SA companies need to stop confusing lean with resilient
SA companies need to stop confusing lean with resilient
South African companies have spent years stripping cost and complexity out of their operations. But in automotive, manufacturing and retail, the pursuit of ever-leaner value chains is starting to expose a different risk: fragility.
The question facing business is no longer simply how efficiently goods can be sourced, produced and delivered. It is how much disruption a value chain can absorb before efficiency breaks down.
“Resilience is not the opposite of efficiency. It is the ability to remain efficient without becoming fragile,” says Serena Ho, Head of Consumer Markets at BDO South Africa. That distinction matters in an economy where demand, production, inventories, logistics and input costs are not moving in step.
South Africa’s economy contracted by 0.2% quarter-on-quarter in the second quarter of 2026, with manufacturing and trade among the sectors dragging on growth. Manufacturing declined for a third consecutive quarter, while trade contracted by 1.9%. Yet household consumption continued to expand and retail activity remained comparatively resilient.
For companies, this unevenness makes visibility across the value chain more important than ever. “Businesses cannot afford to manage procurement, operations, logistics and the customer as separate conversations,” says Ho. “A demand shift at one end of the chain can become an inventory, production or margin problem somewhere else very quickly.”
South Africa’s automotive sector shows the tension most clearly. The country exported a record 414,268 vehicles in 2025, equal to more than 70% of light vehicles produced domestically. Automotive activity also accounts for a significant share of manufacturing output.
But local content remains at about 39%, well short of the longer-term ambition of about 60%. The temptation is to frame localisation as an answer. Ho argues that would be a mistake. “Localisation only strengthens resilience if local suppliers can compete on quality, price, technology and scale,” she says.
She adds, “South Africa’s automotive sector depends on global markets. Building domestic capability cannot come at the cost of global competitiveness.”
The transition to electric vehicles raises the stakes. Globally, electric cars accounted for roughly a quarter of new-car sales in 2025, with more than 20 million sold worldwide. The share is expected to rise again in 2026.
For South Africa, the risk is not simply that local EV adoption may be slow. “The bigger issue is whether our manufacturing base remains relevant as the global production mix changes,” says Ho. “If export markets transition faster than we do, the competitiveness of our plants, suppliers, skills base and energy profile will increasingly come into question.”
Government’s 150% first-year tax deduction for qualifying investment in electric and hydrogen vehicle production assets is a useful policy signal. But incentives alone will not build a competitive EV ecosystem. Supplier capability, logistics, skills and reliable, lower-carbon energy will matter just as much.
The same trade-off is visible in manufacturing. Seven of South Africa’s ten manufacturing divisions contracted in the second quarter, while manufacturing confidence remained weak in the third quarter.
In that environment, cost control is unavoidable. But Ho cautions against taking lean operating models too far. “When margins are tight, businesses naturally remove duplication and excess capacity. The danger is that they also remove their ability to respond,” she says.
Critical components may justify alternative suppliers. Certain inputs may need buffer stock. Some production lines may require greater flexibility. The common requirement is information.
“The competitive advantage is shifting from having the leanest value chain to having the clearest view of it,” says Ho. That means connecting demand forecasting, procurement, production planning, inventory, logistics and customer commitments so that emerging constraints can be identified earlier.
There are encouraging shifts in South Africa’s operating environment.
Electricity reliability has improved significantly, while freight reform is beginning to produce gains. Transnet reported rail volumes of 167.9 million tonnes for the year to March 2026, up 4.9%, but neither the energy nor freight challenge has disappeared.
For manufacturers, energy resilience is now as much about affordability, grid capacity and access to lower-carbon power as it is about outages. Similarly, improving freight performance does not remove the need for businesses to manage route, supplier and inventory risk internally.
Retail and FMCG face a different version of the same problem. Consumers may never see a retailer’s distribution centre, warehouse system or stock allocation model. But they experience the consequences directly.
“The customer experiences the supply chain through availability, price, fulfilment and delivery,” says Ho. “That makes supply-chain performance part of the customer proposition.” This is becoming more important as online retail expands.
South African online retail is expected to reach about R159 billion in 2026, up an estimated 22.5%, and account for roughly 10% of total retail turnover. That creates opportunity, but also greater complexity.
Retailers need to know not only how much inventory they have, but where it is held, which channel it should serve, how quickly it can move and what it costs to fulfil the sale.
Stats SA recorded a R8.8 billion net build-up in inventories in the second quarter of 2026 as businesses added stock while demand softened in parts of the economy.That is precisely the sort of mismatch companies need to avoid.
“Greater assortment, faster delivery and omnichannel retail can support growth, but they also raise inventory complexity and cost-to-serve,” says Ho. “In a margin-sensitive environment, poor visibility becomes very expensive.”
A further shift is taking place around sustainability. The EU’s Carbon Border Adjustment Mechanism entered its definitive phase in January 2026, creating new reporting and financial obligations for specified carbon-intensive imports such as steel and aluminium.
“Sustainability data is increasingly becoming commercial data,” says Ho. “Customers, procurement teams and export markets increasingly want to know where products come from, how they were produced and what their emissions profile looks like.”
That places greater pressure on companies to improve traceability beyond their own operations and further into supplier networks.
The common mistake is to treat localisation, technology, sustainability and skills as separate initiatives. They are not. Together, they determine how much visibility and control a business has across its value chain, and how quickly it can respond when conditions change.
For South African companies, the objective should not be to retreat from global markets or build costly redundancy into every part of the business. It should be to become more deliberate about where resilience matters.
That means identifying critical dependencies, improving supply-chain visibility, diversifying selectively, building domestic capability where it strengthens competitiveness, and investing in people who can make faster decisions with better information.
