Small enterprises in the manufacturing industry in South Africa have been under financial stress. For years, loadshedding disrupted production, forced companies to rely on costly diesel generators and drained margins already stretched thin.
Energy instability is just part of the economic reality that businesses in the manufacturing industry in South Africa have had to adapt to.
2025 brought some relief on the energy front, but other pressures haven’t let up, including:
- Cheaper imports flooding local markets, squeezing margins on manufacturing products produced in South Africa.
- Operational costs rising for everything from raw materials to skilled labour, while small to medium-sized enterprises (SMEs) try to maintain competitive pricing.
- Traditional funding options not aligning with manufacturing cash flow management realities.
Yet despite these formidable challenges, some manufacturing sub-sectors show solid resilience – and even growth.
In this deep report, we look at what the latest data reveals about the current state of South Africa’s manufacturing sector and the key trends driving the market.
Find out which sectors are growing, what obstacles business owners need to overcome, and how they can position themselves for profitability in 2026 and beyond.
Current State of the Manufacturing Sector in South Africa
South Africa’s manufacturing sector – responsible for 12.5% of national GDP – remains one of the country’s most critical economic engines, but the latest data reveals a sector still struggling to build momentum after several turbulent years.
Manufacturing production grew by just 0.3% in Q3 of 2025, according to Statistics South Africa’s Q3 2025 GDP report – a tiny gain that contributed very little to the country’s overall 0.5% economic growth during that period.
This stagnation reflects weak domestic demand, slow export recovery and ongoing cost pressures across key sub-sectors.
Business confidence mirrors this fragile outlook. The Absa Purchasing Managers’ Index (PMI), one of South Africa’s most important ‘early warning’ economic indicators, fell sharply to 42.0 in November 2025 from 49.5 in the previous month, reported economic data aggregator Trading Economics, its sharpest decline since the 2020 lockdown period and well below the 50-point threshold that signals expansion.
Absa told Reuters in a statement that the survey results “underscore the fragility of South Africa’s manufacturing sector”.
While the industry has seen modest job creation and easing cost pressures, these have been overshadowed by production and demand declines.
Manufacturing export sales have been sluggish since late 2024, and domestic sales have faltered after a brief recovery in the third quarter.
“Despite government policy, the sector is under pressure,” said Lebo Raolane, Senior Investment Manager at Goodwell Investments, in an interview with SME South Africa.
“The sub-sectors are mature, and you need a high capital to get into the industry,” he added. “Also, if you look at the last 20 years, the manufacturing industry’s contribution to the GDP has dropped. Manufacturing is struggling.”
Still, not all sentiment is negative.
A forward-looking PMI sub-index climbed to 50.8, the same Trading Economics report concluded, pointing to cautious optimism for mid-2026 as energy stability improves and private-sector investment begins to recover.
With this mixed backdrop, the key question becomes: Which manufacturing divisions are still generating real growth – and which are falling behind?
Which Manufacturing Industry Sectors are Driving Growth?
Several manufacturing divisions are outperforming expectations, even though the broader market remains sluggish.
Statistics South Africa manufacturing data from September 2025 showed five out of 10 manufacturing divisions reporting year-on-year production growth since 2019.
Seven divisions saw sales grow, amounting to 3% growth in total manufacturing sales in September 2025.
For SMEs looking to expand or diversify in 2026, these outperforming sectors highlight where demand and opportunity is strongest. Data published by Aluma shows modest improvement in both production volume and sales value in the manufacturing sector in Q3 2025.
Food and beverages: Steady growth despite economic headwinds
Food and beverages manufacturing stands as the largest sub-sector in terms of sales and is showing real resilience.
Accounting for nearly a quarter of total manufacturing sales as measured by Stats SA, the industry recorded a 3.4% increase in sales value in September compared to the year prior.
Production grew 1.8% year-on-year, making it the second-largest positive contributor to total manufacturing output growth. The beverages sub-sector showed particularly strong performance, with production jumping 3.7% in September alone.
There’s a simple reason for this dominance. People need to eat regardless of economic conditions.
The sector’s essential goods status insulates it from the worst volatility plaguing other manufacturing divisions.
Action for manufacturers: Food processing offers resilience and room for specialisation – from artisanal goods to export-ready packaged foods for regional markets.
Automotive: Building towards ambitious targets
The automotive sector contributes 16.9% of domestic manufacturing value addition and was the industry’s biggest value contributor according to Stats SA, despite accounting for only 8.7% of production output in September.
Posting 7.6% year-on-year growth and with some of the largest manufacturing companies in South Africa investing in the sector, South Africa’s automotive industry aims to increase vehicle production and sales under the South Africa Automotive Masterplan 2035.
Yet behind the numbers and promises lie significant challenges, forcing 12 company closures and 4,000 job losses in the past two years.
“Some 64% of motor vehicles sold in South Africa are imports. Additionally, localisation – the level of local assembly, labour and components – remains stagnant at 39%, well short of the 60% target, while US tariffs now significantly impact the country’s R28.7 billion ($1.64 billion) automotive exports,” Parks Tau, Minister of Trade, Industry and Competition, told Reuters.
