Beruflich Dokumente
Kultur Dokumente
Banking and
Business in
South Africa
Edited by
Stuart Jones
Palgrave Macmillan
ISBN 978-1-349-09634-3
ISBN 978-1-349-09632-9 (eBook)
DOI 10.1007/978-1-349-09632-9
Stuart Iones,
1988
Softcover reprint ofthe hardcover 1st edition 1988 978-0-333-44465-8
Contents
List of Tables
Vlll
Acknowledgements
Xl
Introduction
2
3
11
16
23
27
Merchant banks
Company promoters and speculators
Exploration companies
Investment trusts
Investment groups
Conclusions
28
30
33
35
39
42
47
Stuart Jones
Stanley D. Chapman
Arthur Webb
50
51
55
58
65
Contents
vi
69
Introduction
The Second World War and post-war years
Parent bank and affiliated bank
Two affiliated banks - a mutual relationship
Two affiliated banks - a one-sided relationship
End of the relationship
Summary and conclusions
69
69
71
73
74
75
76
1945-73
81
Introduction
Supporting organisations promoting trade
The NBSA role in overseas trade
Commodities and markets
Conclusion
81
86
87
95
99
Grietjie Verhoef
105
106
107
108
110
113
Introduction
Background on commercial banking and the financial
system
The Reserve Bank and the commercial banks
Banking regulations and its problems
The de Kock Commission and monetary reform
Key questions
113
114
115
117
119
120
Contents
Africa, 1964-84
Stuart Jones
Index
vii
121
124
126
126
128
130
133
134
136
138
140
148
150
155
155
157
161
163
173
175
181
List of Tables
1.1
1.2
1.3
1.4
1.5
1.6
1.7
2.1
2.2
2.3
2.4
3.1
3.2
3.3
3.4
3.5
3.6
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
4
9
13
15
19
20
21
36
38
41
42
49
52
57
58
59
61
82
83
84
90
91
91
92
93
List of Tables
5.9
5.10
5.11
5.12
5.13
5.14
8.1
8.2
8.3
8.4
9.1
9.2
9.3
9.4
9.5
9.6
9.7
IX
93
93
94
96
97
97
142
143
145
147
161
164
166
168
169
170
172
Acknowledgements
The editor would like to acknowledge the generous financial
assistance given by the following firms towards the cost of
publication: The Gold Fields Foundation, the Council of the
Johannesburg Stock Exchange and the South African Reserve Bank.
I would also like to thank Pat Brent for help with the typing and
preparation of tables.
STUART JONES
xi
Xli
1 Introduction
StuartJones
Introduction
Stuart Jones
Introduction
4
Table 1.1
14596
176741
634 130
1 680 826
3 275 150
Stuart Jones
Introduction
track in the whole country - a suburban line linking Cape Town with
Wynberg, the line from Cape Town to Wellington, and the tiny line
from Durban to the Point. 9 Inland there was nothing because
two-thirds of the way through the century South Africa was
economically backward when compared with the United States,
Canada or Australia. Indeed the Boer Republics were barely part of
the international economy.
The explosive growth of Kimberley made a railway to the mining
town essential, but private capital was either not able or not willing to
pay for a line so far inland which passed through territory that offered
limited opportunities for picking up additional traffic - hence the
burden fell upon the state. From Kimberley the nearest port was East
London, but the government of the Cape Colony was in Cape Town
and in Port Elizabeth there was another lobby seeking the terminus of
the line to the interior at the 1820 settler city. State capitalism under
the leadership of the politicians provided Kimberley with three lines to
the coast, but at the price of using a narrow gauge that cost less to
build. Later, as the lines from the coast reached out into the interior of
the continent, the same narrow 3 ft 6 ins gauge was used instead of the
standard 4 ft 8Y2 ins of Europe and North America. The state
capitalism of the Cape Colony was, therefore, ultimately responsible
for determining the gauges of all the railways in Southern and Central
Africa, including that of the Benguela Railway through Zambia, Zaire
and Angola to the coast at Lobito Bay.
Kimberley finally received its railway in 1885, the year before gold
was discovered on the Witwatersrand and the year before the
Canadian Pacific reached Vancouver; but political problems had
prevented the choice of the most direct route to the coast at East
London through the Orange Free State and any direct connection with
the Natal railways. A decade and a half of diamond digging in
Kimberley had led to the construction of a railway network in the
Cape, by developing a flow of traffic inwards and by providing the
Cape government with a new source of revenue in the form of
enhanced customs receipts that were used to finance railway
construction. However, this particular example of state capitalism had
not provided the Colony with a network best suited to its existing
agricultural economy. All three lines were built helter-skelter to
Kimberley without any thought of the business of the districts through
which they passed. In this way, right from the beginning, state
capitalism exposed the danger inherent in letting politicians decide
important economic questions - a practice from which the South
Stuart Jones
Introduction
Local resources were inadequate. In this way the era of gold brought
South Africa into immediate and direct contact with the capital
markets of the world.
Johannesburg burst upon the economic scene. Within a year,
sixty-eight companies with a total nominal capital of 3 063 000 had
been floated: within two years of the discovery of gold, forty-four
mines were operating with a nominal capital of 6600000 and the
value of the gold output had risen to 1300000. II By January 1890, 450
companies had been floated in Johannesburg with a nominal capital of
11000000. The first bank, the Standard, opened in a tent in 1886 and
was followed by an instant stock exchange that had over fifty members
at the time of its official opening in November 1887. 12 Within two
years of the Stock Exchange opening it had 300 members and over 300
companies were officially quoted on the Exchange.
After the initial discovery of gold, Johannesburg's development was
punctuated by successive booms. In 1888-9, there was a boom,
another one in 1891 with the introduction of the MacArthur cyanide
extraction process, and a third in 1894-5 when deep-level mining was
developing and the mines were becoming very capital intensive.
Overseas capital markets were involved in this boom, which in the
course of 1894 saw the London market value of quoted South African
shares rise from under 20 million in January to over 55 million in
December. 13 This third boom culminated in the crash of 1895 when
French investors panicked and unloaded gold shares on the Paris
Bourse. 14 In this way capitalist developments in South Africa exerted
an almost immediate impact upon the great financial centres of the late
nineteenth-century world, and the mining industry learned to live
through periodic winnowing-out processes when the weaker and
financially vulnerable companies went to the wall. The survivors
tended to be those companies that commanded large financial
resources. From the time that deep-level mining began in 1892, the
gold mines needed the resources of large companies, so that almost
from the beginning developments favoured the growth of the mining
finance houses that have dominated the industry ever since. As day to
day control was not always exercised by the owners, the South African
gold mining industry began to display some of the characteristics of the
multicorporation in the United States that Alfred Chandler has
termed managerial capitalism. 15
The meteoric growth of Johannesburg had a dynamic impact upon
all sectors of the economy. Mining was revolutionised and agriculture,
hitherto retarded by both the lack of markets and the lack of transport,
Stuart Jones
10 000
6 000 000
27 000 000
70 100 000
86 800 000
92 400 000
242 000 000
285 900 000
574 900 000
R8 301 296 000
South Africa very rapidly became the world's major source of gold
in the 1890s, but large though the gold output was on the eve of the
Boer War, it was small by comparison with that on the eve of the First
World War. The additional 50 million a year of revenue from the gold
mines in the Edwardian era made South Africa overnight an important
trading partner for Britain. By then, too, close relationships had been
established with City interests as Stanley Chapman shows, though
even among the exploration companies the Rand did not dominate
and they pursued a deliberate policy of diversification.
10
Introduction
Gold went out of South Africa: foreign investment flowed in. There
are, however, no precise statistics of the capital investment in the gold
mines in the early years, because of the practice of calling up only a
proportion of the nominal value of the shares, the distribution of
special founder shares to favoured persons, the cost of marketing them
in Europe, and so on. As a result, despite voluminous literature on
economic imperialism and capitalism during this period, no historian
or economist has yet produced fully reliable figures on the investment
in South African gold mines in the twenty-eight years prior to 1914.
