Global companies are looking to expand manufacturing outside South Africa, as policy uncertainty around BEE threatens to erode local capacity and drive investment away.
South Africa was dealt another such blow recently, when international vehicle giant Nissan announced a $45 million (~R750 million) investment to expand manufacturing capacity in Egypt.
While South Africa is currently the largest economy on the African continent, with an estimated GDP of $427 billion, Egypt is the second-largest at $365 billion.
For 2026, South Africa’s GDP growth is projected at a paltry 1%, continuing its more than a decade of stagnation, while Egypt’s is set to grow 4.2%.
Alongside Nigeria, Egypt has been in a long-term battle for the crown of having Africa’s biggest economy, and has even ranked above South Africa a few times over the past 10 years.
According to Business Leadership South Africa (BLSA) chief executive, Busi Mavuso, Nissan’s decision to expand manufacturing in Egypt rather than South Africa reflects how global companies view local business conditions and accessibility.
“That decision speaks volumes about where we stand in the global competition for manufacturing investment,” she said.
“Every month…more boardroom decisions in Detroit, Tokyo, Stuttgart and Shanghai are choosing Egypt, Vietnam and Mexico over South Africa.”
Meanwhile, more factories are closing, jobs are lost, and supply chains are dismantled back home.
Mavuso noted that manufacturing contributes roughly 12% of GDP and supports more than 1.5 million direct jobs, with multiples of that in supply chains.
However, she said that this foundation is eroding.
“In the last two years alone, Bridgestone and 13 other automotive component manufacturers have shut down operations,” she said.
Nissan has also effectively exited manufacturing in South Africa, maintaining only marketing and sales functions after selling its Rosslyn plant.
The plant had built bakkies for over 60 years, and it is now being offloaded to the Chinese manufacturer Chery.
“The problems go far beyond the automotive sector – to cite just one example, British American Tobacco closed its remaining South African factory last year,” Mavuso added.
BEE regulations are biting
Mavuso said that policy uncertainty, particularly around BEE, is one of the main things driving companies away.
She said that the Department of Trade, Industry and Competition (DTIC) should be the part of the government that welcomes manufacturers and helps them succeed.
Instead, it is seemingly becoming a source of policy uncertainty that is actively driving investment away.
The proposed amendments to B-BBEE regulations are a recent example, she said.
“Original equipment manufacturers have spent years building local supply chains, deliberately including majority black-owned businesses as part of their transformation commitments,” Mavuso said.
“Now the DTIC’s proposed amendments threaten to strip them of their BBBEE status because many suppliers are not 100% black owned.”
Components for specific models can’t simply be swapped out when BEE rules change, she said.
“Developing new suppliers takes years, requiring testing, certification, and integration into production lines. Under the proposed amendments, OEMs would lose their BBBEE status immediately.”
“That status is critical to accessing the tax incentives and support schemes that the government has established for the industry. No one knows how this could possibly be managed.”
Mavuso said that company boards and directors sitting in capitals around the world will look at this regulatory uncertainty and compare it to other markets.
South Africa will not compare favourably.
The CEO said that this also raises many questions about the country’s BEE policies and what they have or haven’t done for the decades they’ve been in operation.
“Where are the black suppliers that should have been systematically developed over the years? Where is the pipeline of black businesses that institutions like SEFA, the NEF, and the IDC were meant to build?”
“What has become of the Black Industrialisation Programme? What tangible outcomes have emerged from the Localisation Fund?” she asked.
In assessing the outcomes of BBBEE policy, these questions must be answered, she added.
“It will allow for more coherent solutions, rather than sudden changes that risk damaging businesses that are large employers.”
