The Political Economy of South Africa: From Minerals-Energy Complex to Industrialisation

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Ben Fine; Zavareh Rustomjee (1996). The Political Economy of South Africa: From Minerals-Energy Complex to Industrialisation. C. Hurst & Co. (London); Westview Press (Boulder).

Type	book
Scope	Economics and economic history of apartheid
Method	mixed
Period studied	1920–1994
Regions	South Africa, Witwatersrand/PWV, Orange Free State goldfields, South Korea (comparative)
Themes	business and state, manufacturing industrial policy, mining migrant labour, origins segregation, macro fiscal finance debt, politics ideology elections, transition post apartheid, comparative theory, methods data sources
Citation key	fine1996a

Argument

Fine and Rustomjee argue that a Minerals-Energy Complex (MEC) of mining, energy and linked mineral-processing/chemical manufacturing is the core of the South African economy and a system of accumulation. It shapes industrialisation, finance and state policy. Input-output data show that the economy's dependence on the MEC has risen, not fallen, so the conventional story of manufacturing displacing mining is a statistical artefact. Six conglomerate 'axes' control mining, manufacturing and finance. State corporations, the IDC and the erosion of the English/Afrikaner capital disjuncture directed industrial policy towards the MEC core and away from diversification. Hence industrialisation ran forward from the MEC rather than backward through import substitution (ISI). The authors reject the 'autonomous developmental state' and the state-versus-market dichotomy, deriving state policy from class and fractional interests, using South Korea as a comparative foil.

Evidence and method

Official South African input-output tables (1984, 1988), national accounts, Union and South African Statistics, Minerals Bureau data, IDC, BTI and Competition Board annual reports, commission reports (Holloway, Viljoen, Reynders, Kleu), McGregor ownership handbooks and Rustomjee's unpublished 1990 thesis, company histories, secondary literature on South Korea and the state, and the South African historiography (Davies et al., O'Meara, Innes, Clark, Kaplan, Christie, Martin, Lazar).

Place in the debates

• Liberal vs Marxist revisionist on apartheid and capitalism (see Liberal vs revisionist: was apartheid functional or dysfunctional for capitalist growth?). Treats both as sharing a race-class dichotomy that neglects the forces of production and sectoral economic structure. The authors draw on revisionism but break with it by arguing that the class structure shifts and that policy cannot be read off class power directly.
• Inter-war hegemony debate (Davies et al. vs Yudelman, Christie, Martin) (see The state and capital: instrumentalism, autonomy and fractions of capital). Rejects a simple zero-sum reading of Afrikaner national capital against imperial/mining capital. Argues for interdependence, a disjuncture between English economic and Afrikaner political power that blocked diversification out of mining, and sector-by-sector variation.
• Developmental state: autonomy and state versus market (see Industrialisation, protection and industrial structure). Rejects state autonomy and the state/market dichotomy. State and market are forms through which class interests operate, and privatisation is a form of state intervention.
• Pattern of South African industrialisation: ISI and its exhaustion (see Industrialisation, protection and industrial structure). Argues that ISI from consumer to capital goods is a false description. Industrialisation ran forward from MEC core activities, and heavy sectors were developed early.
• Mining versus manufacturing, and decline of mining (see Industrialisation, protection and industrial structure). Contends that the division is statistical and arbitrary (transfer pricing, SIC classification). The MEC's GDP share and export dependence persist.
• Corporate concentration and anti-monopoly policy (see Industrialisation, protection and industrial structure). Concentration is high and competition law never challenged large capital. They doubt that unbundling would by itself improve performance.

Findings

• Dependence on mining and energy has increased, so the claim that manufacturing has overshadowed primary production is wrong. (p. 21)

  the economy's dependence on mining and energy and directly related activity has increased and not decreased.

• The MEC's share of GDP rose and non-MEC manufacturing stagnated in a narrow band. (p. 93)

  Since 1960, non-MEC manufacturing has stagnated within a narrow band of 15-17 pet cent of GDP.

• The MEC is internally cohesive and weakly linked to the rest of manufacturing. (p. 94)

  58.3 per cent of MEC inputs are from the MEC and that27.7 per cent of MEC output is returned to MEC sectors.

• The six conglomerate groups dominate mineral production. (p. 111)

  the six conglomerates mine more than 70 per cent of all major minerals in South Afi'ica.