Kubicek's book of 1979 gives the impression of being an up to date
study of this important topic, but in the event it contains little that is
new, and his figures of capital investment in the gold mines are taken
straight from Frankel's work of 1967. 18 Frankel estimates that
between 1886 and 1913 between 116 and 134 million flowed into the
South African gold mines. This was a large amount of money for South
Africa, but it formed only a small proportion of total British, French
and German foreign investment and was, furthermore, small by
comparison with the volume of funds that flowed into American
railways. Its main impact, of course, was to make possible the rapid
development of the gold mines and that in turn helped to smooth the
working of the international gold standard and boost South Africa's
imports. Before 1886 the South African colonies had from time to time
relied upon raising capital in Britain, but the four provinces that were
to form the Union were not dependent upon inflows of capital for their
development. The diamond industry had been financed from within
the country. The discovery of gold changed all this and, after 1886,
South Africa became dependent upon a regular flow of investment
capital into the country in order to maintain the pace of development
without a reduction in consumption. This situation has continued until
the present.
Capital inflows and development on this scale could not have
occurred without the aid of financial intermediaries and the emergence of banks of comparable size. The Standard Bank, the first of the
imperial banks to make its appearance in South Africa, had done so
before the discovery of diamonds in Kimberley. It was solidly based in
the Cape, first in the Eastern Province and then in Cape Town.
Though it claimed the distinction of being the first bank to open in
Johannesburg and undoubtedly added to the stability of the infant
mining town, it was not overwhelmed by it. Nor in this period was it
drawn to move its South African headquarters from the Cape to the
Transvaal. The presence of a powerful and conservative bank in the
Stuart Jones
11
12
Introduction
Stuart Jones
13
State gold field was discovered, but its development began only after
the war and it had not come on stream by 1948. Between 1914 and 1948
the value of the gold oputput almost trebled with virtually all the
growth occurring after 1933. Table 1.3 below gives the figures.
Table 1.3 The value of gold output, 1914-1948 ( millions)
1914
1919
1924
1929
1934
1939
1944
1948
35.664
39.280
44.739
44.229
72.311
98.943
103.149
99.919
Source: Union Statistics for Fifty Years, 1910-1960 published by the Central
Statistical Service, Pretoria, 1960, K-4 and reproduced under Government
Printer's Copyright Authority 8629 of 18 December 1986.
All other market economies that have made the crossing from underdeveloped to developed have done so by first developing their
agriculture and raising productivity in that sector. This did not happen
to any significant extent in South Africa and it inevitably impeded the
progress of capitalist enterprise in other sectors of the economy.
Across the ocean in India, the main restrictions on the progress of
industrialisation were the low productivity of peasant agriculture and
the low incomes of peasant households - the same conditions which
applied to much of South Africa. The paradox of South Africa was that
on the one hand a portion of the primary sector, gold mining, provided
a powerful stimulus to development and effectively removed constraints on the balance of payments, while another portion of the
primary sector, agriculture, remained locked in antiquated methods
and low productivity that held back the growth of the market. Even
within the gold mining sector the continuance of low wages to Black
workers retarded the growth of the market. The real wages of Blacks
between 1914 and 1948 did not rise in either mining or in
agriculture. 22
The picture in the agricultural sector was bleak. In 1914, South
Africa needed to import food because the low productivity of the
Afrikaner farms made it impossible for them to feed the rapidly
growing urban regions of the country. For years they had been
sheltered from market forces and this made it difficult for them to
14
Introduction
adapt to the sudden growth in demand. The farms were undercapitalised and the farmers undereducated. Problems had been building up
before the Boer War; but the dislocation that resulted from the war
and Kitchener's brutal policies, together with a growing shortage of
land for the rapidly increasing population, created the 'poor White
problem' that exacerbated race relations and made some positive
policy towards both industry and agriculture imperative. Non-capitalist policies were adopted. The 'poor White problem' was to be solved
by a positive policy of industrialisation - recognition at least that the
land could not support them and in direct contrast to later National
Party policies towards surplus Black labour - and the agricultural
problem was to be solved, not by raising productivity as in contemporary America, but by raising prices through the creation of state
marketing monopolies. Monopsony became the policy of the government. Even so, the value of output did not rise significantly before
1939.23 Subsidies to farmers became the normal policy in the
inter-war years and in the 1930s these amounted to about 15 million a
year. Their limited impact upon the process of modernisation was
revealed in a 1941 study of farm incomes. In that year half the
owner-occupiers received less than 200 per year, more than half the
tenant farmers less than 100 per year, and the sharecroppers
(bywoners) less than 50 per year. 24 Nevertheless, the 1937 Marketing Act that authorised the setting up of Commodity Control boards
was to determine the pattern of post-war development which finally
succeeded in raising farm incomes.
Despite this weak agricultural base the period from 1914 to 1948 was
one of rapid industrialisation; and it may be argued that the role of
leading sector in the South African economy, which had been filled by
the mining sector in the half century before 1914, was now filled by
secondary manufacturing in the years after 1914. Most of this
industrial development was the product of market capitalism. Until
around 1924 the number of factories and workshops increased at the
same rate as the gross value of output, but after that date more
intensive use was made of capital and the value of output rose faster
than the number of establishments. An idea of the change under way
may be gained from Table 1.4.
The gross value of industrial output had risen more than fourteenfold while the value of gold output had barely trebled. Some large
industries had emerged, but the move towards industrialisation
represented a democratisation of capital away from the hands of a few
mining finance houses and to a broader section of the community. In
Stuart Jones
15
35699
79750
66295
63766
78425
82448
140582
267839
531 195
Source: Union Statistics for Fifty Years, 1910-1960 published by the Central
Statistical Service, Pretoria, 1961, L-3 and reproduced under Government
Printer's Copyright Authority 8629 of 18 December 1986.
economic terms, the move away from excessive reliance upon the
primary sector reflected the maturing of the South African economy
and offered the prospect of more balanced growth in the future.
While this expansion of the secondary sector might be seen as
evidence of dynamic capitalist enterprise, this does not mean that
individual capitalists were always able to determine policy. On the
contrary, there were signs that non-economic factors frequently
determined state policy. Full factoral freedom was not achieved and
was becoming less likely as the state began to place restrictions upon
development. Labour mobility was restricted by laws tying Blacks to
the land or by laws restricting free movement into the urban areas. The
apprenticeship laws effectively kept Blacks out of skilled occupations
and the 'civilised labour policy' acted as a formidable barrier to labour
mobility. Recruitment into the bureaucracy followed a similar line. In
peace time there were no restrictions on capital movements in the
White areas, but the division of the country between the races
effectively kept White capital out of the Black homelands. In general,
though, restrictions on the free movement and use of the factors of
production were still limited in their extent and cannot be said to have
had more than a marginal effect on the progress of capitalism in South
Africa.
In the tertiary sector the banking system stood up well to the
depression ofthe 1930s. The amalgamation movement that swept over
England immediately after the First World War had its counterpart in
South Africa, where the degree of concentration went much farther
than it did in Britain. For much of this period there were only two
16
Introduction
banks of importance, the Standard Bank and the National Bank that
was bought up by Barclays in 1925. There were no merchant banks
and no discount banks, but from 1921 there was a central bank, the
South African Reserve Bank. Bank deposits did not significantly rise
in the inter-war years and branches were closed, reflecting the weak
agricultural base of the country.
Looked at from the macroeconomic point of view and the growth of
the national income., South African capitalism made steady if
unspectacular progress in the years before 1948. The national income,
at 1948 prices, rose from 257 million in 1919 to 801 in 1949,25 and
the rate of growth was accelerating. The total capital stock increased as
did the per capita investment, but the inequalities between rich and
poor became, if anything, more pronounced. (This had also happened
in the USA in the late nineteenth and early twentieth century.)
Efficient economic organisation within a capitalist framework was at
work generating wealth, but the modernised sector of the economy
was still too small to embrace the whole Union, while within the
modernised sector there were disquieting signs of increasing state
interference with the factors of production in a way that was hostile to
the development of free market capitalism.
