Industrial Concentration and Business Groups in South Africa: A Comparison with Japanese Zaibatsu

Literature › Works

Akio Nishiura (n.d.). Industrial Concentration and Business Groups in South Africa: A Comparison with Japanese Zaibatsu. Conference paper, probably World Economic History Congress.

Type	conference paper
Scope	Economics and economic history of apartheid
Method	mixed
Period studied	1940s–1999
Regions	South Africa, Japan (comparative)
Themes	manufacturing industrial policy, business and state, sanctions divestment, macro fiscal finance debt, comparative theory
Citation key	nishiurand

Argument

Nishiura argues that four of South Africa's six major business groups (AAC, Rembrandt, Liberty Life, Anglovaal) meet the criteria of the pre-war Japanese zaibatsu: diversified business, oligopoly in some industries and strong family influence. Sanlam and SA Mutual are closer to the Konzern type. Group formation and diversification were driven partly by apartheid-era factors, namely tightened exchange control from 1961 and 1980s sanctions and disinvestment. Life insurer–bank combinations supplied cheap acquisition funds. Group-led industrialization was limited, because three groups invested in manufacturing directly while the others bought existing firms. South African groups kept founding-family control through multistory holding companies until the mid-1990s, unlike the Japanese zaibatsu. The case is made by classifying the groups against a five-point typology and tracing them through tables of group histories and top-ten company rankings.

Evidence and method

Secondary literature (company histories and biographies of Oppenheimer, Rupert, Gordon and Old Mutual; Nattrass; Feinstein; Fine and Rustomjee; Kikkawa; Leff); Who Owns Whom and Financial Mail Top Company 100 rankings for 1978-1998; company annual reports (AAC 1960, Anglovaal 1958); the Commonwealth Secretariat 1989 report on disinvestment. The author compiled the tables.

Place in the debates

• Relationship between industrialization and apartheid (conservative, liberal and Marxist views) (see Industrialisation, protection and industrial structure). Cited as background. The paper does not take a side but locates business groups as an under-studied actor in industrialization and finds their direct contribution limited.
• Minerals-energy complex as the driver of industrialization (see Industrialisation, protection and industrial structure). Accepts the mining and energy origin of industrial capital and shows mining-house groups (AAC, Anglovaal) diversifying into manufacturing from the 1940s and 1960s.
• Why business groups form in developing economies (Leff: market imperfection) (see Industrialisation, protection and industrial structure). Partly adapts it. Group formation within a sector shows no consistent pattern, but diversification reflects exchange control and sanctions, which acted as a form of market imperfection.
• Sanctions and disinvestment effects (see Sanctions, disinvestment and the anti-apartheid movement). Sanctions stimulated concentration because local conglomerates, with large funds, bought out departing foreign firms.

Findings

• Six business groups dominated the JSE in the late apartheid era. (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

• Tightened exchange control after Sharpeville pushed surplus capital into domestic reinvestment, starting the 1960s diversification. (p. 7)

  the government strengthened foreign exchange control in 1961 and restricted the foreign outflow of capital

• AAC's manufacturing investment grew sharply in the 1960s. (p. 7)

  increased from 40 million rand in 1960 to 283 million rand in 1969

• Sanctions are identified as the main driver of 1980s diversification. (p. 7)

  Economic sanctions are considered to be the main factor in the diversification of the 1980s.

• US disinvestment was largely absorbed by South African capital. (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

• Life insurers became the central firms of the groups, supplying acquisition funds. (p. 9)

  A life insurance company became a central firm in three business groups among the six major business groups.

• Manufacturing overtook mining in value-added share between 1948 and 1989. (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.

• Multistory holding companies let founding families keep control with little equity. (p. 12)

  The existence of a multistory holding company played a large role.

• Unlike the Japanese zaibatsu, South African groups retained family control into the mid-1990s. (p. 12)

  In contrast to Japanese Zaibatsu, South African Zaibatsu had maintained their founding families’ influences until the mid-1990s.

• Group acquisitions in the 1980s concentrated the manufacturing sector. (p. 13)

  the nine largest manufacturing firms, except for Sasol, a former state corporation, all belonged to one of groups in 1988.

• The groups' direct contribution to industrialization was limited. (p. 14)

  Thus, the contribution of business groups towards to industrialization seems to be limited.

