South Africa Business Report

Introduction
South African economy has been analyzed and critiqued in a number of ways low
productivity, poor international competitiveness, unequal distribution of the income,
overconcentration and other structural problems impeding sustained economic growth
and human development. However, there has as yet been no overall analysis of the
sustainability of the economy. This is a source of concern, a rough and ready analysis of
the economy points to some worrying structural problems in this regard.
From environmental point of view one could say that three factors characterize the
economy.
1. It is highly reliable on a number of energy intensive sectors dependent on low
electricity prices.
2. It has a set of old capital stock due to South Africas relative absence from the world
economy and low levels of foreign investment in the 1980s.
3.

Primary non-renewable resource extraction and associated industries, essentially

mining and minerals processing, provide a major, albeit declining in parts, proportion of
gross domestic product (GDP) exports and employment.
South Africas coal based electricity generation, in combination with high energy
intensity, makes it the third highest producer of greenhouse gasses in the world relative to
GDP (World watch Institute 1996).
South Africas power stations are not fitted with desulphurization or gentrification
equipment, leading to high level of sulphur dioxide (SO2) and nitrogen oxides (NOx)
emission which contribute to acidic deposition and health risks.

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Old Capital stock means that clean technology innovations are not widespread throughout
the industrial economy. Production process with low pollution per output levels and high
materials and energy efficiency are not widespread in the manufacturing section, nor are
facilities for waste exchange and recycling. Levels of waste production are very high
particularly in those primary and secondary sectors on which the economy is so
dependent, gold and coalmining and minerals and metals processing, as well as in certain
other key manufacturing sectors such as chemical production. Apart from the waste
production the mining sectors generates enormous environmental impacts, particularly in
certain regions of the country. Air pollution, destruction of arable and land and natural
areas, water pollution and huge health and safety impacts are all associated with this
sector of the economy. At the same time South Africa is dependent on the renewable
resource section production for employment and subsistence farming. This makes the
country dependent on soil and water quality and on sustainable natural resource
management and highly vulnerable to shocks to these resources or the declines in their
quality.
The challenge of Agenda 21, the manifesto arising from the United Nations Conference
on Environment and Development (1992) to improve production systems through
technologies and processes that utilize resources more efficiently and at the same time
produce less wastes-achieving more with less. is a challenge facing the worlds
developed and developing countries. For a number of decades there have been warnings
that the scale of human activity could exceed the capacity of the earths natural systems
to sustain them. The warnings initially came from academics and researchers.
As Postel (1994) points out, this may well be because of signs of environmental
constraints are now pervasive. In South Africa grasslands have been overgrazed and
fisheries are overexploited. Water resources are overstretched and polluted, and South
Africans have to extend further and further afield for future supplies.
It is therefore necessary to consider the changes needed to avoid crashing into these
barriers.

Fuggers Welsers and Rothschilds

Fuggers Family:
The Fugger family is a German family that was a historically prominent group of
European bankers, members of the fifteenth and sixteenth-century mercantile participate
of Augsburg, international mercantile bankers, and venture capitalists. The Fuggers
family controlled much of the European economy in the sixteenth century and
accumulated enormous wealth. This banking family replaced the de' Medici family, who
influenced all of Europe during the Renaissance. The Fuggers took over many of the
Medicis' assets and their political power and influence.
The Fuggers initially focused their attention on silver business but expanded their field
of activity to trade in copper, which was increasingly needed for the production of a
variety of commodities, including weapons and armor. When Maximillan summoned the
Baumgartners of Kufstein in 1492 to sell a part of their copper store to him, the Fuggers
resold the copper for the king account in Venice. The Fuggers also invested in Salsburg
mining districts of Gastein and Rauris where they acquired their own shares in mines.

Welsers Family:
Welser was a German banking and merchant family, originally a patrician family from
Augsburg, that rose to great prominence in international high finance in the 16th century
as financiers of Charles V, Holy Roman Emperor. Along with the Fugger family, the
Welser family controlled large sectors of the European economy, and accumulated
enormous wealth through trade and the German colonization of the Americas. The family
received colonial rights of the Province of Venezuela from the Charles I King of Spain in
1528, becoming owners and rulers of the South American colony of Klein Venedig.
The Welsers were the second most powerful next to the Fuggers trading and banking
house of Augsburg, Germany. Their main activities were spices and general trading.

They were neither miners nor metal traders, the way the Fuggers were but they thought
they had a good nose for business, and they were anxious to steal a march on the
Fuggers.

Rothschilds Family:
The Rothschild family is a descendent family from Mayer Amschel Rothschild, a court
Jew to the Landgraves of Hesse-Kassel, in the Free City of Frankfurt, who established his
banking business in the 1760s. Unlike most previous court Jews, Rothschild managed to
bequeath his wealth, and established an international banking family through his five
sons. During the 19th century, when it was at its height, the Rothschild family is believed
by some to have possessed the largest private fortune in the world as well as the largest
private fortune in modern world history.

The family's wealth is believed to have

subsequently declined, as it was divided amongst hundreds of descendants.

