The Internationalization of South African Capital: South African Direct Foreign Investment in the Contemporary Period¶
David E. Kaplan (1983). The Internationalization of South African Capital: South African Direct Foreign Investment in the Contemporary Period. African Affairs, Vol. 82, No. 329. Oxford University Press on behalf of The Royal African Society.
| Type | journal article |
| Scope | Economics and economic history of apartheid |
| Method | mixed |
| Period studied | 1960–1982 |
| Regions | South Africa, USA, UK, Chile, Zimbabwe, Brazil, Australia |
| Themes | business and state, macro fiscal finance debt, manufacturing industrial policy, mining migrant labour, comparative theory, inequality poverty unemployment |
| Citation key | kaplan1983 |
Argument¶
Kaplan argues that the recent surge in South African direct foreign investment, mainly post-1976 and especially post-1978, differs from DFI by other non-advanced countries such as Argentina and India. It is directed at advanced capitalist countries, takes the form of acquisitions and majority ownership, and is financed via overseas borrowing or the financial Rand. The driver is extreme domestic capital concentration and a limited home market, itself a result of a highly exploitative low-wage economy, combined with gold-price-driven profits and a relaxation of Reserve Bank exchange control. The Anglo American case study shows an internationalization with little centralization of R&D or head-office functions in South Africa, which Kaplan attributes to South Africa's 'less-developed' character. This challenges generalizations about Third World multinationals.
Evidence and method¶
Press reports, company annual reports (about 250 JSE-quoted companies), broker reports, and in-depth interviews with senior management at 18 firms; Anglo American, MINORCO and Charter annual reports and financial data; secondary studies of Argentine and Indian DFI (O'Brien and Monkiewicz, Lall); Kaplan's 1977 D.Phil. thesis; Reserve Bank correspondence.
Place in the debates¶
- Nature of Third World multinationals / DFI from non-advanced countries (see Industrialisation, protection and industrial structure). Argues South African DFI departs from the Argentine/Indian pattern (small-scale, regional, minority joint ventures, adapted technology), so generalizations from those studies need re-appraisal.
- Monopoly capital and the South African state (radical/structuralist analysis of concentration) (see Industrialisation, protection and industrial structure). Treats monopoly concentration, rooted in the mining houses, as the key characteristic of South African capitalism and the main driver of overseas expansion.
- Technological dependency of South African industry (see Industrialisation, protection and industrial structure). Contends that dependency is not yet properly specified and that many South African firms develop and internationally capitalize 'know-how', though R&D is often located abroad.
- Are Anglo and South African firms conventional MNCs? (see Industrialisation, protection and industrial structure). Finds loose, decentralized integration with little intra-firm trade and head-office functions; partly accepts but also treats as ideological the firms' claims of autonomy.
Findings¶
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South African DFI is oriented toward advanced capitalist countries, unlike other developing-country DFI. (p. 12)
But the basic tendency is to invest in the advanced capitalist countries. The USA and UK have recently been the major magnets for South African DFI
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Ownership pattern: much DFI is wholly or majority owned. (p. 11)
South African DFI often takes the form of a wholly owned venture (in nearly one-half of the cases examined) and in most cases (nearly two- thirds) South African companies are either sole owners or majority partners.
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The Reserve Bank's permissiveness and timing were critical, linked to the gold-driven balance of payments surplus. (p. 17)
the willingness of the Reserve Bank to permit capital export or, as is often the case, to allow companies to guarantee loans contracted abroad for their foreign ventures, appears to be a consequence of the massive surplus on the Balance of Payments which South Africa enjoyed from 1978-80.
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Capital concentration and market dominance were the main reason firms gave for investing abroad. (p. 19)
In over two-thirds of the companies interviewed, the major reason given for overseas expansion was either that the firm already dominated the local market or that its growth in the local market was constrained
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The limited home market is linked to exploitation, low wages and rising unemployment, with rising profits fuelling concentration and investment abroad. (p. 19)
The limited size of the domestic market is primarily a function of a highly exploitative system. Wages for the bulk of the work force are extremely low, while black unemployment has been constantly increasing
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Anglo's profits surged after 1977, much faster than the book value of its investments, implying a higher profit rate. (p. 21)
While profits increased 96.6 per cent between 1972 and 1976, they increased by 170.3 per cent between 1978 and 1981.
