Although malls create jobs in the construction phase, and limited retail jobs in the longer term, investment in a manufacturing sector poses more opportunity to fuel growth, the often touted silver bullet to increase jobs and reduce poverty. (Delwyn Verasamy/M&G)
South Africa is saturated with shopping malls that encourage consumer spending but economists say there is an urgent need for more logistics parks and factories that are essential for economic growth and creating jobs across supply chains.
Although malls create jobs in the construction phase, and limited retail jobs in the longer term, investment in a manufacturing sector poses more opportunity to fuel growth, the often touted silver bullet to increase jobs and reduce poverty.
Recent mall developments include the R1.3 billion Westown Square which opened last week in Shongweni, KwaZulu-Natal, and is part of a R15 billion new city development; the R370 million Riverstone Mall in Meyerton, Gauteng, which is set to open in October; the R1 billion Lion Pride Shopping Centre in Fourways, Gauteng, and the R1 billion Groot Phesantekraal View in Durbanville, Cape Town, which is due to open in July.
“South Africa has one of the highest ratios of shopping centre space per capita globally, exceeding many developed markets,” said Nesi Chetty, Stanlib’s asset management head of property and fund manager.
He said the oversupply results in malls competing for the same consumer base, leading to cannibalisation rather than net new growth. And it often results in higher vacancies and weaker rentals.
Retail developments have contributed to urbanisation and infrastructure improvements in South Africa, Chetty said, but the marginal benefit of each new mall is now down.
“Additionally, new malls may contribute to urban sprawl and strain on municipal services.”
Chetty said investment should shift to mixed-use developments, logistics, affordable housing and industrial nodes to achieve sustained economic growth.
PwC senior economist Christie Viljoen said more than 60% of GDP, which grew by just 0.6% in 2024, is generated by consumer spending. Although there is no perfect combination to boost growth, investment spending and exports are key drivers that will help build long-term prosperity, he said.
“Consumer spending is susceptible to economic shocks like inflation, job losses and a decline in consumer sentiment,” he said.
The three biggest obstacles to economic growth in Viljoen’s view are a poor water supply, the cost and reliability of logistics and crime.
Viljoen added that both local and foreign investors cited difficulties with administrative requirements, as did local small and medium enterprises.
Stanlib asset management chief economist Kevin Lings agreed that South Africa has developed a relatively high level of consumption over many decades.
“Because there is very fixed investment activity [over the past 15 years], the burden falls on consumption spending to grow the economy,” he said.
South Africa has also become increasingly import intensive, which means that a large portion of the consumer spending leaves South Africa to pay for imports.
“Second, the level of consumer activity will struggle to add further employment. In other words, once you have built a large array of shopping centres any further increase in consumer spending can easily be handled by the existing retail sector and not lead to much job creation.”
Because South Africa has not attracted much new investment, all areas of economic activity have high levels of underinvestment, in particular infrastructure over the past 15 years.
Lings noted that although new businesses start every year, many fail, with the manufacturing sector, in particular, being in structural decline. This shortage of new business development hinders job growth.
“SA has a relatively vibrant informal sector, which offers the country significant areas of economic growth, but this sector would need to be better supported and encouraged to develop into formal sector business,” Lings said.
South Africa had potential to expand its manufacturing base, especially in terms of the beneficiation of raw material, but many of these opportunities had been lost over the past 15 years.
“This is reflected in the declining capital stock [the decrease in the value or quantity of a company’s assets used for production] of the manufacturing sector,” said Lings.
There was still opportunity in agri-processing and exporting South African manufactured goods to sub-Saharan Africa, but this would require further investment in supporting infrastructure.”
Lings said factories provide more sustainable jobs than malls because of the forward and backwards linkages to other economic sectors, especially if the raw materials are sourced locally and some output can be exported.
Investing in malls has been less risky than the manufacturing sector, but South Africa’s highly developed retail sector does not require more investment.
“The manufacturing sector remains a higher risk investment option given the high level of regulation, lack of infrastructure, cheap imports from China and skills shortage,” he said.
To improve the ease of doing business and achieve higher economic growth, the four priorities must be to revamp port and water infrastructure, deregulate the business sector, improve local government service delivery and encourage the informal sector to develop into small businesses, Lings said.
“SA needs to grow GDP at 3% or more on a sustained basis. Achieving strong growth [of 5%] for one or two years would not really help much,” added the economist, who expects growth of 1.4% in 2025, 1.7% in 2026 and 2.1% the year after.
John Loos, FNB’s senior economist for commercial property finance, said areas such as townships and rural regions remain underserved by malls and retail centres in these areas can play a crucial role in creating jobs.
“The emergence of more township-based retail centres helps redirect purchasing power back into these communities, fostering local job creation and reducing commuting expenses,” he noted.
“What is clear is that … since the mid-2010s, the industrial property sector has generally outperformed retail. Moreover, new retail developments have accounted for a declining share of total commercial property construction, while industrial developments have gained a larger share.”
A stronger manufacturing sector would allow South Africa to afford imports without running current account deficits, Loos said. But achieving this requires targeted policies, infrastructure development and human capital investment to enhance global competitiveness.
Industrial property construction has increased its share of commercial development in recent years, but Loos said much of this growth is probably in warehousing and logistics rather than manufacturing.
“The growth in warehousing and logistics reflects the retail sector’s shift toward online shopping and delivery, reducing reliance on physical malls,” Loos said.
Recent industrial building plans show that Gauteng saw a 39.8% increase in new industrial space approvals in 2024, KwaZulu-Natal had a -27.1% decline and the Western Cape showed 1.1% growth.
“Regional disparities may reflect land availability constraints rather than demand alone. However, the data suggests a pressing need for more industrial property, while demand for new retail and office space is relatively weaker,” he added.
Independent analyst Duma Gqubule said the manufacturing sector had experienced a “bloodbath” of job losses in recent years while the trade sector, which includes retail, had added only 100 000 new jobs since the 2008 global recession.
Although manufacturing created 168 000 new jobs in 2024, today the sector employs just 1.7 million people after peaking at 2.1 million in the last quarter of 2008, representing a loss of 422 000 jobs. The trade sector employed 3.3 million people in the fourth quarter of 2008 and, in 17 years, had risen to just 3.4 million.