• Ownership of the Johannesburg Stock Exchange is concentrated in the conglomerates. (p. 114)

  In 1988, 82.5 per cent of the entire JSE was controlled by the six conglomerates (Table 5.6), three of which were dominant.

• Anti-monopoly regulation was used to help Afrikaner capital enter, not to dismantle large-scale capital. (p. 129)

  although anti-monopoly legislation has been in existence since 1955, it has never been exercised to the detriment of large-scale capital.

• In the inter-war period the disjuncture between Afrikaner political and English economic power impeded diversification out of mining. (p. 159)

  The position of the MEC during the inter-war period was determined by the disjuncture between Afiikaner political and English economic power which impeded industrial diversification

• IDC financing was heavily directed at MEC sectors, reaching 68.3 per cent in 1960. (p. 171)

  with 68.3 per cent going to the complex in I gOO, a gradual decline to 37 .4 per cent in I 980 and a subsequent rise to 48.0 per cent in I 985.

• Tariff policy was reactive and incoherent and was not the central instrument of industrial policy. (p. 197)

  Thus, tariff policy was neither coherent nor decisive as a policy to shape industrialisation. Instead, it was reactive to interests of various fiactions of capital.

• Import substitution had largely occurred before 1945, and heavy sectors were developing alongside consumer goods, contradicting the ISI sequence. (p. 233)

  Fig. 9.1 shows that 'import substitution' had largely taken place before 1945 even at the most aggregated level.

Evidence ledger

Sources used

Source	Kind	Period	How used
Input-Output Tables (1984 and 1988)	official statistical series	1984, 1988	Calculates inter-sectoral flows, import propensities, value added and the MEC's input/output cohesion, which underpin the definition of the MEC core.
South African Labour Statistics (1990)	official statistical series	1970-1989	Provides mining and manufacturing employment series to compare conventional and MEC-based sector employment.
Minerals Bureau data / South Africa's Mineral Industry Yearbook (SAMI)	official statistical series	1979-1990	Gives raw and processed mineral production and export shares used to show continuing export dependence on the MEC.
Foreign trade statistics, Commissioner for Customs and Excise	international trade or finance data	1980s	Trade classified under HS and ISIC is the basis for sectoral export shares, with reclassification of 'classified' trade categories.
McGregor, Who Owns Whom (1990); Financial Mail Top Companies Supplement, 19 May 1989; Rustomjee (1990)	secondary literature compilation	1988-1989	Ownership tables of JSE shares, listed companies, financial institutions and mining house cross-holdings establish the six-conglomerate structure.
Du Plessis (1977; 1978; 1979) concentration studies, with Fourie and Smit (1989)	secondary literature compilation	1972, 1982	Supplies manufacturing concentration ratios and oligopoly measures from industrial census data to show high concentration.
Competition Board Annual Reports and Published Investigations 1980-90	commission or official report	1980-1990	Used to catalogue investigations and show that anti-monopoly regulation never challenged large-scale capital.
Regulation of Monopolistic Conditions Act 24 of 1955; Competition Act 96 of 1979; Act 5 of 1986; 1986 deregulation Act; Hansard 1977	legislation gazette	1955-1990	The legislative record shows enabling-only competition policy that favoured Afrikaner capital entry.
IDC Annual Reports (various years) and IDC (1990) policy document	company records or reports	1950s-1991	IDC investment shares in MEC sectors demonstrate state-financed MEC expansion.
Department of Mineral and Energy Affairs Annual Reports (1980, 1981)	commission or official report	1980-81	Documents the institutional concentration of energy and mineral policy in one department and the Energy Policy Committee.
Escom commissioning schedule and Statistical Review 1989	company records or reports	1950-2001	Used to show power station commissioning and coal contracts awarded to Afrikaner-owned mines.
Trade Monitor (1993), University of Cape Town; CEAS (1993); Keys (1993)	secondary literature compilation	1988-1993	Export composition data and the normative economic model are used to criticise current industrial policy.
O'Meara (1983) and Lazar (1987) on Afrikaner capital	secondary literature compilation	1939-1960	Data on Afrikaner share of turnover, factories and finance in 1939-49 are drawn from these studies.
Newspapers and periodicals (Business Day, Financial Mail, Sunday Times, Weekly Mail)	newspapers periodicals	1982-1992	Used for statements on IDC, BTI resignation, section 37E incentives and competition policy.
Union Statistics for Fifty Years and Jones/Muller, Verhoef and Innes data on banking	secondary literature compilation	1947-1981	Deposit shares of commercial banks illustrate Volkskas's growth after 1948.

