The third major support of the ‘reform coalition’ was the assumption that the ANC as government would provide for the social and political conditions in which private capital could operate. After all, it was the steady erosion of the capacity of the NP government to maintain control over the subordinated black majority of the population from the mid-1970s which had led to the equally steady withdrawal of the support of large-scale capital for continued white rule from the early 1980s (as indicated inter alia by the succession of meetings, some of them clandestine, between business leaders and the exiled ANC in a variety of foreign locations). In broad terms, large-scale business underwrote the political transition because it came to recognise that only the ANC (which during the 1980s had called for South Africa to be rendered ‘ungovernable’) had the popular legitimacy which could provide for a restoration of political stability; and only a democratic settlement could provide that political stability, which by the early 1990s, had itself become a pre-condition for economic liberalisation. This is not to say that large-scale business had much faith in the ability of the ANC to run the affairs of state extending beyond economic policy through to the running of the education, health, legal, policing and defence systems et cetera efficiently. (This was to be indicated by the extent to which better off whites – notably the corporate community – withdrew into privatised spheres of social life, from private healthcare through to gated communities). Nonetheless, there was overall recognition by large scale business that political stability could only be attained by the prospect of a ‘triple transition’, that is, the formal extension of social as well as economic and political citizenship rights to blacks as well as to whites (Webster and Omar 2003).
In sum, the ‘reform bargain’ which facilitated South Africa’s success was underpinned by the new government’s commitment to providing the opportunity for large-scale business to internationalise; by capital accepting, at least rhetorically, the social and economic imperative of black empowerment; and by the widespread recognition of the necessity of a ‘triple transition’. However, it can be argued that, even if the superstructure of the reform bargain still largely holds, its support system is beginning to give way.
THE CONTRADICTIONS OF INTERNATIONALISATION
The central argument of domestic business, foreign investors, the international financial institutions and the major foreign governments (notably the US and UK) backing the political transition was that the level of economic growth required by post-apartheid South Africa could only be attained through engagement with the global economy and the access this would give to continually advancing high technology (Habib et al 1998: 106). Yet the reality is that the opening up of the economy has had highly contradictory outcomes; first, the economy has become far more subject to short-term global financial influences without; second, an accompanying level of diversification; third, while access to new technology has improved, South Africa’s technological advance is shaky; and fourth, critically, the disappointingly low level of economic growth which has been achieved has been grossly insufficient in providing for the employment needs of the country while being accompanied by high levels of inequality. These are all in themselves huge topics, but briefly:
The internationalisation and financialisation of South African capital
It is well-known that the apartheid era provided the conditions for the concentration and consolidation of capital, as the major mining houses diversified into manufacturing, as finance capital diversified into both, and as English-speaking and Afrikaner capital steadily merged their interests with each other and foreign capital. A further development was a greater interpenetration of private capital and the parastatals. By 1981, over 70 per cent of the total assets of the top 138 companies in South Africa were controlled by state corporations and eight private conglomerates spanning mining, manufacturing, construction, transport, agriculture and finance (Davies et al 1984: 58). Yet greater concentration was to come as, with the mounting political crisis, foreign companies disinvested and sold their assets locally. By 1990, just three conglomerates – Anglo-American, Sanlam and Old Mutual – controlled a massive 75 per cent (R425bn) of the total capitalisation (R567bn) of the Johannesburg Stock Exchange (JSE) (McGregor et al 2009). However, a dramatic change was to sweep through the capital market thereafter. First, the conglomerates chose to ‘realise shareholder value’ by an extensive process of ‘unbundling’; second, the opening up of the economy encouraged major South African corporations to go global alongside a (limited) inflow of foreign capital (see Mohamed below).
The post-1994 liberalisation of the economy was critical. By December 2008, although the market capitalisation of the big three had increased to R1.1 trillion, this represented no more than 24.4 per cent of the total capitalisation of the JSE. Unable to invest widely abroad under apartheid, the conglomerates had invested their excess capital by buying local assets which were often far distant from their core business. But from the early 1990s they had responded to lobbying by their own shareholders to unbundle by selling their non-core assets.
Their non-core assets were largely taken up by institutional investors, both public (for example the Public Investment Corporation) or private (pension funds), as well as by new BEE players who were, in turn, backed by the banks and the institutional investors themselves.2 Meanwhile, unbundling had a major effect upon the big three (and the other former conglomerates) themselves. In 1990, Sanlam controlled sixty-four JSE listed companies with interests across food, clothing, mining and construction. By 2008, it had slimmed down to become a financial services company, having in excess of 25 per cent ownership in only four companies on the JSE. Similarly, whereas in 1990 Old Mutual had a controlling stake in seventy-four JSE-listed companies, by 2008 it had stakes exceeding 25 per cent in only two companies (Nedbank and Mutual & Federal). Yet the most remarkable transformation took place at Anglo-American. In 1992, Anglo controlled some eighty-six JSE-listed companies which had interests across the economy, yet by 2008 it had become a more focused miner with holdings of more than 25 per cent in only four JSE companies: AngloGold Ashanti, AngloPlatinum, Kumba and Tongaat Hulett (McGregor et al 2009).
Unbundling was accompanied by rapid internationalisation. Major South African corporations had invested overseas even under apartheid (through both legal and illegal means), yet they had faced myriad restrictions and controls in doing so. From 1994, however, the situation eased considerably, notably by the scrapping of the Financial Rand, the grant by government of exchange