Wim Naudé warns that South Africa’s oligarchy offers a case study in how elite control can subvert democracy and entrench inequality. Since the end of Apartheid, the country has embraced neoliberal economic policies that favour mining, finance, and agri-business elites, pointing to a strong collusion between oligarchs and the ANC. While corporate profits and market capitalisation have soared, most South Africans face poverty, high unemployment, and poor public services. Naudé argues that South Africa’s stagnant, exclusionary economy can only be transformed through dramatic reforms.
Wim Naudé
The world has an oligarchy problem. It threatens economic and social stability and accelerates planetary environmental destruction and global warming. While much has been written about Russian oligarchs, it has become clear that the West, particularly the US, has a similar and growing oligarchy problem. Thom Hartmann writes how ” The American Oligarchs Have Arrived to Destroy US Democracy.” George Monbiot describes the UK’s oligarchy and how they “seek the destruction of oversight”, which has led to “UK bodies such as the Environment Agency and the Health and Safety Executive” to have been “comprehensively gutted.”
This article highlights the ultimately destructive nature of an enduring, long-standing oligarchy: South Africa. It provides a stark warning to the rest of the world how insidious, damaging, and pervasive the oligarchic control model of capitalism can be once it is entrenched. South Africa has, at least since the mid-17th century, been South Africa Inc. – a corporate project of global capitalism – controlled successively by the Dutch VOC, the British Empire, and a narrow Afrikaner elite who extracted much wealth from the country’s land and mineral resources.
The oligarchy’s incorporation of the ANC
When the African National Congress (ANC), established in 1912 and fighting for the liberation of the country from colonialism and apartheid, came into power in 1994, the new democracy was rapidly subverted by the business oligarchy, which incorporated the top of the ANC. “Democratic” South Africa was efficiently absorbed into global capitalism’s neoliberalist project, and the oligarchy could continue business as usual in South Africa.
The oligarchy’s incorporation of the ANC had been so effective that the ANC after 1994 embraced 30 years of fiscal and monetary conservatism: tariff liberalisation, protection of property rights (however obtained in the past), international financial openness, and Central Bank independence-in fact, all the orthodox policies that mark World Bank structural adjustment programs. The oligarchy’s incorporation of the ANC, whose current leader, Cyril Ramaphosa, is himself a billionaire oligarch, was so effective that by 2024, the ANC had lost its majority in parliament. It concluded a Government of National Unity (GNU) cooperation agreement with the Democratic Alliance (DA), the “most business-friendly” party. The corporate-controlled press immediately greeted the coalition government as welcome and calls were made for even more fiscal austerity and financial liberalisation.
In other words, after more than 30 years of neoliberal policies, which had only led to a stagnant economy that had entrenched the highest levels of inequality in the world, South Africa’s business sector was jubilant. This insanity – given that the definition of insanity is keeping on doing something that does not work, can only be explained by the fact that it does work – for the corporate sector, but not for the vast majority of South Africa’s citizens.
For the cast majority of South Africa’s citizens, the captured and controlled democracy did not bring much social and economic progress. This is reflected in the country’s dismal economic growth record. Fig 1 shows that per capita GDP growth has been negative for most of the decades. since the 1970s. In the country’s modern history, the 2000s until Jacob Zuma’s presidency, which started in 2009, was the golden period. And it wasn’t much of a golden period, with a paltry 2,6% annual growth on average.
A growth model for the billionaires
The mainstream explanation for the poor growth record, favoured by corporate South Africa and the IMF and World Bank, is that it is broadly the result of poor governance: the state capture scandal, government inefficiency and crumbling public infrastructure are most often blamed. This, of course, is used by corporate SA to argue for the privatisation of “inefficient” public services. Another favoured explanation is that South Africa’s education system does not turn out to be the type of skilled labour that would promote growth.
These are all real problems. But they are not the main problem—in fact, they are all symptoms of an economy built around the interests of a narrow set of oligarchic industries—mining, finance, and the agro-industry primarily. South Africa has an underappreciated oligarchy problem. To see how this causes low growth, whose benefits accrue to a privileged few, consider that economic growth is driven by technological innovation and the accumulation of labour and capital. Use more labour or capital, or make them work smarter using technology, and GDP has to increase. This is standard economic growth theory. In South Africa, technological innovation and labour accumulation have not driven economic growth over the past two decades, given the dismal rates of productivity growth and high unemployment. The slight growth we have observed since 2000 has thus been due to the remaining factor: capital intensification.