THE ERA OF NATIONALISM AND STATE CAPITALISM,
1948-80s
From 1948, along with much of the world, South Africa experienced
rapid economic growth that in effect amounted to an industrial
revolution. At the same time, this transformation of the economy was
accompanied by a far-reaching social revolution, as the underprivileged Whites of yesteryear used their newly won political power to
advance their economic interests. Afrikaner capitalism made its
appearance, accompanied by a plethora of supportive state agencies,
and began its long rise to a commanding position in the economy. For
about twenty years after their original victory the ruling groups of
Afrikanerdom were anti-capitalist in their attitudes. As state capitalism in practice means bureaucratisation, it is sometimes difficult to
distinguish between the state capitalism of South Africa and that of the
centrally planned economies of Eastern Europe. Recent capitalist
enterprise in South Africa consequently has had to contend with an
unsympathetic government - a government which elevated poor
White attitudes into a political philosophy, while at the same time
Stuart Jones
17
18
Introduction
Stuart Jones
Table 1.5
19
200
329
730
2565
11 684
growth in the assets of the banks and insurance companies, and the
emergence of a few very large corporations.
The figures of gold output in Table 1.5 convey some idea of the
magnitude of the expansion under way and of the ravages of inflation.
With the 1984 gold output amounting to a capital inflow into South
Africa of R11684 million, the gold mining industry has played a major
role in the recent expansion of the South African economy, and
formed the background to the emergence of sophisticated financial
institutions and services. Since the mid-1960s this expanding gold
output has been accompanied by considerable new investment in gold
mining that has been rising faster than the value of output, and
amounted to 14 per cent of the value of output in 1984. Large though
this is, amounting to almost two billion rands in 1985, it is small by
comparison with the annual new investment of ESCOM. Table 1.6
gives the figures.
This massive increase in the value of gold output was accompanied
by vigorous expansion in other branches of mining. Coal, iron ore and
platinum were of particular importance. Mineral exploitation fuelled
the growth of the economy, but the engine of growth was industrialisation. Not even the explosive rise in the price of gold in the late 1970s
could significantly retard the restructuring of the economy, though it
did retard the restructuring of the pattern of exports. In the early
1960s, gold mining accounted for 13 per cent of the national product:
twenty years later, after the massive increase in the price of gold, gold
mining accounted for only 11 per cent of the national product. 26
This broadening of the base of the economy was reflected in the
growth of the secondary sector. Private enterprise was mainly
responsible for this, though in the 1970s state enterprise in iron and
steel production, the oil from coal programme, armaments and
20
Table 1.6
Introduction
Capital expenditure in the South African gold mines, 1966-85
(Rand millions)
1966
1967
1968
1969
1970
1971
1972
59
76
75
83
90
87
97
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
106.4*
196.1
290.2
374.5
430.3
448.3
689.0
922.0
1221.9
1256.1
1407.6
1645.0
1911.4
Stuart Jones
21
1 062 390
2 013 106
2 650 411
4 044 802
5 983 163
9 136679
20 239 729
water's share of gross fixed investment rose from 8 per cent to 13.9 per
cent. 29 Investment in electricity production was expanding at a faster
rate than investment in manufacturing. At 1975 prices this investment
in electricity rose from R201 million in 1960 to R1252 million in
1982. 30 The full impact of state capitalism may be seen in the figures
of the public corporations' share of gross domestic fixed investment,
which rose from 6.2 per cent in 1960 to 19.9 per cent in 1982Y
The ESCOM Annual Report is more revealing. At the end of 1985
there were twenty-six power stations in operation and a further six
were on order. The total value of the corporation's assets was then
R31251 million. This was calculated by using historic cost accounting
practice. The real value, the replacement value of the investment, was
probably close to R60000 million - a sum which makes ESCOM one of
the world's largest corporations and which dwarfs the investment in
the gold mines, whose market value on 11 August 1986 was something
over R51000 million. The cost of modern coal-fired plant today is
probably close to around R4000 million, more than the Koeburg
nuclear station cost, though not as much as it would cost to replace
Koeburg. One authority thinks that ESCOM's capital requirements
may amount to close to 60 per cent of the country's total savings.
Western Deep Levels, the deepest gold mine, by comparison has a
capital value of around R2000 million, about half a coal-fired power
station.
Paralleling this huge growth in the capital requirements of electricity
generation has been the growth of very large corporations in the
country. The Top 100 analysed in Chapter 8 shows the extent of these
changes in the past twenty years. With a blocked rand since 1961,
22
Introduction
capital has been locked in the country and this has tended to encourage
the take-over movement; and today the two big mutual insurance
companies, Anglo-American and the Anton Rupert's Rembrandt
Group, own or control about four-fifths of the private sector. Against
this should be set the large state-owned sector with its monopolies and
price-fixing practices. In other words, South African capitalism in
recent years has moved in the direction of monopoly or, at best,
oligopoly, state capitalism and pension fund capitalism.
The financial intermediaries responded to these developments in
the economy by expanding their functions and increasing their size.
Nedbank, a small bank, that had previously been geared to the foreign
trade of South Africa, made a sustained attempt to establish itself in
the domestic market and to use this base to increase its position in
South Africa's foreign trade, while its Netherlands parent took the
opportunity to cut its ties with South Africa. Both banking practices
and monetary policies were changing in these years and the Reserve
Bank followed in the footsteps pioneered by the Bank of England in its
use of bank rate and reserve requirements. Volkskas, the Afrikaans
government-oriented bank, grew rapidly on the strength of its
government business from public bodies and the new Afrikaans
corporations presided over by Saniam, the giant insurance company.
While all the other banks moved their head offices to Johannesburg in
this period, Volkskas remained in Pretoria. Most of the banks are
nominally independent, but with the withdrawal of foreign investment
and the decision by Barclays and Standard/Chartered in England not
to maintain their proportion of shares in their subsidiaries, financial
concentrations has taken another step forward, for in practice the
ultimate owner of Volkskas is Rembrandt and of Trust Bank Sanlam.
Old Mutual owns Nedbank, Barclays, now First National, tied to
Anglo-American and Standard, are curiously intertwined with
another insurance company, Liberty Life. They own shares in each
other and may be joined by the United Building Society, as these
former non-profit making institutions go public. In South Africa,
therefore, the grand institutions of capitalism are in the midst of a
period of vigorous innovation, not so unlike that taking place
elsewhere. This significant growth of Johannesburg as a major
financial centre is one of the achievements of recent years and has been
achieved despite government policies.
Stuart Jones
23
CONCLUSION
Developments within South Africa have led to an enormous increase
in the wealth of the country in recent years and this had begun to affect
more and more of the people. Personal disposable income has risen
from R8610 million in 1970 to R46225 million in 1982. Personal
savings have risen at a slower rate because an increasing proportion of
the national income has been going to Blacks and thereby passing into
consumption. Until 1970 the Whites' share of total personal incomes
amounted to about 75 per cent of the total. By 1980 the White share
had declined to about 60 per cent - a remarkable redistribution of the
national income within one decade. 32 The White share of the national
income would probably have fallen to 50 per cent by now, 1987, but for
the economic recession and the political unrest. Already by 1984 Black
expenditure accounted for about 50 per cent of the annual increase in
consumer demand. This does not imply that wealth is equitably
distributed in South Africa and that selfish minorities will not use their
political power to preserve their economic privileges, but it does
suggest that sustained economic growth is in the process of bringing
about a social revolution. Economic growth is bringing an end to
apartheid and a Black bourgeoisie is emerging. Indeed the radical
leaders of today from Tambo in Lusaka to Tutu and Boesak are the
epitome of bourgeois values and attitudes. It is not possible for a
society with an exploding population to have an elaborate structure of
social welfare. (India, four decades after independence, has still not
reached the stage of free and compulsory education and certainly there
is little hope there of pensions and unemployment benefits.) These
benefits do exist in South Africa. They are not yet adequate, but their
very existence is a tribute to the dynamism of the capitalist enterprise
which was primarily responsible for the creation of such wealth as has
occurred. Efficient economic organisation, as displayed by some of the
institutions examined in this book, together with clearly defined
property rights, have created conditions in which individual enterprise
on the periphery has been able to respond to the signals emanating
from North Atlantic and Japanese core economies. In the process,
without foreign aid, though with foreign investment, the South
African economy has been transformed, the low productivity of
peasant agriculture overcome, and the economically active population
increased to almost 9 million. The alternative road to development,
that of the socialist model adopted by the countries to the north, has
not worked.
Introduction
24
1.
2.
3.
4.
5.
