APRIL 1998 ∑ VOLUME 18∑ NUMBER 4


ECONOMICS

 
Truth Time for Corporate
South Africa?
 


By Patrick Bond

Johannesburg -- When the leaders of large corporations have to confess guilt by association with a crime as heinous as apartheid, there is no end to the excuses and buck-passing.

The November 1997 hearings of South Africa's Truth and Reconciliation Commission on corporate connivance with apartheid began to remedy matters, for it brought to public consciousness some of the racist practices through which a handful of firms achieved near total dominance of South Africa's private sector.

Big business offered an array of defenses for its complicity with apartheid. "The ability of companies to adapt to almost any political regime is in many ways a great asset," said Ann Bernstein, director of the Centre for Development and Enterprise, a business-backed think-tank, in one of the more brazen rationalizations of corporate practices in the apartheid era.

Most business representatives were more contrite, however. In two dozen submissions, corporate representatives, trade associations and allied experts offered the Truth Commission apologies for "sins of commission and omission," for "missed opportunities to oppose apartheid and hasten its demise," or for not "speaking out" against the political system with more vigor.

Many firms distanced themselves from "an artificial and intolerable political, economic and social system which was designed to fail," testified Raymond Parsons, leader of the South African Chamber of Business. Parsons claimed his organization had "embarked on a policy of constructive engagement to eradicate apartheid" long before apartheid's demise.

The new government was not satisfied with business's presentation. Justice Minister Dullah Omar immediately warned of "a need for reparations measures" against big business, perhaps taking the form of a 0.5 percent annual wealth tax lasting at least a decade. "The ANC views these proposals with sympathy and understanding," he said.

Yet most critiques and demands for restitution associated with the historic role of corporations in South African racism remain superficial. Said Archbishop Desmond Tutu, "It would be wonderful to have someone here saying, 'We did this and we did that, and we want to rub some oil on the wounds, here is $2 million for the President's Fund.'"

Larger structural issues arose at the Truth Commission, but were essentially pushed aside. For example, Anglo American Corporation and the four other largest conglomerates -- the Afrikaans tobacco-based empire Rembrandt, and insurers Old Mutual, Sanlam and Liberty Life -- controlled 85 percent of the Johannesburg Stock Exchange (JSE) as recently as 1994, the year of South Africa's first democratic election. Such matters -- and how to address them -- were not discussed at the Truth Commission.

Corporate Distaste for Apartheid?
Nearly all of the country's corporate leaders were long-time "liberal" opponents of apartheid, at least since the 1970s. As they testified to the Truth Commission, most leading firms requested modifications to a system which imposed costs on their own business operations.

Anglo's former chair, Harry Oppenheimer, for example, had argued in 1985 that "Nationalist policies have made it impossible to make proper use of Black labor."

Restrictions on Black residency in, and right to travel to, urban areas, aspects of petty apartheid (including separate office amenities) that had become symbols of racism, prohibitions on Black home ownership and access to mortgage credit, the illegal status of African entrepreneurs in townships and most other areas, inadequate African basic education and vocational training and other policies made the Black workforce less productive and more expensive, and burdened the national economy.

But the hearings provided overwhelming evidence that South Africa's intense economic distortions were often generated for the benefit of conglomerates, or at minimum that such distortions had the effect of increasing their size, profitability and market dominance.

Current Anglo boss Julian Ogilvie Thompson conceded that apartheid created "a siege economy with wasted investment in ‘strategic industries' which often enjoyed domestic monopolies and were protected from international competition by high tariff barriers."

Among business elites, there were always differences between protectionists (mainly industrial leaders, especially Afrikaners) and neoliberal internationalists (led by English-speaking financiers and mining magnates). The internationalists argued that key policies -- exchange controls, tariff policy, local content requirements, subsidies for decentralized investments, as well as, more generally, centralized economic management and political support for specific ethnic-based economic enterprises -- contributed to slower growth, macroeconomic mismanagement, poor investment decisions and intensified sanctions and disinvestment.

