South African State Corporations: 'The Death Knell of Economic Colonialism'?

Literature › Works

Nancy Clark (1987). South African State Corporations: 'The Death Knell of Economic Colonialism'?. Journal of Southern African Studies, Vol. 14, No. 1. Taylor & Francis (Oxford University Press).

Type	journal article
Scope	Economics and economic history of apartheid
Method	archival narrative
Period studied	1919–1939
Regions	Transvaal/Witwatersrand, Pretoria, Vereeniging, Durban, Cape Town, South Africa
Themes	manufacturing industrial policy, business and state, labour markets wages, origins segregation, unions strikes
Citation key	clark1987

Argument

Clark challenges the view that the state corporations Escom (1923) and Iscor (1928) were nationalist/industrial/Afrikaner instruments set against foreign and mining capital. She argues that both could only secure capital, markets and market share by negotiating compromises with foreign-dominated private firms (the VFPC, Usco, Baldwins, Lysaghts, the European steel cartel), guaranteeing those firms profits. The resulting financial burden was offset by cutting labour costs, so both corporations relied on cheap black labour and neglected the 'civilised labour' policy. The result was a partnership between state and private capital, and the corporations were moulded to the practices they were meant to subvert. She argues this through detailed archival case studies of the two corporations.

Evidence and method

South African Central Archives (departments of Mines and Industries, Commerce and Industry, Labour, Railways, the Electricity Control Board, Board of Trade and Industries), Transvaal Archives, Standard Bank Archives, Iscor Library memo, parliamentary Hansard and select committee reports, Escom and Iscor annual reports, Afrikaans press (Die Vaderland, Die Transvaler), commission evidence, C.S. Richards (1940), and her Yale PhD (1987).

Place in the debates

• State corporations as national/Afrikaner capital versus foreign/mining capital (see Industrialisation, protection and industrial structure). Rejects the conflict thesis (Bozzoli, Davies et al., Adam and Giliomee). Argues the corporations were integrated with foreign and mining capital and partnered with it.
• Civilised labour policy and white versus black labour in the state sector (see The job colour bar, white labour and its erosion). Argues the corporations paid scant lip-service to civilised labour and replaced whites with cheap black workers. This corrects Kaplan and Morris and Christie, who she says miss the implications of the shift for the 'national capital' argument or still see Escom as promoting white labour.
• Economic role of the state in industrialisation (state versus private capital) (see Industrialisation, protection and industrial structure). The state corporations were neither challengers nor mere 'tools' of private enterprise, but a growing link between state and private sector, and they did broaden the industrial base.

Findings

• Thesis: the state corporations depended on foreign capital and black labour rather than opposing them. (p. 3)

  the state corporations were not antagonistic to foreign capital - nor were they shy of using black labour rather than 'civilised' labour - but that their very survival and success depended on the extensive utilisation of both.

• Compromises with private operators imposed financial burdens that were met by cutting labour costs, as in mining. (p. 4)

• The Escom-VFPC Witbank deal let the foreign-owned VFPC operate the station with black labour and keep profits, while Escom took ownership. (p. 10)

  Escom gained the right to own the station at Witbank and the VFPC agreed to operate the station, employing black labour at wages similar to those in the mining industry.

• By 1933 most Escom sales were for redistribution by other bodies, chiefly the VFPC. (p. 13)

  Yet almost 80 per cent of its sales were for redistribution by other power bodies - primarily the VFPC.

• Escom grew to nearly half of national generation by 1939 but did not change the structure of the industry. (p. 14)

  Escom had gained control of massive assets but it had failed to alter fundamentally the structure of the local electricity supply industry.

• Iscor secured private markets through joint marketing arrangements with existing importers and producers (IBL, Steel Sales Company). (p. 16)

  Through these agreements, Iscor immediately entered the largest private markets for steel goods in the country; in return, the private companies retained their markets and profits.

• The 1936 European cartel agreement protected Iscor and foreign producers, and raised local steel prices, contrary to the purpose of the Iron and Steel Act. (p. 20)

  Contrary to the purpose of the Iron and Steel Act, Iscor was actually raising the local price of steel.