“To help respond to the challenges the industry is facing, an incentive scheme for local manufacturing now includes electric vehicles and associated components,” Tau assured the press. “Localisation is not merely industrial policy compliance; it is existential. A 5% increase in local content would unlock R30 billion in new procurement, dwarfing the R4.4 billion US export market,” he added.
Action for manufacturers: Automotive component manufacturing requires significant technical know-how and certifications. However, government support programmes and the sector’s promised growth trajectory make integration into the automotive supply chain a business idea in manufacturing worth considering – especially for manufacturers with metalworking, plastics or electronics expertise.
Petroleum, chemicals, rubber and petrochemicals: High-value production
The petroleum, chemical products, rubber and plastic manufacturing industry in South Africa accounts for a quarter of total manufacturing production. This division saw an 8.7% year-on-year uptick in sales value in September.
High value-added production makes this sector particularly attractive.
Chemical refineries transform relatively low-value raw materials – including crude oil, minerals and natural gas – into sophisticated industrial products commanding premium prices. These include pharmaceuticals, speciality chemicals, industrial polymers and agrochemicals.
Within this broad division, basic chemicals production climbed 8.1% year-on-year in September.
Plastic products climbed 6.6%, signalling steady demand despite sustainability concerns driving innovation towards recycled and biodegradable alternatives. Rubber production, on the other hand, slumped by over 25%.
Action for manufacturers: Industrial chemical manufacturers like Sasol (petrochemicals and synthetic fuels), AECI (mining explosives and chemicals) and Omnia (fertilisers and chemicals) export across sub-Saharan Africa and rely on accredited local suppliers for niche inputs, packaging and logistics.
Securing vendor accreditation is the fastest way to access these supply chains.
Communication and professional equipment: The digital surprise
It might not grab headlines like automotive or chemicals, but the radio, television and communication apparatus and professional equipment division is posting some of the manufacturing sector’s strongest growth numbers.
Sales for this division surged 10.9% year-on-year in Stats SA’s September 2025 report, reaching R2.7 billion.
Digital transformation is the driving force behind this business trend in South Africa.
Tech giants and local telecommunication companies invested billions in fibre networks and data centres, driving demand for specialised electronic equipment.
Furthermore, the automotive sector’s push towards electric and smarter vehicles creates sustained demand for locally produced sensor arrays, power-management systems and communication modules.
The communications sector needs high-value, skills-intensive manufacturing across its value chain. Investing in the production of this type of electrical machinery can position South Africa as a world-class technology hub rather than just a raw material exporter.
Action for manufacturers: Electronics assembly requires skilled labour and quality systems, but margins are high. SMEs can tap into supply chains for telecoms, data centres and EV component production.
Renewable energy manufacturing: The rising star
Ask economists which industry is booming in South Africa, and renewable energy component manufacturing is sure to be mentioned.
Loadshedding’s history has created permanent structural demand. Businesses and households installed back-up power systems during the crisis years and aren’t removing them now that grid reliability has improved.
Declining solar technology costs also make renewable installations increasingly competitive with grid electricity — even without loadshedding as the driving factor.
With the help of solar finance solutions, South Africa increased rooftop solar capacity by 349% between 2022 and 2023, according to energy export firm Energy Monitor.
The energy market will incorporate another 32GW of renewable energy by 2030, the non-profit GreenCape estimates, translating into strong demand for solar panels, inverters, mounting systems and battery storage.
South Africa is globally competitive in manufacturing certain renewable components for export, not just local use, the GreenCape report confirms.
This export potential, combined with local content incentives, could help create between 9,500 and 15,900 new manufacturing and assembly jobs by 2030, positioning the country as a key supplier for the region’s green energy transition.
Action for manufacturers: Demand for renewable energy component manufacturing is proven and growing. Companies should consider partnerships with established solar installers to understand technical requirements and identify specific component needs where local manufacturing could substitute imports.
Furniture and other manufacturing: Tailored demand driving growth
Perhaps the biggest surprise in recent data comes from the furniture and other manufacturing divisions, which posted one of the largest growth contributions to the sector.
Rising urbanisation and demand for space-efficient, multi-functional furniture in smaller living spaces are fuelling sales, according to a market report from analyst Fortune Business Insights. Moreover, there’s a growing preference for eco-friendly, locally sourced materials like indigenous hardwoods, as consumers increasingly value sustainability over mass-produced imports.
Other niche sub-segments are seeing strong returns, too. The coffin manufacturing industry in South Africa is projected to hold a 27.6% share of the African market in 2025, valued at approximately R1.3 billion ($82 million), according to Cognitive Market Research. This demonstrates how focusing on distinct market needs creates defensible positions even in challenging environments.
Action for manufacturers: Success in this sector now depends on customisation and sustainability. Instead of competing on volume against cheap imports, focus on ‘mass customisation’ – using modular designs that allow customers to personalise locally made products. Niche manufacturing segments are also outperforming the division as a whole.
