A historical analysis of joint stock companies in the Cape Colony between 1892 and 1902 by Lloyd Melusi Maphosa Dissertation presented for the degree of Doctor of Philosophy (History) in the Faculty of Arts and Social Sciences at Stellenbosch University Supervisor: Prof. Johan Fourie Co-supervisor: Dr Anton Ehlers Co-supervisor: Dr Edward Kerby March 2021 Stellenbosch University https://scholar.sun.ac.za Declaration By submitting this dissertation electronically, I declare that the entirety of the work contained therein is my own, original work, that I am the sole author thereof (save to the extent explicitly otherwise stated), that reproduction and publication thereof by Stellenbosch University will not infringe any third party rights and that I have not previously in its entirety or in part submitted it for obtaining any qualification. Signature: Date: March 2021 Copyright © 2021 Stellenbosch University All rights reserved i Stellenbosch University https://scholar.sun.ac.za Abstract The promulgation of laws sanctioning the use of limited liability joint stock companies during the nineteenth century has been linked to economic growth in Europe and North America. These legal changes minimised transaction costs in business practices, which in turn encouraged entrepreneurial innovation, and expanded the capital market. This is because as companies multiplied, income distribution improved, thereby increasing the amount of savings available for companies from which to pool capital. Despite similar legal changes in frontier markets such as South Africa, very few attempts have been made to analyse these outcomes. In South African history, although companies feature in broader economic history studies and micro-firm studies, attempts to analyse their long-term impact remain underexplored. In the few studies that examine their growth, attention has either been on their distribution in the period prior to the legal changes, or generally on their legal framework. This study aims to add to this body of knowledge by analysing the impact of the Cape Joint Stock Company Act of 1892 on company growth and the private capital market. It is the first study to use company micro-data to assess the distribution of companies and investors in colonial South Africa. It examines the sectors in which these companies were engaged, their geographic location, size, average lifespan, and the individuals who financed them. The analysis shows that there was a substantial increase in the number of companies engaged in various sectors of the economy between 1892 and 1902. In this significant feat of colonial business, the middle-class constituted 31% of the capital market, and had the highest percentage of individuals registered as starting members of companies. This meant that they were not only the largest source of capital, but were at the helm of entrepreneurial innovation. Within this dynamic, women towards the end of the nineteenth century became regular participants in the private capital market, despite strong cultural institutions that prohibited them from many economic activities. Farmers, despite being the second largest group in the capital market, had the lowest capital value by contrast. Proposed explanations for this are that women used the securities market to exercise economic freedom, while farmers used it to salvage the agricultural sector that had been scourged by environmental disasters. This is because during this period there was a growing ideology that supported women’s independence. Also, farmers, unlike other investor groups that spread their investments, channelled most of their finances towards agricultural companies. Therefore, the nature of joint stock companies during this period and the diversity of the capital market show that the Company Act of 1892 had a profound economic impact on the Cape Colony. ii Stellenbosch University https://scholar.sun.ac.za Opsomming Die aanvaarding van wetgewing vir die instelling van maatskappye met beperkte aanspreeklikheid in die 19e eeu word met ekonomiese groei in Europa en Noord-Amerika verbind. Die regswysigings het transaksiekoste tot die minimum beperk wat innovasie deur entrepreneurs aangemoedig en die kapitaalmarkte uitgebrei het. Soos die maatskappye vermeerder het, is inkomsteverdeling verbeter en die hoeveelheid beskikbare spaargeld vanwaar maatskappye kapitaal kon lok, uitgebrei. Ten spyte van soortgelyke wetgewing in grens/koloniale gebiede soos Suid-Afrika is weinig pogings nog aangewend om die uitkomste van die wetgewing in die gebiede te analiseer. Hoewel maatskappye in die breë ekonomiese geskiedenis en in mikro-maatskappy studies in die Suid-Afrikaanse geskiedenis figureer, is weinig pogings nog aangewend om hul langtermyn impak te analiseer. Die studies wat wel