The Impact of Sanctions on Apartheid South Africa, 1985-90 (The Impact of Sanctions on South Africa's Apartheid Regime, 1985-90)¶
Samuel Bowman (n.d.). The Impact of Sanctions on Apartheid South Africa, 1985-90 (The Impact of Sanctions on South Africa's Apartheid Regime, 1985-90). Student essay supervised by Dr. Diarmuid Whelan.
| Type | other |
| Scope | Economics and economic history of apartheid |
| Method | synthesis review |
| Period studied | 1985–1990 |
| Regions | South Africa, United States, European Community, Japan |
| Themes | sanctions divestment, macro fiscal finance debt, politics ideology elections, transition post apartheid, business and state, labour markets wages |
| Citation key | bowmannd |
Argument¶
The essay argues that international sanctions were the main factor in driving South African whites and the ruling class towards negotiation with the ANC. It contends that the 1985 financial crisis, triggered by Chase Manhattan's refusal to roll over loans in August 1985, was itself caused by the political momentum towards US sanctions. It also argues that sanctions retarded growth during a global boom. It rejects the Lowenberg-Levy view that internal labour-market distortions drove the change and that sanctions were merely psychological. It reaches this through a literature review, a timing argument about Congress votes and the bank decision, and a Penn World Table comparison of South African and US GDP per capita. It treats the fall of the USSR as the final trigger for negotiations.
Evidence and method¶
Secondary literature (Lowenberg, Levy, Manby, Schwartzmann, Desmond, Lewis, Feinstein, Waldmeir, Hirsch). It also draws on press items (Economist 1985, NYT June 1985, a Financial Times quote) and UN Security Council resolutions. The author's own calculations from Penn World Table 6.2 produce the GDP and per capita comparisons with the US and Ireland.
Place in the debates¶
- Sanctions effectiveness: economic impact vs merely psychological role (see Sanctions, disinvestment and the anti-apartheid movement). Sides firmly with Manby, Desmond and Schwartzmann. It argues sanctions caused the 1985 financial crisis and a lasting growth shortfall, and were the main factor behind the move to negotiations.
- Internal labour-market distortions (Lowenberg, Levy) vs external finance and sanctions as the cause of apartheid's economic failure (see Why apartheid ended: reform, transition and elite bargaining). Rejects the Lowenberg-Levy 'internal forces' thesis as too reductive and economistic. It gives primacy to international finance and the political isolation of the country.
- Cause of the 1985 financial crisis (gold price and unrest vs sanctions) (see Finance, capital flight, the 1985 debt crisis and banking). Accepts gold-price collapse and unrest as contributing causes. It argues the anticipation of sanctions drove the creditors' refusal to roll over loans.
- Effect of the arms and oil embargoes (costly import substitution vs a profitable arms industry) (see Sanctions, disinvestment and the anti-apartheid movement). Presents both views, citing Lowenberg on costly capital-intensive synfuel and Schwartzmann on arms exports. It finds neither conclusive.
- Role of the end of the Cold War in releasing Mandela and unbanning the ANC (see Why apartheid ended: reform, transition and elite bargaining). Treats the fall of the USSR as the 'final factor' pushing the government to the table, following Levy and Waldmeir, but subordinate to sanctions.
Findings¶
-
Central thesis: sanctions drove white South Africans away from apartheid. (p. 4)
international sanctions played a large role in driving South African whites away from apartheid, ultimately leading to the end of apartheid and white rule in South Africa.
-
The Lowenberg position that labour-market apartheid was dismantled before sanctions, which the essay contests. (p. 12)
led to abolishing labor market apartheid well before the imposition of significant foreign economic sanctions in the mid-1980s.
-
Gold's export dependence and the falling gold price underpinned the crisis. (p. 14)
By 1984 that price had plummeted to $400 per ounce and still accounted for over 40% of total exports.
-
Divestment campaigns pushed firms out, partly through the management burden they imposed rather than moral concern. (p. 15)
although we get 10% of our profit from South Africa, it’s taking up 50% of boardroom time
-
Foreign debt and its short-term share rose sharply by 1985. (p. 16)
Foreign debt as a percentage of GDP ballooned from 20.3% in 1980 to 50% in 1985, of which 70% was short-term debt
-
Levy's growth figures used to argue sanctions failed to hurt the economy. (p. 24)
it was 0.5 percent in 1986, 2.6 percent in 1987, and 3.2 percent in 1988
-
Relative decline against the US after 1985 is read as a sanctions-era break from trend. (p. 25)
South Africa’s GDP per capita shrinks remarkably compared with the US after 1985, plummeting by about a third over the ten-year period following sanctions.
