Economic history and background
The discovery of gold in 1886 triggered the ‘Gold Rush’ on the Witwatersrand in Johannesburg. The Gold Rush was characterized by a boom in gold exports, and by the end of the 1890s, gold accounted for 50% of South Africa’s total exports (Schwank, 2018). The development of the gold mining sector created a need for transport for mining machinery and equipment, building materials, and other consumer goods. The Cape Government began railway construction, connecting the coast to the interior regions of Kimberley, the Free State, KwaZulu-Natal, and Gauteng. Gold and diamond mining created a system of cheap migrant labor. Urbanization resulted from workers migrating from the peripheries of South Africa to the economic cores of Johannesburg and Kimberley (De Kock, 1924).
Agriculture
During the nineteenth century, South Africa was a primary exporter of grains such as barley, wheat, sorghum, and maize, as well as livestock, between 1910 and 1921. Agricultural export income increased from £9.5 million in 1910 to £33.1 million in 1919. The sector made its highest contribution to total exports in 1919 at 31% and was a significant source of export income at the time. In 1921, agriculture generated £17.9 million in export income and contributed 24% to total exports (De Kock, 1924: 175).
Gold and diamond mining
By 1922, Cape Town, Port Elizabeth, East London, and Durban had become the four major ports since the opening of the gold mines in Johannesburg. All these ports were located near warehouses and shipping facilities. Roads, bridges, and communication infrastructure were built to connect the coast to the interior (De Kock, 1924). South Africa had the opportunity to export gold and diamonds, given its geographical advantage as a coastal country. During this time, the British pound was still in use, and tax revenue increased from £27.7 million in 1931-2 to £38.7 million in 1934-5 (De Kock, 1936: 108-109). By the end of the 1930s, gold had constituted 70% of total exports. However, fluctuating gold prices threatened the stability of export income from gold and associated manufactured goods (Oqubay, Tregenna & Valodia, 2021).
State-owned entities (SOEs)
The state played a crucial role in developing the local industrial sector. South African Synthetic Oil Limited (SASOL) and the Iron and Steel Corporation (ISCOR) were established as state-owned enterprises. SASOL diversified into the production of chemicals, fuel, and synthetic rubber. ISCOR played a major role as it expanded its value-added activities and was able to produce 70% of the domestic steel required as inputs for heavy machinery. By 1955, ISCOR had its coal plant and undertook public-private partnerships to promote the manufacturing of heavy machinery (Schwank, 2018). Table 1 below indicates the state-owned entities that played a key role in supporting the private sector in driving economic diversification:
Table 1: State-owned entities that fostered South Africa’s economic diversification
| Period | State-owned entity | Function |
| 1928 | Iron and Steel Corporation (ISCOR) | Iron and steel production |
| 1936 | South African Pulp and Paper Industries (SAPPI) | Pulp and paper products |
| 1940 | Industrial Development Corporation (IDC) | Industrial development |
| 1950 | South African Synthetic Oil Limited (SASOL) | Energy and chemicals |
| 1951 | Foskor | Phosphates and phosphoric acid |
Source: Author’s adaptation from Schwank (2018).
The country’s natural resources enabled domestic value addition. The development of pulp, paper, metal, and chemical industries by SOEs played a key role in developing the local manufacturing sector. Despite diversification generating multiple income streams within the same sector, it resulted in industry concentration and hindered expansion into other manufacturing and service sectors (Bhorat, Ewinyu, Lilenstein, Christopher, Steenkamp & Thornton, 2019).
Manufacturing
The manufacturing sector fostered the growth of Gauteng, KwaZulu-Natal, and the Western Cape. Between the 1970s and 1990s, manufacturing activity in these three provinces accounted for the largest share of national GDP. Human capital development was historically concentrated in the three metropolitan areas of the country. This human capital was employed in the manufacturing sector and ultimately increased service-sector activities. The coastal location of the latter two provinces also provided opportunities for international trade (Fedderke & Wollnik, 2007).
Small, medium, and micro enterprises (SMMEs)
In 2021, the majority of South Africa’s SMMEs were in trade and accommodation (37.6%), followed by community services (14.8%), construction (14.7%), and financial and business services (13.7%). This meant that two-thirds of SMMEs were in the services sector. In terms of the regional distribution of SMME owners, Gauteng accounted for 34.0%, followed by KwaZulu-Natal (16.0%) and the Western Cape (12.0%). Hence, SMME activity is inequitably distributed despite being a vital source of employment. This has resulted in significant economic agglomeration in the three provinces (Small Enterprise Development Agency (SEDA), 2021).
Current economic structure
South Africa is the most diversified economy in Sub-Saharan Africa, in terms of both its domestic production and export base. The country also has the most advanced financial sector on the continent and attracts FDI from the United States, Europe, and Asia (Economist Intelligence Unit, 2023). Table 2 below denotes trends in the country’s sectoral composition of GDP between 2020 and 2024. It is evident that South Africa is largely driven by services.
Table 2: South Africa’s GDP trends by sector, 2020-2024
| Sector/year | 2020 | 2021 | 2022 | 2023 | 2024 |
| Agriculture | 2.6% | 2.5% | 2.6% | 2.5% | 2.8% |
| Industry | 23.3% | 24.9% | 25.0% | 24.6% | 24.3% |
| Services | 64.6% | 62.7% | 62.3% | 62.7% | 63.0% |
Source: World Development Indicators (2026).
In terms of regional distribution of GDP, in 2024 Gauteng accounted for 33.2%, followed by KwaZulu-Natal (16.1%) and the Western Cape (14.2%). Their respective GDP contributions have not changed between 2020 and 2024. Thus, these regions have retained their historical position as South Africa’s major urban centers (Quantec EasyData, 2026).
Offline References
De Kock, M.H. 1924. Selected subjects in the economic history of South Africa. Johannesburg, South Africa: Juta.
De Kock, M.H. 1936. The economic development of South Africa. London, United Kingdom: P.S. King & Son Limited.
Connect with the Author
Palesa Mpofu is a developing researcher at the University of South Africa’s Department of Economics. Her area of specialization is economic development, with specific interests in economic diversification and structural change, urban and regional economics, gender and development, climate change, and food insecurity. She is also a member of the Regional Studies Association.