6.
7.
8.
9.
lD.
11.
12.
13.
14.
15.
16.
17.
18.
Douglass, C. North and Robert Paul Thomas, The Rise of the Western
World, Cambridge, 1973, p. 1.
Ibid.
See the article by A. L. Muller, 'The State and the Development of the
Cape, 1795-1820', The South African Journal of Economic History,
vol. 1, 1986.
W. Arthur Lewis, Growth and Fluctuations, 1870--1913, London, 1978,
p.149.
John R. Shorten, The Johannesburg Saga, Johannesburg, 1970, p.
249.
See the article by Jon Inggs, 'The Liverpool ofthe Cape: Port Elizabeth
Trade: 1820-70' in The South African Journal of Economic History,
vol. 2, no. 1,1987.
A. E. Hirschman, The Strategy for Economic Development, New
Haven, 1958, p. 83; and W. W. Rostow, 'Leading Sectors and the
Take-off, in W. W. Rostow (ed.), The Economics of Take-off into
Sustained Growth, London, 1963, pp. 5-6.
V. E. Solomon, 'Transport', in F. L. Coleman (ed.), South African
Economic History, Pretoria, 1983, p. 93.
Ibid,. p. 100.
S. H. Frankel, Capitalist Investment in Africa, Oxford. 1983, pp. 81,95.
D. Hobart Houghton, 'Economic Development, 1865-1965', in Monica
Wilson and Leonard Thompson (eds), The Oxford History of South
Africa, vol. II, Oxford, 1971, p. 14.
John R. Shorten, The Johannesburg Saga, p. 117.
H. Klein (ed.), The Story of the Johannesbury Stock Exchange,
1887-1947,Johannesburg, 1948,p.46.
Ibid., p. 49.
Alfred D. Chandler, Jr, The Visible Hand: The Managerial Revolution
in American Business, Cambridge, Mass., 1977.
John R. Shorten, The Johannesburg Saga, pp. 180,249.
Ibid., p. 234.
Robert V. Kubicek, Economic Imperialism in Theory and Practice: The
Case of South African Gold Mining Finance 1886--1914, Durham, N.C.
1979, p. 22; and S. H. Frankel, Investment and the Return to Equity
Capital in the South African Gold Mining Industry, 1887-1965, Oxford,
1967.
Stuart Jones
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
25
2 VentureCapitaland
Financial Organisation:
The American comedian Bob Hope once defined a bank as 'a place
that will lend you money if you can prove that you don't need it'. I
Interpreting his quip, we might say that a bank is a financial institution
that conventionally avoided taking significant risk; historians have
traced a long succession of 'lock-ups' of bank capital that have brought
the unwary to their knees and generated the conventional wisdom
behind bank policy.2 But it is equally clear that for generations this
caution left a large gap in national and international money markets,
that of supplying capital for investment where there is recognised to be
significant risk. This sector of the market is now known as the venture
capital market, and it is important to recognise that it has a history of
its own.
Drawing on recent historical research, it is useful to make three
initial points about venture capital during last century and the first half
of this century. First, in London, the undisputed centre of international finance, there was no overall shortage of funds available for
speculative investment. The problem was one of effective connections
between lenders and borrowers, of realistic ways of identifying and
evaluating enterprises that needed capital for growth. 3 Secondly, the
'high risk' (as distinct to 'safe') sector of investment was what we may
call a moving frontier. Traditionally, and still in the early part of the
nineteenth century, this was mercantile activity in the remoter parts of
the world (Africa, Latin America, the Orient, and Australasia). From
the I820s to the I850s it was the securities of new states (including the
USA) and their railway bonds. In the second half of the century it
became mining and (in Britain, at any rate) manufacturing industry.4
The final point, closely related to this one, is that the policies of the
various firms that proved successful in meeting one or other of these
27
28
Stanley D. Chapman
29
upon which all credit and circulation depended, it was at that time in
30
Stanley D. Chapman
31
32
Stanley D. Chapman
33
34
Stanley D. Chapman
35
Mexican and Alaskan mining, and with the safer London public
utilities; by 1895 it already had a diversified portfolio. From the
investor's point of view it offered the additional advantage of priority in
buying shares in the company's promotions, and in the syndicates in
which it participated, often at prices which, in the whirlwind stock
inflations of the period, soon proved to be bargains. 28
The Exploration Company undoubtedly won pre-eminence in the
genus but there were rivals which, from the perspective of this chapter,
warrant some attention. The Venture Corporation was formed in 1897,
originally to amalgamate several doubtful Western Australia mining
promotions. Its status was no doubt increased when the leading
American mining engineer John Hayes Hammond became its
consultant. Perhaps its greatest success was in copper mining in the
Russian Caucasus where, by the Second World War, ithad fathered an
investment of 1.5 m. The subscribers to the copper company included
partners in Morgans, Barings and Hambros, a familiar string of
merchant banks. However - and here is the point for offering this
particular example - there is no reason to assume that such financial
interests and the eminent consulting engineers they could afford to
engage necessarily had the Midas touch. According to E. C. Grenfell of
Morgan Grenfell, the Caucasian Co. 'was never a success' and in 1930
was finally liquidated as a complete loss.29
However, in the longer perspective of financial history, exploration
companies were a meteoric phenomenon; they rose quickly and
disappeared almost as fast. Many were obviously a cover for speculation
if not fraud, and, taken as a group, those located in Australia, Russia
and Africa were not very successful after the turn of the century.
Investors preferred to commit themselves to a trusted name, and so we
see the rise of the investment trust and the investment group.
INVESTMENT TRUSTS
There have been several histories of the British and American
investment trust movement, so it is not necessary to retell the story
here. 30 The present purpose is simply to consider to what extent, if any,
these organisations were prepared to invest in other than safe securities.
Investment trusts were, of course, originally a Scottish development,
and their early success is spelt out in some useful estimates of Scottish
capital invested abroad in 1884 (Table 2.1).
36
Yield
20.0m
4.0
4.5
4.5
0.5
2.0
5.0
8.0
40.5
5.5
6.3%
5.0
4.5
0.0
5.0
3.0
Stanley D. Chapman
37
38
1891
1901
1914
1919
Home
Continental
Colonial
USA
River Plate
Other localities
7.9
4.5
19.2
47.3
14.2
7.0
10.0
5.5
10.8
47.9
12.7
13.2
14.9
2.1
10.7
50.7
9.3
12.3
30.8
3.6
6.7
35.8
11.0
12.1
Realised profits
Home
Continental
Colonial
USA
River Plate
Other localities
Profits
Losses
236744
20404
32575
289723
Realised losses
39769
56676
131 976
228421
Source: The Merchants Trust AGM Report, The Times, 1 March 1919.
Stanley D. Chapman
39
40
41
Stanley D. Chapman
Table 2.3
10 coal companies:
Europeans
Indians
Americans
Value (lacs)
1551
97
59
nd*
409
105
8 jute companies:
Europeans
Indians
2471
423
Value ()
699300
148
25
173
1 152 180
1 851480
*assumed to be very small and treated here as negligible for the purpose of
calculation.
Calculation of exchange rates: 1 lac (lakh) = 100 000 Rupees.
One Rupee = Is 4d = 0.0666.
Sources: Report of the Indian Industrial Commission 1916--18, ParI. Papers,
1919, XVIII, ev. of W. A. Ironside for financial data, p. 881. The numbers of
Birds' jute companies are given in G. Harrison, Bird & Co. of Calcutta
1864-1964 (Calcutta, 1964), p. 144.
42
Table 2.4
Group
Market
Valuation
British
Valuation
Wernher Beit
J. B. Robinson
Consolidated Goldfields
Barnato
Farrer
Neumann
G. & L. Albu
A. Goerz
Sundries
73.75m
16.43
38.80
8.83
13.38
11.14
5.30
6.15
14.57
57.53m
13.64
36.86
8.47
10.30
8.80
1.59
18.5
13.40
78
83
95
96
77
79
30
30
92
188.35
152.44
81
Stanley D. Chapman
43
1.
2.
3.
4.
5.
6.
7.
8.
9.
