4 of South Africa’s biggest employers in serious trouble

Manufacturing, mining, motoring, and agriculture, four of South Africa’s key industries, face significant challenges that threaten their roles as major employers.

Manufacturing, which once contributed significantly to South Africa’s GDP and job market, is underperforming compared to global peers.

Meanwhile, the mining sector—particularly in platinum group metals, coal, and diamonds—has seen shrinking profits due to weak commodity prices and operational difficulties.

According to data from Stats SA and reports from the economic research institution Trade and Industrial Policy Strategies (TIPS), South Africa’s economic recovery post-pandemic has masked disparities between sectors.

While private services, agriculture, public services, and logistics now make up 40% of GDP as of the first quarter of 2024, manufacturing and mining remain under pressure.

Since 2019, manufacturing output has declined by 5%, leading to job cuts.

Between April 2023 and March 2024, the manufacturing industry shed 50,000 jobs, continuing a downward trend that has seen employment in the sector fall by 150,000 since pre-pandemic levels.

Job losses are particularly pronounced in specific manufacturing industries, such as automotive, glass, and non-metallic minerals.

The transport equipment sector alone saw a 20% drop in employment, with over 20,000 positions lost.

These declines are concerning, given that manufacturing still accounts for 12% of South Africa’s GDP and formal employment.

Mining, long a cornerstone of South Africa’s economy, faces equally pressing challenges.

While the industry still employs around 477,000 people and generates significant tax revenue, it is struggling with volatile labour relations, organised crime, and regulatory uncertainty.

These factors, coupled with weak commodity prices, are eroding profits, prompting job cuts and jeopardizing future growth.

S&P Global recently highlighted the financial difficulties faced by mining companies, particularly those in the platinum group metals (PGM), coal, and diamond sectors.

While these companies are accustomed to cyclical downturns, the prolonged low demand and prices have exacerbated their financial strain, forcing some to consider further job reductions.

In mining, operational challenges are compounded by inefficiencies in the national electricity supplier Eskom and logistics provider Transnet.

Companies are investing heavily in efforts to stabilise these institutions, but this is raising the cost of doing business and limiting funds available for expansion.

According to S&P, while relatively low debt levels still support these companies’ financial health, ongoing challenges in the power and transport sectors could lead to further financial deterioration.

For instance, Impala Platinum’s CEO, Nico Muller, has warned that without significant cost reductions, the company faces the risk of further restructuring or even closure.

Since 2023, fellow PGM miner Sibanye Stillwater has already cut over 11,000 jobs, and more cuts may follow if these operational issues persist.

The automotive industry, which employs over 110,000 people directly and around 500,000 in the broader value chain, is also under threat.

As the global market shifts toward electric vehicles (EVs), South Africa’s car manufacturers risk losing relevance unless they adapt quickly.

The European Union’s ban on internal combustion engine (ICE) vehicles by 2035 has accelerated the need for innovation, but local manufacturers are slow to respond, potentially jeopardising their future market share.

Analysts warn that this reluctance to shift to EVs could be disastrous for the sector, similar to how established companies like Kodak and Nokia failed to adapt to new technologies.

While agriculture provided a rare bright spot in the first quarter of 2024, its prospects are also clouded by logistical inefficiencies, animal diseases, and climate-related challenges.

Despite growing 13.5% in early 2024, the sector’s long-term outlook remains precarious.

The industry is critical not only for its contribution to GDP but also for its role in employment and food security.

However, with droughts, poor infrastructure, and water shortages caused by a failing water supply system, the risks to future agricultural productivity are significant.

PwC estimates that by 2035, nearly a quarter of maize production and over a third of wheat production will be at risk due to rising temperatures and heat stress, further threatening food security and the agricultural workforce.

South Africa’s key industries—manufacturing, mining, automotive, and agriculture—are all facing unique but interconnected challenges.

While the economy’s overall recovery remains fragile, the jobs at risk in these sectors number in the hundreds of thousands, posing serious risks to South Africa’s long-term economic stability.

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