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Gold's share of Anglo's income rose sharply with the gold price. (p. 22)
In 1980 gold contributed 52 per cent of the company's income, as compared to 37 per cent in 1979, 30 per cent in 1978 and 28 per cent in 1976.
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Strict postwar exchange control, tightened after Sharpeville, shaped Anglo's choice to diversify domestically rather than expand mainly in overseas mining. (p. 29)
Strict exchange control in South Africa in the period following World War II seems to have been a major factor in the Group's decision to diversify in the domestic economy
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Overseas operations are weakly integrated with South African head offices and R&D is located abroad, reflecting South Africa's less-developed character. (p. 20)
R and D for the entire firm is generally not being centralized in South Africa. Neither is the South African Head Office responsible for the same wide range of activities
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Anglo's overseas arms (MINORCO, Charter) were structured offshore to shield against South African taint and anti-trust action. (p. 24)
Concentration of overseas operations in off-shore MINORCO will also help shield Anglo American Corporation and De Beers, where activities may be sensitive to South African origins
Evidence ledger¶
Sources used¶
| Source | Kind | Period | How used |
|---|---|---|---|
| Annual reports of some 250 companies quoted on the Johannesburg Stock Exchange | company records or reports | c. 1976-1982 | Source of the Table 1 listing of principal South African foreign investments made after about 1976 and of the broad-trend findings on DFI. |
| Press and business reports on South African overseas investments (Rand Daily Mail, Sunday Times, Financial Mail, The Star, South African Industrial Week, The Economist, Forbes) | newspapers periodicals | 1969-1982 | Supplies details of investments (Table 1), Triton's strategic rationale, Anglo's Consgold/Newmont moves and executive statements. |
| In-depth interviews with senior management of 18 companies making significant foreign investments | interviews oral history | c. 1981-1982 | Fills gaps in annual reports and yields motives, Reserve Bank attitudes, concentration as driver, and head-office autonomy findings. |
| Brokers' reports | company records or reports | c. 1980-1981 | Part of the data base for DFI; James Capel is quoted on the Consgold-Newmont deal benefiting Anglo. |
| Anglo American Annual Report 1981 (Ten Year Summary) and Anglo-American Report 1977 | company records or reports | 1972-1981 | Basis for Table 2 on Anglo profits and book/market value of investments, from which profit and investment growth rates are calculated. |
| MINORCO Annual Reports and MINORCO company announcement 27 February 1981 | company records or reports | 1981 | Source for Table 3 on MINORCO's principal holdings and percentage stakes. |
| Charter Consolidated Annual Report, 1981 | company records or reports | 1981 | Source for Table 4 on Charter's holdings by geographical area and investment category. |
| Boart International Annual Report 1981 and company booklet; South African Manganese Corporation Annual Report 1979 | company records or reports | 1979-1981 | Documents the foreign share of Boart's earnings, its Longyear acquisition, and directors' claims of technological superiority at the Roane plant. |
| Financial Mail Special Survey Top Companies, 8 May 1981; Financial Mail 'Inside the Power House' (4 July 1969) and 19 October 1979 | newspapers periodicals | 1969-1981 | Supports Anglo's rank among the largest companies, its holding-company structure, Oppenheimer's views on exchange control, and Charter's restructuring. |
| Correspondence with the South African Reserve Bank | other | c. 1982 | Supports the claim that dividend/balance-of-payments contribution is a criterion for approving foreign investment. |
| O'Brien and Monkiewicz, Technology Exports from Developing Countries: Argentina and Portugal (UNIDO, 1981); Lall, Developing Countries as Exporters of Technology (1979) | secondary literature compilation | 1967-1980 | Supplies the Argentinian and Indian DFI comparator data against which South African DFI patterns are contrasted. |
| Mutungwazi 'Foreign Investment and Economic Development in Zimbabwe' (1981); Stoneman (1982) | secondary literature compilation | 1981 | Estimates South African share of foreign investment stock in Zimbabwe. |
| Governmental commission on concentration (anti-monopoly/competition inquiry) | commission or official report | c. 1970s-1980s | Cited as concluding that the economy is highly concentrated, though the author criticises its market-share criteria. |
| Kaplan, Class Conflict, Capital Accumulation and the State (D.Phil. thesis, Sussex, 1977) and R. Kaplan, Anglo American Corporation of South Africa Ltd: investments in North America (ACOA, 1982) | secondary literature compilation | 1922-1982 | Supports claims about mining-house monopoly, absence of anti-monopoly legislation, Anglo's South African base and MINORCO's investment portfolio. |
| Work in Progress No. 17, April 1981 ('Inflation and the Working Class') | newspapers periodicals | 1981 | Cited for rising number of Soweto households below the poverty datum line during growth. |
New data¶
Table 1: author-compiled listing of principal post-1976 foreign investments by South African firms (excluding Anglo and mining), built from press reports, annual reports of ~250 JSE-listed companies and interviews at 18 firms; also author-compiled tables on Anglo, MINORCO and Charter from company reports.