44
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
Stanley D. Chapman
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
45
48
49
Arthur Webb
Table 3.1
Year
Export (kg)
Value ()
1830
1835
1840
1845
1850
1855
1860
1865
1870
(36 packs)
36218
182127
945762
1 961 175
4395423
8817185
13 066 559
14493049
223
4261
21023
114153
212166
508283
1213 410
1 453 189
1430773
Source: Compiled from the relevant Cape of Good Hope Blue Books.
50
the colony, as discount rates on bills on Britain were set high, due to
the unfavourable balance of trade, and it was considered less
expensive to conduct overseas transactions in coin. It was variously
estimated that the amount of coin in circulation between 1837 and
1838 was around 225000 to 300000, II of which 100000 was held
in the military chest. Under these circumstances, and given the
comparative isolation of the frontier, the shortage of coin in this
region was even more pressing, although the situation was
considerably relieved by the increased military presence during the
Sixth Frontier War (1834-5). This shortage of currency led to higher
discount rates in the Eastern Cape than at Cape Town.
THE FOUNDATION OF THE EASTERN PROVINCE
BANK IN 1838
The background to the foundation of the Eastern Province Bank was
the considerable local resentment caused by the higher interest
charges imposed upon the district by the Cape Town mercantile
establishment. Already in 1836, at the time of the Sixth Frontier
War, Cape Town merchants had refused accommodation to
Grahamstown. 12 When the Cape of Good Hope Bank, the first
private bank in the Cape, opened a branch in Grahamstown in 1838,
this provoked a response by local businessmen that led to the
formation of the Eastern Province Bank, for not only was the
discount rate higher in the east, but local bills would only be
discounted for promissory notes payable twenty-one days after sight
in Cape Town. As The Graham's Town Journal hinted, 'The Bank
should be aware that this narrow policy has created a spirit of
opposition, which may materially balk its anticipations of ultimate
success.'13
By the end of September 1838 the Cape of Good Hope Bank had
made no effort to alter its Grahamstown rates,14 and it became clear
that it had no intention of doing so. It was against this background
that the local bank was established. All the members of the Cape of
Good Hope Bank's local board of management were now involved in
the new venture. 15 These men were: Charles Maynard, head of a
local mercantile firm, William Cock, a contractor for provisions for
the commissariat, farmer, and entrepreneur behind the development
of the Kowie river mouth as a port, William Rowland Thompson, a
trader who had established himself in Grahamstown in 1819, John
Arthur Webb
51
Norton and James Black, again both prominent local merchants. All
became directors of the new bank.
The capital of the bank was set at 40 000 in 1600 shares of 25
each. 16 As early as October an amount of 27250 of the capital had
been subscribed, auguring well for the new institution. 17 No shareholders were permitted to own more than seventy-five shares, while 150
were set aside for English traders connected to the Eastern Province
and a further 200 for persons living in Cape Town. The reservation of
only 200 shares for the Cape merchants can be seen as a direct snub
and attempt to distance the new institution from Cape dominance. As
there was no official charter, the institution was to operate as a
partnership with unlimited liability for its shareholders, as in
contemporary England.
The Eastern Province Bank opened its doors on Church Square,
Grahamstown, on 1 January 1839. Paid up capital amounted to 6 at
the opening but was raised to 1613s 4d per share by March 1839. The
bank was soon undertaking the functions of discounting, issuing its
own bank notes, and accepting deposits, and, in 1840, a London
agency was opened with a view to facilitating immigration. The
London and Westminster Bank was appointed to act as agent, holding
securities of the bank, cashing remittances and granting letters of
credit on the Eastern Province Bank to persons proceeding to the
Cape. The bank was also quick to open a branch in Port Elizabeth.
Two motives suggest themselves for this step, namely, to pre-empt the
Cape of Good Hope Bank and to keep that institution out of the
Eastern Province, and the full realisation that the trade of the port
warranted such a move.
THE EARLY YEARS, 1839-50
The growth of the bank during its first decade of existence can be
gauged from Table 3.2.
Government expenditure was important. In 1831, the civil establishment of the districts of Albany and Somerset approached 150 salaried
officials whose annual incomes ranged from 400 for the civil
commissioner to 18 for the various postmasters. In addition, there
was a military contingent of some 830 men stationed in these districts.
The population of the area was estimated at roughly 16000 people, of
whom 1700 were involved in commerce and a further 1100 in
'manufacturing,.18 Under these circumstances there was a consider-
52
Table 3.2
Assets
Coin,
Securities
(Discounts)
Treasury bills
Date
July
Jan.
Jan.
Jan.
Jan.
Jan.
1841
1843
1844
1846
1848
1849
22614
18283
17454
22873
102632
38581
62365
68936
77839
110 370
114990
94640
Liabilities
Deposits
Note
Circulation
23837
30265
32003
47223
106341
76289
25257
23284
27950
48070
60652
19874
Arthur Webb
53
loss statements was irregular during the years of the bank's existence,
so that an imperfect picture exists of the financial growth of the
organisation. Nevertheless, it would seem that the bank enjoyed
early prosperity, reflecting a surplus of over 1300 in its first year of
trading, after the substantial deduction of 800 for formation
expenses and management costs. On the basis of this result it was
decided to declare a dividend of 6 per cent on the paid up capital.
During the first year some 2295 bills were discounted valued at
170466. With no losses recorded on transactions confidence in the
institution grew to the extent that forty-five unsold shares were made
available at a premium of 310s. In response to the large demand for
these shares it was subsequently decided to hold out for an even
higher price. 23 The price of bank shares continued to rise and in May
1842 a small number were sold for 35, a substantial appreciation on
the paid up value of 1613s4d. 24 Furthermore, profits of 3531 in
1841 allowed the declaration of a dividend of 1 per share, and 3775
in 1842 yielded a dividend of 15s. Reserves at the end of 1842
amounted to 5159.2 5 Dividend payments of 117s 6d in 1843, 3 in
1845, 31Os in 1846, and 415s in 1847 reflect the continuing
prosperity of the bank.
The effect of the Seventh Frontier War of 1846-7 on the affairs of
the bank are best reflected in the disproportionate growth of
business, clearly reflected in the above table. This situation indicates
the unnatural state of the economy of the region caused by the
additional military presence and was soon dissipated. The bank chose
to act with caution throughout the boom. The increase in note issue
was forced upon the bank by the abnormal circumstances surrounding the outbreak of hostilities. An automatic drain of coin ensued as
the military required cash to pay for supplies from frontier farmers,
who now insisted on payment in hard money. As one source
commented, the specie paid to these farmers 'is locked up in their
wagon chests and is for the time as much lost to the Colony as though
sunk in the ocean'!26 Under these circumstances the bank placed
restrictions on its cash outflow and encouraged the extension of its
note circulation. Ever cautious, however, adequate provision was
made against the time when such notes would be returned for
payment. The specie supply of the frontier was slowly augmented by
imports from Britain throughout the year 1847. The reduced scale of
operations and widespread commercial embarrassment of 1849 did
not detract from the bank being able to show a profit but no mention
is made of the declaration of a dividend. 27
54
Arthur Webb
55
56
developed in the 1860s with the arrival of the imperial banks and
improved communications, particularly the telegraph.
Under these circumstances a bank's growth was limited by the size
of the community it served. The linkages between the success of the
Eastern Province Bank and the expansion of Grahamstown's prosperity as the hub of the Eastern Province in this period are strong. There
is, for example, a striking correlation between the fluctuations in the
business of the bank and the revenue account of the municipality. 32
The value of property in Grahamstown and the Albany district was to
rise significantly in the period from 530535 in 1844 to 865404 in
1859. 33 Likewise, the civil establishment of the town alone now
represented some 125 people whose salaries ranged from 1150 for
the Lt Governor to 250 for the Postmaster. The directory for
Grahamstown listed 1218 entries in 1861, although this figure also
included the names of the inhabitants of the 'Hottentot Village' who
had been excluded from the directory of 1849. An interesting feature
of this list is that it recorded only twenty-seven names as merchants
and traders and forty-one in the category of shopkeepers, storekeepers and chandlers. There was also a substantial group who could be
listed as manufacturers. Of the twenty-six people recorded, the
majority were involved in wagon and cart building. The reduction in
the numbers of merchants and shopkeepers can be attributed to the
increase in the size and scale of undertakings and the influence of
competition, both within the community itself, and from the rival
commercial sectors of Port Elizabeth and the other expanding centres
of the Eastern Province, such as Cradock and Graaff Reinet. An
interesting corollary to this development was the rise in the number of
persons who gave their occupation as 'agent', suggesting their
employment by the merchants of either Grahamstown or Port
Elizabeth for the purpose of travelling around the countryside for the
procurement of wool and other commodities.
