rejected neoliberal notions that South Africa’s global competitiveness could be enhanced by lowering wages and increasing labour market flexibility.8
The effect of these changes instituted by the new government is summarised by Omar and Webster (2004, p.208):
The removal of political apartheid has severed the link between the state and racial despotism in the workplace, changing the dynamic between race and class. Indeed, the post-apartheid state is no longer bolstering the racial division of labor. It is intervening through legislation to break down the apartheid workplace regime.
In beginning to address apartheid institutions of control and discipline in the workplace, the democratically elected govenment weakened the power of capital relative to workers. The new legislation indicated that the relationship between the state and business would be different in a democratic South Africa, and that pressure by the trade unions, the majority of the electorate (who are black) and democratic standards would shape institutions in the workplace and labour markets. Unfortunately, the shift to neoliberal economic thinking within the state created a situation where macroeconomic and financial policies favoured big business. Labour may have won the battle for progressive legislation but they seemed to have lost the war for progressive economic policies.
The high level of concentration in the South African economy has not changed as a result of the corporate restructuring of the 1990s and the surge in international mergers and acquisitions (Roberts et al 2003). In South Africa, most sectors are dominated by one or two firms that are often vertically integrated. A few large corporations still dominate the economy. On the whole, control of the commanding heights of the South African economy remains in the hands of white capitalists. Since the end of apartheid these capitalists have become more accepted into the global economy and have increased the integration of their businesses with global business.
South African capital adapted to changes in labour relations and its relative loss of power since 1994. Although there has been restructuring of the workplace and improvements for black workers in the largest enterprises, many capitalists have also moved production offshore, limited new investment in the economy, resorted to capital flight, listed on overseas stock exchanges, shed jobs and chosen more capital intensive production methods – and have generally been unwilling to create new jobs.
Business has resisted unions’ attempts to democratise firm level decision-making and other efforts to increase worker power. Instead, the unions sought to undermine central bargaining and to bypass the national industry bargaining councils. They increasingly entered into agreements at enterprise level and introduced individualised performance management and reward systems. There has also been an increase in contracting out of services and ‘non-core’ activities by businesses and they increasingly casualised jobs that had been full-time. In many sectors, including business services, retail services, transport services and footwear and clothing production, there has been growing informalisation.9
Outsourcing has been a major strategy for South African big business to address its changing power relationship with capital. Services have been a major contributor to economic growth in South Africa. The shares of finance and business services, trade, catering and accommodation, and transport, storage and communication services have all increased over the past fifteen years. This predominance of services has been interpreted by some commentators in a positive light – as a sign of the maturing of the South African economy and its move to a post-industrial development phase. While services tend to be more labour absorbing, and thus provide a better answer to the high levels of unemployment than an industry-oriented development path, Mohamed and Roberts (2007) argue that the rise in employment in services has been in extremely low-wage activities such as security and cleaning services, meaning that average remuneration has fallen as employment has increased. We argue: ‘... some of these jobs are a result of the change in classification as such activities are outsourced by, for example, manufacturing firms to independent businesses and are now classified under services’ (p.9). Our view is that the increasing role of services in the South African economy is not a sign of economic maturation and is not good for labour. The growth in the importance of services is due to the withdrawal of capital from the economy and the misallocation of capital towards financial speculation, housing price booms and exuberant consumption instead of productive investment.
Tregenna (2008) developed a methodology to analyse outsourcing and related shifts in the sectoral structure of employment. Her rigorous quantitative analysis supports our arguments. She says:
The analysis confirms that significant intersectoral outsourcing has taken place in South Africa over the last decade. The focus here is on the outsourcing of cleaners and security guards, away from manufacturing and from the public sector and towards private services. Employment in these two occupations has become increasingly concentrated in the ‘other business services’ subsector of services in particular, which is where companies that provide services such as cleaning and security to firms across the economy are generally classified (Tregenna 2008, p.33).
Increasing outsourcing of manufacturing and mining jobs has left many more workers with precarious employment, harsher and less safe working conditions, lower wages and reduced benefits.
CONCLUSION
Big business worked closely with the apartheid state to prop up the economy during the politically turbulent 1980s, when community and labour struggles were advancing and international pressure and economic isolation of the economy intensified. The economy was dominated by diversified conglomerates. These large groups bought up the assets of foreign companies that left South Africa. In fact, there seems to have been a reversal of capital flight during this period (Mohamed and Finnoff 2005). After democracy there was huge restructuring of the South African corporate sector, many of the largest conglomerates embarking on a process to increase their international operations and to reduce their South African businesses. In line with the demands of the shareholder value movement, they simplified their corporate structures and increasingly focused on core business activities when they restructured. In short, much of big business had diversified its businesses to reduce their exposure to the South African economy after 1994. At the same time, South Africa had a weak industrial structure focused around a minerals and energy complex because of the political, economic and historical processes that shaped its industrialisation. The corporate restructuring further weakened the industrial structure of the economy.
The economic policies of the new democratic government were aimed at attracting and appeasing foreign finance and investment. It was probably believed that foreign investment would pour into the new South Africa and reshape and modernise the industrial landscape. The economic policies were deliberately neoliberal because it was believed that foreign investors would be attracted to a country where the government was willing to show its credibility by ensuring low inflation and low budget deficits. The government did not adopt or implement an industrial policy to address the industrial structural weaknesses because of the fiscal implications and because their neoliberal policies favoured less state intervention in the economy.
The neoliberal macroeconomic and financial policy choices of the government proved disastrous. The policy choices left them unable to deal with the effects of financialisation and the corporate restructuring and deindustrialisation crisis in the economy. These policy choices further integrated the economy into the global economy and opened it to relatively uncontrolled hot money flows. The surges of hot money into and out of the economy led to volatility in macroeconomic variables such as exchange rates and interest rates and had a huge impact on liquidity in financial markets. The effect of this volatility
