White monopoly capital: good politics, bad sociology, worse economics

White South Africans own most companies and shares on the Johannesburg Stock Exchange. Reuters/Philimon Bulawayo.

Many would like to consign the polarising debate about “white monopoly capitalism” (WMC) in South Africa to the margins. They argue that its proponents are nothing more than Marxist ideologues or mischievous political manipulators

But, even if we query the integrity of the term WMC, its introduction into South Africa’s contemporary discourse is indisputably good for the country’s politics.

Above all, it’s an urgent reminder that the inequalities of wealth, income and opportunity in this country are not only extreme but still highly racialised. It forces people to ask why, even under a black government, a white minority continues to dominate the most productive parts of the economy.

The extremes of racialised inequality in the country are not just an affront to social justice but are also politically explosive. Granted, the implementation of employment equity and Black Economic Empowerment (BEE) has somewhat ameliorated racialised patterns of wealth and ownership. But, no one should be surprised when black people at the bottom of the heap get angry. Neither should people be surprised that there are politicians who, for reasons good and ill, are willing to exploit that anger and mobilise around it.

For the last twenty years, mainstream politics has talked a lot about addressing the extremity of inequality, but has done little about it. The governing African National Congress (ANC) has indulged in much egalitarian rhetoric while the opposition Democratic Alliance (DA) has targeted “equality of opportunity”.

In practice, both have embraced the mantra that a rising tide in the economy will lift all boats. But, today the tide has long been out. The boats are stuck in the mud. And it’s taken the rise of the radical Economic Freedom Fighters (EFF) to shake the major parties out of their complacency by espousing a revolutionary assault upon WMC.

That’s a major plus for the country’s politics. A serious conversation about the continued racialisation of wealth, inequality and poverty is needed. Yet the problem for the EFF, and those who simplistically target WMC, is the dismal nature of their sociology.

Monopoly capital under apartheid

White monopoly capital was at its most cohesive and concentrated during the late phases of apartheid. In 1981, over 70% of the total assets of the top 138 companies were controlled by state corporations and eight privately owned conglomerates. These spanned mining, manufacturing, construction, transport, agriculture and finance.

Further concentration followed the mounting political crisis of the 1980s. Foreign companies disinvested and sold their assets locally. Unable to invest abroad during late apartheid, the conglomerates invested their excess capital by buying local assets that were often distant from their core business.

By 1990, just three conglomerates – Anglo-American, Sanlam and Old Mutual – controlled a whopping 75% of the total capitalisation of the Johannesburg Stock Exchange (JSE). Given the overwhelmingly domestic and white nature of the ownership of these companies, as well as the astoundingly high level of concentration of capital in a handful of conglomerates, we could fairly – even usefully – refer to “WMC”. But things have changed considerably since then.

Changing corporate landscape

The democratic era that started with the ascension to power of the ANC in 1994 has seen major changes in a corporate structure which had historically revolved around a minerals-energy-complex dominated by the major conglomerates.

The opening of the economy to the global market post-apartheid, led to major processes of “unbundling”, as conglomerates shed their “non-core” assets in search of “shareholder value”. By 2016, Anglo-American’s share of market capitalisation on the JSE had shrunk to as low as 15%.

In addition, foreign money poured in, some to purchase unbundled assets, some to invest in an expanding financial sector. Yet some simply sought to make short term returns from high interest rates. Correspondingly, the role of the banks and private investment institutions increased. By 2010, financial institutions (14%) – along with mining houses (37%) accounted for over half of market capitalisation of the JSE by 2010. The economy was now dominated by a minerals-energy-finance-complex.

Alongside the growing financialisation of the economy, there has been a shift in racial patterns of ownership. At the end of apartheid, companies listed on the JSE were almost wholly owned by white South African investors. But, by 2016, (if we accept the calculations done by Alternative Prosperity) white South African ownership was down to just 22%.

Julius Malema leads a protest by the Economic Freedom Fighters to the Johannesburg Stock Exchange. Reuters/Siphiwe Sibeko

Meanwhile, foreign ownership had leapt to 39%, black direct ownership (mainly through BEE schemes) to 10% and black indirect ownership (largely through pension funds) to 13%, with another 16% uncategorised.

Such statistics are always a matter of controversy. President Jacob Zuma recently insisted that black ownership of the JSE was as low as 3%. Yet the trend towards both greater foreign ownership and increased black ownership is indisputable. Three major issues follow.

Evolving ownership patterns

Large scale capital in South Africa is less monopolised and more diversified in its ownership than it was under apartheid (even if major corporates continue to dominate). It follows that the country needs to grasp how the nature of capitalism is changing. For a start, the growth in black pension funds reflects the strong upward movement of black people into the higher ranks of the public service since 1994.

Even if we continue to refer to “monopoly capitalism” in these circumstances, it makes far less sense to refer to it, uncritically, as “white”. Yes, it’s probable that the major stake of foreign investment is ultimately owned (largely indirectly via institutional investments) by foreigners who are white. But, does this suggest that we would prefer that they were yellow or brown? Surely that takes us on to very shaky territory? Should we categorise the Gupta empire – the politically-connected family at the centre of state captures – as “brown monopoly capitalism?”

Critics such as Prof Chris Malikane, the economic adviser to Finance Minister Malusi Gigaba, have objected that the growth of black investment on the JSE is not significant. That’s because, they argue, black pension funds are largely controlled by white asset managers. And black direct investments via BEE schemes are largely funded through debt owed to white capital. These are certainly very real issues. But, is the main issue here the racial patterns of ownership and control – or the growing power of financial institutions and their lack of accountability?

All this means that it’s simply too crude, too simplistic and too out of date to depict the economy in broad brush terms as under the domination of white monopoly capital. The reality is more complex. It follows that suggestions that the decolonisation of the economy demands the nationalisation of WMC is profoundly bad economics.

The troubled experiences of South Africa’s state-owned enterprises such as South African Airways, Eskom and PetroSA do nothing to inspire confidence. What the economy might gain in terms of direct state ownership would be confounded by flight of capital and know-how. Class rule by capitalists would be replaced by class rule by state managers who would be no more accountable to ordinary citizens than their predecessors.

Innovative solutions needed

South Africa needs to devise far more inventive solutions than nationalisation to tackle the brutally unequal nature of its economy. Citizens need to pose profound questions about how to make international capital more accountable. They must ask questions about how to make the country’s corporate elite more accountable and how state capital can work productively with private capital while remaining responsive to local communities. And, yes, about how present patterns of corporate ownership can be not only de-racialised but democratised.

Yes, it’s a nice idea to think of overthrowing “white monopoly capital”, but we need to think very carefully of what we might replace it with!

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