Engaging the MEC: or a few of my views on a few things

Literature › Works

Ben Fine (2009). Engaging the MEC: or a few of my views on a few things. Transformation: Critical Perspectives on Southern Africa, no. 71. Transformation (Project MUSE).

Type	journal article
Scope	Post-1994 South African economy
Method	theoretical or conceptual
Period studied	1970s–2008
Regions	South Africa
Themes	business and state, manufacturing industrial policy, macro fiscal finance debt, transition post apartheid, comparative theory, labour markets wages, politics ideology elections
Citation key	fine2009

Argument

Fine reflects on how he formulated the minerals-energy complex (MEC) in the mid-1980s. He presents it as an evolving system of accumulation, not just a descriptive sectoral category, and as a historiographical alternative to racist Fordism and the Industrial Strategy Project. He argues that South African industrialisation grew around core MEC sectors and state corporations (ESKOM, ISCOR, SASOL), not around failed import-substituting consumer-goods protection. After 1994 the MEC persisted, but its conglomerates turned to financialisation and capital export. This, he says, shaped orthodox macroeconomic policy, depressed domestic investment and contributed to the electricity crisis. He proposes extending the MEC approach to labour markets, the history of mining and wider social provision, and he laments the loss of critical political-economy scholarship after the transition.

Evidence and method

Mainly the author's own recollection and earlier work (Fine and Rustomjee 1997 and others). He draws on secondary statistics on capital flight, outward FDI and unbundling (Mohamed and Finnoff 2004, Wesso 2001, Chabane et al 2006), and on World Bank, EIU, UBS and Business Day reports, ministerial statements (Manuel) and the electricity-sector literature. No new archival or survey data are presented.

Findings

• Fine's definition of the MEC as a specific system of accumulation that extends beyond its core sectors through corporate control and state-capital relations. (p. 3)

  In brief, the MEC is to be understood in terms of the concrete form of accumulation of capital taken in South Africa, centred on a core set of sectors, but reaching beyond them in terms of corporate control and influence.

• The first 'holy cow' he targets is the consumer-goods import-substitution account of industrialisation. (p. 5)

  First is the belief that South Africa’s industrialisation had been based on a (failed) import-substituting industrialisation around consumer goods.

• His alternative account is that industrial development occurred around core MEC sectors. (p. 5)

  For South Africa’s industrialisation had been the consequence of development, if within limits, around the core MEC sectors.

• His critique of racist Fordism: its underconsumptionism cannot explain non-consumption sectors such as gold and capital goods. (p. 4)

  unable to address the fate of non-consumption sectors – why should gold and capital and intermediate goods be restricted by race

• He cites estimates that illegal capital flight rose in the post-apartheid period. (p. 8)

  flight from South Africa rose as a percentage of GDP from 5.4 per cent between 1980 to 1993 to 9.2 per cent from 1994 to 2000

• Outward FDI by domestic conglomerates grew rapidly after 1995, contrary to the claim that overseas listings fund domestic investment. (p. 8)

  total stock of outward FDI has grown from $8.7billion in 1995 to $28.8billion in 2004

• The financial sector has grown much faster than GDP while excluding a large share of the population. (p. 9)

  they have grown at almost twice the rate of GDP over the last decade or so but offer no services directly at all to 40 per cent of the population

• State-led MEC investment under the Industrial Development Corporation (IDC) was highly capital-intensive, with weak employment effects, during the GEAR period. (p. 11)

  often creating jobs at a capital cost of between R5m and R8m in capital per worker, hardly conducive to employment creation

• Electricity expansion needs were huge, yet capital and the state both preferred other uses of funds. (p. 12)

  over R300 billion over the first five year period alone or of the order of 17 per cent of GDP

• Post-apartheid tariff cuts favoured MEC core sectors and hurt labour-intensive black employment. (p. 13)

  tariff reduction exceeding WTO membership requirements, MEC core sectors the main beneficiaries, and black labour-intensive employment the main casualty

• BEE and the minerals bill shifted mineral wealth at the conglomerates' expense, showing that state-capital coordination was possible. (p. 12)

  essentially appropriated 25 per cent of the nation’s mineral resources worth R55 billion at the expense of the conglomerates

• He argues that the democratic transition neutralised critical political-economy scholarship. (p. 18)

  the associated methodologies and critical stances involved seem subsequently to have been lost