Unlocking Manufacturing Growth in South Africa: Firm Productivity, Labour Mobility and Participation

Policy Paper 52

Abstract

This paper examines the sources of South Africa’s manufacturing underperformance through the lens of three interrelated mechanisms: within-firm productivity growth, the between-firm reallocation of resources, and labour mobility and participation. While manufacturing has historically played a central role in structural transformation by supporting productivity growth, export expansion, and relatively stable formal employment, its contribution to output and employment has declined steadily over the past two decades. The paper argues that this decline cannot be understood through aggregate trends alone. Instead, it reflects how distortions across firms and workers disrupt these mechanisms, constraining firm upgrading, weakening reallocation toward more productive producers, and limiting the extent to which labour mobility and participation translate into upward progression for workers and productivity growth for firms.