New data

The authors reclassify official sectoral statistics (input-output tables, GDP, employment, trade) into an 'MEC core' versus non-MEC manufacturing and construct series on MEC GDP share 1924-90, MEC fixed investment, imports/value added by sector, and ownership tables from secondary compilations; no new primary survey or archive.

Inference

Quantification: Descriptive tables.

Descriptive reclassification of official sectoral statistics (input-output linkages, GDP, exports, investment) plus historical narrative and sector-by-sector case studies of the inter-war and post-war periods, combined with critical review of secondary literature; no regression or formal causal identification.

Key claims

Claim	Basis	Strength
Reclassifying MEC-related manufacturing with mining shows the economy's dependence on the MEC has increased rather than declined; non-MEC manufacturing stagnated at roughly 15-17% of GDP since 1960. (p. 81)	Input-Output Tables 1988, South African Statistics, Union Statistics for Fifty Years; recalculated GDP shares (Figs 4.1, 4.5).	Systematic data
The MEC is highly cohesive: 58.3% of MEC inputs come from the MEC and little of its demand is met by non-MEC manufacturing. (p. 81)	Input-Output Tables 1988 (Table 4.3).	Systematic data
Six conglomerate groups (axes) control mining, much of manufacturing and the financial sector, with 82.5% of the JSE controlled by them in 1988. (p. 102)	McGregor's Who Owns Whom, Financial Mail 1989 and Rustomjee (1990) ownership tables; Central Statistical Service data; Du Plessis concentration ratios.	Partial data
Anti-monopoly regulation never challenged large-scale capital and was used to force English capital to admit Afrikaner capital. (p. 117)	Legislation (1955, 1979, 1986 Acts), Competition Board reports and investigations, Hansard.	Partial data
The inter-war disjuncture between English economic and Afrikaner political power precluded an industrial strategy of diversification out of mining, with state enterprises (Iscor, Escom) remaining dependent on mining demand. (p. 138)	Case studies of steel, chemicals, diamonds, agriculture drawing on secondary sources (Christie, M. Kaplan, Cartwright, Newbury) and inter-war statistics.	Illustrative or anecdotal
South African industrialisation did not follow the ISI sequence from consumer to capital goods; heavy MEC-linked sectors industrialised early, so ISI is a misleading framework. (p. 222)	Import/value-added ratios and gross output series (Figs 9.1-9.4) from official statistics; literature review.	Partial data
Post-war industrial policy (state corporations, tariffs, decentralisation) was reactive and incoherent, and the pro-active thrust came from IDC support for the MEC; Afrikaner capital was favoured. (p. 191)	BTI reports and application records, Viljoen/Reynders/Kleu commissions, IDC investment shares (Table 7.4), Norval, secondary sources.	Partial data
Financial-sector concentration and deregulation encouraged speculation and capital flight (about 7% of GDP per annum) rather than productive investment. (p. 247)	Authors' own capital-flight estimates (Rustomjee 1991), financial sector tables, Roux et al. and Ovendon and Cole.	Partial data

The author's caveats

Notes that South African trade statistics are hard to decipher because roughly half of reported trade is listed under 'classified', and that more recent concentration data than 1972 are unavailable; acknowledges capital flight figures are contested; admits some statements rest on 1984 or 1988 tables and may have changed, and that MEC boundaries are arbitrary.

Gaps in the evidence

The argument relies heavily on aggregate input-output tables for only 1984 and 1988 and on secondary compilations for ownership, so linkage changes over time and the causal claim that the MEC shaped industrial policy are not tested with time-series or firm-level data. Primary archival evidence (cabinet, IDC, BTI, Chamber of Mines and company records) for how Afrikaner capital was favoured is thin and largely drawn from other scholars. Disaggregated input-output tables for earlier benchmark years, firm-level ownership and investment records, and BTI tariff files would allow direct testing; many of these existed and are now more accessible.

Replicability: Data described but not public.