Business Unity South Africa CEO Khulekani Mathe. Picture: (, SUPPLIED )
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The lack of a funding framework for the government’s cabinet-approved industrial development strategy (IDS) 2026 was a key weakness identified by presenters during a parliamentary engagement with business organisations and trade unions on Tuesday.
Parliament’s trade, industry and competition committee chair Mzwandile Masina summed up the views, saying that a clear funding strategy is needed or the IDS “will fail dismally”.
But the fiscal constraints faced by the government in the context of low economic growth raise questions about whether the necessary funding will be forthcoming.
Bureau for Economic Research senior economist Roy Havemann noted that without a specialised financing mechanism such as a ring-fenced industrial development fund with multi-year appropriations, the strategy risked being executed “cheaply” without full implementation. This had been the downfall of previous industrial policies which lacked sufficient resources.
Business Unity South Africa (Busa) CEO Khulekani Mathe noted that there would be uncertainty in the business community in the absence of a multi-year framework of ring-fenced funding.
The strategy identifies priority sectors categorised under the policy goals of decarbonisation, diversification and digitalisation, which are required to modernise the economy and ignite its lacklustre growth trajectory, which has suffered from decades of deindustrialisation and a decline in the manufacturing sector’s share of GDP.
Read: EDITORIAL | Revised industrial plan lacks imagination
One deficiency of previous industrial strategies, namely the silo approach by different government departments — highlighted by a number of presenters — has been addressed in the strategy, which proposes the creation of a multi-departmental co-ordinating committee led by the department of trade, industry & competition and an interministerial committee chaired by the presidency.
Deputy trade, industry & competition minister Zuko Godlimpi emphasised the need for co-ordination.
Havemann said the strategy recognised that “industrial policy failure primarily stems from inadequate state co-ordination rather than solely market shortcomings. South Africa urgently requires a framework to streamline fragmented activities.”
He said it was uncertain whether the proposed presidency-based structure would be able to effectively co-ordinate the macro-institutional realignment that was necessary, saying the IDS could not resolve interdepartmental conflicts.
Cosatu’s Tony Ehrenreich also emphasised the need to remove the silos existing between government departments and to adopt an integrated approach, while DA spokesperson on trade, industry & competition Toby Chance also highlighted the lack of co-ordination but pointed out that there were too many ministries.
While Havemann hailed the IDS 2026 as the most advanced industrial policy framework since 1994, he said there were key weaknesses outside its control, namely the lack of fiscal space and the need to rebuild state capacity quickly.
“It assumes a capable developmental state, not recognising persistent domestic risks.
“Improved co-ordination alone cannot fix implementation challenges,” he said. “The real question for 2026-29 is not whether the IDS is a decent strategy but whether South Africa’s leadership can guide, co-ordinate and implement it.”
Mathe also questioned the capacity of the department to implement the strategy given its high level of vacancies.
He criticised the strategy for its “bottom-up” approach of aggregating what already exists without offering alternative scenarios on how to support growth. He said the economy needed to be mapped as a multi-nodal supply chain and constraints ranked in order of importance so choices could be made.
Trade & Industrial Policy Strategies senior economist Neva Makgetla criticised the IDS as not being an instrument to create employment. Its priority was to support established businesses, which, though necessary, would not create a lot of jobs.
Increasing competitiveness without increasing demand would not create a lot of employment. Neither would beneficiation, which was extremely capital intensive.
“I do think we need more innovative thinking,” she said in an interview ahead of her presentation.