McGregor's Privatisation in South Africa, Including Schedules of State-Owned Bodies¶
Robin McGregor (ed.); Anne McGregor (asst.); Wolfgang H. Thomas; Norman R. Griffiths; Robin Bosomworth; Chris Cairncross; P. Gerhardt Human; Jan H. Meiring; Fred Macaskill; Nic Nel (1987). McGregor's Privatisation in South Africa, Including Schedules of State-Owned Bodies. The McGregor Library. Juta & Co, Ltd, Cape Town.
| Type | book |
| Scope | Economics and economic history of apartheid |
| Method | policy analysis |
| Period studied | 1922–1987 |
| Regions | South Africa |
| Themes | business and state, macro fiscal finance debt, manufacturing industrial policy, politics ideology elections, sanctions divestment, labour markets wages, methods data sources, inequality poverty unemployment |
| Citation key | ed1987 |
Argument¶
This edited volume, which the foreword says is not an academic work, was published just after the August 1987 White Paper (WPG 87). It collects free-market advocacy and practitioner commentary on privatising and deregulating South Africa's large state sector. The contributors claim that concentration in both state and private hands, protection and cartels, and heavy taxation hold back growth. Wolfgang Thomas is the most analytical contributor. He argues that the privatisation drive stalled because the government feared losing white civil-service votes after the May 1987 Conservative Party gains, and because the private sector over-promised. The White Paper itself ties the push to the fiscal squeeze, capital outflow after 1985 and rising state debt. The appendices supply directory-style schedules of state bodies, hospitals, abattoirs and local authorities.
Evidence and method¶
Contributor essays by an economist, a valuer, steel-industry commentators, a Price Waterhouse consultant, an oil-industry executive, a free-market activist and a tax consultant. Reproduces the 1987 White Paper (WPG 87) and an extract from the Commission for Administration annual report. Includes Iscor price and cost tables, Escom statistics, Margo Commission tax figures, and schedules of state-controlled bodies, hospitals, abattoirs, municipal markets and local authorities with employee numbers and populations.
Place in the debates¶
- Size and efficiency of the state sector (privatisation vs state ownership) (see Industrialisation, protection and industrial structure). Mostly pro-privatisation and pro-deregulation, but Thomas is sceptical. He argues that privatisation is no panacea and that efficiency gains can come without it; Macaskill and Nel are ideological free-marketeers.
- Politics of apartheid-era state reform: white civil service and the Conservative Party (see Industrialisation, protection and industrial structure). Thomas argues that fear of white unemployment and right-wing opposition in the civil service explains the toned-down 1987 White Paper.
- Tariff protection, cartels and industrial strategy (Iscor and the steel club) (see Industrialisation, protection and industrial structure). Bosomworth and Cairncross argue that protection and two-tier pricing hurt secondary industry; deregulation should come first.
- Tax reform (Margo Commission and supply-side economics). Nel rejects the Comprehensive Business Tax and proposes a flat-rate and transaction tax, claiming it would raise R44 billion.
Findings¶
-
McGregor says four groups dominate the Johannesburg Stock Exchange, and that private concentration is a reason to worry about privatisation. (p. 8)
The following four groups control ove r 80Vo of the shares on the Johannesburg Stock Exchange:
-
Thomas argues that the state's fear of white job losses and right-wing opposition in the civil service shaped its privatisation caution. (p. 17)
the spectre of white unemployment and rightwing political opposition with its stronghold in the lower and middle echelons of the civil service and semi-state enterprises.
-
The White Paper appeared just after the Conservative Party's electoral breakthrough in 1987. (p. 17)
was finally released in August 1987, just three months had passed since the landslide shift to the Conservative Party, a movement entirely
-
Public and semi-state employment is a large part of the Transvaal white workforce, which gave civil-service opposition its political weight. (p. 18)
where civil servants of all three tiers of government and the semi-state sector together probably constitute half the white labour force
-
Defence and security demands and capital outflow from disinvestment are cited as pressures that pushed the government towards fiscal discipline. (p. 15)
Given increasing claims upon the fiscus by the defence and security system and the net outflow of capital due to the disinvestment campaign in the mid-1980s
-
Thomas finds that state enterprises had already improved their efficiency, so privatisation is not a precondition for efficiency. (p. 22)
This suggests that privatisation per se is not a precondition for higher efficiency.