Information pertaining to the bank in the 1850s is remarkably
scarce. Even the Grahamstown press offers very little beyond the bald
annual statements of assets and liabilities. Trends at least may be
gathered from Table 3.3, which reveals long-term growth interrupted
by wartime fluctuations.
The period of the 1850s opened with the outbreak of yet another
frontier war which persisted down to 1853. Once more the beneficial
influence of war on the business of the bank is evident. This upswing
was followed by a setback in keeping with the general recession which
affected the rest of the Cape economy.34 There was a 40.75 per cent
57
Arthur Webb
Table 3.3
Date
1850
1851
1852
1853
1854
1855
1856
1857
1858
1859
1860
32213
30510
60974
70285
59685
34379
41695
49803
40181
46803
59300
Assets
Securities
79267
80195
105860
137230
108625
94267
98393
121590
217915
212905
214204
Liabilities
Deposits
Note in
circulation,
Post bills,
Drafts
58331
57874
81475
127773
105017
75704
80664
89740
138132
149949
158990
18219
18251
49611
43228
27929
13 302
17409
27870
44 445
31858
36202
Source: Compiled from various numbers of The Graham's Town Journal and
The Cape Frontier Times.
decline in deposits, a 51.09 per cent fall in liquid assets, and a 31.31 per
cent drop in the value of securities held between 1853 and 1855. It was
not before 1857 that the bank was to regain a situation comparable to
that held at the end of the war. Reports indicate that by then the two
Grahamstown banks were once more in a healthy condition. 35 If there
is a trend to be noted in the affairs of the bank in this period, it is the
extent to which deposits had grown over the decade. It is fair to state
that by the 1850s the Eastern Province Bank had successfully emerged
as a bank of deposit, mobilising the savings of more than simply a
select group of merchants. As such, the bank's role in fostering
economic expansion was considerably enhanced, while the loan of
such funds contributed significantly to the growing profitability of the
institution.
The 1850s were, however, to witness a shift in the position of the
Eastern Province Bank relative to its competitors. The wool boom of
the 1850s, which saw an increase in exports from the Eastern Province
from 1961175 kg worth 212166 in 1850 to 8817185 kg worth
1213410 in 1860, also brought growing prosperity to such regional
centres as Cradock, Graaff Reinet and Fort Beaufort, all of which saw
the successful establishment of their own merchant communities and
58
banks during the 1840s and 1850s. Thus while Grahamstown continued
to prosper and enjoyed a considerable share of the total trade of the
region, the competition which drew away trade similarly diminished the
potential discount business and note circulation of the Bank. The high
profitability of the two Grahamstown banks, as reflected in Table 3.4,
suggests that while they lost ground to the new banks in total turnover,
the Grahamstown banks were now evolving into deposit banks.
Table 3.4
Bank
Eastern Province
Frontier C & A
Port Elizabeth
P. E. Commercial
Cradock Union
British Kaffrarian
Graaff Reinet
S. A. Central
Liabilities
Assets
Profits
265 192
234619
237689
170469
53611
43110
82831
61 764
273504
242119
246573
175585
54165
46312
85394
65018
12038
11250
8887
5116
533
3201
3563
3254
1 149285
1 189674
47862
Arthur Webb
59
had been built. In part, this was attributable to the greater competition
experienced in the British market from Australian wools, but this fact
itself rested heavily on the inability of local merchants to encourage
the production of a better quality product. 36 The severe drought of
1861-2 also played its part, not only in decimating flocks but in raising
the costs of transporting wool to regional centres and the ports. In
Britain, the market for Cape wool was unstable in the early years of the
decade owing to the outbreak of the American Civil War. The same
cause closed the American market for Cape greased wools. Anticipating that wool would stand to gain from the disruption to the British
cotton textile industry by the Civil War, Cape merchants bought up
large quantities of wool at inflated prices. This speculation collapsed
when prices failed to rise causing considerable losses to the eastern
merchants. Prices fell from over Is to 7d per lb for greased wool on the
London market within the space of seven months in 1860. Table 3.5
indicates the trend of wool production and values in the critical years
of the 1860s.
Table 3.5
Year
Weight
(Change)
Value
(Change)
1860
1861
1862
1863
1864
1865
1866
1867
1868
1869
8817 185 kg
9407869
9615031
12252253
14823581
13 066 559
13 144537
12784872
12387821
13 045 205
%
6.7
2.2
27.4
21.0
-11.0
0.6
-2.7
-3.1
5.3
1 213 410
1218474
1080729
1278286
1665835
1453189
1643074
1524796
1407927
1255945
%
0.4
-11.3
18.3
30.3
-12.8
13.1
-7.2
-7.7
10.8
The financial crisis of the 1860s had its origins in the years of
prosperity of the previous decade. The wool boom and consequent
general need for cash and capital encouraged the creation of ten new
local banks in the Eastern Province between 1857 and 1862. 37 With
the increased funds made available by these institutions, credit
transactions and speculative wool buying increased. The evidence of
both the Eastern Province and Cradock Union Banks suggests that
these institutions now also indirectly financed speculative land
60
purchases. While high wool and land prices prevailed agents and
storekeepers offered extended credit to farmers, relying themselves
on accommodation from the merchants and brokers. The chain of
credit linking farmer, agent or storekeeper, merchant and woolbroker, was not conducive to security in times of crisis. Given the close
ties between merchants and the banks, it was inevitable that the
speculative losses incurred on their wool dealings would ultimately
spill over into the discounting and other business of the banks. Loans
were advanced directly to farmers for improvements and additional
land purchases against the revenue of future wool clips calculated on
stable or rising prices.
The greatest challenge in the longer term to be faced by the local
banks of the Eastern Province in the 1860s was to come from the
establishment of the imperial banks. Once again it is possible to
identify the linkages between the steady growth of the Cape economy,
the improved communications of the period between the metropole
and the colony, both by telegraph and more rapid and regular sea
links, and the rise in interest in the area by British capital. The boom of
the late 1850s and early 1860s also generated an expanding demand for
capital and liquidity. In 1861, the capital of the colonial banks was
estimated at 1572 815, of which 924021 was paid up. The
circulation of these twenty-seven institutions again only amounted to
348318. 38 The Cape economy seemed ripe for fresh capital infusion
but it was unfortunate that the incursion of the imperial banks
coincided with the slump in the Cape economy. Their larger capital
resources and an aggressive bid to capture local banking business
drove the majority of the local banks out of business within the next
two decades.
The Eastern Province Bank entered the 1860s in a healthy
condition. Influenced by the boom conditions, the paid up capital of
the bank was increased to 100000 during the course of 1860. The
profitability of the bank is indicated by the fact that its 25 shares
enjoyed a market value of 45, while a dividend of 20 per cent was
paid in 1860. 39 By 1862 it was still possible to pay a dividend of 41Os
per share but the management of the bank was troubled by the steady
decline in note circulation. This was attributable to the influence of the
recession and the growing competition of the smaller inland banks
which suffered no scruples in curtailing their note issue. The position
of the Eastern Province Bank in relation to some of these banks is
indicated in the Table 3.6 below.
Most of the local banks had been influenced by the recession but the
Arthur Webb
61
Table 3.6 Liabilities of the Eastern Cape Banks, 1861 and 1862
Bank
E. P. Bank
Frontier C & A
Fort Beaufort
P. E. Bank
P. E. Camm.
Cradock Union
Queenstown
S. A. Central
G. R. Bank
Br. Kaffrarian
Somerset
Albert
Colesberg
Note circulation
June 1861
Dec. 1862
20637
30240
13 638
19615
35727
38427
16367
12674
15395
8122
14525
17077
10 332
15106
35208
13 809
6464
8805
14849
11710
9117
18629
Paid up capital
and Reserves
Dec. 1862
104497
80600
15000
79157
67500
17952
15 614
23000
24000
22475
16687
12307
17500
62
Arthur Webb
63
64
Arthur Webb
65
66
2.