maatskappygroei ondersoek het, het veral gekonsentreer op hul verspreiding in die periode voor die wetgewing of in die algemeen die regsraamwerk waarbinne hulle gefunksioneer het, ondersoek. Hierdie studie beoog om die leemte te vul deur op die impak van die “Cape Joint Stock Company Act” van 1892 op maatskappy- en kapitaalmark-groei te fokus. Hierdie is die eerste studie wat mikrodata van maatskappye gebruik om die verspreiding van maatskappye en hul aandeelhouers in koloniale Suid-Afrika te ondersoek. Die studie ondersoek die sektore waarin die maatskappye betrokke was en bepaal hul geografiese ligging, grote, gemiddelde leeftyd en stel was wie hulle gefinansier het. Die analise het aangetoon dat daar `n aansienlike toename in die aantal maatskappye in verskeie sektore in die periode 1892-1902 was. Tydens hierdie uitsonderlike groei in maatskappystigting het die middelklas 31% van die kapitaalmark gevorm en die hoogste persentasie maatskappystigters opgelewer. Dit het beteken dat hulle nie net die grootste bron van kapitaal was nie, maar dat hulle ook as entrepreneurs op die voorpunt van vernuwing en innovasie was. Binne hierdie dinamika het vroue teen die einde van die 19de eeu gereelde deelnemers aan die kapitaalmark geword – ten spyte van sterk kulturele instellings en tradisies wat hulle van baie ekonomiese aktiwiteite uitgesluit het. Hoewel boere getallegewys die tweede grootste groep in die kapitaalmark gevorm het, het hul in terme van kapitaal bygedra die laagste posisie beklee. Moontlike verklarings vir die tendense is dat terwyl vroue die kapitaalmark gebruik het om hul ekonomiese vryheid uit te oefen of te bevestig, boere die kapitaalmark gebruik het om die landbousektor wat onder `n reeks omgewingsrampe deurgeloop het, te red. Die tendense het ook saamgeval met `n groeiende ideologie en tydsgees wat vroue se onafhanklikheid ondersteun het. Boere het ook in teenstelling met ander beleggersgroep wat hul beleggings verspei het die meeste van hul beleggings na maatskappye iii Stellenbosch University https://scholar.sun.ac.za in die landbousektor gekanaliseer. Die aard van die maatskappye wat in die periode gestig is en die diversiteit van die kapitaalmark dui dus daarop dat die “Company Act” van 1892 `n diepgaande ekonomiese impak op die Kaapkolonie gehad het. iv Stellenbosch University https://scholar.sun.ac.za To my young brother Mthabisi Maphosa with love and passion. v Stellenbosch University https://scholar.sun.ac.za Acknowledgements I would like to express my gratitude to the Gerda Henkel Foundation, and the Graduate School of Arts and Social Sciences at the Stellenbosch University for the doctoral scholarship they granted me, and providing facilities that prepared me to conduct my PhD studies. I am also grateful to my supervisor, Professor Johan Fourie, for selecting me for this programme, and providing guidance for my study. I appreciate his patience and moral support. Many thanks also go to my co-supervisor, Dr Anton Ehlers, whose attention to detail, and constructive criticism was very instrumental in the completion of this dissertation. His incredible sense of humour also made it easy for me to take some of the obstacles I met during my PhD journey with a stride. I should mention, however, that the completion of this dissertation would have been impossible without the mentorship of Dr Edward Kerby. His innovative ideas, and solutions helped me overcome the challenges I faced with data capturing and analysis. He also sharpened my ideas and guided me from the beginning to the end of my studies. I am also grateful for the financial support that he, and Professor Fourie, gave me during the difficult time of the COVID-19 pandemic. I will forever appreciate their kindness. In the early stages of my PhD I had the privilege of being hosted by Professor Klas Rönnbäck and Professor Oskar Broberg at Gothenburg University for a period of three months in 2018. They gave me valuable insights on how to structure my dissertation and referred me to sources that proved to be very valuable to this work. I am greatly indebted to their support. My work also benefited immensely from Professor Sandra Swart’s ideas. I am grateful for her willingness to read my chapters, and the many suggestions she proposed for this dissertation. During my studies, it was also a privilege to be part of the Laboratory of the Economics of Africa’s Past (LEAP) and the Stellenbosch University History Department. I presented in, and attended, many workshops and seminars facilitated by these entities, and had the opportunity to connect with some of the brightest minds in Southern African history. Also worth mentioning is Dr Thembani Dube, and other mentors from my previous department at the University of Zimbabwe: Dr Ushehwedu Kufakurinani,