-
The White Paper documents the rapid rise in South African foreign debt between 1975 and 1985. (p. 108)
Foreign debt increased in rand terms from R9 500 million in 1975 to R65 800 million at the end of 1985
-
The White Paper shows that public bodies dominated net fixed investment in 1970-84. (p. 109)
63,7 per cent of all net fixed investments was invested in general govemment at all levels and public corporations
-
Iscor sold steel to local manufacturers at far higher prices than it charged on export markets (a two-tier pricing system). (p. 43)
For example, the export of wire rod, FoB Durban is about R454 a ton as compared with the R830 a ton Iscor charges domestic secondary industry.
-
The 1922 Electricity Act shut out private electricity development and made Escom the near-monopoly supplier. (p. 62)
This Act, when it was promulgated in 1922, effectively stopped all significant development of private enterprise in the electricity business and as a result Escom today supplies almost all the electric power needed in South Africa.
-
Nel says the tax burden shifted onto individuals in the early 1980s. (p. 74)
In 1981, private individuals accounted for about 26 percent of Inland Revenue. This figure has since risen to around 54 percent.
-
Griffiths's rough, self-described guesstimate of gross state asset values. (p. 37)
it is suggested that it will be in excess of R250 billion.
Evidence ledger¶
Sources used¶
| Source | Kind | Period | How used |
|---|---|---|---|
| White Paper on Privatisation and Deregulation in the Republic of South Africa (WPG 87), August 1987 | commission or official report | 1987 (data to 1985) | Reproduced in full as Appendix 2; supplies the official policy framework, macro-statistics on public sector investment and the list of already-privatised activities, and is analysed by Thomas and others. |
| Extract from the Annual Report of the Commission for Administration on privatisation and deregulation | commission or official report | c. 1986/87 | Describes the Commission's privatisation programme, phases, forms of privatisation, criteria and the number of investigations completed. |
| Schedule of State Controlled Bodies considered privatisable (Appendix 3) | other | 1987 | Company-by-company listing of state-controlled bodies (parent, employees, directors, activity) offered as an identification basis for privatisation; sources of the data are not named. |
| Schedule of Hospitals (Appendix 4) | other | 1987 | Tabulates state-controlled hospitals as candidates for privatisation; the table is largely illegible in the scan and its sources are not stated. |
| Schedule of Abattoirs and Municipal Markets (Appendix 5) | other | 1987 | Lists abattoirs by town, owner (municipality/state), grading, and municipal markets with market master, telephone and turnover. |
| Schedule of Local Authorities (Appendix 6), citing 1985 population census figures | population census | 1985 | Provides town populations, telephone numbers and town clerks for municipal privatisation candidates; the Editor warns of errors. |
| Richard Ellis SA 'guestimate' survey of gross asset values of state organisations | author survey or fieldwork | c. 1987 | Gives order-of-magnitude gross asset values for government land, SATS, Escom, Iscor, forests, housing, hospitals and education, totalling over R250 billion. |
| Annual reports of SATS, Iscor, PTC and SABC (balance sheets) | company records or reports | c. 1986 | Cited to argue that published balance sheets do not reveal true current asset values. |
| Financial Mail 6/4/84 chart of Iscor capital expenditure 1964-1984 | newspapers periodicals | 1964-1984 | Source for chart of Iscor capex in the steel chapter. |
| Independent Wire Convertors Association Bulletin, August 1987 (wire rod prices and international cost comparison) | employer association records | August 1987 | Gives the comparison of production cost elements and wire rod price levels used to argue Iscor's two-tier pricing and protection. |
| Price Waterhouse Phase One study of Government Motor Transport, report of 31 March 1987 | company records or reports | Nov 1986 - Mar 1987 | Government motor transport fleet figures, cost and operating-practice findings and privatisation options are drawn from the consultants' own study. |
| Data supplied by Department of Transport and Provincial Administrations on vehicle stock and costs | state archives | 1985/86 | Supplies the fleet size (24 000 vehicles, R100m book value) and R120m maintenance and operation cost figures. |
| Energy Projections for South Africa (Kotze & Cooper, RAU Institute for Energy Studies, 1985) | secondary literature compilation | c. 1985 | Source for market share of energy carriers in South Africa. |
| Engineering News, 6 June 1986, Supplement Power Generation (international electricity prices, 1985/86) | newspapers periodicals | 1986 | Comparison of average electricity prices to show Escom is cheap. |
| Escom Annual Report 1986 | company records or reports | 1986 | Source for Escom's fixed assets, employees, turnover and coal costs used in the efficiency calculation. |
| Statutes: Electricity Act 42 of 1922, Act 4 of 1958, Coal Resources Act 60 of 1985 and other energy/oil Acts | legislation gazette | 1922-1985 | Used to describe the legal foundation of Escom, coal control powers and the regulatory burden on the oil industry. |
