State Policy and Technological Change - The Development of the South African Telecommunications Industry¶
David Kaplan (1989). State Policy and Technological Change - The Development of the South African Telecommunications Industry. Journal of Southern African Studies, Vol. 15, No. 4. Taylor & Francis.
| Type | journal article |
| Scope | Economics and economic history of apartheid |
| Method | archival narrative |
| Period studied | 1950–1989 |
| Regions | South Africa, Transvaal/East Rand |
| Themes | manufacturing industrial policy, business and state, labour markets wages, sanctions divestment, comparative theory |
| Citation key | kaplan1989 |
Argument¶
The article traces how the state, initially driven by military-strategic concerns, used South African Post Office purchasing power through long-term Manufacture and Supply Agreements to build a local telecommunications industry from 1958. For two decades, under slow-changing electro-mechanical technology, this was a clear success, with high local content and local design capability. The 1977 decision to go fully digital, and the choices of CIT-Alcatel and Siemens as technology sources, brought technology transfer but also lower local content, rising price differentials, loss of design capability and negligible exports. Kaplan concludes that the old policy instrument is too blunt for rapidly changing technology and must be recast.
Evidence and method¶
About thirty anonymised interviews with senior management at telecommunications firms, the South African Post Office and government officials, plus company annual reports and brochures, Post Office annual reports and correspondence, Board of Trade and Industries reports, press reports (Financial Mail, Cape Times, Sunday Times) and market surveys by Business and Marketing Intelligence.
Place in the debates¶
- Role of the military and strategic considerations in 1950s industrialisation (see Industrialisation, protection and industrial structure). Argues the military's role in establishing local production, through the Defence Resources Board and the Electronics Committee, is omitted in the literature, and criticises Frankel for ignoring it.
- Effectiveness of state-led import-substitution and local-content policy under rapid technological change (see Industrialisation, protection and industrial structure). Held effective under slow electro-mechanical technology but ineffective after digitalisation, which raised capital intensity, cut employment, made the local market too small and weakened design capability.
- Technology transfer to developing countries in return for market access (see Industrialisation, protection and industrial structure). Supports Hobday's claim that multinationals will transfer core technology to keep markets; sees the Siemens case in South Africa as further evidence.
Findings¶
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The origin of local telecoms manufacturing was primarily military, driven by fear of supply disruption. (p. 5)
The initial motivation for the establishment of the electronics industry was therefore primarily military.
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The Post Office's purchases were made contingent on local manufacture, drawing the foreign suppliers into local production. (p. 5)
guaranteed purchases of telecommunications equipment on the part of the South African Post Office would be made contingent upon local manufacture.
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Firms were informally pressed to employ whites only, a policy that eroded as the 1960s boom created labour shortages. (p. 6)
Although nothing was ever written down, the telecommunications companies were prevailed upon to employ white labour only, except in the most menial grades.
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Local industry grew rapidly in the first agreement period. (p. 7)
By 1968 turnover of the local industry had risen from an initial R2m to R50m, capital investment from some R2m to R40m, and employment even more dramatically
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Siemens obtained a two-thirds share of the switching market in return for transferring digital and integrated-circuit know-how. (p. 13)
Siemens, in effect, got a 2/3 share of the lucrative South African market for switching equipment in return for which they agreed to the transfer of significant know-how in digital technology
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Sanctions threats and the French arms embargo shaped the decision to have two foreign technology sources. (p. 14)
Asked why there should be two import sources, Mr. Rive [Postmaster General at the time] said that with threats of sanctions hanging over South Africa, it would be an advantage to have two supply sources.
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Digital adoption was early and the network became very modern, but the local industry benefited less. (p. 15)
despite the transfer of significant digital telecommunications technology to South Africa, the impact upon the local telecommunications industry has not been so favourable.
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Telecoms was the worst exporter among local electronics sectors, and local content aims were unmet. (p. 15)
Among the local electronics manufacturing sectors, the telecommunications sector, in respect of its export achievement (only 1.5 per cent of production is exported), is indeed the poorest performer
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Digital technology made production capital-intensive, cut labour use, and shrank the local market's efficient scale. (p. 16)
these changes in technology rendered the industry far more capital intensive and led to a very substantial reduction in the employment of labour.
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The long-term agreement is judged too blunt an instrument for the digital era. (p. 16)
the long-term agreement is, since the advent of digital, simply too blunt an instrument to sustain a viable local industry.