Today, Rothschild businesses are far less well known than they were throughout the 19th
century, although they encompass a diverse range of fields, including finance, real estate,
mining, energy, mixed farming, wine, and charities.
Today their services include strategic advisory and financing advisory, including
restructuring. They advise clients on transactions of all sizes from large cross border
and domestic deals through to smaller complex transactions.

Industrial Revolution
The Industrial Revolution, which took place from the 18th to 19th centuries, was a period
during which predominantly agrarian, rural societies in Europe and America became
industrial and urban. Prior to the Industrial Revolution, which began in Britain in the late
1700s, manufacturing was often done in peoples homes, using hand tools or basic
machines. Industrialization marked a shift to powered, special-purpose machinery,
factories and mass production. The iron and textile industries, along with the
development of the steam engine, played central roles in the Industrial Revolution, which
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also saw improved systems of transportation, communication and banking. While

industrialization brought about an increased volume and variety of manufactured goods
and an improved standard of living for some, it also resulted in often grim employment
and living conditions for the poor and working classes.

Britain: Birthplace of the Industrial Revolution

Before the advent of the Industrial Revolution, most people resided in small, rural
communities where their daily existences revolved around farming. Life for the average
person was difficult, as incomes were meager, and malnourishment and disease were
common. People produced the bulk of their own food, clothing, furniture and tools. Most
manufacturing was done in homes or small, rural shops, using hand tools or simple
machines.
Innovation and Industrialization
The textile industry, in particular, was transformed by industrialization. Before
mechanization and factories, textiles were made mainly in peoples homes (giving rise to
the term cottage industry), with merchants often providing the raw materials and basic
equipment, and then picking up the finished product. Workers set their own schedules
under this system, which proved difficult for merchants to regulate and resulted in
numerous inefficiencies. In the 1700s, a series of innovations led to ever-increasing
productivity, while requiring less human energy. For example, around 1764, Englishman
James Hargreaves (1722-1778) invented the spinning jenny (jenny was an early
abbreviation of the word engine), a machine that enabled an individual to produce
multiple spools of threads simultaneously.
Transportation and the Industrial Revolution
The transportation industry also underwent significant transformation during the
Industrial Revolution. Before the advent of the steam engine, raw materials and finished
goods were hauled and distributed via horse-drawn wagons, and by boats along canals
and rivers. In the early 1800s, American Robert Fulton (1765-1815) built the first
commercially successful steamboat, and by the mid-19th century, steamships were
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carrying freight across the Atlantic.

In the early 1800s, British engineer Richard

Trevithick (1771-1833) constructed the first railway steam locomotive.

Communication and Banking in the Industrial Revolution
Communication became easier during the Industrial Revolution with such inventions as
the telegraph. In 1837, two Brits, William Cooke (1806-1879) and Charles Wheatstone
(1802-1875), patented the first commercial electrical telegraph. By 1840, railways were a
Cooke-Wheatstone system, and in 1866, a telegraph cable was successfully laid across
the Atlantic.
Quality of life during Industrialization
The Industrial Revolution brought about a greater volume and variety of factoryproduced goods and raised the standard of living for many people, particularly for the
middle and upper classes. However, life for the poor and working classes continued to be
filled with challenges. Wages for those who labored in factories were low and working
conditions could be dangerous and monotonous.
Industrialization moves beyond Britain
The British enacted legislation to prohibit the export of their technology and skilled
workers; however, they had little success in this regard.
Industrialization spread from Britain to other European countries, including Belgium,
France and Germany, and to the United States. By the mid-19th century, industrialization
was well-established throughout the western part of Europe and Americas north eastern
region. By the early 20th century, the U.S. had become the worlds leading industrial
nation.

Standard Oil Company

Standard Oil Company and Trust, American company and corporate trust that from 1870
to 1911 was the industrial empire of John D. Rockefeller and associates, controlling
almost all oil production, processing, marketing, and transportation in the United States.
The companys origins date to 1863, when Rockefeller joined Maurice B. Clark and
Samuel Andrews in a Cleveland, Ohio, oil-refining business; in 1865 Rockefeller bought
out Clark, and two years later he invited Henry M. Flagler to join as a partner in the
venture. By 1870 the firm of Rockefeller, Andrews, and Flagler was operating the largest
refineries in Cleveland, and these and related facilities became the property of the new
Standard Oil Company, incorporated in Ohio in 1870. By 1880, through elimination of
competitors, mergers with other firms, and use of favorable railroad rebates, it controlled
the refining of 90 to 95 percent of all oil produced in the United States.
Business Strategy:

Taken competitive advantage in reducing the transportation costs of moving the

oil around.

Made secret pacts with three transportation companies for preferential prices.

Within just a few weeks he bought out 22 of the 26 oil refineries in Cleveland.

Bribed politicians to legislate in his favor.

Create huge economies of scale he cut the cost of refining oil by two thirds.

Buy out the competition and retain only those that were efficient and potentially
profitable.

Amassed a monopoly in the oil industry - refining 90% of all the oil in the world.

Unconcerned with people losing jobs.

Vertical integration he controlled all aspects of the oil journey from supply to
final distribution. Would even supply to peoples houses.

