Johannesburg, February 19 2026 – The South African Metals & Engineering Sector faces a difficult 2026, according to the SEIFSA State of the Metals and Engineering Sector Report 2026, which the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) released today.
The report assesses the state of the Metals and Engineering (M&E) sector as it confronts a range of risks, including escalating electricity prices, deteriorating municipal services and intensifying geopolitical pressures.
“Overall, we are emerging from a multi-decade downturn reflected across production, employment and capacity utilisation indicators. The 2025 data reaffirms this trajectory,” says SEIFSA Chief Executive Officer, Tafadzwa Chibanguza.
According to the latest full-year estimates for 2025, the sector’s production declined by 1.6% (after a 1.4% decrease in 2024), while there was a 0.43% decrease in employment, indicating continued employment contraction in the sector. The sector’s contribution to GDP remains approximately 5%, underscoring its systemic importance to the domestic economy.
“A number of material risks will shape the sector’s outlook in the coming year, and they require close monitoring,” warns Chibanguza.
The main risks to the 2026 outlook are as follows:
- While electricity supply has stabilised and load-shedding has largely abated, escalating electricity tariffs have emerged as the dominant cost risk.
- Finalisation and operationalisation of the public procurement framework is critical to unlocking infrastructure-led demand.
- Reform activity in energy and logistics is beginning to yield measurable improvements; however, this progress has not yet translated into sustained order book depth for firms in the sector.
- Municipal service delivery is deteriorating, forcing companies to carry the cost of these services themselves.
- Geopolitical pressure is intensifying as industrial policy becomes the global norm. Heightened industrial policy in major economies, particularly the United States and Europe, raises the risk of trade friction and contagion effects across global value chains.
- As public-private partnerships (PPPs) gain momentum, there is a risk that projects may prioritise financial efficiency without sufficiently strengthening domestic productive capacity.One of the biggest challenges is the lack of demand.
“Looking ahead and defining the problem, a central structural constraint remains insufficient demand in the economy. The production capacity exists, but the weak economic environment means that there is no demand.”
“We are operating in a structurally punitive environment for two principal reasons. Globally, countries are turning inward through aggressive tariff and non-tariff measures, constraining export potential. Domestically, fiscal headroom has narrowed significantly, limiting the scale of state-led infrastructure expansion,” says Chibanguza.
Visible green shoots in the economy include South Africa’s exit from the Financial Action Task Force greylist in October 2025, early gains from energy and logistics reforms, a flattening yield curve, and an upgrade from S&P Global Ratings in November 2025 — the first in nearly two decades.
“There are definitely greenshoots, and ideally we should capitalise on these greenshots. But the development state has run out of fiscal runway,” says Chibanguza.
This aligns with recent International Monetary Fund assessments cautioning that public debt levels remain elevated and fiscal consolidation pressures persist.
The solution lies in structured public-private partnerships that distribute risk, pool expertise and mobilise private capital. The state does not currently have sufficient fiscal space to drive large-scale infrastructure-led reindustrialisation alone. However, the risk profile of infrastructure projects remains elevated. The Credit Guarantee Vehicle developed by National Treasury is therefore a critical instrument in improving project bankability and crowding in private investment.
In addition, unsolicited bids from private sector participants with localised infrastructure solutions may further accelerate implementation, provided that governance and competitive neutrality principles are preserved.
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