For an industry that has become accustomed to bad news, it is tempting to look at some of the latest economic indicators and trends and conclude that things may be getting a bit better.
I am not sure we are there yet, though. Nevertheless, there are enough developments taking place to suggest that South Africa’s manufacturing sector may be approaching a turning point. For the metalworking and engineering industries, in particular, the outlook for 2027 could be better than it has been for some time.
The key word is cautious. National Treasury expects the economy to grow by 1.6% in 2026 and 1.8% in 2027. More interestingly for manufacturers, gross fixed-capital formation is forecast to increase by 2.4% this year and 3.3% next year. I get to visit a lot of machines shops, and I see these signs.
These are hardly growth rates to get excited about but they do point towards something the manufacturing sector needs: Investment.
For too long, much of South African industry has been focused on keeping existing equipment running rather than investing in new capacity. Machine tools have been retained for longer, maintenance has taken priority over replacement and companies have become increasingly careful about committing capital.
That may be starting to change and government’s infrastructure programme provides one of the more obvious opportunities. Roads, rail, ports, water and energy infrastructure all require steel, fabricated structures, machined components, pumps, valves, electrical equipment and a range of engineering services.
The automotive industry provides another reason for optimism, though it may not be to everyone’s tastes, South Africa continues to attract investment into vehicle manufacturing, while new entrants and additional production programmes should create opportunities further down the line for this to feed into local supply chains.
Mining, too, remains important. The sector continues to invest in equipment, automation and alternative energy, while maintaining existing operations creates ongoing demand for local engineering, machining, fabrication and refurbishment.
There is also one development that manufacturers will appreciate: Eskom is keeping the lights on.
Loadshedding has pretty much ended. That is a significant improvement for a CNC machine shop, foundry or fabrication company where an interrupted production run can be costly.
Unfortunately, the electricity problem has not gone away. It has changed from a reliability issue into a cost issue. Energy-intensive manufacturers still face high electricity tariffs, and this will continue to influence investment decisions.
Then there is steel, perhaps the biggest unresolved problem. A manufacturing sector cannot be competitive without access to competitively priced raw materials. At the same time, South Africa needs a viable domestic steel industry. Protecting local producers through tariffs may provide some breathing space, but it also raises input costs for downstream manufacturers.
Finding the balance will not be easy, but, is there cause for optimism? I think there is. But I would stop short of calling it a road to recovery just yet. The real test will be whether the infrastructure projects become factories producing components rather than announcements in government documents; whether automotive investment translates into orders for local suppliers; whether mining continues to spend; and whether manufacturers themselves have the confidence to invest.
Perhaps 2026 will ultimately prove to be the year in which the direction changed rather than the year in which the results became visible. If that is the case, 2027 could be rather more interesting. After years of talking about protecting and rebuilding South Africa’s manufacturing base, we may finally get an opportunity to see what the industry can do when there is a little more work to do.
A recovery will not benefit everyone equally. Companies that have invested in productivity, skills, automation, precision machining and the ability to manufacture components locally should be better placed to take advantage of it.
For an industry that has spent much of the past decade dealing with declining demand and rising costs, this is perhaps enough to justify a little optimism.
Damon Crawford
Online Editor / Journalist