• Iscor's labour force at opening included many blacks in the factory, contradicting civilised labour and the minister's expectations. (p. 21)

  He discovered that the true labour totals - 1,715 whites and 1,356 blacks -were quite different from the projections he had been given in November 1933 -850 whites and 350 blacks.

• Iscor reclassified white jobs as low-paid 'General Labourer' jobs for blacks, and the Industrial Agreement and arbitration upheld this. (p. 22)

  Indeed, in 1936, the Corporation began reclassifying 'white' jobs as 'General Labourer' jobs for blacks and with extremely low wages.

• Iscor's profit jump in 1938 is attributed largely to lower production costs from the labour arbitration award. (p. 24)

  This increase was largely attributable to lowered production costs, which in turn were the result of the implementation of the labour arbitration award.

• Conclusion: the corporations were integrated into an economy dominated by private foreign capital. (p. 25)

  resulted in the creation of powerful institutions working in the interests of the state yet fully integrated into an economy dominated by private foreign capital.

Evidence ledger

Sources used

Source	Kind	Period	How used
South African Central Archives (SABA), Department of Mines and Industries (MNW) files, e.g. MNW 717 mm583/23, mm1367/24, mm1288/24	state archives	1919-1934	Establishes the Escom-VFPC negotiations over Witbank, Johannesburg and mine contracts, including memos, agreements and Chamber of Mines cables.
SABA, Department of Railways and Harbours (SAS) files, e.g. SAS 1021 P4/14, SAS 1081, SAS 1083	state archives	1912-1921	Shows the SAR's rationale for electrification and state control of power because of labour stoppages.
SABA, Electricity Control Board (ECB) files, e.g. ECB 56, ECB 56/8/1, ECB 171	state archives	1910-1939	Documents VFPC ownership, supply contracts and licence applications, and ECB reports on Escom's expansion.
SABA, Department of Commerce and Industry (HEN) files, incl. ECB Annual Reports 1932, 1934, 1938 and Iscor files (HEN 454, 457, 3248, 3258, 3261, 3262, 3276)	state archives	1926-1939	Documents Iscor's marketing agreements, subsidiaries, board minutes, labour policy and ECB reports on power prices.
SABA, Department of Labour (ARB) files, incl. ARB 567, 570, 571, 1103, 2005 (Iscor Conciliation Board 1937)	state archives	1935-1939	Documents the Iscor labour dispute, Conciliation Board minutes, importation allowance and replacement of whites by blacks.
SABA, Minister of Economic Development (MED) 8 C134, MED 11 C139A, and Board of Trade and Industries (RHN) files	state archives	1933-1939	Supports claims about Iscor employment charts, the minister's investigation of black employment, and the cartel agreement.
SABA, Scientific and Technical Adviser (STA) Vol. I	state archives	1922	Shows van der Bijl's views on Escom's economy and the VFPC.
Transvaal Archives (TABA), Power Companies Commission (C40), Volume II	commission or official report	1909	Evidence on VFPC financing by AEG and its ownership structure.
SABA, Low Grade Ore Commission (K34), vol. 5, evidence of Bernard Price	commission or official report	1931	Supplies the Escom-VFPC agreed rates and cost terms (.115d vs .4418d per unit).
SABA, Committee of Inquiry into the Base Mineral Industry (K14), Vol. 7, evidence of A. C. McColm	commission or official report	1938	Evidence on Iscor's higher capital costs relative to European producers.
UG 14/1926 Economic and Wages Commission; UG 21/1944 Witwatersrand Mines Native Wages Commission	commission or official report	1926, 1944	Cited for VFPC's refusal to raise black wages above mining levels.
Report of the Select Committee on the Iron and Steel Bill (1927)	parliamentary debates	1927	Evidence on Usco's contacts with Stewart and Lloyds and Baldwins.
Hansard, House of Assembly Debates (21 Feb 1927; 23 May 1922)	parliamentary debates	1922-1927	Quotes government rationale for Escom and Iscor as promoting industrialisation.
Escom Annual Reports (1927, 1932, 1939)	company records or reports	1927-1939	Source for Escom's units sold and its expansion in 1932 and 1939.
Iscor Directors' Reports and Balance Sheets (1934-1939)	company records or reports	1934-1939	Source for Iscor sales tonnage, profits and investments in subsidiaries.
Iscor Library, Memo from H. J. van der Bijl to Iscor Board (1929); Iscor Board minutes	company records or reports	1929	Shows van der Bijl's expectation of SAR sleeper purchases.
Standard Bank Archives (INSP inspection reports; GMO letters of the General Manager)	company records or reports	1935-1939	Evidence on Usco's workforce racial composition and on Amcor's formation and plans.
Slater Papers, AJS12 (Hadley to Price, 1934), as cited in Christie	company records or reports	1934	Quote on VFPC-Escom cooperation.
Union of South Africa, Union Statistics for Fifty Years (1960), Table L34	official statistical series	1939	Total national electricity production in 1939 used to calculate Escom's share.
C. S. Richards, The Iron and Steel Industry in South Africa (1940), Appendices 7	secondary literature compilation	1934-1939	Source of rail and structural steel price comparisons showing Iscor raised local prices.
Newspapers: Johannesburg Star, Die Vaderland, Die Transvaler, Cape Times	newspapers periodicals	1922-1939	Documents SAR-Iscor price disputes, white workers' union complaints and public protest over black labour at Iscor.
Nancy Clark, 'State Intervention in a Capitalist Economy: the South African State Corporations' (Ph.D., Yale, 1987)	secondary literature compilation	1920s-1940s	Underlying doctoral research on which the article draws for background.

