Business, State and Society in the Western Cape from 1960 to 1990
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BUSINESS, STATE AND SOCIETY IN THE WESTERN CAPE FROM 1960 TO 1990 Thesis submitted in fulfilment of the requirements for the degree of DOCTOR PHILOSOPHIAE Faculty of Business and Economic Sciences Nelson Mandela Metropolitan University By ROBERT JAMESON WOOD Student Number: 210252758 January 2014 SUPERVISORS: PROFESSOR R.J. HAINES PROFESSOR HENDRIK LLOYD ABSTRACT This research examines the relationship between business, the state and society in South Africa -- particularly the Western Cape -- over the period from 1960 to 1990, viewed against the background of economic conditions in this region, South Africa and the world. Utilising a development history approach, it is based on an extensive study of primary and secondary documentation, supplemented by a panel of in-depth interviews and observation. This study finds that the relationship between business and apartheid incorporated both functional and dysfunctional elements, although over time the benefits diminished and the costs multiplied. The latter, Regulation Theory suggests, is true for any institutional order, but it could be argued that, under apartheid, the particularly fragile and contradictory nature of the institutional arrangement made inevitable crises more rapid and more pronounced. On the one hand, apartheid restricted the economic development of the country, as a result of a range of factors from skills shortages to the visible waste of resources on grand ideological projects and security; as suggested by Resource Curse Theory, minerals windfalls tend to encourage irresponsible behaviour by governments. On the other hand, certain businesses prospered, notably the Afrikaner business sector. All business benefited from the overall growth of the 1950s and 1960s, whilst niche players often did quite well even during the 1980s. Further, the South African businessmen, both English- and Afrikaans-speaking, were skilful in adapting to the difficult conditions brought about by apartheid, and in many cases they prospered. As highlighted by Business Systems Theory, embedded social ties and informal relations may help either support or compensate for formal regulatory pressures. Many of these general trends were particularly accentuated in the Western Cape. The fact that business protests against government policies were often more motivated by concerns as to future property rights and of social disorder, rather than human rights, does indeed raise serious moral issues. However, in helping encourage political reform, they may have made a positive contribution. This study is founded on three related strands of thinking within the political economy tradition, Resource Curse Theory, Regulation Theory and Business Systems Theory, ii with the emerging common ground between these three bodies of thought being highlighted. As suggested by Resource Curse Theory, non-mineral producing regions tend to be particularly adversely affected in mineral rich countries, and there is little doubt that the region bore all the costs of the collapse of the gold price in the 1980s, and lacked the deeper capital base of the now Gauteng region to cushion the shock. Whilst apartheid may, as we have seen, have served conservative sectors of agriculture and mining quite well for many years, it also involved large costs incurred through social engineering experiments and the increasing demands of the security establishment. Resource Curse Theory suggests that national economies become dangerously dependent on the vagaries of commodities markets, and that the process of institutional design and evolution is hampered by assumptions of easy money which may temporary resolve the negative consequences of any institutional shortcomings. The poor price of gold in much of the 1980s brought about a crisis in the system, and, there is little doubt that this contributed to the demise of the order. As suggested by Resource Curse Theory, the experience of the Western Cape, a region of the country poor in minerals, was often one of inefficient and wasteful state intervention, coupled with increasingly poor performance of non-mineral related industries. Indeed, the effects of the recession of the 1980s were most pronounced in non-mineral producing areas of the country, particularly in the Western Cape. Regulation Theory highlights that no set of institutions and practices is ever totally coherent and functional, but at specific times may work to promote both certain types of economic activity and overall growth. It is wrong to suggest that because an order only works for some players at specific times it is simply dysfunctional or does not work properly at all. However, over time, internal contradictions mount and the benefits diminish. A particular feature of the apartheid order was that some of its core benefits at its height were particularly concentrated on some players (segments of