3.
4.
5.
6.
7.
8.
See for example, S. Marks and A. Atmore, Economy and Society in Pre
industrial South Africa, London, 1980.
P. Maylam, A History of the African People of South Africa: From the
Early Iron Age to the 1970s, Cape Town, 1986, pp. 34-5.
J. B. Peires, The House of Phalo, Johannesburg, 1981, pp. 95ff.
S. D. Neumark, Economic Influences on the South African Frontier
1652-1836, Stanford, 1956.
E. J. Inggs, Liverpool of the Cape: Port Elizabeth Harbour Development 1820-70. Unpublished M.A., Rhodes University, 1986, p. 25.
R. Godlonton, A Narrative of the Irruption of the Kaffir Hordes,
reprint, Cape Town, 1965, p. 140.
B. A. Le Cordeur, The Politics of Eastern Cape Separatism 1820-1854,
Cape Town, 1981, p. 37.
T. Kirk, The Cape Economy and the Expropriation of the Kat River
Settlement, 1846-53', in S. Marks and A. Atmore, Economy and
Society in Pre-industrial South Africa, pp. 230-1.
Arthur Webb
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
67
68
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
4 The Separation of
Nedbank, South Africa,
from the Parent Institution
in the Netherlands
1
H. W.J.Bosman
INTRODUCTION
In 1888, the Nederlandsche Bank en Credietvereeniging voor
Zuid-Afrika was founded in Amsterdam. 'One of its objectives was to
effect banking and credit operations in and with South Africa and for
this purpose a Chief Agency was opened in Pretoria which started to
operate in August, 1888. ,2
In 1903, the name of the bank was changed to Nederlandsche Bank
voor Zuid-Afrika. Later, the letters 'N.V.' (Naamloze Vennootschap,
which has the meaning of English 'Limited') were added in accordance
with Dutch law. In 1925, the bank merged with the Transvaalsche
Handelsbank. This bank also had a head office in Amsterdam, but its
chief agency was in Johannesburg. Offices were situated in Hamburg,
London and Cape Town. These are the main facts which must be
known in order to understand the history of the post -war years.
In this description I shall refer to the bank in Amsterdam either as
the parent institution or the Dutch bank, or I shall use its name, e.g.
Nederlandse Overzee Bank (NOB). I shall call the bank in South
Africa 'Nedbank', although this name only became official in 1971
(Nedbank Limited). This will indicate more clearly which institution is
meant. Reference to the name 'Netherlands Bank', though often used
in South Africa, could be confusing because it is the officially used
English translation of 'De Nederlandsche Bank NV', the central bank
ofthe Netherlands.
THE SECOND WORLD WAR AND POST-WAR YEARS
The occupation of the Netherlands by Germany, in May 1940,
naturally led to a disruption of relations between the Netherlands and
69
70
H. W. J. Bosman
71
72
The basis of the remaining Dutch part of the old bank was a rather
narrow one and that is why a broadening of the activities was looked
for. In this way the shares of the NY De Haagsche Commissiebank in
The Hague and of the Societe Hollandaise de Banque SA in
Brussels were taken over.
As from 1 October 1954 a merger became effective, whereby the
Nederlandsche Bank voor Zuid-Afrika NY and the Amsterdamsche
Goederen-Bank NY (specialising in the financing of international
trade in commodities) together formed the N ederlandse Overzee
Bank NY with a balance sheet total of Oft. 155.5 million. This bank
retained 75 per cent of Nedbank in the following years. Even when in
1957 Nedbank increased its issued capital from 2 million to 2.5
million, NOB subscribed for 75 per cent of the issue, as they were
'convinced of the desirability to maintain our participation in the
capital of Nedbank at 75 per cent of issued capital'. 8 Other interesting
take-overs by NOB were Mesdag en Groeneveld's Bank NY in
Groningen and Theodoor Gilissen NY in Amsterdam.
During these years the annual reports of NOB paid much attention
to the affiliation in South Africa and the economic conditions in both
South Africa and the Federation of Rhodesia and Nyassaland. For
the first time in the 1959-60 report considerable attention was paid to
the political situation, undoubtedly in connection with the events in
Sharpeville, in March 1960Y
The report pointed out that situations in which different races in
varying stages of development are living on one territory do not lend
themselves to radical simplistic solutions. On the other hand, the
report continued, it is not possible to apply a policy, which would
be fixed for all times, to a position which had been reached after a
certain historical growth. Developments in a particular part of the
world cannot be seen apart from what happens elsewhere. A
continuing revision and adjustment of the spiritual attitude of a
people is required in order to find the right answer to the problems
which they face. And efforts to reach reasonable solutions are less
successful the longer one waits. Undoubtedly this part of the annual
report was written by Keuning who, during his long association with
South Africa, always had an open mind for possible future developments.
In these years there was surely a great interest by the mother bank
in what happened in South Africa. As an example, it can be noted
that up to and including the year 1960-1 the balance sheet of
Nedbank was published in the annual reports of NOB. After that
H. W. 1. Bosman
73
74
H. W. 1. Bosman
75
It was further decided in 1968 that the Dutch group would not
participate in a new issue of capital then floated by Nedbank. The high
stock exchange quotations of shares and thus also of the claims were
mentioned as one of the reasons for the non-participation. Consequently the Dutch group's stake in Nedbank declined to 20 per cent.
In July 1969, agreement was reached concerning the sale of the
remaining 20 per cent participation in Nedbank to South African
interests. 'It seemed that the time had come to implement the policy
that had already been favoured by the two banks in regard to this
shareholding.'14 The uninterrupted high prices of shares on the
Johannesburg Stock Exchange, and also of Nedbank shares, determined the moment of the sale; but the underlying reasons were that
the development of European banking had forced Bank Mees en
Hope to use a greater part of its resources in that area, as well as the
fact that the South African participation did not deliver a proportional
contribution to the commercial banking business of Bank Mees en
Hope. This final withdrawal by Mees en Hope from South Africa was
initiated by the Dutch and was unexpected by the South African side.
The details of the transaction included monthly payments between 1
August 1969 and 1 June 1970 in an overall sum of Dfl.55 million,
furthermore, the acquisition of a nominal RlO million of SA treasury
bills with a currency of five years (the amount of which would be
transferable after that period) and a participation of R1.5 million in
institutions, related to Nedbank.
From the point of view of the Mees en Hope Group the investment
had thus come to an end. Instead of reflections on South Africa the
annual reports now contained considerations on other points of
interest, domestic as well as foreign. Apart from that, the problems of
Mees en Hope in the years following, i.e. in connection with a possible
cooperation with the Dutch savings banks, became the focus of the
attention of management and board of directors.
76
H. W. 1. Bosman
77
78
sometimes calm and then in turmoil, was a factor that supported the
dominating tendency. The final abandonment of the Dutch investment of Nedbank, however, was caused by the rather sudden
take-over of the Mees en Hope Group by Algemene Bank Nederland.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
79
Appendix
Table A4.1
Nedbank 1
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
% held by
Dutch bank
4000000
4000000
4000 000
4 000 000
4 000 000
4 000 000
5000000
5000 000
5000000
5000 000
5000 000
6000000
6000000
6000000
8000000
8000 000
10 000 000
75
75
75
75
75
75
75
75
75
75
49
49
49
25
25
25
25
10 044 000
12555000
12555000
12555000
12601000
14516000
14533000
14533000
14532000
20
30-9-1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
30-9-1967
31-12-1967
1968
1969
1970
1971
1972
1973
1974
1975
9396000
10 000 000
10 000 000
20000000
20000000
22000 000
26400 000
26400000
26400000
26400000
26400000
30000000
30000000
30000000
30000000
33000000
33000000
33000000
62602000
62602000
62602000
62602000
62602000
62602000
62602000
62211 500
12
15
14
14
14
14
14
7
7
7
7
7
7
7
IFor reasons of clarity the amounts are given in Rand from the beginning.
See note 9 of the chapter. The years refer to the situation on 30 September.
