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The Economy and Poverty in the Twentieth Century in South Africa

Literature › Works

Nicoli Nattrass; Jeremy Seekings (2010). The Economy and Poverty in the Twentieth Century in South Africa. CSSR Working Paper No. 276, Centre for Social Science Research, University of Cape Town (shortened version forthcoming in Cambridge History of South Africa, vol. 2). Centre for Social Science Research, University of Cape Town.
Type working paper
Scope Economics and economic history of apartheid
Method synthesis review
Period studied 1910–1994 (with post-apartheid coda to c.2004)
Regions South Africa, Witwatersrand, Transkei and Ciskei reserves, bantustans
Themes origins segregation, mining migrant labour, agriculture land, manufacturing industrial policy, bantustans removals influx, labour markets wages, inequality poverty unemployment, unions strikes, business and state, macro fiscal finance debt, education human capital, transition post apartheid, demography urbanisation
Citation key nattrass2010a

Argument

The authors argue that twentieth-century South African growth was constrained and accompanied by persistent poverty, because the state combined coercive supply of cheap African labour with a high-wage 'civilised' institutional framework (wage boards, industrial councils, colour bars, welfare) for white insiders. This combination, backed by tariffs and import controls, pushed the economy down an ever more capital- and skill-intensive path with weak productivity and exports. Deagrarianisation and the shift from labour shortage to mass unemployment made labour-market exclusion the main proximate cause of poverty by the 1970s-90s. They contest the view that apartheid was functional to growth until the 1970s, citing weak comparative performance and falling profit rates from c.1960. They also stress path dependence: the wage-setting institutions persisted after 1994 and perpetuate unemployment.

Evidence and method

Synthesis of secondary literature (Feinstein, Moll, Crankshaw, Simkins, Wilson, Duncan), government commission reports (Mills/Lucas 1926, Native Economic Commission, SEPC, Wage Board, Botha), Year Books, SARB and Statistics SA series, Nattrass's profit-rate data, the 1993 SALDRU survey, fiscal-incidence studies (McGrath, Van der Berg), and local case studies of reserves.

Place in the debates

Findings

  • Gold profitability rested on controlled unskilled African labour costs; doubling African wages was inconsistent with minimum profitability. (p. 7)

    higher wages for black miners were simply not consistent with minimum levels of profitability

  • White-to-African pay ratio on the mines was extremely high in the interwar period. (p. 8)

    peaked at about twelve to one in 1921, and was about ten to one for the rest of the interwar period

  • African labour was cheap relative to Britain and white workers, not globally; South African industry paid high skilled and low unskilled wages. (p. 19)

  • Wartime labour shortages briefly eroded the colour bar and wage differentials, and TFP grew fastest in 1939-45. (p. 30)

    total factor productivity growth between 1939 and 1945 was faster than in any other period

  • Post-war apartheid growth was weak relative to comparable countries. (p. 35)

    whose average growth rate of GDP per capita over the period 1950-73 was almost double South Africa‟s (at 4 percent p.a. compared to 2.2 percent p.a.)

  • Productivity growth under apartheid was very low, costing substantial output. (p. 35)

    total factor productivity – i.e. that part of growth that cannot be explained by increased use of capital or labour – rose by a meagre 0.2 percent p.a. in South Africa between 1950 and 1973

  • Manufacturing became more capital-intensive as the relative cost of capital fell, with declining capital productivity. (p. 38)

    Between the 1960s and early 1980s, the cost of capital relative to labour fell by about one half, due to rising wages and negative real interest rates.

  • Mechanisation and removals destroyed the African peasantry on white farms. (p. 51)

    More than one million people, i.e. about one-third of the resident African population, were removed from white-owned farms to the reserves

  • Open unemployment emerged in the 1970s as underemployment gave way to a dualistic labour market. (p. 49)

    probably resulted from the shift from widespread underemployment (as many unskilled people worked for part but not all of each year) to a more dualistic labour market

  • Mine stabilisation reduced the number of mine jobs even as wages rose. (p. 45)

    shut out a whole generation of new work-seekers who could once have counted on a mine job, if nothing else

  • The apartheid budget redistributed little because the labour market and land generated the inequality. (p. 57)

    was tiny in comparison with the inequality generated in the labour market (and through unequal land-ownership)

  • The wage-setting institutions built for white workers persisted and were captured by African unions, with employment consequences. (p. 48)

    The extension of minimum wages across whole sectors had the effect of preventing the survival or emergence of smaller, low-wage, labour-intensive enterprises

Evidence ledger

Sources used

Source Kind Period How used
Statistics South Africa and South African Reserve Bank real GDP per capita series (from 1932), with Du Plessis (1950) estimates for 1911-12, 1917-18, 1927-28 national accounts macro 1911-2001 Plots real GDP per capita over the century; pre-1932 estimates are rescaled on 1937-38 data to show stagnation, then growth.
South African Reserve Bank data on GDP growth, current account, sectoral real value-added and profit rates (Figures 2-5) national accounts macro 1947-2001; profit rates 1960-2001 Shows balance-of-payments constraints, structural change, and declining net profit rates by sector under apartheid.

Inference

Quantification: Descriptive tables.

Synthetic overview essay.

Replicability: Not applicable.