A History of Finance and Uneven Geographical Development in South Africa¶
Patrick Bond (1998). A History of Finance and Uneven Geographical Development in South Africa. South African Geographical Journal.
| Type | journal article |
| Scope | Economics and economic history of apartheid |
| Method | synthesis review |
| Period studied | 1810–1998 |
| Regions | South Africa, Cape Colony, Witwatersrand/Johannesburg, Transvaal, black townships |
| Themes | macro fiscal finance debt, origins segregation, business and state, sanctions divestment, comparative theory, transition post apartheid, agriculture land, politics ideology elections, demography urbanisation |
| Citation key | bond1998 |
Argument¶
Bond offers a synthetic, qualitative history of South African finance, arguing that financial ascendance recurs alongside excessive debt, speculation, geopolitical manoeuvring and crises of accumulation. Each episode of financial expansion reshapes economic geography and amplifies uneven development. He periodises the history into about a dozen bursts, from the Cape copper mania of 1854 through the diamond and gold booms, the 1930s gold-standard exit, Afrikaner finance, post-war monopoly finance and the 1980s 'financial explosion' and 1985 debt standstill. He concludes that the orthodox, finance-led development strategy of post-apartheid neo-liberalism risks cementing apartheid space, and recommends financial controls, lower interest rates and credit directed at industrial policy.
Evidence and method¶
Mostly secondary and institutional sources: Schumann's study of business cycles, Henry's history of the Standard Bank, Mabin on the Cape banking system, O'Meara, Innes, Keegan, Giliomee, Gelb, Fine and Rustomjee, and Nattrass for aggregate growth. It adds scattered quantitative points (bank branch counts, loan/deposit ratios, interest-rate spreads, debt figures, JSE share values, township bond defaults). No archival or survey work of its own.
Place in the debates¶
- Role of finance in uneven geographical development (neglected by earlier spatial studies) (see Finance, capital flight, the 1985 debt crisis and banking). Bond follows Mabin in arguing that earlier studies of uneven development neglected sectoral switches between productive and financial funding flows. He holds that at particular moments finance becomes dominant and amplifies unevenness, though it is not always the driving force.
- Marxist/revisionist political economy of mining capital, finance and Afrikaner capital (see The state and capital: instrumentalism, autonomy and fractions of capital). Works within a radical political-economy and Harvey-style framework. He draws on Innes and O'Meara to portray centralisation and monopoly finance capital, and the rise of Afrikaner financial capital, as shaping the state and nationalist politics.
- Neo-liberal/orthodox vs counter-hegemonic approaches to finance and development after 1994 (see Post-apartheid economic policy, governance and corruption). Rejects modernisation theory and liberalisation of trade and finance as entrenching uneven development. Advocates capital controls, levies on luxury consumption, debt rescheduling and cheaper, directed credit.
- Abandoning the gold standard in 1932 (see Finance, capital flight, the 1985 debt crisis and banking). Argues the mining houses used the flight of capital to force devaluation, which was a laissez-faire route rather than the only one. He cites Schumann's view that exchange controls could have kept the country on gold and suggests a public works programme as an alternative.
