The recent national budget speech has been roundly criticised as a “no-growth budget”, and at the time of writing this stands to be one of the main reasons it could be the first budget rejected by parliament. The Treasury’s “optimistic scenario”, where infrastructure investment resolves rail and port blockages and export volumes pick up, leads to a staggeringly low growth rate of 2.6% by 2032. Given the current crisis on the global stage, South Africa’s export-led development path is in danger. What are the prospects for South Africa to drive a locally-oriented growth strategy instead?
“Multilateralism can and must deliver—because the stakes are too high for failure.” Thus spoke Ramaphosa, with his Brazilian and Spanish counterparts, in early March. The circumstances which prompted these three country leaders are obvious. The genocide in Gaza had already indicated the limits of the extent to which the Global North were willing to subject themselves to their own ‘rules-based order’. Now, Trump and his team, having learned from their tepid first term in office, have managed to kick in the door and frighten the residents of the domestic and international liberal order in less than three months. Europe and the Global South are responding in ways that aim to either retain or reshape multilateralism, but what if these measures fail and multilateralism doesn’t deliver?
How important is trade?
First, let’s talk context—how important are our trade relations? According to trade data, South Africa’s exports in 2023 totalled $154bn, with close to 50% being minerals, ores, precious stones, and the like. The EU and China are our two biggest trade partners. China receives almost entirely minerals and the EU a broader mix, including minerals, but also cars, agricultural produce, and some machinery. Aside from cars and machinery, which together make up around 15% of exports, all other manufactured goods are a very small proportion of the export basket. South Africa’s export intensity, which measures exports as a percentage of the size of the economy, is around one-third. South Africa’s import intensity is about the same, with trade partners retaining roughly the same proportions. These are both quite high when compared to other countries, meaning that South Africa is quite reliant on imports and exports.
The general trend is that revenue from mineral exports enables the import of manufactured and consumer goods.
These are the consequences of an export-led development model that has remained in place since the end of the 1990s. This included signing on to the World Trade Organisation, the removal of protections for industries such as textiles, as well as firmer localisation requirements. As South Africa’s most successful export industries are capital-intensive, creating very few jobs per rand of investment, this has contributed to the crippling unemployment crisis.
Localisaton
Why should we consider local-oriented growth strategies? For one, this would reduce the risks currently evident in the international economic order. This would ensure a more stable basis for growth than one determined by the prices of commodities in international markets, or the position of Western democracies’ liberalism-to-fascism political pendulum.
Secondly, localisation strategies might achieve a positive effect which is non-financial yet valuable to society, such as subsidising an uncompetitive pharmaceutical industry so that supply is secured in times of crisis.
Most importantly, localisation could lead to a kind of virtuous cycle in which new industrial value chains support the development of other interlinked industries. This could reduce costs and create employment and demand across the economy, which in turn would support the development of other sectors, and so on. The popular conception of this involves short-term sacrifices from labour and sections of capital in exchange for long-term gains in decent, higher-skilled work, dynamic economic growth, and capital accumulation.
We must realise that South Africa’s export dependency is not because South Africa’s ruling elite are not interested in localisation. While the Executive has not been pushing a comprehensive and coordinated localisation agenda, different departments have increasingly undertaken their own efforts, and the term has taken off over the past few years. The Department of Trade and Industry’s 2021 policy brief states that “Localisation has been a key component of Government’s economic policy since 2014”. Many documents and plans exist. Recently, in his speech at the 2025 Investing in African Mining Indaba, Gwede Mantashe called for an end to the export of ‘critical minerals’, “so that we can stop the export of jobs and profits.”
Cipla South Africa is one of the country’s fastest-growing pharmaceutical manufacturing companies. Localisation strategies might achieve a positive effect which is non-financial yet valuable to society, such as subsidizing an uncompetitive pharmaceutical industry so that supply is secured in times of crisis.
Without trying to absolve South Africa’s ruling class and unimaginative technocrats from blame for our export-dependency, it is absolutely vital to point out that localisation and industrial development are bloody hard. Few developing countries have managed to achieve the successful localisation of specific industries and sectors, and only a select few have ever managed to climb the ladder of industrial development all the way to the top.
Beneficiation and localisation are often approached uncritically, especially in political discourse, where they have become fashionable terms. Not all beneficiation or localisation is created equally, and it is not always desirable. There are competing options and approaches, each with their own risks. Economist Neva Makgetla provides excellent overviews of the issues in two recent papers, which heavily informed this article.
For example, one common pitfall is for localisation and beneficiation strategies to end up subsidising uncompetitive and inefficient failed ventures of local capitalists when these resources could be used to far greater effect elsewhere. The impacts of this are especially severe in the case of upstream industries, meaning those early in industrial value chains such as mining and smelting. If beneficiation efforts fail to become competitive, then there will be huge knock-on effects for the rest of the economy.
Competing interests
For example, let’s imagine that the state decides to replace all foreign steel imports with an expanded local industry, beneficiating our iron, manganese, and chromium. Subsidies are given out, and tariffs are put in place, but the local steel industry is not able to make steel at prices equal to that of their foreign competitors. The problem here is that all other industries which use steel, including construction, will now be paying a higher price for their inputs, reducing their own competitiveness. Jobs and growth gained through localisation or beneficiation could be lost many times over in downstream sectors. As Makgetla argues,
If support measures do not ensure input prices below international levels, the central argument for focusing on beneficiation falls away. Other industries might be able to use these kinds of support and they are often more supportive of job creation and small business development.
However, another way of making beneficiation competitive could be to reduce the costs of the raw minerals required. Makgetla outlines a number of possible measures, including export restrictions and taxes or preferential pricing for local producers. However, she writes that “implementing policies to achieve this fundamental objective necessarily runs into opposition from mine owners”. In less diplomatic terms, the extremely powerful mining lobby would be not willing to reduce their rents and push down their prices for the sake of localising the processing of their minerals, except through targeting labour. For mineral beneficiation to serve as a driver of a localised growth strategy, the power of mining capital would need to be challenged directly.
Beyond the traditional minerals-energy-complex, there may be other opportunities for localisation that do not require such a direct confrontation with capital. There may be industries much further downstream that could benefit much more from subsidisation and protection while delivering far more jobs for every rand spent. One example is the electrical equipment industry. This is a relatively labour-intensive sector that not only aligns with key objectives, such as the expansion of the electricity transmission system, but also could be made competitive with some effective support and planning. Another opportunity is the localisation of basic goods, including food and textiles, through import protections. This may result in price increases for basic goods, but a ‘basic needs’ approach to localisation may be worth the cost, as many of these industries are very labour intensive; the costs could be balanced out by the rise in incomes on a household level.
Requires political leadership
Regardless of the route taken, an inward-looking growth and development strategy will not be easy. However, given not only the international crisis but also our own socio-economic triple-crisis, we may not have another option than to attempt it. Where industrialisation efforts have succeeded, they have often done so through repression and hyper-exploitation of the working class. A successful inward-focused growth strategy which uplifts rather than further immiserates South Africans will require a sober analysis of economic opportunities and trade-offs. It will also need the democratic participation of the working class, a deep understanding of our political economy, and the willingness to fight capital and win. Slim, then, are the prospects of an inward growth strategy without a Left party to lead it.
Jaco Oelofsen is a Programme Officer at the Alternative Information and Development Centre.
