. But there’s a critical piece missing from the puzzle: a deep and sustained investment in our people.

If South Africa is serious about inclusive growth, we need to treat human capital not as a by-product of policy, but as its beating heart. That means thinking holistically, not just about jobs, but about the full lifecycle of economic agency. Because building a capable workforce and future owners of the means of production doesn’t start with a factory floor, it starts in our communities, our homes and from an early age.

Let’s talk about Early Childhood Development (ECD), the unglamorous but absolutely vital foundation of any functioning society and economy. Right now, only around 1.6 million children under six are enrolled in early learning programmes, a drop from pre-Covid levels. Government has made bold commitments through the Department of Basic Education’s 2030 Strategy for ECD Programmes to reach 1.5 million children by 2027/28, but underfunded infrastructure and administrative red tape continue to throttle small-scale providers, particularly in the very communities we claim to want to uplift. It's difficult to raise industrialists when you're underpaying their pre-school teachers nor investing in the infrastructure to facilitate human capital development with industrial policy in mind.

Then there’s our school system, which continues to churn out devastating statistics. Over 80% of Grade 4 learners still can’t read for meaning. This is not just a tragedy; it’s an economic handbrake. How do we expect to compete in global value chains when the majority of our children are being left behind by age ten?

TVET colleges, meanwhile, are stuck in a bureaucratic time warp. Curricula are outdated. Employer linkages are weak. And young people, particularly those in townships and rural areas, are left with certificates that rarely translate into jobs. Even adult workers, especially in sectors that receive government support, struggle to access reskilling opportunities or move up the value chain. The pipeline is leaky, underfunded, and structurally biased toward exclusion.

And here lies the bitter irony. While South Africa continues to pump billions into industrial support, through tax breaks, incentives, and procurement schemes, the jobs simply aren’t following. According to Stats SA, in March 2025, the country lost 95 000 jobs. The manufacturing sector added a paltry 2 000. Not exactly a banner year for reindustrialisation.

Yes, there are some bright spots. The Coega SEZ posted impressive numbers in 2024, R25 billion in income and a 14.7% increase in employment. Youth made up nearly half of the workforce. But these success stories are exceptions, not the rule. Meanwhile, the potential shutdown of ArcelorMittal’s long-steel operations could wipe out 3 500 direct jobs - and up to 100 000 across the value chain. We are incentivising production, yes, but not resilience.

And so, we return to a hard truth. As French economist Thomas Piketty warned in Capital in the 21st Century, when the return on capital (r) outpaces economic growth (g), inequality doesn’t just persist; it deepens. Without serious investment in human capability, the benefits of industrial growth will continue to accrue to capital owners, large firms, global investors, asset-holders, while the majority of South Africans remain spectators in their own economy.

This isn’t just an economic problem. It’s a political crisis waiting to happen.

Now, let’s be clear: South Africa has no shortage of plans. Our National Industrial Policy Framework, our IPAPs, our Economic Reconstruction and Recovery Plan, all speak fluently about transformation and inclusivity. But here’s the rub: these strategies rarely account for the actual state of human capital at scale. They assume skills where there are none. They envision absorption without first building readiness. It's like designing a racing car and handing it to someone who’s never learned to drive.

We can and must do better. And we don’t have to reinvent the wheel. Countries like Germany have perfected dual-education systems that marry vocational learning with real-world training. Denmark’s active labour market policies ensure no one is left behind by economic shifts. South Korea turbocharged its development through heavy investment in education and R&D.

Thirdly, we must scale dual-education models in industries with real growth potential, electric vehicles, green energy, agro-processing, linking TVETs directly to jobs.

And finally, financing a life-cycle approach to human capital will require more than re-allocating existing budgets, it demands bold, innovative solutions. Government could crowd in new resources through blended finance, social impact bonds, and challenge funds that reward outcomes over inputs. For example, a Human Capital Investment Fund, backed by government, donors, and the private sector, could coordinate funding across early childhood development, TVET expansion, and adult upskilling. But perhaps the most transformative lever is debt relief. With debt-service costs consuming a rising share of national revenue, a new wave of strategic debt forgiveness, championed through multilateral forums like the G20, could free up billions for long-term investment in people. As economists have argued, when countries are unshackled from unsustainable debt, they can reinvest in health, education, and productive capacity. In South Africa's case, this would mean financing the crèche-to-career pipeline not with austerity, but with ambition.

Because here's the thing: we can’t build an inclusive industrial economy by focusing only on inputs and outputs. We need to invest in people, at every life stage, and design policy that unlocks their full economic potential.

The Freedom Charter said: “The people shall share in the country’s wealth.” That’s not a metaphor. It’s a metric. And if our industrial policy isn’t helping us get there, then it’s time for a fundamental re-think.

So what should South Africa do?

First, we must tie industrial incentives to actual human capital outcomes, measured not by paperwork but by people: how many were trained, how many were absorbed, how many progressed and are in a position to become future owners of capital and the means of production themselves (either through building a financial profile, thereby gaining access to financial markets). The jobs created by industrial policy incentives need to provide workers with baseline of economic inclusion. This includes a decent living wage, access to social insurance to boost personal and national saving rates, health and potential for upward economic mobility for themselves and their families.

Secondly, every foreign investor or technical expert who benefits from our industrial strategy should be required to transfer knowledge to locals not as a box-ticking exercise, but through structured, enforceable mentoring and co-training.

Sthandiwe Msomi, Economic Analyst

*** The views expressed here do not necessarily represent those of Independent Media or IOL

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