Findings¶
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Banking crashes recurred from the 1850s to the 1880s, driven by speculation, with London-based bank management seen as a cause of severity. (p. 3)
Unsound banking practices, over and above the natural credit expansion inherent in an elastic monetary system, had greatly contributed to the overintensity of the boom
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Financial crashes fed the centralisation of capital into the mining finance houses. (p. 4)
widespread financial catastrophe often resulted in an even more powerful centralisation of capital which in turn prepared the ground for an even deeper round of speculation and economic manipulation
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The 1932 exit from the gold standard was driven by mining houses at a time of weak popular organisations and white-worker priorities. (p. 8)
the mining houses were able to determine the path out of depression
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Growth from 1933 through the 1940s was fast, relatively even across sectors and accompanied by larger relative black wage rises. (p. 9)
growing faster (8 percent average GDP increase per annum), more evenly across sectors, and with larger relative wage increases for blacks, than at any other time in the twentieth century
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Reliance on foreign finance gave anti-apartheid sanctions campaigners a target in international banks. (p. 11)
such financial dependence that by the 1970s the international anti-apartheid movement discovered that it represented the country's Achilles Heel, and hence began to focus sanctions pressure on international banks
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Overaccumulation in the 1970s moved capital out of productive sectors and into financial and infrastructural expansion. (p. 11)
a substantial decline in the economy's growth rate from late 1974; a steady drop in manufacturing employment from 1975; and a substantial fall in private sector investment in plant and equipment from 1976
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Foreign banks withdrew credit and Pretoria called the 1985 debt standstill. (p. 12)
Pretoria was ultimately forced to call a "debt standstill" in 1985 and refused to make repayments on more than $13 billion in foreign debt (out of a total of $20 billion then outstanding)
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1980s township housing finance reached only a narrow segment and collapsed into defaults after interest rates rose. (p. 12)
nominal interest rates on housing loans soared to 21 percent (then 6 percent in real terms) in 1989, leading to the country's longest-ever depression (1989-93) and, in the process, a 40 percent default rate on the 200 000 bonds granted to black borrowers
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Stock market and financial booms in the late 1980s and early 1990s were decoupled from the real economy. (p. 12)
In 1991 JSE industrial shares increased in price by 56 percent, while the industrial economy suffered negative growth.
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Private-sector indebtedness rose steadily from the post-war era to the late 1990s. (p. 12)
the private sector debt/GDP ratio rising from a stable level of 30 percent during the post-war era, to 50 percent during the 1980s and more than 65 percent by the late 1990s
Evidence ledger¶
Sources used¶
| Source | Kind | Period | How used |
|---|---|---|---|
| Schumann, Structural Changes and Business Cycles in South Africa, 1806-1936 (1938) | secondary literature compilation | 1806-1936 | Supplies the narrative and judgments on early banking booms and crashes (1810s, 1854, 1860s, 1881, 1889-90, 1920, 1932) that carry the argument. |
| Henry, The First Hundred Years of the Standard Bank (1963) | company records or reports | 1860s-1930s | Company history cited for share-market values, bank lending behaviour, speculation and bank-farmer conflicts, and loan-to-deposit ratios. |
| Mabin and Conradie (eds), The Confidence of the Whole Country: Standard Bank Reports on Economic Conditions in Southern Africa, 1865-1902 (1987) | company records or reports | 1865-1902 | Source for the 1895 bank branch counts by bank. |
| Mabin (1984, 1985, 1989) studies of Cape Colony banking and economy | secondary literature compilation | 1837-1900 | Used for claims that imperial banks created the urban system and facilitated magnate share purchases and amalgamations at Kimberley. |
| Keegan, Rural Transformations in Industrializing South Africa (1986) | secondary literature compilation | 1840s-1914 | Evidence on rural mortgage and debt chains and Boer farmers' dependence on credit. |
| O'Meara (1983) on Afrikaner capital and nationalism | secondary literature compilation | 1930s-1960s | Documents the rise of Afrikaner financial institutions (Sanlam, Rembrandt), the share of Afrikaner capital in Afrikaner institutions, and state account transfers after 1948. |
