Industrial Concentration and Business Groups in South Africa: A Comparison with Japanese Zaibatsu¶
Akio Nishiura (2006). Industrial Concentration and Business Groups in South Africa: A Comparison with Japanese Zaibatsu. World Economic History Congress paper (file ID FAA-WEHC-1734783-11).
| Type | conference paper |
| Scope | Economics and economic history of apartheid |
| Method | mixed |
| Period studied | 1917–1999 |
| Regions | South Africa, Japan (comparative) |
| Themes | business and state, manufacturing industrial policy, macro fiscal finance debt, sanctions divestment, comparative theory, mining migrant labour |
| Citation key | nishiura2006 |
Argument¶
Nishiura argues that four of South Africa's six major business groups (AAC, Rembrandt, Liberty Life, Anglovaal) fit the pre-war Japanese zaibatsu concept, while Sanlam and SA Mutual look more like Konzern. He identifies three drivers of group formation and diversification: apartheid-era factors (the 1961 tightening of exchange control and 1980s sanctions), mergers through a developed financial market, and the combination of life insurer and bank as a source of funds. Groups' diversification into manufacturing was often by buying existing firms, so he judges their contribution to industrialization limited, though capital moved between industries within groups. Unlike Japanese zaibatsu, South African groups kept founding-family control until the mid-1990s through multistory holding companies. The argument rests on a five-criterion typology (Tables 2-4) and on tables of firm rankings and group histories.
Evidence and method¶
Secondary literature (company histories, Innes, Feinstein, Nattrass and Seekings), Who Owns Whom/McGregor, Financial Mail 'Top Company 100' rankings (1978-1998), AAC annual report, Commonwealth Secretariat 1989 report on financial links, and the author's own classification tables.
Place in the debates¶
- Relationship between industrialization and apartheid (conservative, liberal, Marxist views) (see Industrialisation, protection and industrial structure). Mentioned but not engaged. The paper focuses on business groups, and stresses that apartheid-linked exchange control and sanctions shaped diversification.
- Role of the minerals-energy complex vs business groups in industrialization (see Industrialisation, protection and industrial structure). Accepts that mining and energy drove industrialization (Fine and Rustomjee) but argues groups' own contribution to manufacturing was limited and mostly through acquisition.
- Sanctions effectiveness and disinvestment (see Sanctions, disinvestment and the anti-apartheid movement). Argues that sanctions and disinvestment fostered concentration, since local business groups with ample capital became buyers of withdrawing foreign firms.
- Why business groups form in developing countries (Leff's market-imperfection thesis) (see Industrialisation, protection and industrial structure). Partly applies it: the 'imperfection' was the restriction on investing abroad caused by exchange control. Group formation within a sector is not explained by it.
Findings¶
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Business groups dominated JSE market capitalization in the late apartheid period. (p. 1)
the share of market capitalization of the six major business groups in the Johannesburg Stock Exchange (JSE) was over 80% from 1985 to 1995
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Exchange controls after Sharpeville pushed the AAC group to reinvest domestically, in manufacturing. (p. 7)
The total investment amount in the manufacturing sector by AAC Group, which came into stride in the 1960s, increased from 40 million rand in 1960 to 283 million rand in 1969
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Sanctions are held to be the main factor in 1980s diversification. (p. 7)
Economic sanctions are considered to be the main factor in the diversification of the 1980s.
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Business groups bought up the assets of divesting US firms. (p. 8)
After 1986, at least 115 US companies withdrew their investment from South Africa, and this is supposed that 59% of them sold off shares to the South African capital
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Life insurer-bank combinations supplied the funds that fuelled concentration. (p. 9)
These abundant funds were invested in the manufacturing, mining, and services sectors and promoted industrial concentration.
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The structural shift from mining to manufacturing, 1948-1989, is documented. (p. 10)
the mining sector’s share of value added fell from 19% to 9%, whereas the manufacturing sector’s share rose from 11% to 21% between 1948 and 1989
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Multistory holding companies let founding families control groups with little capital. (p. 12)
founding family will be able to govern the center firm a completely for the fund of about 1/15.
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By 1988 nearly all the largest manufacturing firms belonged to the major groups, via 1980s acquisitions. (p. 13)
the nine largest manufacturing firms, except for Sasol, a former state corporation, all belonged to one of groups in 1988.
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Groups' direct contribution to industrialization is judged limited. (p. 14)
Thus, the contribution of business groups towards industrialization seems to be limited.
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Post-1994 restructuring unbundled the groups, ending the zaibatsu form. (p. 7)
Thus, we can precisely describe Liberty Life Group as an industrial group rather than a Zaibatsu.
