The Capital Goods Industry in South Africa: An Overview

Dec 10, 2025 0

As of October 2025, the economy of South Africa is the largest in Africa. Following 1996, at the end of over twelve years of international sanctions, South Africa's nominal gross domestic product (GDP) almost tripled to a peak of US$416 billion in 2011.

The formal economy of South Africa has its beginnings in the arrival of Dutch settlers in 1652, originally sent by the Dutch East India Company to establish a provisioning station for passing ships. At the end of the 18th century, the British annexed the colony. In 1870 diamonds were discovered in Kimberley, while in 1886 some of the world's largest gold deposits were discovered in the Witwatersrand region of Transvaal, quickly transforming the economy into a resource-dominated one.

GDP per capita in South Africa

Diversification and Key Sectors

Although the natural resource extraction industry remains one of the largest in the country with an annual contribution to the GDP of US$13.5 billion, the economy of South Africa has diversified since the end of apartheid, particularly towards services.

South Africa has a comparative advantage in the production of agriculture, mining and manufacturing products relating to these sectors. South Africa has shifted from a primary and secondary economy in the mid-twentieth century to an economy driven primarily by the tertiary sector in the present day which accounts for an estimated 65% of GDP or $230 billion in nominal GDP terms.

The state-owned enterprises of South Africa play a significant role in the country's economy, with the government owning a share in around 700 SOEs involved in a wide array of important industries. South Africa is a popular location for offshoring, with many international companies relocating operations or services to the country. In 2025, Robert Walters plc found that 60% of business leaders ranked South Africa as the most attractive country for offshoring, surpassing other popular regions by a large margin. The main industry that has shown considerable growth in offshoring activities to South Africa is "Tech and IT", which accounts for 53% of new roles. This is followed by categories "customer service and support", "finance and accounting", and "human resources and recruitment".

Manufacturing and Automotive Industry

The manufacturing industry's contribution to the economy is relatively small, providing just 13.3% of jobs and 15% of GDP. There are growing sectors of manufacturing, however, such as in the Space industry.

The South African automotive industry accounts for about 10% of South Africa's manufacturing exports, contributes 7.5% to the country's GDP and employs around 36,000 people. Annual production in 2007 was 535,000 vehicles, out of a global production of 73 million units in the same year. Vehicle exports were in the region of 170,000 units in 2007, exported mainly to Japan (about 29% of the value of total exports), Australia (20%), the UK (12%) and the US (11%). BMW, Ford, Volkswagen, Daimler-Chrysler, General Motors, Nissan and Toyota all have production plants in South Africa. Large component manufacturers with bases in the country are Arvin Exhaust, Bloxwitch, Corning and Senior Flexonics. There are also about 200 automotive component manufacturers in South Africa, and more than 150 others that supply the industry on a non-exclusive basis.

Automotive Industry in South Africa

Trade and Investment

Principal international trading partners of South Africa-besides other African countries-include Germany, the United States, China, Japan, the United Kingdom, Bangladesh and Spain. Chief exports include corn, diamonds, fruits, gold, metals and minerals, sugar, and wool. Machinery and transportation equipment make up more than one-third of the value of the country's imports.

Read also: Discover Thula Thula

As a result of a November 1993 bilateral agreement, the Overseas Private Investment Corporation (OPIC) can assist US investors in the South African market with services such as political risk insurance and loans and loan guarantees. OPIC is establishing an additional fund - the Sub-Saharan Africa Infrastructure Fund, capitalised at $350 million - to investment in infrastructure projects. Despite the numerous positive economic achievements since 1994, South Africa has struggled to attract significant foreign direct investment.

The situation may have started to change however, with 2005 seeing the largest single FDI into South Africa when Barclays bought a majority share in local bank Absa Group Limited. Deals between the British-based Vodafone and South Africa's Vodacom have taken place in 2006. In 2010, two multibillion-dollar deals, one by HSBC to acquire Nedbank and one by Walmart to acquire Massmart Holdings, fell through.

Challenges and Reforms

At the start of 2000, then President Thabo Mbeki vowed to promote economic growth and foreign investment by relaxing restrictive labour laws, stepping up the pace of privatisation, raising governmental spending and cutting interest rates sharply from 1998 levels. His policies faced strong opposition from organised labour.

In April 2017, political tensions in the country arose over the sacking of nine cabinet members including Minister of Finance Pravin Gordhan by the president Jacob Zuma. The finance minister was seen as central to efforts to restore confidence in South Africa.

South Africa's mass unemployment dates back to the 1970s, and continued to rise throughout the 1980s and 1990s. Unemployment has increased substantially since the African National Congress came to power in 1994, increasing from 15.6% in 1995 to 30.3% in 2001. In the second quarter of 2010, the jobless rate increased to 25.3%, and the number of people with work fell by 61,000 to 12,700,000. The biggest decline in employment was recorded in the manufacturing industry, which lost 53,000 jobs.

Read also: Traditional South African Bread

The official unemployment rate, though very high by international standards, understates its magnitude because it includes only adults who are actively looking for work. The unemployment problem is characterised by its lengthy duration. In the mid-1990s, nearly two-thirds of unemployed people had never worked for a salary. The 2005 Labour Force Survey found that 40% of unemployed individuals have been unemployed for more than three years, while 59% had never had a job at all.

The unemployment rate has fuelled crime, inequality and social unrest. The global economic downturn made the problem worse, wiping out more than one million jobs. Among the reasons cited for wishing to leave the country was the declining quality of life and high levels of crime.

Scheduled rolling blackouts are a part of daily life. Electricity theft is widespread. After years of sub-standard maintenance and the South African government's inability to manage strategic resources, the state-owned power supplier Eskom started experiencing deficiency in capacity in the electrical generating and reticulation infrastructure in 2007. Initially, the lack of capacity was triggered by a failure at Koeberg nuclear power station, but a general lack of capacity due to increased demand and lack of government planning soon came to light.

The margin between national demand and available capacity is still low or negative (particularly in peak hours), and power stations are under strain, such that surges in demand, which are common during winter, or drops in supply, often a result of a lack of coal for power plants, result in another phase of rolling blackouts. The government and Eskom are currently planning new power stations, at cost to the South African consumer.

Economic Indicators

The following table shows the main economic indicators in 1980-2022.

Year	GDP Growth Rate (%)	Inflation Rate (%)	Unemployment Rate (%)
1980	3.9	13.8	N/A
1990	-0.5	13.3	N/A
2000	4.2	5.4	25.2
2010	3.0	4.1	25.0
2020	-6.4	3.2	29.2
2022	1.9	6.9	33.9