-
Contemporary bankers read the crisis as political, not economic (quoted via Manby). (p. 26)
South Africa’s difficulties are not comparable with those of other developing countries; its problems are political
-
The timing argument: the US House vote preceded Chase Manhattan's August 1985 refusal to roll over. (p. 27)
In June 1985, the US House of Representatives voted overwhelmingly, 295 to 127, to impose wide-ranging sanctions
-
Counterfactual growth loss, quoted from Lewis (1989). (p. 28)
Had the South African economy been able to sustain its growth rates of the 1946-75 period through the late 1980s, real GDP would have been more than 45 per cent higher
-
The collapse of the USSR is treated as the final factor in bringing the government to negotiate. (p. 29)
The fall of the Berlin Wall and the collapse of the Soviet empire in Eastern Europe was almost certainly the final factor in driving the apartheid government to the negotiating table with the ANC.
-
Conclusion on the relative income shortfall attributed to sanctions. (p. 30)
real GDP per capita fell from being one third of the US level to one quarter within ten years of the sanctions’ implementation.
Evidence ledger¶
Sources used¶
| Source | Kind | Period | How used |
|---|---|---|---|
| Penn World Table 6.2 (real GDP and GDP per capita, South Africa, US, Ireland) | international trade or finance data | c. 1950s-1990s (thirty years before 1985 to ten years after) | Author computes GDP and GDP-per-capita comparisons (Figures 1 and 2) to argue South Africa diverged from the US and Irish trends after 1985. |
| UN Security Council Resolution 569 (1985) | legislation gazette | 26 July 1985 | Defines the scope of 'international sanctions' as the non-binding recommendations followed by other countries. |
| UN Security Council Resolution 181 (1963) | legislation gazette | 7 August 1963 | Cited as the basis for the voluntary arms embargo of 1963. |
| UN Security Council resolution on mandatory arms embargo (cited as Resolution 282, URL gives 417, 1977) | legislation gazette | 4 November 1977 | Cited as the basis for the mandatory arms embargo of 1977. |
| New York Times, Jonathan Fuerbringer, 'House Votes Sanctions Against South Africa' (6 June 1985) | newspapers periodicals | June 1985 | Documents the 295-127 House vote for sanctions, used to argue that sanctions momentum preceded Chase Manhattan's August 1985 refusal to roll over loans. |
| The Economist, 'Anti-apartheid without tears; the disengager's tale' (30 March 1985), Survey | newspapers periodicals | March 1985 | Source for over $5 billion of South African stock 'disinvested' by 1985. |
| Financial Times 1985 article (unnamed US executive quoted) | newspapers periodicals | 1985 | Anecdotal quote illustrating that disinvestment campaigns consumed corporate boardroom time. |
| Lowenberg (1997), 'Why South Africa's apartheid economy failed', incl. GDP growth figures and Wiehahn/Riekert quotation | secondary literature compilation | 1974-1988 growth figures; 1950s-80s narrative | Supplies the labour-market-weakness thesis, the Wiehahn/Riekert reform claim, and the GDP growth figures that the author reinterprets. |
| Levy (1999), 'Sanctions on South Africa: what did they do?' | secondary literature compilation | 1974-1988 | Source for the claim that GDP growth accelerated after sanctions and for the EC's September 1985 sanctions; counter-argued by the author. |
| Manby (1992), 'South Africa: the impact of sanctions' (data on trade partners, crisis, quotations from Swiss National Bank director) | secondary literature compilation | 1980s | Provides the account of the 1985 crisis, the sanctioning countries, gold prices and the 'political not currency crisis' interpretation. |
| Fine and Rustomjee (1996), The Political Economy of South Africa (gold export share) | secondary literature compilation | 1980 | Source for gold accounting for over 50% of South Africa's exports in 1980. |
| Hirsch (1989), on foreign debt and short-term debt share | secondary literature compilation | 1980-1985 | Source for foreign debt rising from 20.3% to 50% of GDP, 70% short-term. |
| Lewis (1989), The Economics of Apartheid (counterfactual GDP estimate) | secondary literature compilation | 1946-75 growth trend; late 1980s | Counterfactual estimate that GDP would have been 45% higher without the late-1980s slowdown. |