Yet these same aspects of state control also intensified corporate concentration and raised profitability. Indeed, increased industry concentration during both the early 1960s and the 1970s-1980s reflected the fact that apartheid policies and intense political repression compelled multinational businesses to leave the country. The multinationals typically sold their South African subsidiaries or holdings to local conglomerates at a deep discount.

But corporate acquiescence to apartheid had deeper roots. Critics, including organized labor and the South African Communist Party, pointed out to the Truth Commission that a symbiotic relationship between capitalism and racism predated 1948, when the National Party won an historic whites-only election and formally implemented apartheid.

As whites first established diamond mines in the 1860s and gold mines in the 1880s, towns were segregated to assure maximum control of workers both in the mines and in their compounds. Industrialization began in earnest during the 1920s as large mining corporations began investing in factories that grew dependent upon cheap Black labor.

Firms earned an additional surplus income from working-age men who were considered "temporary sojourners" in towns and cities. Paying very low wages, the corporations left the costs associated with the workers' childhood, old age and ill health to be borne by mutual aid systems -- in particular, reliance upon women caregivers -- in the "Bantustan" homelands where so many millions of people were forcibly removed.

The Congress of South African Trade Unions (COSATU) provided the Truth Commission with a detailed description of oppressive practices which (at least initially) gave big business income unwarranted by the logic of market relations: the forced conquest of indigenous African people; the systematic denial of trade union rights to Black workers in the earlier industrial years; the enforcement of the migrant labor system (which the Chamber of Mines considered vital to the mining industry); the Industrial Conciliation Act of 1924 entrenching racial exclusivity for white workers; security legislation which suppressed the rights of Black workers; enforcement of the Communism Act of 1950 which targeted many trade union leaders; other aspects of repression that prevented strikes and led to the stunting of the real wage of Black workers during the 1960s; and subsequent repression of trade unionists from the 1970s through the early 1990s.

"Captains of industry, particularly those associated with the diamond and gold-mining industry," COSATU explained in its written submission to the Truth Commission, "pioneered many of the core features of what later came to be known as apartheid; far from spontaneously eroding racial oppression, profit-driven economic growth in South Africa coincided with the deepening oppression and dispossession of the majority; and even in the final two decades of apartheid rule, in the midst of a deepening economic crisis, a sometimes-wavering business community in South Africa generally collaborated heavily and benefited enormously from a close relationship with the minority regime."

There were very few examples of corporations violating the fundamental premises of apartheid. "Business carried out the economic mandate of apartheid," the Black Management Forum, a professional association told the Truth Commission. "It succeeded. The culture within business during the apartheid period was amazingly and powerfully common with respect to the ‘Bantu.' The story of the Baas and the Bantu reverberates with painful recurrence from corporat[ion] to corporat[ion]."

The Black Management Forum reminded the Truth Commission of the toll of apartheid policies, including government policies that located Black residential areas far from their places of work. "The long distances that some Blacks had to travel contributed directly not only to poor productivity, but to accident rates due to fatigue. Their living circumstances at home were typically characterized by lack of running water, poor sanitary facilities, no electricity, untarred streets, etc."

The interventionist apartheid state supplied other benefits to South African corporations besides guaranteed cheap labor. Afrikaner companies benefited from a kind of affirmative action designed to advance Afrikaners in the context of English-speaking dominance of corporate South Africa. In the years following the "Ekonomiese Volkskongres" of 1939, the Afrikaner Broederbond (a top secret group whose members comprised the leading elements of the state, its security apparatus and the Afrikaans media, universities and business community) and a large Afrikaner insurance company worked closely with the National Party to promote ethnic capitalism. (Ironically, the more orthodox economic managers of the ANC have opposed most patronage benefits for aspirant Black businesses, and several of the major new Black-controlled conglomerate groups and companies have suffered spectacular bankruptcies.)

