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The political economy of corporate governance reform in South Africa

Literature › Works

Diamond, George Johannes (2012). The political economy of corporate governance reform in South Africa. Research project, MBA, Gordon Institute of Business Science, University of Pretoria (submitted 13 November 2008). University of Pretoria.
Type thesis
Scope Post-1994 South African economy
Method policy analysis
Period studied 1985–2008
Regions South Africa, United Kingdom, United States
Themes business and state, transition post apartheid, politics ideology elections, comparative theory, macro fiscal finance debt
Citation key diamond2012

Argument

The study asks why South Africa's post-1994 corporate governance system, built mainly through the King Reports, stayed shareholder-centred despite fundamental political transformation. It argues that business, through the Institute of Directors, took the initiative during the 1990-94 negotiation phase, while the ANC-led tripartite alliance could not agree a coherent economic policy. Business preferences were therefore aggregated into governance policy 'almost by default'. The approach is exploratory and observational, applying Gourevitch and Shinn's actors-preferences-institutions framework to public documents, statutes, case law and press reports. The author says it is not a causal study. The work is mostly relevant to the transition and post-apartheid corporate sector.

Evidence and method

Public-domain documents: King Reports I and II, statutes and regulations that use the term 'corporate governance', 11 reported court judgments (1996-2007), DTI company law papers and Companies Bills (2007, 2008), newspaper and magazine reports, speeches, party documents, parliamentary submissions, a few interviews and personal communications, and secondary literature (Terreblanche, Giliomee, Murray and Luiz, Mallin, Andreasson, West).

Findings

  • The King Committee was a private-sector initiative launched in the middle of the political negotiations, not a response to corporate scandal. (p. 48)

    The King Committee was established in 1992, in the midst of the negotiation phase described above.

  • Business alone had a worked-out governance vision, so its preferences became policy by default. (p. 107)

    the preferences of the business community (as articulated by the Institute of Directors) became corporate governance policy and regulation in South Africa almost by default.

  • The second King Report widened attention to stakeholders but kept shareholder primacy, a point the author draws from West. (p. 57)

    the position of shareholders, capital, return on capital – in short, all the issues that were regarded as central to Anglo-American corporate governance systems – have remained paramount.

  • The government's GEAR programme is read as a pragmatic stabilisation policy adopted to avoid dependence on the IMF and World Bank. (p. 78)

    GEAR was nothing more than a stabilisation initiative.

  • The RDP's ambiguity and the alliance's lack of a coherent economic policy left a policy vacuum. (p. 76)

    The RDP was the result of an alliance-building process, with the result that a wide variety of ideas were put into the document, but there was very little prioritisation.

  • Corporate governance concepts spread into statutes only from 2001 and into case law from 1996. (p. 57)

    the term “corporate governance” was not used in any legislation prior to the year 2001.

  • The government's 2005 'stakeholder capitalism' rethink was not adopted by the ANC and apparently never resurfaced. (p. 81)

    The General Council, however, referred the document back to ANC branches for discussion and it was not adopted.

  • The opening to the ANC is read, via Terreblanche, as the business elite pursuing capitalism's interests, with corporate governance reform as a 'second clever blow'. (p. 108)

    struck a second clever blow for capitalism at a time when South Africa's future was being negotiated.

  • Conclusion: shareholder-centred governance persisted after transformation because of the relative strengths of actors at the bargaining table. (p. 115)

    the basic tenets of shareholder-centred corporate governance remained intact, contrary to what could be expected after a country has undergone such fundamental transformation as South Africa has.