Which Manufacturing Sectors are Facing Contraction?
Not every manufacturing division shared in the recovery. Below are some of the most important trends of sub-sectors in decline.
Metals industry: Structural decline continues
Basic iron and steel production plummeted 35.6% year-on-year compared to 2019 levels, as the economic data from Stats SA shows, continuing a worrying downward trend driven by weak global demand for metal products and local infrastructure delays.
Sales for the broader non-ferrous metals division grew only modestly, masking this sharp contraction in primary steel output.
Electrical machinery: Decreased consumer demand
Electrical machinery manufacturing also faced headwinds, recording a 7.3% year-on-year production decline in September, according to the Stats SA report. Despite the renewable energy boom boosting specific components, the broader electrical machinery category contracted as construction activity remained uneven and consumer spending on appliances tightened.
Clothing and textiles: Under threat from cheap imports
The clothing and textile industry faces significant headwinds from low-cost Asian imports, particularly from China, Bangladesh and Vietnam. South Africa’s textile imports jumped 33.6% in January 2025 alone, according to the Fashion Herald, reflecting the intense pressure on local producers.
Yet, despite these challenges, the clothing manufacturing industry in South Africa employs between 60,000 and 80,000 people, representing 14% of manufacturing employment, reports Cape Town news outlet CBN. The industry also remains a pillar of the manufacturing economy.
What these Declines Mean for Small Businesses
These numbers stress one thing: Diversification is critical for businesses in these contracting sectors. An effective way to grow and market a manufacturing business in a struggling market is by innovating products and manufacturing processes, and by selling to new markets.
This means:
- Shift towards renewable energy components: Pivot from basic steel fabrication to producing towers, mounting structures and other components for the fast-growing renewable energy value chain.
- Serve resilient local sectors: Wood and paper manufacturers can offset declining print demand by focusing on packaging for food and e-commerce, where demand remains strong.
- Expand into regional markets: South African manufacturers should use the African Continental Free Trade Area (AfCFTA) access and the weaker rand to compete more effectively in neighbouring African markets with locally manufactured finished goods.
This way, manufacturers can effectively pivot their existing capabilities, move up the value chain and enter new markets.
How to Future-Proof Your Business: What Lies Ahead for 2026?
What does the future hold for South African manufacturing? SMEs shouldn’t expect any overnight turnarounds – but there’s reason for cautious optimism built on structural improvements and regional initiatives.
Economic forecasts suggest a gradual recovery. Standard Bank projects GDP growth to inch up from 1.2% to 1.4% in 2026. Three structural shifts support this positive outlook:
- (Green) energy stability: With renewable capacity rapidly coming online – including an expected 14.4GW of wind power by 2030 – manufacturers can finally plan production schedules with greater certainty. Green practices are also becoming a prerequisite for doing business with major retailers and international buyers. From installing solar panels to reducing energy costs to adopting circular economy principles in textile production, green manufacturing drives efficiency as much as it protects the planet.
- Investment momentum: Gross fixed capital formation rose 1.6% in Q3 2025, signalling that businesses are starting to spend on machinery and equipment again. The outlook for 2025–2026 is modestly optimistic, notes a recent sector analysis by M&J Group Africa, but it depends heavily on whether investment momentum holds.
- Regional integration: As the AfCFTA matures, regional tariff barriers will continue to fall, opening up new export markets for South African manufactured goods that are ‘made for Africa’.
For SME manufacturers, the worst of the volatility may be behind us. Small business owners who use these market opportunities to invest in efficiency, diversify into growing sub-sectors like food or renewables, and secure flexible manufacturing finance will be best positioned to capture the growth that is slowly but surely returning.
Securing the Right Funding to Capture Growth Opportunities
Small businesses need capital, whether they’re investing in digital technologies, pivoting to sustainable packaging or expanding production capacity for export.
This represents a significant hurdle: traditional funding often fails manufacturers.
Small businesses need large capital amounts for equipment purchases costing R500,000 to R5 million. As a business owner, you’ll see that revenue arrives weeks or months after you’ve paid for materials and labour.
Seasonal demand creates cash flow fluctuations that rigid monthly repayment schedules simply don’t accommodate.
Traditional lenders typically require extensive collateral, take weeks for approval and impose strict terms that don’t change when a customer delays payment.
That’s where alternative SME funding bridges the gap.
At Lula, we understand the manufacturing industry’s unique cash flow realities. Our funding solutions – including a Cash Flow Facility for ongoing working capital access and Fixed-Term Funding for specific investments – are built for businesses with the actual cash flow patterns manufacturers experience.
We offer fast, flexible access to up to R5 million within as little as 24 hours, allowing you to seize growth opportunities without the red tape.
With business sentiment already optimistic about future conditions, the race to capture new market share has begun. Don’t let a lack of capital keep you on the sidelines – secure the funding you need to lead the recovery.