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 by business group, 1983-2005)	company records or reports	1983-2005	Shows the six major groups held over 80% of JSE market capitalization in 1985-1995, establishing the scale of group concentration.
McGregor's Who Owns Whom 1992 (Rembrandt Group holding structure, 1991)	company records or reports	1991	Supplies the cross-shareholding percentages in Figure 2 used to illustrate how a multistory holding company let the founding families keep control.
"Top Company 100," Financial Mail, 1979, 1989, 1994, 1999 editions	newspapers periodicals	1978, 1988, 1993, 1998	Source for the top-ten company rankings by assets (Table 6) and the top-ten manufacturing firms (Table 7), used to trace group ownership over time.
Anglo American Corporation of South Africa Annual Report 1959	company records or reports	1950-1959	Evidence that AAC's after-tax profits rose 3.3 times in 1950-59, creating surplus funds for diversification.
Anglovaal 1933-1958: Twenty-five Years of Progress	company records or reports	1933-1958	Documents Anglovaal Industries (1944) and its expansion into food, packing, metals and chemicals.
Commonwealth Secretariat (1989) Banking on Apartheid: The Financial Links Report	commission or official report	post-1986	Source for the figure that at least 115 US companies withdrew after 1986 and 59% of them sold to South African capital.
Webb (1983) 'Mining in South Africa' – AAC manufacturing investment figures	secondary literature compilation	1960-1969	Provides AAC Group's manufacturing investment rising from 40 to 283 million rand, 1960-69.
Nattrass (1981) The South African Economy – foreign exchange control 1961	secondary literature compilation	1961	Supports the claim that the 1961 tightening of exchange controls after Sharpeville restricted capital outflow and pushed reinvestment at home.
Nattrass and Seekings (2011) – sectoral shares of value added and parastatal/tariff industrialization	secondary literature compilation	1948-1989	Background on the manufacturing share of value added rising from 11% to 21%, and on the role of parastatals and tariffs; the sectoral figures are uncited in the text.
Fourie (1996) and Fourie and Smit (1989) industrial concentration time series	secondary literature compilation	since 1972	Cited as prior time-series evidence of high concentration in manufacturing, used as the paper's starting premise.
Business histories and biographies (Innes 1984; Simons 1995; Romain 1989; Hocking 1987; Davies, O'Meara and Dlamini 1984)	secondary literature compilation	1940s-1980s	Supply the acquisition and diversification histories of AAC, Sanlam, Rembrandt, SA Mutual and Liberty Life groups.
Author-compiled tables of business groups (Tables 1, 3, 4, 5), classified using Kikkawa 1996, Rumelt 1974 and Shimotani 1993	other	1980s-1999	Classifies the six groups against Zaibatsu, Konzern and industrial-group criteria; the underlying sources are not named.

New data

Author-compiled tables on the six major business groups: founders, central firm, affiliates, family influence (Table 1), classification against concept criteria (Tables 3-4), and timelines of formation, diversification and unbundling (Table 5). Table 7 and Table 6 are rankings tagged with group affiliation from Financial Mail. Underlying sources are mostly unspecified.

Inference

Quantification: Descriptive tables.

Comparative, conceptual classification of six business groups against Japanese Zaibatsu/Konzern criteria. Descriptive tables of top-company rankings and group affiliations, with firm-level histories drawn from secondary business literature. Causal factors (exchange control, sanctions, life insurer-bank combinations) are inferred by narrative, with no statistical testing.

Key claims

Claim	Basis	Strength
The six major business groups held over 80% of JSE market capitalization from 1985 to 1995. (p. 1)	Who Owns Whom data in Figure 1.	Systematic data
Diversification in the 1960s was driven by surplus funds and the 1961 tightening of exchange controls, which pushed AAC to reinvest domestically. (p. 7)	AAC 1959 Annual Report profit figure; Nattrass (1981) on exchange control; Webb (1983) on AAC manufacturing investment.	Partial data
Economic sanctions in the 1980s led to diversification as foreign capital withdrew and the groups bought out the divested firms. (p. 7)	Commonwealth Secretariat (1989) on US company withdrawals; case examples of Liberty Life and AAC (Barclays).	Partial data
Combinations of life insurance companies and banks provided funds for takeovers and promoted industrial concentration. (p. 9)	Financial Mail top-company rankings (Table 6) showing insurers rising in the top ten; pairings of insurer and bank named in the text.	Partial data
By 1988 nearly all of the top ten manufacturing firms belonged to one of the major groups, mostly through acquisition in the 1980s. (p. 13)	Financial Mail top-100 rankings tagged by group (Table 7).	Systematic data
Multistory holding companies allowed founding families to keep control of the groups until the mid-1990s on a small share of capital. (p. 12)	Rembrandt shareholding chain from McGregor's Who Owns Whom 1992; arithmetic illustration.	Illustrative or anecdotal
The contribution of the business groups to industrialization was limited, because most invested by buying existing manufacturing firms. (p. 14)	Table 7 rankings and acquisition histories from secondary business literature.	Partial data

The author's caveats

The author acknowledges that the paper is exploratory. They note that capital transfer among and within the groups needs more detailed analysis, and that other small groups remain unexamined.

Gaps in the evidence

The argument depends on rankings, ownership snapshots and secondary company histories, and lacks firm-level data on investment, capital flows and acquisition financing. Direct data on intra-group capital transfers, such as company annual reports, JSE and Registrar of Companies filings, and sectoral concentration ratios from the industrial censuses, would test the claims about diversification and industrialization. These sources existed at the time and are accessible in archives and company reports. No counterfactual exists for the claim that apartheid-era factors drove diversification, and the exchange-control and sanctions causes are asserted rather than tested.

Replicability: Data poorly documented.