State, Business and Growth in Post-Apartheid South Africa

Literature › Works

Nicoli Nattrass; Jeremy Seekings (2010). State, Business and Growth in Post-Apartheid South Africa. IPPG Discussion Paper Series, no. 34 (Institutions and Pro-Poor Growth programme, University of Manchester). IPPG, IDPM, University of Manchester.

Type	working paper
Scope	Post-1994 South African economy
Method	synthesis review
Period studied	1895–2009
Regions	South Africa, Mauritius (comparative)
Themes	business and state, transition post apartheid, labour markets wages, unions strikes, inequality poverty unemployment, macro fiscal finance debt, manufacturing industrial policy, comparative theory, politics ideology elections
Citation key	nattrass2010

Argument

The paper asks why state-business relations (SBRs) in South Africa have not produced pro-poor, employment-intensive growth. It traces fragmented business organisation from apartheid through the role of big business in the transition (CBM, Peace Accord, NEF) to the creation of Nedlac. Nedlac failed because Cosatu, allied to the ANC, could bypass it through the Labour Ministry. Meanwhile Treasury (GEAR) and Trade and Industry pursued orthodox policies without consulting it, so Labour and Treasury policies were incoherent. BEE then gave black and white big business incentives to deal bilaterally with government, undermining the collective action a development coalition needs. The authors stress continuities with apartheid: a high-wage, capital-intensive, insider-protecting growth path that generates structural unemployment.

Evidence and method

Secondary literature (Handley, Feinstein, Moll, O'Meara, Turok, Green, Gevisser, Parsons, Seekings and Nattrass 2005). Competition Commission 2008 and TRC business submissions. SARB, JSE and Who Owns Whom data, plus BusinessMap and Empowerdex figures on BEE deals and black directorships. Press reports. Authors' interviews and discussions with business, Presidency and Nedlac figures (2008-09).

Findings

• Nedlac failed as a consensus forum for social and economic policy. (p. 5)

  but failed to live up to its promise as an institutional forum for forging consensual social and economic policies

• Incoherent Treasury and Labour Ministry policy exacerbated unemployment. (p. 5)

  the Treasury promoted a business-friendly set of policies, whilst the Ministry of Labour promoted pro (organised labour) policies; a policy incoherence which exacerbated the post-apartheid unemployment crisis

• Extreme corporate concentration inherited at the transition. (p. 7)

  In 1994, the giant, mining-based Anglo American controlled 44% of the entire capitalisation of the Johannesburg Stock Exchange, whilst the top five corporate groups together controlled 84%.

• The Chamber of Mines shaped the early labour-control system (pass laws). (p. 11)

  The Chamber of Mines (COM) actually drafted the pass laws that were introduced in the old Transvaal Republic in 1895

• The mines moved to higher wages and lower employment from the late 1970s, closing off mine jobs for new entrants. (p. 12)

  Even the mines shifted to a higher wage, lower employment outcome from the late 1970s onwards

• Mass African unemployment by 1994. (p. 12)

  at the dawn of democracy in 1994, more than one-third of the African labour force indicated that they wanted work but could not find it

• Apartheid-era South Africa failed to exploit the post-war boom in exports. (p. 27)

  South Africa’s share of global manufacturing exports fell from 0.8% to 0.3% between 1955 and 1985 and its share of developing country exports fell from an astonishing 12.6% to 1.9% over the same period

• BEE transferred a significant share of JSE ownership by 2006. (p. 10)

  By the end of 2006, BEE deals had transferred ownership of between 6 and 10% of the Johannesburg Stock/Securities Exchange (JSE)

• BEE deal values surged after 2003, tracking the equity boom. (p. 33)

  an explosion of deals averaging almost R60 billion per year between 2003-07

• Government sidelined Nedlac by releasing GEAR without tripartite consultation. (p. 44)

  The Treasury published GEAR in 1996 without having taken it to Nedlac.

• A fiscal squeeze in the transition period constrained expansionary options for the ANC. (p. 49)

  the sharp increase in the government deficit (from 1.5% of GDP in 1990 to 7.3% in 1993) that took place during the transitional period

• Gold-mining crisis of 1985-92 led NUM to accept wage restraint and profit-sharing deals, showing labour can bargain over trade-offs. (p. 65)

  Due to falling grades, rising costs and a falling gold price, profit per ton of ore milled dropped by 80% between 1985 and 1992.