| Parliamentary debate on Electricity Act 1922 (Dr Van der Bijl quotation) | parliamentary debates | 1922 | Quotation illustrating the aims of Escom's founding. |
| Meiring doctoral thesis, Planning, logistics and operational aspects of the oil industry (RAU, 1986) | secondary literature compilation | 1986 | Author's own thesis underpins the energy chapter. |
| Report of the Margo Commission on Taxation, incl. para 25.104 SA Reserve Bank bank-debit statistics and a table on tax/GDP | commission or official report | 1983-1987 | Nel criticises its CBT proposal, and uses its Reserve Bank transaction figures to extrapolate a Transaction Tax base; Thomas cites its tax/GDP table. |
| Nel's 1986 national accounts-type statistics for Flat Rate Tax revenue estimate | national accounts macro | 1986 | Remuneration, net operating surplus and property income used to estimate potential Flat Rate Tax yield. |
| Robin McGregor talk to the Star Executive Forum, 25 June 1987 (number of JSE-company subsidiaries) | other | 1980-1987 | Cited for rise in subsidiaries of JSE-listed companies from 9 500 to 18 000. |
| Government 'Framework for the Discussion on Privatisation' (November 1986 Pretoria Indaba, confidential draft) | commission or official report | November 1986 | Compared with the White Paper to show a toning down of privatisation momentum. |
| Wassenaar, Assault on Private Enterprise (1977); En route to 'Fairyland' | secondary literature compilation | 1977 onward | Cited by McGregor and Thomas for the case against state enterprise and for state pension underfunding. |
New data¶
The Editor compiled schedules of state-controlled bodies (about 150 entries with parent, employees, directors, activity), state hospitals, abattoirs and municipal markets, and local authorities (towns, population, town clerk), loaded into the McGregor database. Underlying sources are not stated.
Inference¶
Quantification: Descriptive tables.
A collection of advocacy and consultancy essays. Claims are established by assertion, policy argument, comparison with the UK and other countries, close reading of the White Paper, and illustrative figures (asset valuations, price comparisons, hypothetical tax examples). There is no statistical testing; the appendices are directory-style schedules.
Key claims¶
| Claim | Basis | Strength |
|---|---|---|
| Four groups control over 80% of JSE shares and collusion pervades most industries. (p. 8) | No source cited; asserted by the Editor. | Asserted |
| State assets are worth many times more than R250 billion in gross value (e.g. SATS over R60bn, Iscor over R20bn, Escom over R10bn). (p. 31) | Richard Ellis 'guestimate' survey; no method or data shown and described by author as non-authoritative. | Illustrative or anecdotal |
| Iscor's expansion and protection produced a two-tier price system with domestic steel prices about 60% above inflation 1973-80 and export prices about half domestic prices. (p. 36) | Wire rod price example and IWCA Bulletin plus Financial Mail chart; mostly assertion by an interested party. | Partial data |
| Escom is relatively cheap and more efficient than most utilities, though less so once its cheap coal is adjusted for; a private return of 10% would imply about 11,2 c/kWh. (p. 57) | Engineering News price table, Escom 1986 Annual Report and the author's own calculation. | Partial data |
| Privatisation success is not assured: gains depend on rationalisation, higher prices or monopoly, and public-sector inefficiency is asserted without systematic evidence. (p. 16) | Reasoned argument from the White Paper text and observation, with no empirical series. | Asserted |
| Government motor transport operates with lower vehicle utilisation, older fleets and over-maintenance than the private sector, but cost comparisons were impossible. (p. 47) | Price Waterhouse Phase One study based on government-supplied data; no comparative cost profile could be drawn. | Partial data |
| The proposed Tandem Tax (flat rate tax plus 0.5% transaction tax) would yield about R44 billion, proving it viable. (p. 89) | Author's extrapolations from 1985-86 statistics and Margo Commission bank-debit data, with two admitted estimated components. | Partial data |
The author's caveats¶
The Foreword states the book is not an academic work and the appendices are not necessarily complete or accurate schedules. Griffiths says his figures are not authoritative gross values, and Human notes public-sector costing data were inadequate for comparison. Nel admits only two components were estimated, and the Editor warns of errors in the local authority population figures and a published erratum corrects Technetics' ownership.
Gaps in the evidence¶
The argument would be better tested by audited asset registers and historical cost data for SATS, Escom, Iscor and local authorities, which existed in annual reports and Auditor-General records. Comparative cost and productivity data on public versus private provision, plus case studies of the activities already privatised (Annexure A), were also lacking, as the White Paper itself provided none. Distributional evidence on pensions, employment and tariffs, and data on JSE concentration and share ownership, existed in official statistics but were not used.
Replicability: Data poorly documented.