Evidence ledger¶
Sources used¶
| Source | Kind | Period | How used |
|---|---|---|---|
| Author's ~30 confidential interviews with senior management of the larger telecommunications companies, South African Post Office personnel and government policy personnel (HSRC project) | interviews oral history | c. 1987-1988 (interviews); covers 1950s-1980s | Principal basis for reconstructing the history of the industry, the Post Office's policy decisions, the digital choice and company motivations. |
| South African Post Office correspondence (team recommendation on hybrid vs digital systems) | company records or reports | 1977 | Shows the Post Office team's reasoning in recommending a fully digital system rather than another hybrid. |
| Telephone Manufactures of South Africa correspondence | company records or reports | 1977-1979 | Documents why TM could not agree licence terms with CIT-Alcatel over control of the firm. |
| South African Post Office Annual Reports (telephone numbers 1977/8 and 1982/3) | official statistical series | 1977/8-1982/3 | Supports the claim that the network expanded by almost 50 per cent after the digital decision. |
| Annual Report of the Postmaster General (1958) | commission or official report | 1958 | States the object of the Manufacture and Supply Agreements as stimulating local manufacture. |
| Board of Trade and Industries, Investigation into the South African Electronics Industry, Report No. 2455 (Pretoria, 1987) | commission or official report | 1984-1987 | Used for telecommunications' share of domestic electronics production (about one-half in 1984) and its poor export performance (1.5 per cent of production). |
| Business and Marketing Intelligence, The South African Electronics Industry. Management Report and Global Scenario (Pretoria, 1985) | secondary literature compilation | 1984-5 | Provides statistical survey data on local content (60 per cent for telecommunications versus 24.7 per cent for electronics overall). |
| Financial Mail, 27 Sept. 1968 (industry survey) | newspapers periodicals | 1968 | Source for the white share of the labour force in 1968 (55 per cent) and claimed local content of 50-90 per cent by the end of the first agreement. |
| Cape Times, 26 November 1977 | newspapers periodicals | 1977 | Quotes Postmaster General Louis Rive's caution about relying on French technology after the arms embargo. |
| Sunday Times, 2 October 1977 | newspapers periodicals | 1977 | Quotes the Postmaster General on the political-risk rationale for two import sources of technology. |
| Altron Group Public Relations Department, 'Standard Telephones and Cables - the first 60 years' brochure (1984) | company records or reports | 1950-1984 | Documents the small STC assembly operation (eight employees) in 1950. |
| J. Wegner, Siemens in Südafrika (Berlin-München, 1970) | secondary literature compilation | 1950s-1960s | Cited for details of the 1950s arrangement between Siemens and the Defence Resources Committee for ten-year purchases of locally made products. |
| Company annual reports of the supplier firms | company records or reports | 1960s | Together with interviews, documents the range of components manufactured locally from the mid-1960s. |
New data¶
Author-conducted interview set of about 30 anonymised interviews with telecommunications company, Post Office and government personnel, used to reconstruct the industry's history; no quantitative dataset is built.
Inference¶
Quantification: Illustrative figures.
Historical case study and process-tracing of policy decisions, relying chiefly on anonymised elite interviews, supplemented by official reports, company records and press, with a before/after comparison of the electro-mechanical and digital technological periods.
Key claims¶
| Claim | Basis | Strength |
|---|---|---|
| The initial impetus for the local telecommunications industry was military/strategic, via the Defence Resources Board's Electronics Committee, a role neglected in the literature. (p. 567) | Interviews and Wegner's account of Siemens negotiations; contrasted with Frankel. | Partial data |
| Under the 1958-68 agreement, the industry grew rapidly (turnover R2m to R50m, investment R2m to R40m, employment to 8,000) with high and rising local content. (p. 570) | Company interviews, annual reports and Financial Mail 1968; claimed local content treated cautiously by the author. | Partial data |
| Firms were informally pressed to hire only whites at first but shifted to Indian and Coloured labour in the 1960s, so that blacks were the majority of employees by about 1978. (p. 570) | Company interviews, Financial Mail 1968; author's estimate from incomplete firm data. | Partial data |
| The Post Office decided in late 1977 to go fully digital after Siemens withdrew its CP hybrid, becoming one of the first authorities to do so. (p. 573) | Company and Post Office interviews and Post Office correspondence. | Partial data |
| The choice of suppliers (Alcatel E10 via Altech/Teltech; Siemens EWSD via TM, plus SAMES chip foundry) reflected political risk, the French arms cancellation, desire for multiple suppliers and local content concerns, with Siemens trading technology transfer for a two-thirds market share. (p. 576) | Post Office, company and SAMES interviews, press quotations of the Postmaster General and TM correspondence. | Partial data |
| After digitisation, local content failed to reach targets, local prices exceeded international prices, design capabilities declined and exports were negligible, so the long-term agreement system became inadequate. (p. 578) | Business and Marketing Intelligence survey, Board of Trade and Industries report, Post Office interviews; no systematic price data. | Partial data |
| Digital technology made production more capital-intensive, cut labour use, and increased scale economies and cost-calculation difficulty, making the local market too small. (p. 579) | Largely asserted from interviews and analytical reasoning, with one Post Office interview figure on product life and cost-investigator time. | Asserted |
The author's caveats¶
Interviewees are anonymous and cited only by location; racial breakdowns of the labour force are not published for all firms, so the estimate is based on available data; the definition of local content is 'fraught with problems' and treated with caution; the real local content in 1968 is likely lower than claimed; one stated reason for the Siemens decision 'may be suspect' given hindsight; price differentials are difficult to assess overall.
Gaps in the evidence¶
The argument leans on anonymised, retrospective elite interviews with few documentary checks. Post Office and company contract files, the text of the Manufacture and Supply Agreements, and firm-level cost, price, employment and local-content series would test the claims of rising price gaps, falling local content and labour displacement. Some such records (Post Office archives, Board of Trade and Industries evidence, company reports) existed then and may now be accessible; Hansard and Cabinet records would test the military and political motives.
Replicability: Data poorly documented.