In fact, intensifying capital deepening through mechanisation and other tools that reduce the labour share has been facilitated by low and declining real interest rates in South Africa. At the same time as the decline in real interest rates, the Rand Exchange rate significantly depreciated against the dollar and other hard currencies. Fig 2 below shows these two trends over the past decades:
The exchange rate depreciation provides an incentive for exporting – it raises South Africa’s competitiveness. The combination of low interest rates and a depreciated exchange rate is excellent news for capital-intensive, resource-based (and heavily polluting) industries – such as mining and agriculture. Thus, the vast bulk of the meagre economic growth that the country enjoys is due to mining and agricultural products being exported. The financial industry greatly benefits from facilitating the money flows associated with the capitalisation and mechanisation of mining and agriculture and their international transactions. In the process, only the privileged few who controlled or shared in the extraction of minerals and land got rich, at the costs of the majority of the population and at the cost of a deteriorating natural environment.
The problem is that this growth model is independent of the economic prosperity of ordinary South Africans. These sectors are insulated against the deterioration in real wages and the entrenchment of poverty. Indeed, if ordinary South Africans became richer, consumed more, and required more investment in local infrastructure, it would push up interest rates, appreciate the Rand, and hurt the business model of South Africa INC—the interests of the mines, big farming, and the bankers.
This is why, despite economic growth stagnating in South Africa, the share prices and market capitalisation of Big Capital, perversely, keep growing. In 2003, the JSE had a market capitalisation of around R 344 billion. Currently, it is around R 20 trillion. That is a 61-fold increase. The JSE is dominated by 49 companies (“Big Business”) whose market capitalization is worth around ZAR 4,7 trillion. These financial-mining giants include FirstRand, Standard Bank Group, Capitec Bank, Gold Fields, AngloGold Ashanti, and Sanlam. And these giants are swimming in profits, unlike most South Africans who have to count every cent. If only the top 49 companies on the JSE were to be liquidated, then given that around 30 million people in South Africa live below the most recent upper-bound poverty line of R 1558 per month (as calculated by StatsSA), everybody in poverty could be lifted out of poverty for almost 10 years.
These oligarchic firms are swimming in profits. FirstRand, for instance, recently reported that its normalised earnings had increased in 2023 by 12% to ZAR 36.7 billion, and it paid out a handsome dividend. Standard Bank reported that for 2023, headline earnings of ZAR 42.9 billion, Capitec Bank’s headline earnings are up 15% to R9.7 billion, and Gold Fields achieved normalised earnings of around ZAR 16 billion. And so one can continue. No wonder, as a recent research paper documents, a mere 3,500 individuals in a population of 60 million “own 15 per cent of household net worth, more than the bottom 90 per cent.
Indeed, as the Harvard Growth Lab recently concluded, “Three decades after the end of apartheid, the economy is defined by stagnation and exclusion.” As Statistics SA documents, gains in the quality of life of the poorest in South Africa barely improved in more than twenty years: 23% of households still rely on open fires fuelled by wood and coal for cooking and heating. Around 45% of youths are unemployed. Environmental racism continues unabated, including deliberately placing landfills and polluting industrial plants in low-income and migrant communities, often along racial lines. Progress in terms of most of the SDG’s is off-target. And with 35 murders per 100,000 population each year, one is safer in warn-torn Afghanistan and Iraq.
Tax the rich
South Africa’s fundamental challenge is to address its oligarchy problem. The first step is to tax away their windfall profits and invest them in infrastructure and public services benefitting low-income households. Interest rates should be raised, which would also strengthen the Rand, and strict exchange controls on financial outflows should be imposed. Like Indonesia and Chile, the country should also restrict and /or nationalise the export of critical raw materials, amongst other iridium, reserving it for domestic beneficiation and value creation. Although these are already radical policies, given the current neoliberal-dominated policy debate in the country, much more is needed to ultimately re-align the interest of big corporations with the welfare of all South Africans.
Featured Photograph: A protest placard of Atul Gupta carried by two EFF members on either side of it at the Zuma Must Fall protests in Cape Town (Wiki Commons).
Wim Naudé is a visiting professor at RWTH Aachen University in Germany. He’s a Fellow at the African Studies Centre at the University of Leiden in the Netherlands, and a Distinguished Visiting Professor at the University of Johannesburg
