The multiyear slide in South Africa’s metals and engineering sector, which makes up about 25% of South Africa’s manufacturing sector and 5% of GDP, continued last year, the Steel and Engineering Industries Federation of Southern Africa (Seifsa) has confirmed.

In its ‘State of the Metals and Engineering Sector 2026’ report, Seifsa shows that production fell by 1.6%, having declined at a compound annual growth rate of 1.7% since 2008. In addition, employment fell by 0.43% to about 360 000 employees from over 575 000 in 2008.

The sector’s weak performance comes despite signs of growth in other parts of the South African economy, which has experienced four consecutive quarters of expansion, raising yet more deindustrialisation concerns.

The deterioration in 2025 was particularly pronounced in the upstream basic iron and steel subsector, which saw ArcelorMittal South Africa move its Newcastle mill into care and maintenance and wind down much of its long-steel business.

Production in the subsector fell by 12% for the year as a whole, and Seifsa indicated that capacity utilisation fell to only 53% for the year, and slumped precipitously in the fourth quarter of 2025 to only 48%.

Despite weak domestic steel consumption, which has declined by 12% since 2018, there had still been a 93% rise in imports over the period, rising to nearly 1.6-million tons last year.

Seifsa CEO Tafadzwa Chibanguza stressed that the difficulties were not confined to the upstream sector, however, with downstream companies also reporting insufficient demand, suboptimal capacity utilisation levels and growing import threats.

These difficulties were being amplified by the reality that South Africa’s developmental-State model had “reached its fiscal and operational limits”, while other countries were employing trade and industrial policies that were limiting export prospects for domestic firms.

Chibanguza argued that both these realities would have to be navigated for the “green shoots” of growth being experienced elsewhere in the economy to be transmitted to the metals and engineering sector.

The domestic economy, he said, would need to do the “heavy lifting” by raising gross fixed capital formation well beyond the current level of 12% of GDP, and by adopting an investment architecture based on public–private partnerships (PPPs).

However, PPPs alone would prove insufficient “without embedding domestic capacity development” into their design.

“If not structured carefully, PPP programmes may crowd-in capital fiscally, but fail to catalyse industrial deepening or strengthen local capacity,” Chibanguza warned.

Seifsa also remained concerned about the prevailing uncertainty in relation to the public procurement framework. Concerns that it has been especially vocal in expressing in relation to the potential for local industry to be excluded, owing to the way the rules have been drafted, from participating in the inaugural procurement of electricity transmission infrastructure from the private sector.

Seifsa warns that interim arrangements are disrupting localisation enforcement and investment planning, while weakening one of the State’s most powerful industrial policy levers.

Chibanguza said that 2026 should not be about managing the ongoing decline of the sector, but about converting reform into sustained domestic demand and the country’s long-term industrial base.

“The principal risk is not reform failure, but reform without execution,” he said.

Such an outcome, he warned, would entrench stagnation, as it would be characterised by policy drift, procurement instability, and rising administered costs, in a context of intensifying global trade fragmentation.