Inference¶
Quantification: Descriptive tables.
Comparative descriptive analysis of South African DFI against Argentine and Indian DFI patterns from secondary studies, using a hand-compiled, non-random table of investments and management interviews, plus a single case study of Anglo American Group with company-report tables; the main argument rests on qualitative inference.
Key claims¶
| Claim | Basis | Strength |
|---|---|---|
| South African DFI differs from other developing-country DFI: it is concentrated in advanced countries (USA, UK), mostly acquisitions or partnerships, and often wholly or majority owned. (p. 474) | Table 1 compiled from annual reports, press and interviews, contrasted with O'Brien/Monkiewicz and Lall data on Argentina and India. | Partial data |
| The rise in DFI after 1976, especially after 1978, was enabled by Reserve Bank willingness to permit capital export following the balance-of-payments surplus from the gold price rise. (p. 480) | Interviews with almost all companies, correspondence with the Reserve Bank, press reports; no Reserve Bank or balance of payments statistics presented. | Illustrative or anecdotal |
| Capital concentration and the limited domestic market were the primary factors driving DFI. (p. 482) | Interviews: over two-thirds of interviewed firms gave dominance or constrained local growth as the main reason; general assertions on concentration. | Partial data |
| Anglo American profits and investments rose much faster in 1978-81 than 1972-76, with the rate of profit apparently rising. (p. 484) | Table 2 from Anglo annual reports (1972-1981), noting non-comparability of statistics. | Partial data |
| Anglo's overseas expansion runs through offshore vehicles MINORCO and Charter, which are loosely integrated with the South African head office. (p. 490) | MINORCO and Charter reports (Tables 3 and 4), press reports, interviews. | Partial data |
| South African firms do not centralize R&D, head-office functions or intra-firm trade in South Africa as advanced-country MNCs do, a consequence of South Africa's less-developed character. (p. 483) | Interviews with firms, company reports on Boart and Abercom, and Murray's figures on US intra-firm trade; no systematic data. | Illustrative or anecdotal |
| The Anglo Group exercises a dominance over the South African economy without parallel elsewhere. (p. 485) | Financial Mail Top Companies survey and listing of sector shares; no systematic comparative data on other economies. | Asserted |
The author's caveats¶
The author states there are no overall data on South African DFI, that data come from press, company and brokers' reports and interviews, that annual reports omit some investments and give incomplete information, that Table 1 covers only principal post-1976 investments (not a complete listing), and that the sample covers probably over 75 per cent of relevant quoted companies.
Gaps in the evidence¶
The argument lacks systematic balance-of-payments and exchange-control data on approved capital exports, Reserve Bank approval records, and firm-level R&D or intra-firm trade data to test claims about decentralisation and technology. Pre-1976 DFI and unquoted or omitted sectors (banks, operating mines, property) are excluded, so the 'increase since 1976' is not benchmarked. Some such data (Reserve Bank statistics, company filings) existed then; interview claims could be checked against archival company records now.
Replicability: Data poorly documented.