Afrikaner commerce and industry, mining and agriculture), whilst the costs were shared across a wider range of players, with a disproportionate burden being borne by the black majority. A further feature was that the costs were often indirect and spread over many years if the benefits were sometimes immediate: this would include the persistent iii dysfunctionality of much of the South African education system and the criminal ecosystem that was nurtured through sanctions busting. Internal contradictions and spreading dysfunctionality rarely leads to a conscious and coherent period of institutional redesign, but rather an incoherent, experimental and contested process, such as characterized late apartheid reforms, and, indeed, the post February-1990 negotiation process. Finally, again at a theoretical level, as Business Systems Theory highlights, it is important to take account of the formal and informal ties interlinking firms in different sectors in the region, and firms and government, and the extent to which regions within a particular country may follow very distinct developmental trajectories. The benefits and the costs of the system diffused unevenly in the region, giving many players both a stake in the existing order, and an interest in some or other type of reform. iv TABLE OF CONTENTS ABSTRACT ii TABLE OF CONTENTS v LIST OF TABLES ix LIST OF FIGURES x ACKNOWLEDGEMENTS xi CHAPTER 1 : GENERAL INTRODUCTION 1 1.1 Introduction 1 1.1.1 Context 2 1.1.2 Scope 3 1.1.3 Empirical Foundations 5 1.1.4 Aims and Objectives 5 1.2 The South African Economy 1950-1990 6 1.3 Western Cape Economy 19 1.4 Understanding Institutions: The Value of a Development History Approach 22 1.5 Conclusion 25 CHAPTER 2 : RESEARCH DESIGN AND METHODOLOGY 27 2.1 Introduction 27 2.2 Methological Foundations 27 2.3 A Multi-Method Approach 28 2.3.1 Documents 29 2.3.2 Observation 30 2.3.3 Interviews 31 2.4 Triangulation of Data 33 2.5 Theoretical Sampling and Analysis 34 2.6 Delimitations 35 2.7 Conclusion 35 CHAPTER 3 : THEORETICAL FOUNDATIONS 37 3.1 Introduction 37 3.2 Apartheid Business and the Resources Curse Theory 39 3.3 Regulation Theory, Business and Apartheid 42 3.4 Business Systems Theory 48 v 3.5 Conclusion 49 CHAPTER 4 : GENERAL EFFECTS OF APARTHEID ON BUSINESS 51 4.1 Introduction 51 4.2 General Perceptions 51 4.3 Impact of Apartheid on Coloured, Indian and Black Business 71 4.4 Theoretical Implications 74 4.5 Conclusion 75 CHAPTER 5 : IMPACT OF APARTHEID ON AFRIKANER BUSINESS IN THE WESTERN CAPE 77 5.1 Introduction 77 5.2 The rise of Afrikaner Business 77 5.3 The Western Cape Situation 80 5.4 High and Late Apartheid 81 5.5 Theoretical Implications 96 5.6 Conclusion 97 CHAPTER 6 : SPECIFIC EFFECTS OF APARTHEID 99 6.1 Introduction 99 6.2 High Levels of Taxation 99 6.3 Bantustans 101 6.4 Job Reservation 104 6.5 Skills 107 6.6 Education 119 6.7 The Trade Unions 124 6.8 Group Areas Act 130 6.9 Coloured Labour Preference Policy 133 6.10 Decentralisation Policy 144 6.11 Other Effects of Apartheid 154 6.12 Theoretical Implications 160 6.13 Conclusion 161 CHAPTER 7 : SANCTIONS AND BOYCOTTS 163 7.1 Introduction 163 7.2 The Origins of Sanctions 163 7.3 South Africa’s Neighbours and Sanctions 164 7.4 Counter-Tendencies – ‘Constructive Engagement’ 166 vi 7.5 British Banks and Sanctions 168 7.6 New Pressures in the 1980s 171 7.7 The Eminent Persons Group 174 7.8 Shifting US Policy 175 7.9 Changes in Exports 176 7.10 Effect of Sanctions 177 7.10.1 Trade – The Consequences for the Western Cape 178 7.10.2 Air links and the Western Cape 184 7.10.3 Maritime Links 185 7.10.4 Tourism 186 7.11 Theoretical Implications 187 7.12 Conclusion 188 CHAPTER 8 : WESTERN CAPE BUSINESS ASSOCIATIONS AND ORGANISATIONS: ATTITUDES TO APARTHEID 189 8.1 Introduction 189 8.2 Cape Town Chamber of Commerce (The Chamber) 189 8.3 Cape Chamber of Industries (CCI) 204 8.4 Other Western Cape Business Organisations 207 8.5 Debates and Perspectives on Business Under Late Apartheid 209 8.6 Theoretical Implications 213 8.7 Conclusion 213 CHAPTER 9 : THE BUSINESS SECTOR AND THE TRUTH AND RECONCILIATION COMMISSION OF SOUTH AFRICA REPORT (TRC) 215 9.1 Introduction 215 9.2 Introducing the TRC 215 9.3 Corporate evidence to the TRC 217 9.4 Findings of the TRC 218 9.5 Theoretical Implications 219 9.6 Conclusion 219 CHAPTER 10 : CONCLUSION 221 10.1 Introduction – The Long View 221 10.2 Uneven Costs and Benefits 222 10.3 Employer Associations 226 vii 10.4 Consequences and Contradictions 227 10.5 Theoretical Implications 229 10.6 Limitations of Research 232 10.7 Concluding View 233 BIBLIOGRAPHY 237 PRIMARY SOURCES 237 Archives 237 Government Documents 239 In-Depth Interviews 240 Newspaper Reports 241 SECONDARY SOURCES 242 ANNEXURES 259 Annexure A 259 Annexure B 260 Annexure C 261 Annexure D (a) 262 Annexure D (b) 263 Annexure E 264 Interviews (listed chronologically) 264 Written Response to Questionnaire: 301 Annexure F 304 viii LIST OF TABLES Table 1: Average Annual Percentage Change 14 Table 2.