The Alternative Information and Development Centre (AIDC) notes the release of the highly concerning Quarterly Labour Force Survey results for the Second Quarter of 2026, which show that the ranks of the unemployed have grown by 114 000 over the past year, with job losses centred around manufacturing and social and community services. Unemployment has increased to 33.6%, but including discouraged work-seekers brings this to 43.8%. The AIDC is concerned that the government’s economic policies are contributing to the long-term decline of South Africa’s manufacturing sector and structural mass unemployment. It is critical that we reverse this trend of deindustrialisation to help overcome mass unemployment. This will require a radical shift in economic development policy to address the crises of mass unemployment, poverty, and climate change through labour-intensive green industrial policy and public employment programs.
Deindustrialisation: A leading cause of mass unemployment
The manufacturing sector lost 100 000 jobs over the past year. This is a shocking decline of almost 6% in one year. The job losses should not come as a surprise for those who have been following the news of various high-profile firm closures over the past year, including AMSA’s Newcastle steel mill, Goodyear’s Kariega plant, and Aspen’s pharmaceutical plant, to name only a few. According to the Stats SA Manufacturing Production and Sales data for June, released on the same day as the QLFS, manufacturing production decreased by 1.7% year-on-year, with food and beverages, furniture, steel, metals, and machinery leading the recent declines. Some may want to attribute this to external shocks, including unfolding wars underpinned by intensified geopolitical rivalry. However, these job losses are part of a historical trend of declining employment in the manufacturing sector as a share of total employment. South Africa’s path to deindustrialisation already began in the late 1980s, with a key factor being the adoption of conservative fiscal and monetary policies that heavily favoured the financial sector. These policies, continued through GEAR in the 1990s, were compounded by South Africa’s reckless rush towards trade liberalisation in the 1990s and early 2000s, which devastated many industries.
It is shocking that the government fails to see the important role manufacturing has played and can continue to play in driving structural transformation. The latest QLFS report indicates that 15 000 fewer people are employed as plant and machine operators and 100 000 fewer as technicians. Yet this does not appear to be a problem for National Treasury’s Director General, who says that manufacturing is becoming less important for job creation, focusing purely on the number of jobs. The reality is that manufacturing creates decent jobs for skilled and semi-skilled workers, each of whom is able to support others with their income. According to the Nelson Mandela Bay Business Chamber, each job in the auto sector supports 21 jobs elsewhere. The loss of these jobs represents not only the threat of poverty for laid-off workers, but also the possible loss of important industrial skills and capabilities for South Africa, especially if these workers emigrate or move to another sector.
Austerity and Unemployment
In addition to the deindustrialisation of the South African economy, structural mass unemployment is exacerbated by the stagnation of public employment programmes and the decline in public sector headcounts. Community and social services recorded the largest employment decline of any industry, shedding 101,000 jobs in a single year. Given that community and social services encompasses education, health, and administrative services, the scale of these losses is consistent with the effects widely attributed to government austerity measures. Budget freezes, unfilled vacancies, and pressure on departments to constrain their wage bills are all elements of austerity measures that unions and civil society groups have long warned would hollow out frontline service delivery. It was reported in April 2026 that half of all schools in Gauteng are operating beyond capacity, which is just one example of how budget cuts and staff shortages undermine the country’s broader developmental objectives.
Austerity and deindustrialisation are related issues. Firstly, South Africa’s recently released Industrial Development Strategy notes that the Department of Trade, Industry and Competition has lost 40% of its budget between 2013 and 2025 when adjusted for inflation. It now represents only 0.4% of government spending, compared to 0.9% more than a decade ago. This means that the DTIC is less able to plan and implement industrial policy and is severely limited in the industrial support, subsidies, or incentives it can effectively provide. Secondly, the lack of public-sector investment has contributed to the slump in manufacturing sales, as the public sector is a major buyer of many manufactured goods. If public sector departments are unable to purchase clothing, medication, furniture, or other goods, these industries are left to turn to foreign markets, a difficult prospect under current hostile trade conditions. Thirdly, underinvestment in public infrastructure has contributed to unsustainable costs for industries – if the public provision of water, electricity, freight, healthcare and education is compromised, then these industries will have to find private solutions, which piles additional costs on them.
Alternatives to Combat Mass Unemployment
South Africa’s existing public employment programmes, such as the Expanded Public Works Programme and the Presidential Employment Stimulus, have offered a partial cushion against joblessness, but they remain limited by short-term contracts, low stipend-level wages, and funding that has not kept pace with the scale of the unemployment and service delivery crises. Scaling up investment in areas like early childhood development, home-based care, and community health work would not only help absorb people into jobs, particularly youth, it will also strengthen the very social services infrastructure that austerity measures have been eroding.
But these programs will not be enough on their own. Truly fighting the unemployment crisis means supporting industrial development and structural transformation. The AIDC has argued that the government’s current approach to development, exemplified by GAIN and Operation Vulindlela, is to make South Africa’s existing economic structure run smoother but without changing it – structural lubrication instead of structural transformation. Fixing the freight rail bottlenecks may help mining companies export their minerals, and liberalising the energy sector may help large corporations and well-off municipalities secure renewable electricity deals, but the current proposals will not stop the deindustrialisation of the South African economy, nor will they address the crises of mass unemployment and poverty. The government’s new Industrial Development Strategy is similarly unambitious and underfunded, placing a great deal of emphasis on developing high-tech, capital-intensive export sectors that are unlikely to create jobs at the scale needed.
Instead, the AIDC calls for a radical new approach to industrialisation and economic development. South Africa needs to build many rail lines, houses, apartments, electricity transmission lines, schools, and hospitals to meet people’s needs. Industrial development and job creation should focus on meeting these needs, using public investment and strategic procurement to support our own industries (such as steel) and to develop new ones, particularly in areas that are becoming globally relevant, such as those related to climate change adaptation. This perspective will be outlined in a forthcoming briefing paper.
Financing a Radical Needs-Based Development Strategy
The AIDC’s view is that it is impossible to fight mass unemployment, reduce inequalities and propel inclusive economic growth while maintaining the government’s current restrictive macroeconomic framework (fiscal conservatism and strict monetary policy). While reducing South Africa’s debt-servicing costs is important, tightening the purse strings for urgent developmental spending is not only unnecessary but also counterproductive.
The AIDC and other progressive organisations have raised several possibilities for mobilising domestic resources to invest in a needs-based green industrialisation strategy. The Fair Tax Monitor has shown that there are opportunities to raise billions of Rand by reforming the tax system, including imposing a wealth tax and making changes to the personal income tax system. These measures will not only increase tax revenue but also help reduce inequality. The AIDC has also for many years pointed out that the Public Investment Corporation, Africa’s largest asset manager due to its stewardship of the Government Employees Pension Fund, can play a key role in supporting South Africa’s development through a number of measures, including shifting its assets to low-interest bonds, possibly ringfenced for investment in public infrastructure. These are only a few of the many possibilities.
Ultimately, macroeconomic (fiscal and monetary) policies must be used in service of an economic development strategy, with all options explored. This must be coupled with trade and investment policies that stimulate a labour-intensive, low-carbon industrialisation strategy. But the South African government has continued to make economic development subject to the conservative fiscal strategy of the National Treasury along with the SARB’s highly restrictive monetary policy framework. This is largely to the benefit of the powerful financial and mining sectors. We are not likely to see any change in the trajectory of mass unemployment and steady deindustrialisation so long as this policy framework remains entrenched.