Evidence ledger¶
Sources used¶
| Source | Kind | Period | How used |
|---|---|---|---|
| Who Owns Whom / McGregor's Who Owns Whom in South Africa 2006 (JSE market capitalization control, 1983-2005) | company records or reports | 1983-2005 | Figure 1 shows the share of JSE market capitalization controlled by the major business groups, supporting the claim of over 80% control by six groups in 1985-1995. |
| McGregor ed., McGregor's Who Owns Whom, 1992 (Rembrandt Group holding structure 1991) | company records or reports | 1991 | Source for Figure 2 showing the multistory holding company shareholding chain of the Rembrandt Group, used to show how families keep control. |
| "Top Company 100," Financial Mail, 1979, 1989, 1994, 1999 editions | newspapers periodicals | 1978, 1988, 1993, 1998 (rankings); manufacturing also 1968 | Source for Table 6 (top ten companies by asset base) and Table 7 (top ten manufacturing firms), used to show the rise of life insurers and group control of manufacturing. |
| Anglo American Corporation of South Africa Ltd, Annual Report 1959 (AAC [1960]) | company records or reports | 1950-1959 | Used to show AAC's after-tax profits rose 3.3 times from 1950 to 1959, creating surplus funds that fed 1960s diversification. |
| Anglovaal 1933-1958: Twenty-five Years of Progress (Anglovaal [1958]) | company records or reports | 1933-1958 | Documents Anglovaal Industries' founding in 1944 and its expansion into food, packing, metal processing and chemicals. |
| Commonwealth Secretariat [1989] Banking on Apartheid: The Financial Links Report | commission or official report | post-1986 | Source for the claim that at least 115 US companies withdrew after 1986 and about 59% sold to South African capital. |
| Nattrass [1981] The South African Economy (data on 1961 foreign exchange control) | secondary literature compilation | 1960-1961 | Source for the 1961 tightening of foreign exchange control after Sharpeville capital flight. |
| Webb [1983] 'Mining in South Africa' (AAC manufacturing investment figures) | secondary literature compilation | 1960-1969 | Gives AAC Group's manufacturing investment rising from 40 million rand in 1960 to 283 million rand in 1969. |
| Nattrass and Seekings [2011] (sector shares of GDP/value added 1948-1989; state corporations and tariffs) | secondary literature compilation | 1948-1989 | Used for mining and manufacturing shares of value added and for the role of parastatals and tariffs in manufacturing growth. |
| Innes [1984] Anglo American and the Rise of Modern South Africa (AAC industrial moves c.1960) | secondary literature compilation | c.1960-1978 | Source for AAC's move into industry around 1960, including Highveld Steel, AMIC and Scaw Metal. |
| Davies, O'Meara and Dlamini [1984] The Struggle for South Africa (Rembrandt tobacco) | secondary literature compilation | 1948-1960s | Supports the claim that Rembrandt became the third largest tobacco manufacturer in the world in the 1960s. |
| Company histories/biographies: Simons [1995] Old Mutual; Romain [1989] Liberty Life; Hocking [1987] Sappi | secondary literature compilation | 1963-1989 | Used for acquisitions by SA Mutual (Tiger Oats, Barlow Rand), Liberty Life (SAB, Premier) and Sanlam (Sappi). |
New data¶
The author compiled Tables 1, 3, 4 and 5 classifying six major South African business groups (founders, sectors, affiliates, family influence, holding companies, 1980s-1999) and coded them against Zaibatsu/Konzern/industrial-group concepts. Tables 6 and 7 rearrange Financial Mail top-company rankings with group affiliation coded. These are small hand-built classifications, not a dataset.
Inference¶
Quantification: Descriptive tables.
Comparative case study of six South African business groups, using Japanese Zaibatsu/Konzern concepts as a classification scheme. Qualitative coding of group characteristics plus descriptive tables of company rankings and ownership chains over time. Causal claims about diversification (exchange controls, sanctions, life insurer-bank funds) are inferred narratively, without statistical testing.
Key claims¶
| Claim | Basis | Strength |
|---|---|---|
| Six major business groups controlled over 80% of JSE market capitalization in 1985-1995. (p. 1) | Who Owns Whom data plotted in Figure 1. | Systematic data |
| Four of the groups (AAC, Rembrandt, Liberty Life, Anglovaal) fit the Zaibatsu concept, while Sanlam and SA Mutual are closer to Konzern. (p. 5) | Author's own coding in Tables 2-4 against Kikkawa, Rumelt and Shimotani definitions; no external data. | Illustrative or anecdotal |
| 1960s diversification was driven by surplus profits and tightened exchange control after Sharpeville, with AAC manufacturing investment rising from 40m to 283m rand in 1960-1969. (p. 7) | AAC annual report profit figure, Nattrass on exchange control and Webb on investment; the causal link is inferred. | Partial data |
| 1980s diversification was driven by sanctions and disinvestment, with groups buying out departing foreign firms. (p. 7) | Commonwealth Secretariat figure on 115 US withdrawals and 59% sold to South African capital; other examples are anecdotal. | Partial data |
| Life insurers and banks provided the funds for group buyouts and concentration. (p. 9) | Financial Mail top-ten asset rankings (Table 6) showing life insurers entering the list, plus listed insurer-bank pairings. | Partial data |
| Group ownership of top manufacturing firms rose from three in 1968 to nine of the top ten in 1988, largely through acquisitions. (p. 13) | Table 7 from Financial Mail rankings with group affiliation coded by the author. | Systematic data |
| Founding families kept control through multistory holding companies until the mid-1990s, unlike Japanese Zaibatsu. (p. 12) | Figure 2 shareholding chain of Rembrandt in 1991 and an illustrative 51% calculation; other groups are described without data. | Partial data |
| The contribution of business groups to industrialization was limited, because most invested by buying existing manufacturing firms. (p. 14) | Inferred from Table 7 and group acquisition narratives; no data on output, investment or employment. | Asserted |
The author's caveats¶
The author does not discuss data limitations. Wording is hedged ("is considered", "is surmised", "seems"), and the conclusion says capital transfers among and within groups need more detailed analysis.
Gaps in the evidence¶
The argument rests on secondary histories and ranking tables, with no archival or financial-statement data on group capital flows, cross-shareholdings, or investment by sector. Testing the claims on sanctions, exchange control and industrialization would need firm-level balance-sheet and acquisition data (JSE and Registrar of Companies filings, group annual reports), and counterfactual evidence on non-group firms. Much of this existed at the time in company reports, and parts are now accessible in archives and the Who Owns Whom series.
Replicability: Data poorly documented.