VIEWPOINT-Can South Africa’s Manufacturing Potential Thrive Under BEE Laws

: Viewpoint - General; 30 September 2025; Hits: 578; Rating:

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South Africa’s manufacturing sector holds immense potential, boasting world-class infrastructure, innovation, and a robust industrial base capable of producing a wide array of goods, from consumer products to advanced technologies.

However, the Broad-Based Black Economic Empowerment (B-BBEE) laws, introduced by the African National Congress (ANC) government to address historical inequalities, create significant challenges for establishing new manufacturing ventures. Meanwhile, an innovative proposal suggests that old age homes could tap into this manufacturing potential, enabling elderly residents to contribute economically while generating revenue for facilities. This article explores South Africa’s manufacturing capabilities, the impact of B-BBEE regulations, and the feasibility of involving old age homes in small-scale production.

South Africa’s manufacturing sector is a cornerstone of its economy, contributing 13% to GDP and employing over 1.6 million people (Stats SA, 2024). With advanced capabilities in automotive, agro-processing, pharmaceuticals, and green technologies, the country produces high-quality goods for domestic and international markets. For instance, South Africa is a global leader in avocado exports, with a 432% increase in export volumes since 2015, and its automotive industry supplies components to brands like BMW and Toyota. The country’s infrastructure supports innovation, as seen in Cilo Cybin’s hemp extraction facility, poised to be among the world’s largest, and investments in AI-driven agriculture showcased at the 2025 Humboldt Kolleg Conference.Yet, despite this potential, manufacturing growth is hampered by structural challenges, including high energy costs, logistics bottlenecks, and regulatory hurdles. The private sector’s role is expanding, with deregulation in electricity and rail transport unlocking billions in investments, but barriers to establishing new factories remain significant.

South Africa’s high unemployment rate (25% in 2010, 50% among youth) surpasses that of Tunisia during the Arab Spring (14% and 30%), yet the absence of unrest is attributed to the informal sector, which keeps the economy afloat. Marketing consultant GG Alcock, speaking at a BKB GrainCo session at Nampo Cape, emphasized the significant opportunities in the informal market. BKB, traditionally strong in fiber and livestock, capitalizes on this sector, with 40% of Atlanta Sugar’s sales in it and a 49% profit increase to R136.6 million in 2025. Examples include ZZ2’s Mooketsi market, generating millions in turnover, and BKB’s Jozini auction, where livestock fetches 8–10% more. Alcock estimates the true unemployment rate at 10%, with 41% of “unemployed” youth earning around R15,000 monthly. The informal sector showcases South Africans’ resilience and economic potential despite challenges.

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The B-BBEE Act of 2003 aims to increase economic participation of black South Africans through ownership, management, and skills development. The 2025 Employment Equity Regulations set ambitious race- and gender-based targets for businesses with over 50 employees, requiring, for example, 56.7% of top management in the accommodation sector to be from designated groups by 2030. While these measures address historical imbalances, critics argue they create obstacles for new manufacturers.

Compliance Costs: B-BBEE certification requires significant investment in ownership structures, training, and reporting, which can deter small and medium enterprises (SMEs) from starting factories. Compliance is particularly challenging for foreign investors, who may face pressure to relinquish control to meet empowerment criteria.
bureaucratic Delays: The complex verification process and sector-specific codes (e.g., Agri-BEE) add red tape, delaying factory setups and increasing costs.
Market Distortions: Preferential procurement favoring high B-BBEE ratings can exclude capable firms without the resources to meet targets, stifling competition and innovation.

These challenges are evident in the cannabis industry, where Cilo Cybin’s CEO, Gabriel Theron, noted that regulatory uncertainty, compounded by B-BBEE requirements, pushes firms to focus on exports rather than local markets. Despite these hurdles, South Africa’s manufacturing potential remains vast, with companies like BKB leveraging the informal sector to achieve a 49% profit increase to R136.6 million in 2025.

South Africa’s ability to manufacture virtually any product is undeniable, but B-BBEE laws, while well-intentioned, create barriers that hinder new factories, particularly for SMEs and innovative ventures. The proposal to involve old age homes in manufacturing offers a dual solution: addressing funding shortages for elderly care and tapping into the economic potential of a growing demographic. By producing marketable goods like textiles or agro-processed products, these facilities could enhance resident well-being and contribute to local economies. To succeed, the government must ease regulatory burdens and foster partnerships, ensuring that South Africa’s manufacturing prowess and social innovation work hand in hand to build a resilient, inclusive future.

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