The plant will produce the key ingredients needed to make the anti-retroviral drugs that have turned AIDS into a chronic condition, rather than a death sentence in a nation where 5.6 million people have HIV.
"This joint venture, named Ketlaphela, will establish the first pharmaceutical plant to manufacture active pharmaceutical ingredients for anti-retroviral medicines in South Africa," Science Minister Naledi Pandor told journalists.
South Africa will invest 1.1 billion rands, while Lonza will put 500 million rands into the plant, whose name means "I will survive" in Sotho, she said.
"Lonza's high Swiss standards plus their superb track record of establishing and maintaining successful commercial operations in developing countries, make them a valuable and desirable partner," Pandor said.
The new plant will help stabilise the price of drugs used to fight AIDS, as South Africa currently imports the main ingredients needed.
The plant will create about 2,600 jobs once it's running in 2016, he added. About 3,800 people will be employed for its construction.
South Africa has the world's largest AIDS treatment programme, serving 1.3 million people.
The treatment programme has already made gains in combating the epidemic, but the numbers of people needing drugs will keep growing as more and more people begin a lifetime on the medicines.