| Innes, Anglo American and the Rise of Modern South Africa (1984) | secondary literature compilation | 1945-1960s | Supports claims about mining-house fund-raising, the merging of bank and productive capital, and monopoly phase after WWII. |
| Nattrass (1981) The South African Economy, Appendix | secondary literature compilation | 1933-1940s | Source for GDP growth of 8 percent per annum and larger relative black wage increases in 1933-1940s. |
| Gelb (1989), origins of the South African Reserve Bank; Ally (1994) Gold and Empire | secondary literature compilation | 1914-1926 | Used to explain the weakening of London's control and the creation of the Reserve Bank under banker control. |
| Giliomee (1989) on Afrikaner capital and nationalism in the Western Cape | secondary literature compilation | 1870-1915 | Links bank-bashing, Afrikaner Bond banks and Afrikaner nationalism to financial grievances. |
| Wilkinson (1981), A Place to Live: African housing in Johannesburg 1944-55 | secondary literature compilation | 1944-55 | Evidence that Johannesburg property interests lobbied for African home ownership and state-financed building. |
| Bond (1991) Commanding Heights and Community Control; Bond (1990) on township housing | secondary literature compilation | 1970s-1990 | Cited for dating of the 1970s investment and growth slowdown and the township housing finance. |
| Unattributed official/financial figures on 1970s-90s debt, IMF loans, JSE and housing finance | official statistical series | 1970-1992 | Quantities on parastatal foreign borrowing, IMF loans, 1985 debt standstill, private debt/GDP, township bonds and JSE share prices are stated without sources. |
| Standard Bank (1988) An Historical Overview; Barclays Bank (1938) A Banking Centenary | company records or reports | 1883-1938 | Cited for Standard's dropping of 'British' from its name in 1883 amid Afrikaner criticism. |
| Financial Times, 31 December 1997 (Soros quotation) | newspapers periodicals | 1997 | Quotation used to illustrate contemporary view of private international credit allocation. |
Inference¶
Quantification: Illustrative figures.
Synthetic qualitative periodisation of financial episodes (twelve periods) drawn mainly from secondary and bank-history sources, interpreted through Harvey's theory of uneven development and credit; a narrative case sequence with theoretical argument rather than systematic data analysis.
Key claims¶
| Claim | Basis | Strength |
|---|---|---|
| Early Cape and mining-era banking booms and crashes (1810s, 1854, 1860s, 1881, 1889-90) were driven by speculation and imperial bank lending practices that shaped the spatial economy. (p. 3) | Schumann (1938), Henry (1963) and Mabin (1985, 1989) quotations; no primary data examined. | Illustrative or anecdotal |
| Financial crashes repeatedly led to further centralisation of capital in mining finance houses and large banks. (p. 4) | Mabin (1989) and Schumann (1938:128) quotations plus assertion of bank concentration. | Illustrative or anecdotal |
| Rural indebtedness and bank foreclosures fuelled Afrikaner nationalism and state credit institutions (Land Bank 1912, 1924 Agricultural Credits Bill). (p. 7) | Keegan (1986), Giliomee (1989), Schumann and Henry quotations, with an insolvency comparison unsourced. | Partial data |
| Abandoning the gold standard in 1932 was driven by the mining houses and produced a rapid recovery with growth and wide interest-rate spreads. (p. 9) | Schumann (1938:295, 263), bank interest-rate figures and Nattrass (1981) growth figures; not individually sourced. | Partial data |
| Afrikaner finance after 1948 diversified into commerce and industry through Sanlam and Rembrandt, with state accounts shifted to Afrikaner institutions. (p. 10) | O'Meara (1983) quotations. | Illustrative or anecdotal |
| Post-war growth relied on international capital raised by mining houses, mainly from British institutions, drawing South Africa into financial dependence. (p. 10) | Innes (1984) plus unsourced percentages of mining funds. | Partial data |
| Overaccumulation from the 1970s moved capital into finance, foreign debt and township housing credit, producing the 1985 debt standstill, defaults and a JSE boom decoupled from the real economy. (p. 12) | Bond (1991) and unsourced figures on investment, debt, bonds, defaults and JSE prices. | Partial data |
The author's caveats¶
The author describes the article as a synthetic, qualitative sketch that provides enough flavour to suggest lessons, and does not claim systematic documentation.
Gaps in the evidence¶
The argument links finance to geographical unevenness but offers almost no spatial data such as regional bank branch, credit or mortgage distribution, or land and property prices by district. Bank balance sheets, Land Bank and Reserve Bank records, JSE listings and building society lending by area existed and would test the claims directly. Causal claims about political and nationalist outcomes rest on secondary quotations and could be tested against archival and parliamentary sources.
Replicability: Data poorly documented.