“The businesses best positioned for long-term growth will not necessarily be those that avoid disruption,” says Ho. “They will be the ones that see it earlier, adapt faster and continue creating value through it,” concludes Ho.
The question facing business is no longer simply how efficiently goods can be sourced, produced and delivered. It is how much disruption a value chain can absorb before efficiency breaks down.
“Resilience is not the opposite of efficiency. It is the ability to remain efficient without becoming fragile,” says Serena Ho, Head of Consumer Markets at BDO South Africa. That distinction matters in an economy where demand, production, inventories, logistics and input costs are not moving in step.
South Africa’s economy contracted by 0.2% quarter-on-quarter in the second quarter of 2026, with manufacturing and trade among the sectors dragging on growth. Manufacturing declined for a third consecutive quarter, while trade contracted by 1.9%. Yet household consumption continued to expand and retail activity remained comparatively resilient.
For companies, this unevenness makes visibility across the value chain more important than ever. “Businesses cannot afford to manage procurement, operations, logistics and the customer as separate conversations,” says Ho. “A demand shift at one end of the chain can become an inventory, production or margin problem somewhere else very quickly.”
South Africa’s automotive sector shows the tension most clearly. The country exported a record 414,268 vehicles in 2025, equal to more than 70% of light vehicles produced domestically. Automotive activity also accounts for a significant share of manufacturing output.
But local content remains at about 39%, well short of the longer-term ambition of about 60%. The temptation is to frame localisation as an answer. Ho argues that would be a mistake. “Localisation only strengthens resilience if local suppliers can compete on quality, price, technology and scale,” she says.
She adds, “South Africa’s automotive sector depends on global markets. Building domestic capability cannot come at the cost of global competitiveness.”
The transition to electric vehicles raises the stakes. Globally, electric cars accounted for roughly a quarter of new-car sales in 2025, with more than 20 million sold worldwide. The share is expected to rise again in 2026.
For South Africa, the risk is not simply that local EV adoption may be slow. “The bigger issue is whether our manufacturing base remains relevant as the global production mix changes,” says Ho. “If export markets transition faster than we do, the competitiveness of our plants, suppliers, skills base and energy profile will increasingly come into question.”
Government’s 150% first-year tax deduction for qualifying investment in electric and hydrogen vehicle production assets is a useful policy signal. But incentives alone will not build a competitive EV ecosystem. Supplier capability, logistics, skills and reliable, lower-carbon energy will matter just as much.
The same trade-off is visible in manufacturing. Seven of South Africa’s ten manufacturing divisions contracted in the second quarter, while manufacturing confidence remained weak in the third quarter.
In that environment, cost control is unavoidable. But Ho cautions against taking lean operating models too far. “When margins are tight, businesses naturally remove duplication and excess capacity. The danger is that they also remove their ability to respond,” she says.
Critical components may justify alternative suppliers. Certain inputs may need buffer stock. Some production lines may require greater flexibility. The common requirement is information.
“The competitive advantage is shifting from having the leanest value chain to having the clearest view of it,” says Ho. That means connecting demand forecasting, procurement, production planning, inventory, logistics and customer commitments so that emerging constraints can be identified earlier.
There are encouraging shifts in South Africa’s operating environment.
Electricity reliability has improved significantly, while freight reform is beginning to produce gains. Transnet reported rail volumes of 167.9 million tonnes for the year to March 2026, up 4.9%, but neither the energy nor freight challenge has disappeared.
For manufacturers, energy resilience is now as much about affordability, grid capacity and access to lower-carbon power as it is about outages. Similarly, improving freight performance does not remove the need for businesses to manage route, supplier and inventory risk internally.
Retail and FMCG face a different version of the same problem. Consumers may never see a retailer’s distribution centre, warehouse system or stock allocation model. But they experience the consequences directly.
“The customer experiences the supply chain through availability, price, fulfilment and delivery,” says Ho. “That makes supply-chain performance part of the customer proposition.” This is becoming more important as online retail expands.
South African online retail is expected to reach about R159 billion in 2026, up an estimated 22.5%, and account for roughly 10% of total retail turnover. That creates opportunity, but also greater complexity.
Retailers need to know not only how much inventory they have, but where it is held, which channel it should serve, how quickly it can move and what it costs to fulfil the sale.
Stats SA recorded a R8.8 billion net build-up in inventories in the second quarter of 2026 as businesses added stock while demand softened in parts of the economy.That is precisely the sort of mismatch companies need to avoid.
“Greater assortment, faster delivery and omnichannel retail can support growth, but they also raise inventory complexity and cost-to-serve,” says Ho. “In a margin-sensitive environment, poor visibility becomes very expensive.”
A further shift is taking place around sustainability. The EU’s Carbon Border Adjustment Mechanism entered its definitive phase in January 2026, creating new reporting and financial obligations for specified carbon-intensive imports such as steel and aluminium.
“Sustainability data is increasingly becoming commercial data,” says Ho. “Customers, procurement teams and export markets increasingly want to know where products come from, how they were produced and what their emissions profile looks like.”
That places greater pressure on companies to improve traceability beyond their own operations and further into supplier networks.
The common mistake is to treat localisation, technology, sustainability and skills as separate initiatives. They are not. Together, they determine how much visibility and control a business has across its value chain, and how quickly it can respond when conditions change.
For South African companies, the objective should not be to retreat from global markets or build costly redundancy into every part of the business. It should be to become more deliberate about where resilience matters.
That means identifying critical dependencies, improving supply-chain visibility, diversifying selectively, building domestic capability where it strengthens competitiveness, and investing in people who can make faster decisions with better information.
“The businesses best positioned for long-term growth will not necessarily be those that avoid disruption,” says Ho. “They will be the ones that see it earlier, adapt faster and continue creating value through it,” concludes Ho.