Most South African manufacturers, besides those few companies benefiting from market tailwinds linked to the deadly conflict disrupting shipping in the Strait of Hormuz, are under strain. The pain is broad-based, with upstream, midstream and downstream value-chain participants all feeling the effects of weak demand, surging imports and inadequate trade enforcement.

The latest Absa Purchasing Managers’ Index partly reflects this unhappy reality. It declined for the fourth consecutive month in August to 45.8 points, the lowest reading so far this year. South Africa’s second-quarter GDP contraction of 0.2% also underlines the distress, with manufacturing recording its third consecutive quarterly decline.

These prints form part of a longer-running pattern, reflected in the steady decline in the contribution of manufacturing to South Africa’s GDP from close to 25% in the early 1980s to about 12% last year. That peak contribution is distorted by the fact that it coincided with the ramping up of international sanctions against the apartheid government, which responded with various import-substitution measures that were not all underpinned commercially.

Nevertheless, the deindustrialisation trend is undeniable, as is the sector’s falling contribution to employment. This is only partly the consequence of ongoing automation, which could potentially accelerate in the coming years as the role played by AI and robots increases.

All attempts to stem the tide have so far failed, despite government’s decision to adopt a more assertive industrial policy. The result has been various plans and interventions, including the New Growth Path and the Industrial Policy Action Plan, to various sector masterplans and the recently published Industrial Development Strategy 2026.

The latest plan has coincided with a more active trade policy, with the International Trade Administration Commission of South Africa having shown a willingness to break decisively with the previous model that some loosely described as ‘holier than GATT’ in reference to the General Agreement on Tariffs and Trade, and raise protection for a number of products to the bound rates allowed under the World Trade Organisation.

There are now signs that government could also become more muscular in the area of industrial financing. Epitomised by a proposed transaction whereby the Industrial Development Corporation (IDC) could take ownership of ArcelorMittal South Africa; an initiative motivated by a desire to sustain the country’s steelmaking footprint amid the closure of lossmaking capacity.

Despite the IDC having been burned previously when taking on assets in the absence of a partner with industry experience, the financier seems willing this time. Albeit with the proviso that it receive an explicit guarantee from the National Treasury to shore up its borrowings.

Likewise, Eskom’s offer of discounted tariffs to a range of ferroalloy smelters to prevent their closure is a major industrial-policy move.

All these trade, financing and subsidy interventions are understandable in a context where the danger of further deindustrialisation is both real and present. Yet, they are not risk or cost free. It’s, thus, imperative that government begins communicating its strategy and clarifying the trade-offs.