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Sanctions on South Africa: What Did They Do?

Literature › Works

Philip I. Levy (1999). Sanctions on South Africa: What Did They Do?. American Economic Review (AEA Papers and Proceedings), 89(2). American Economic Association.
Type journal article
Scope Economics and economic history of apartheid
Method synthesis review
Period studied 1948–1994
Regions South Africa
Themes sanctions divestment, macro fiscal finance debt, politics ideology elections, transition post apartheid, comparative theory, labour markets wages
Citation key levy1999a

Argument

Levy offers an alternative to the view that the mid-1980s sanctions brought down apartheid. He argues that government-imposed trade sanctions were economically minor (about 0.5 percent of GNP) and may have hardened repression. The most damaging international economic actions were private: bank refusals to roll over loans and corporate disinvestment. He attributes apartheid's demise to three factors: the rising cost of apartheid's labour-market distortions, effective black political opposition, and the fall of communism, which removed the Afrikaner fear of a communist takeover. He concedes that overdetermination makes it impossible to prove that sanctions failed. His case is that a sanctions-effective story must rest on their psychological and signalling impact, and that this is implausible. The argument is built from a timeline of events, GDP growth comparisons and secondary estimates of costs.

Evidence and method

Secondary literature only: Hufbauer, Schott and Elliott (1990) for the sanctions timeline and cost estimates; Waldmeir (1997); Jones and Müller (1992) for GDP and current-account data; Lewis (1990); Lipton (1989); statements by South African leaders and a Chase Manhattan executive. No archival or original data.

Place in the debates

  • Sanctions effectiveness: did the mid-1980s sanctions help end apartheid? (see Sanctions, disinvestment and the anti-apartheid movement). Sceptical. Government-imposed trade sanctions played no significant positive role and may have delayed change. Private financial and disinvestment actions mattered more but cannot be counted as evidence for public sanctions.
  • Causes of the end of apartheid (overdetermination) (see Why apartheid ended: reform, transition and elite bargaining). Stresses internal economic costs of apartheid labour-market distortions, black political opposition and the end of the Cold War and Soviet communist threat. He admits that the end of apartheid was overdetermined and that sanctions cannot be definitively ruled out.
  • Hufbauer et al. scoring of sanctions success (about one-third effective) (see Sanctions, disinvestment and the anti-apartheid movement). Uses their framework but disputes the 'contribution' score for South Africa. He cites Morgan and Schwebach (1997) as arguing that their success rate is overstated.
  • Timing of the economic break: sanctions vs earlier structural slowdown (see Did the apartheid economy fail? Growth, productivity, investment and the post-1970s crisis). The growth break came around 1974 (oil shock, labour-market distortions, external borrowing), well before the 1985-87 sanctions. GDP growth then recovered after sanctions.

Findings

  • The core methodological problem is that the end of apartheid had many causes, so sanctions' role cannot be proven or disproven. (p. 1)

    that the end of apartheid was overdetermined.

  • South Africa circumvented trade sanctions, and export volumes rose even as terms of trade worsened. (p. 4)

    percent, although terms of trade suffered

Evidence ledger

Inference

Quantification: Illustrative figures.

Counterfactual narrative/case study that rests on timing (the growth break in 1974 and the capital flight before the 1985-87 sanctions) and an alternative three-factor story (labour-market distortions, internal opposition, collapse of communism), using secondary compilations. The author concedes the end of apartheid is overdetermined and says the claim cannot be proven.

The author's caveats

The author notes that Lipton's figures may understate growth because of informal-sector activity, that GDP growth lagged population growth, and that the end of apartheid was overdetermined, so sanctions' ineffectiveness cannot be proved. He also notes that Hufbauer et al.'s cost estimates are lower than estimates that include the oil embargo and financial sanctions, and that econometrics would require a larger set of countries.

Gaps in the evidence

The argument leans on secondary compilations and quotations and does not use primary data such as trade flows by commodity, capital-account and bank-lending series, or the Reserve Bank's financial-rand and debt-standstill records. It never tests the timing claims against monthly or quarterly data, and the repression and elite-motivation claims lack archival evidence (cabinet records, National Party, Treasury and business-association documents, ANC-government negotiation records). Much of this material existed or has since become available, including the post-1994 archives and the Truth and Reconciliation Commission records, and it would allow a better counterfactual analysis.

Replicability: Data poorly documented.