Dell
Dell Computers is one of the worlds leading manufacturers and sellers of desktop and
laptop computers.

The Company was founded by Michael Dell a student at the

University of Texas at Austin whose first company was PCs limited, founded in 1984.
Even at this early stage Dell successfully employed several practices that would come to
typify the Dell strategy. Sell directly to customers (not through stores) build each
machine to suit the customers preferences and be aggressive in competing on price. In
1988 the growing company changed its name to Dell Computer Corporation.
Business Strategy:

By selling personal computer systems directly to customers, Dell can better

understand their needs, and efficiently provide the most effective computing
solutions to meet those needs.

Dell offers an in-person relationship with corporate and institutional customers in

addition to telephone and internet purchasing, customized computer systems, online and technical support and next-day on-site product support.

Dell is enhancing and broadening the fundamental competitive advantage of the

direct business model by increasingly applying the efficiencies of the Internet to
its entire business.

Dell arranges for system installation and management, guides customers through
technology transitions.

Designs and customizes products and services to the requirements of

organizations and individuals.

Sells an extensive selection of peripherals hardware and computing software.

British Gas

British Gas is the UKs leading energy supplier, serving around 11 million homes, as well
as providing energy to nearly one million UK business supply points. Affordability is a
key concern for both residential and business customers. As well as supplying energy, its
UK energy services business also offers a comprehensive range of services including
boiler installation, servicing of electrical systems, appliances, plumbing and drains, all
underpinned by a nationwide network of over 10,000 engineers, six engineering
academies and a state-of-the-art nationwide distribution centre.
British Gas was subsequently sold as a single entity in 1986. Thus it was both a
monophony buyer of natural gas from North Sea, and monopoly seller on the domestic
market. The market for gas is broadly divided into four sectors.
1.

The contractors market for industrial consumers requiring more than 25,000 the
thermos a year. Prices are individually negotiated and not published.

2.

Industrial and business consumers requiring between 2500 to 25000 thermos a

year. For these and interruptible customers British Gas has to price according to
published schedules.

3.

The domestic household market where there are published price schedules.

4.

The power market.

In 1997 British Gas was broken into two companies namely. (1) Centrica (2) BG
Centrica will be holding company for British Gas distribution to UK domestic consumers
and GB will inherit the heavily regulated pipeline system and the international oil and gas
exploration and production business (Corzine 1997)
The real price of gas has started to fall, especially to industrial users, to a degree that
domestic prices are now among the lowest in Europe. Britain began exporting gas in

1992 and this is expected to increase as more and more gas pipelines are built to connect
Britain to the European gas grids (Brown Book 1996: Ch.7).

General Electric
The leading American firm in the electrical industry, General Electric later known as GE
was incorporated in 1892. The corporation was created through the merger of two young,
rapidly growing companies, Thomson-Houston of Lynn Massachusetts, and Edison
General Electric of Schenectady, New York. The men behind this merger were rail and
textile magnates, from Bostons State Street and J.P. Morgan, the New York banker who
also organized International Harvester and United States steel.
It is one of the largest and most diversified technology and financial services corporations
in the world.

With products and services ranging from aircraft engines, power

generation, water processing, household appliances to medical imaging, business and

consumer financing and industrial products, GE serves customers in more than 100
countries. The companys operating businesses that are reported as segments include
Energy Infrastructure, Aviation, and Healthcare, Transportation, Home & Business
Solutions and GE capital.
GE has more than a dozen local growth teams in China and India. In the midst of a severe
global recession, GEs businesses in China will grow 25% this yearlargely because of
LGTs. Its way too early to declare victory; however, progress has been uneven. While
some businessesnotably, health care and power generation and distributionhave
taken the ball and run with it, others have been less enthusiastic. And though GEs R&D
centers in China and India have increased their focus on the problems of developing
countries, the vast majority of their resources are still devoted to initiatives for developed
ones. So there is still a long way to go.

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References:

Haberlein M: 2012 The Fuggers of Augsburg: Pursuing wealth in Renaissance Germany

Helmut Waszkis. Woodland Publishing Limited.
Henderson, H. (2009) Encyclopedia of computer science and technology. Revised
edition. New York: InfoBase Publishing.
Means, H. (2001) Money and Power: The History of Business, London: John Wiley &
Sons.
Moore, L. (1999) Britains trade and economic structure. London: Routledge.

Electronic References:
www.rothschild.com Accessed 20/10/2014
www.history.com Accessed 06/11/2014
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HfVtVOHTN5C1sQTu-YCoAw&ved=0CDkQ6AEwAQ#v=onepage&q=south%20africa
%20business%20context&f=false Accessed 20/11/2014
http://www.britannica.com Accessed 12/11/2014
http://classes.soe.ucsc.edu Accessed 12/11/2014
http://www.centrica.com Accessed 14/11/2014.
https://hbr.org/2009/10/how-ge-is-disrupting-itself/ar/1 Accessed 19/11/2014.
http://books.google.co.uk/books?id=Z6ypjtGZjMC&printsec=frontcover&dq=general+electric&hl=en&sa=X&ei=qTFmVMSIDdHVao2
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