Inference

Quantification: Illustrative figures.

Archival case studies of two state corporations (Escom and Iscor), tracing negotiations, agreements and labour policy chronologically, then comparing outcomes against the official and scholarly 'national vs foreign capital' narrative. Claims rest on documentary quotation, supplemented by scattered figures on sales, prices and profits.

Key claims

Claim	Basis	Strength
Escom entered the electricity market only through compromise with the foreign-owned VFPC, which kept operating Escom's stations with black labour and kept its profits. (p. 107)	SABA MNW, ECB, SAS archival correspondence and agreements on the Witbank and Klip stations; Escom annual reports.	Partial data
By 1932 almost 80 per cent of Escom's sales were for redistribution by other power bodies, mainly the VFPC. (p. 110)	Escom Annual Reports 1927 and 1932 sales figures; VFPC private estimate cited via Christie.	Systematic data
Iscor built its market through joint ventures and marketing agreements with foreign and mining-house firms, guaranteeing them profits. (p. 113)	HEN files, Iscor board minutes, Standard Bank archives, Select Committee report, and testimony by van der Bijl and Dobson.	Partial data
The 1936 steel cartel agreement with European producers raised domestic steel prices, contrary to the purpose of the Iron and Steel Act. (p. 117)	BTI correspondence, Richards's appendix price series (structural sections £6.11s.8d in 1934 to £9.18s.4d in 1938).	Partial data
Iscor used black labour in its factory and from 1936 reclassified white jobs as 'General Labourer' jobs, defeating white workers' union resistance. (p. 119)	Department of Labour (ARB) files, Conciliation Board minutes and Shirt Sleeve Committee report, Iscor board minutes, Afrikaans press.	Partial data
Iscor's profit jump to £1.24m in 1938 resulted largely from lowered production costs after the labour arbitration award. (p. 121)	Iscor Directors' Reports 1934-1938 give profit figures; the attribution to labour costs is the author's inference.	Partial data
Overall, the state corporations were not antagonists of foreign capital but formed a partnership with it, being integrated into an economy dominated by private foreign capital. (p. 122)	Synthesis of the Escom and Iscor archival case studies.	Partial data

The author's caveats

The author acknowledges few limits. She notes that the VFPC's estimate of Escom's output share was a private estimate, and that the Minister's initial labour projections differed from actual totals.

Gaps in the evidence

The argument rests on two cases and on the correspondence and testimony of key actors, with no systematic data on costs, wage bills or racial employment shares over time. Wage data and a cost breakdown for Iscor, and electricity tariffs and profit remittances for the VFPC, would test the claims about labour-cost savings and capital outflow; many of these exist in company and ECB records. The claim that profits went overseas is asserted rather than documented from balance-of-payments or dividend records, and the counterfactual of what the state corporations achieved for national industrialisation is not measured.

Replicability: Data described but not public.