| Desmond (1986), 'Sanctions and South Africa' (disinvestment data) | secondary literature compilation | early 1980s-1985 | Source for the net of 19 large Western companies withdrawing by 1985. |
| Waldmeir (1997), Anatomy of a Miracle (incl. de Klerk quotation) | secondary literature compilation | 1989-1990 | Supports the claim that the fall of the USSR removed communist-threat fears and pushed the government to negotiate. |
| Osada (2002), Sanctions and honorary whites | secondary literature compilation | 1985-86 | Source for the content of Japan's sanctions. |
| Feinstein (2005), An Economic History of South Africa (trading partners; township concentration) | secondary literature compilation | apartheid era | Source for identifying the largest trading partners and the claim that blacks were not yet concentrated in townships early in apartheid. |
| Rustomjee (2006), 'Pathways through financial crisis: South Africa' | secondary literature compilation | August 1985 | Source for Chase Manhattan's refusal to roll over loans. |
New data¶
Author computes simple GDP and GDP-per-capita comparisons (Figures 1 and 2) for South Africa, US and Ireland from the Penn World Table 6.2; no other original dataset.
Inference¶
Quantification: Illustrative figures.
Essay-style argument that reinterprets secondary literature. It combines two simple graphs of relative GDP (South Africa vs US/Ireland) with chronological reasoning (Congressional vote before Chase Manhattan's refusal) and quoted contemporary opinion to argue that sanctions caused the 1985 financial crisis and slower growth, which drove whites to negotiate. There is no regression, counterfactual model or primary archival work.
Key claims¶
| Claim | Basis | Strength |
|---|---|---|
| South Africa's growth after 1985 lagged a global boom, and its GDP per capita fell from one third to one quarter of the US level within ten years. (p. 30) | Author's calculations from Penn World Table 6.2 (Figures 1-2), compared against Levy/Lowenberg growth figures. | Partial data |
| The 1985 financial crisis, sparked by Chase Manhattan's refusal to roll over loans, was caused by the anticipated sanctions rather than by internal economic flaws. (p. 27) | Manby's quotations of contemporary bankers, the June 1985 House vote reported in the NYT, and the timing of the August refusal. | Illustrative or anecdotal |
| The crisis had other causes: unrest, the gold price collapse, rising short-term foreign debt and disinvestment. (p. 14) | Manby, Fine and Rustomjee, Hirsch, The Economist and Desmond figures. | Partial data |
| The labour-market-failure thesis cannot explain the collapse, since the labour reforms of the 1970s preceded the sudden post-1985 relative decline. (p. 25) | Lowenberg's account of the Wiehahn/Riekert reforms set against the author's GDP comparison. | Partial data |
| Pre-1985 arms and oil embargoes produced costly import-substitution, but evidence on the arms industry's success is conflicting. (p. 20) | Lowenberg and Schwartzmann, with an anecdote about the navy and Angola. | Illustrative or anecdotal |
| Sanctions were the main factor driving the apartheid rulers to negotiate with the ANC; the fall of the USSR was a final contributing factor. (p. 31) | Inference from the economic argument above; Waldmeir and Gumede for the USSR. | Asserted |
The author's caveats¶
The author acknowledges that Ireland also had economic upheavals, so Figure 1 is not an ideal benchmark and the US is used instead. Levy is said to acknowledge the difficulty of conclusively showing sanctions' effects. A footnote reads 'Citation needed' for the claim about foreign firms' treatment of black workers.
Gaps in the evidence¶
The causal chain from sanctions to the financial crisis rests on timing and contemporary opinion; there are no bank lending records, creditor correspondence, South African Reserve Bank data or capital-flow series to test it. A counterfactual or synthetic-control comparison against other commodity-exporting economies, and decomposition of the effects of gold prices, unrest and sanctions, would be needed; these data existed (IMF, BIS, SARB) and are accessible now. The claim about white political attitudes lacks any opinion surveys, election returns, or archival evidence (cabinet or Business Day sources) on how economic pressure affected National Party decisions.
Replicability: Data poorly documented.