Interconnected gears forming the shape of South Africa, symbolizing manufacturing and economic growth.

South African Manufacturing: Can Transitioning Firms Drive Economic Growth?

Rhea Morgan in Business & Economy August 2025 • 3 min read.

"Exploring the dynamics of manufacturing firms in transition and their impact on employment and economic growth in South Africa."

South Africa's manufacturing sector has faced significant challenges since the end of apartheid. These challenges, marked by economic shifts and global competition, have put immense pressure on local firms. Understanding how these firms adapt and transition is crucial for fostering economic growth and employment.

While much attention has been paid to the broad economic shocks affecting the manufacturing industry, less is known about the specific firm-level strategies that drive employment growth. This article aims to fill that gap by examining the characteristics of South African manufacturing firms that have successfully navigated these transitions.

By analyzing firm-level data, we can identify key factors that contribute to employment growth and overall success in the manufacturing sector. This insight is essential for policymakers and business leaders looking to promote sustainable economic development in South Africa.

The Role of Subcontracting in Employment Growth

Interconnected gears forming the shape of South Africa, symbolizing manufacturing and economic growth.

One of the most significant findings is the critical role of subcontracting in driving employment growth among South African manufacturing firms. Subcontracting, where firms outsource specific aspects of their production to other companies, appears to be a successful strategy for enhancing employment opportunities.

Firms that engage in subcontracting are more likely to experience employment growth. This flexibility allows companies to respond more effectively to fluctuations in workload and to access specialized skills or resources that may not be available in-house.

Flexibility: Subcontracting provides firms with the flexibility needed to adjust to changing market demands and fluctuating workloads.
Access to Specialized Skills: Subcontracting allows firms to tap into specialized skills and expertise without the need for full-time employment.
Cost Reduction: Subcontracting can reduce production costs by leveraging external resources and expertise.

There are a few plausible explanations for how subcontracting drives employment growth. First, it enables firms to outsource lower-skilled tasks, allowing them to focus on higher-skilled activities that require specialized full-time staff. Second, subcontracting can provide access to highly skilled individuals who might not be affordable or necessary to retain on a full-time basis.

Strategies for a Stronger Manufacturing Sector

The transition of South African manufacturing firms is a complex process influenced by various factors. By focusing on strategies like subcontracting, value chain integration, and product upgrading, firms can enhance their competitiveness and contribute to sustainable economic growth. Future research and policy efforts should prioritize these areas to support the continued evolution of the manufacturing sector in South Africa.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: 10.1080/02692171.2019.1524013, Alternate LINK

Title: South African Manufacturing Firms In Transition

Subject: Economics and Econometrics

Journal: International Review of Applied Economics

Publisher: Informa UK Limited

Authors: David Francis, Gareth Roberts, Imraan Valodia

Published: 2018-10-24

Everything You Need To Know

What are the key challenges faced by South African manufacturing firms in the current economic climate?

South African manufacturing firms encounter significant hurdles, particularly since the end of apartheid. These challenges stem from economic shifts and intense global competition, placing considerable pressure on local firms. Adapting and transitioning successfully is critical for fostering economic growth and employment within the South African manufacturing sector.

How does subcontracting contribute to employment growth within South African manufacturing firms?

Subcontracting plays a crucial role in driving employment growth among South African manufacturing firms. This strategy allows firms to outsource specific production aspects to other companies. This approach provides firms with flexibility in adjusting to market demands and fluctuating workloads, access to specialized skills, and potential cost reductions. It helps firms focus on higher-skilled activities, while the outsourced tasks can be handled by others.

What specific benefits do South African manufacturing firms gain from engaging in subcontracting?

South African manufacturing firms benefit from subcontracting in several ways. It offers flexibility, allowing firms to adjust to changing market demands and workload fluctuations. Subcontracting also grants access to specialized skills that may not be available in-house, enhancing operational capabilities. Furthermore, it can lead to cost reduction by leveraging external resources and expertise, contributing to increased efficiency and competitiveness.

What are the primary strategies that can strengthen the South African manufacturing sector and promote economic growth?

Strengthening the South African manufacturing sector involves strategies like subcontracting, value chain integration, and product upgrading. By focusing on these areas, South African firms can enhance their competitiveness and contribute to sustainable economic growth. Future research and policy efforts should prioritize these areas to support the continued evolution of the manufacturing sector in South Africa.

How can policymakers and business leaders leverage firm-level data to foster economic development within the South African manufacturing sector?

By analyzing firm-level data, policymakers and business leaders can identify key factors that contribute to employment growth and overall success in the South African manufacturing sector. This analysis is essential for promoting sustainable economic development. Understanding the specific strategies that drive employment growth, such as subcontracting, allows for the development of targeted policies and business practices that support the sector's evolution and expansion.