State, capital and the emergence of a new power elite in South Africa: 'Black economic empowerment' at national and local levels

Literature › Works

Bill Freund (2006). State, capital and the emergence of a new power elite in South Africa: 'Black economic empowerment' at national and local levels. Harold Wolpe Memorial Trust Tenth Anniversary Colloquium, 'Engaging silences and unresolved issues in the political economy of South Africa', Cape Town, 21-23 September 2006. Harold Wolpe Memorial Trust.

Type	conference paper
Scope	Post-1994 South African economy
Method	synthesis review
Period studied	1910–2006
Regions	South Africa, Malaysia, Durban
Themes	business and state, transition post apartheid, comparative theory, politics ideology elections, manufacturing industrial policy, inequality poverty unemployment
Citation key	freund2006

Argument

Using Peter Evans's concept of 'embedded autonomy', Freund asks whether post-apartheid South Africa can be called a developmental state. He argues that the apartheid-era Afrikaner state-business nexus (parastatals, Broederbond, Federale Mynbou/GENCOR) did fit the late-industrialiser model, although Afrikaner business was never a seamless bloc and broke with the state in the 1970s-80s. The ANC government has made business profitable and stable, so the social crisis is now severed from any crisis of capital. Its project is to create a new, state-aligned black capitalist elite through Black Economic Empowerment (BEE). Comparing Malaysia's New Economic Policy, he finds close parallels in elite formation but a much weaker social and industrial project in South Africa, so the new elite looks rentier and parasitical. The abstract says the local (Durban) level is largely irrelevant, but the Durban section is missing from the text provided.

Evidence and method

Secondary literature (Evans, Yudelman, Clark, Adam & Giliomee, O'Meara, Glaser, Hirsch, Southall, Gumede, Jomo, Emsley, Wah), South African press reports (Business Day, Weekly Mail & Guardian, Sunday Independent), and official Malaysian statistics as cited from secondary sources. The Durban material draws on earlier shared research.

Findings

• Evans's definition of the model developmental state as a state embedded in society through institutionalised negotiation channels frames the paper. (p. 2)

  bureaucratic apparatuses…are embedded in a series of social ties that bind the state to society and provides institutionalised channels for the negotiation and renegotiation of goals and policies.

• Regulation channelled Anglo American into domestic manufacturing and property, tying big mining capital to the national industrialisation project. (p. 3)

  Anglo American, the mining giant, was virtually obliged to become the initiator of textile mills, paper mills and chemical plants and become a major investor in urban property in South Africa by the regulatory regime.

• After 1960 Anglo American helped an Afrikaner mining house to be created, part of the interlocking of Afrikaner, English and state capital. (p. 4)

  it was Anglo-American which was prepared to carve out a section of mining interests to Afrikaner interests in creating Federale Mynbou or GENCOR as it became.

• The apartheid-era state-business-Afrikaner nexus is characterised as a developmental late-industrialiser power elite. (p. 4)

  In this sense, South Africa really did qualify as a developmental, late industrialising state with a particular sort of power elite that reflected the particularities of Afrikaner nationalism.

• Afrikaner business was not a docile ethnic bloc; its interests converged with those of English-speaking capital. (p. 5)

  Much of the time Afrikaner businessmen said much the same thing as English businessmen.

• Post-1994 policy has settled the crisis of capital, which is now detached from the continuing social crisis of the poor. (p. 6)

  the social crisis, which remains acute but is in large part depoliticised, has been severed from the crisis of capital which has largely gotten what it desired

• Malaysia's NEP used procurement, licensing and ownership targets to build a Malay business elite, which Freund sees as close to ANC aspirations. (p. 8)

  Malays were favoured to various degrees in terms of state procurement, tendering processes and the licensing of businesses and targets were set in terms of the Malay share of ownership on the Stock Exchange.

• Unlike South Africa, Malaysia combined elite formation with large-scale poverty reduction (49% poor in 1970 to about 11% in 1995). (p. 9)

  According to official national definitions, 49% of the population was considered poor in the l970 census; this figure has fallen by 1995 to just above 11%

• South African social 'delivery' is mostly transfers and housing amid stagnant unemployment and extreme inequality, far weaker than the Malaysian social project. (p. 10)

  has consisted largely of hand-outs—pensions, disability grants, child support grants, dispersal of electricity and water reticulation as well as houses in the face of stagnant or worsening unemployment levels and extreme income inequality.

• Even in Malaysia the NEP's ownership targets were not met, with Malay corporate equity rising from 1.5% to 20.6% over 1969-95. (p. 10)

  According to official figures, Malays held 1,5% of corporate equity in 1969 and 20,6% in 1995, a considerable but not spectacular increase which was largely accounted for early in the process.

• Sectoral BEE targets such as the Mining Charter work through pressure rather than penalties. (p. 11)

  The Mining Charter, watered down from initially quite extravagant demands for change, eventually required that companies be under black ownership to the extent of 26% in ten years, to be financed by the industry.

• Early corporate-initiated BEE vehicles (NAIL, JOHNNIC) failed, after which BEE shifted toward state-led creation of black capitalists. (p. 11)

  It is an interesting and cautionary tale that these early projects, NAIL and JOHNNIC, ultimately proved to be failures.