Afrikaner-based conglomerates were the most direct beneficiaries of the apartheid state, but evidence was presented of indirect benefits of political repression for the large conglomerates more generally.

Witnesses at the Truth Commission described an array of mutual support systems for the conglomerates and the apartheid state. During the 1970s and 1980s, for example, these included massive expansion of state-owned enterprise infrastructure, the vast increase in defense-related expenditure which was contracted out to the private sector by Armscor, and South Africa's economic and military domination of its neighbors.

Business witnesses before the Truth Commission sought to explain the cozy business-state relationship during apartheid as reflective of nothing more than business's preference for stability. "The positive response by the business community to the relative political stability of the 1960s should not be viewed as support for the apartheid system," stated the South African Chamber of Business's Raymond Parsons, "but rather as evidence that business is generally risk-averse, and that a stable and effective political system are prerequisites for business and investor confidence."

Even if accepted at face value, this rationalization is less than compelling, especially when it is recognized how the desire for "stability" quickly metamorphosized into support for political repression. Thus when then-President P.W. Botha clamped down on the waves of dissent in the 1980s that would ultimately overthrow apartheid, the then-leader of Anglo American Gavin Relly described Botha's states of emergency as "regrettable, though necessary."

Neoliberalism and White Power

The big, white-dominated corporations have certainly won the battle over economic policy in post-apartheid South Africa, with the government implementing World Bank-style neoliberal economic policies and declining to confront entrenched corporate privilege.

But the conglomerates' highly concentrated power may be slowly waning nonetheless. Dilution and "unbundling" (spinning off subsidiaries, sometimes in the name of "Black economic empowerment") reduced the top five conglomerates' share of the market to 60 percent by the end of 1997.

Anglo-American fell from single-handedly controlling 60 percent of the value of the stock market during the 1980s to less than 20 percent today, according to the authoritative McGregor Information Services. While the stock market has boomed since 1994, the value of Anglo's main subsidiaries in gold, industrial activities and offshore investments plunged 44 percent, 33 percent and 19 percent, respectively.

South African Breweries, now chaired by the former Black trade union militant Cyril Ramaphosa, recently overtook Anglo as the largest single company on the Johannesburg Stock Exchange, worth nearly $2.5 billion.

And the conglomerates' sometimes ingenuous performance at the Truth Commission means that, depending on political circumstances, they could continue to be whipping boys for South Africa's ongoing development failures.

Even South Africa's relatively conservative deputy president, Thabo Mbeki -- a favorite of international financiers and corporate chiefs -- manifested a latent critical perspective on large corporations in 1996 when he circulated strongly-worded criticism of big firms in the pamphlet "State and Social Transformation."

Despite the partial dispersal of the conglomerates' power, however, the balance of forces in South Africa remains inhospitable for meaningfully shifting power away from big business generally or redistributing South Africa's stunningly concentrated wealth. With Industry Minister Alec Erwin recently backing down from antitrust actions against the beer industry -- one firm controls 98 percent of the market and also runs vast wholesale trading operations -- the prospect of either social justice or economic efficiency being considered an election-year priority appears to be diminishing.

The ANC will probably continue barking but not biting, and under neoliberal macroeconomic policies the corporate beneficiaries of apartheid will grow wealthier, more readily export their capital and continue ignoring the desperate employment and consumption needs of the country's majority.

The corrupting effect of private financing of political campaigns now seems likely to lock in pro-business policies. Recently, as the early stages of campaigning for the second democratic elections (in 1999) began, President Nelson Mandela has started speeches with the claim that large corporations have "responded excellently" to his calls for sponsorship of a handful of clinics and schools.

Mandela's perceived need to raise campaign funds, to assure the ANC does not lose control of several borderline provinces, practically guarantees that any residual state critique of corporate South Africa will subside, at least for the immediate future.

Patrick Bond is an academic and activist, and author of forthcoming books on Zimbabwe (Africa World Press) and South Africa (Pluto Press).