2By Dutch bank is meant Nederlandsche Bank voor Zuid-Afrika for 1951-3,
Nederlandsche Overzee Bank for 1954--67 and Bank en Assurantie
Associatie, later called Mees en Hope Groep as from 31 December 1968. The
amounts are in Dutch guilders.
5 Aspects of Nedbank's
International Activities
1945-73
Grietjie Verhoef
INTRODUCTION
The 'Nederlandsche Bank voor Zuid-Afrika' (NBvZA) was still a
small bank in 1945. The head office was in Amsterdam and had just
been revived after the cessation of the German occupation of the
Netherlands. The so-called head office of the NBvZA in South Africa
was Pretoria, but was called a chief agency and the manager in South
Africa was the chief agent. During the Second World War the banking
activities of the NBvZA was managed by the South African
government appointed controller, Mr J. Dommisse, I due to the
suspension of the bank's activities in the Netherlands as a result of the
German occupation. The South African branches (agencies) and the
bank's London office formed the core of the bank's activities. After
the war it was clear that the banking activities in South Africa had
acheived a certain degree of independence from the mother institution,2 but those activities remained limited in accordance with the
limited scope of the NBvZA as a commercial bank amongst other
commercial banks in South Africa.
The real growth of the bank only came well after 1945. The period
directly after the war was a period of consolidation of the bank's
activities, also in South Africa. In 1945 the bank's capital amounted to
R1124000, its reserves to R1 005 000, the total amount being
R2129000. 3 The growth of the bank's capital and reserves is
reflected in Table 5.1. From these figures it is clear that the bank
showed substantial growth only from 1961 onwards. The growth in
reserves between 1969 and 1973 indicates the higher profitability
which banking business achieved in those years and not that the bank
grew substantially at the expense of other banks. The Netherlands
Bank's capital and reserves remained between 11 and 15 per cent of
that of all the commercial banks.
The relative position of the Netherlands Bank amongst the other
commercial banks is perhaps more clearly expressed in the ratio of its
81
82
Capital
Reserves
Capital and
reserves
1945
1947
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1 124
1800
1800
4000
4000
4000
5000
5000
5000
6600
8000
10 000
12555
12555
14516
1005
1302
1504
900
1 190
1560
2258
2860
3362
4282
6987
9656
18874
20496
37197
2129
3102
3304
4900
5190
5560
7258
7860
8362
10 882
14987
19656
31429
33051
51 713
10.72
9.9
9.7
11.03
11.79
12.9
12.42
15.2
Source: Published Annual Reports of the NBvZA and the Netherlands Bank
of South Africa (NBSA) - Nedbank from October 1 1971 and SA Reserve
Bank Quarterly Statistical Bulletin, December 1954-December 1973.
assets and liabilities to those of the other commercial banks. The bank
gradually improved its position as far as total assets and liabilities were
concerned, from a 3 per cent to a 10 per cent share of the total assets
and liabilities of all the commercial banks (Table 5.2). The period of
the most pronounced growth was, as reflected in the bank's capital and
reserves position, from 1961 to 1973. A somewhat weaker position is
reflected in the growth of the total deposit funds of the bank. As
reflected in Table 5.3 the banks deposit funds increased from 2 per
cent of the total deposit funds of all the commercial banks to 9 per cent
of that of all the commercial banks, although the increase was only 2
per cent between 1967 and 1971 and almost nothing between 1971 and
1973.
The figures above show that the Netherlands Bank was, even in
1973, still a small commercial bank amongst the other commercial
banks in South Africa. It was one of the four big commercial banks,
i.e. Barclays Bank, Standard Bank and Volkskas, but its market share
83
Grietjie Verhoef
Table 5.2 Assets and liabilities of the Netherlands Bank and its ratio to
other commercial banks, 1945-73 (Rand thousands)
Year
Total NBSA
assets
% of total assets
of all the
commercial banks
1945
1947
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
24964
31470
34525
43013
52789
64 608
80461
89496
101399
135201
167361
193725
311 604
400 223
599029
3.73
3.82
4.81
5.13
5.85
6.24
6.55
6.96
7.51
7.87
7.25
7.15
8.38
9.81
10.43
3.54
3.6
4.62
4.88
5.65
6.12
6.38
6.79
7.43
7.79
7.23
7.01
8.34
10.06
10.47
ranged only from 2-3 per cent in 1945 to 10-15 per cent in 1973 - an
average of about a 12 per cent increase. The Netherlands Bank was
most committed to foreign trade of all the commercial banks and had
far less interest in local agricultural developments. In 1945 the bank
had only twenty-two branches throughout South Africa6 (and one in
London), but when industrialisation and the accompanying trade
boomed in the country, the bank expanded its branch network to
eighty-three branches with forty-eight agencies managed by full
branches, in 1973. 7 The bank regarded itself as a businessman's bank,
a wholesale bank rather than a retail bank and therefore had less
interest in expanded branch representation than in representation at
the point of commercial and industrial activity. 8
The expansion of the activities of the Netherlands Bank up to 1973
stands in the context of the expansion of the South African economy as
a whole. After the world war the South African economy was still
largely dependent on mining and agriculture; but when the terms of
trade turned against South Africa in the fifties and early sixties,
because of its dependence on imports of manufactured and capital
84
Table 5.3 Total deposit funds of the Netherlands Bank in relation to deposit
funds of all the commercial banks, 1945-73 (Rand thousands)
Year
NBSA total
deposits
Total deposits
of all the
commercial banks
NBSA deposits as
a % of all the
commercial banks
1945
1947
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
18887
23242
24825
30616
38911
49841
63220
71 789
81419
101 960
119696
155743
250706
322159
469868
642924
784272
670800
774700
836600
958600
1 139200
1191400
1240000
1588000
2045300
2428100
3243500
3464 000
4895000
2.39
2.96
3.7
3.95
4.65
5.19
5.54
6.02
6.56
6.42
5.85
6.41
7.72
9.3
9.59
Source: SA Reserve Bank Quarterly Statistical Bulletin, 1954-73 and the BA-9
forms reflecting the quarterly asset and liability position of the Netherlands
Bank, submitted to the Registrar of Banks, 1945-73 (using the September
quarterly submission of every year)5.
Grietjie Verhoef
85
86
Grietjie Verhoef
87
88
Grietjie Verhoef
89
90
Table 5.4 South Africa, gross domestic product, 1947-73, (Rand millions)
Year
GDP
1947
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1572
191
2404
3207
3692
4275
4690
5233
6246
7127
8586
10 113
12743
17923
compound growth rate and between 1967 and 1973 it was an increase
of 13 per cent annual compound growth rate alone. Over the same
period South Africa's goods imports and exports increased by a 7 per
cent annual compound growth rate and 10 per cent annual compound
growth rate respectively (and for the period 1967-73 it was 10.6 per
cent and 11.3 per cent respectively) (Table 5.5).
The bank's share in import and export financing is shown in Table
5.6. According to these figures for the period 1947--64 the bank's import and export financing increased by 6 per cent and 8.6 per cent annual compound growth rates respectively. In 1947, the bank's share
in import financing was 8.5 per cent of total SA imports and in 1964 it was
12.7 per cent, and its share in export financing in 1947 was 14.5 per
cent and in 1964, 11.4 per cent. 35 This means that the bank's share in
import financing increased by 4.2 per cent when total imports of the
country rose by a 5.9 per cent annual compound growth rate, and the
bank's share in export financing dropped by 3.1 per cent when total
exports of the country rose by a 10.1 per cent annual compound growth
rate. This can be explained by the fact that the bank had a weak home
(SA) base compared to other commercial banks and that the bank was
very active through its foreign office in London, the representative
91
Grietjie Verhoef
Table 5.5
Imports
Exports
1947
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
601
630
934
849
962
1100
977
1006
1283
1799
1942
2148
2923
3550
210
214
577
593
738
903
867
951
1024
1067
1323
1486
1551
2517
millions)
Year
Imports
Exports
1947
1949
1951
1953
1955
1957
1959
1961
1963
1964
51.2
51.6
72.6
54
66.9
84.9
76
89.6
116.9
137.8
30.5
36.1
75.4
68.6
79.7
100.6
84.4
104.3
130.5
123.4
1947-64.
office in New York, and its offices in Rhodesia and Zambia. The
achievement of the NBSA in the field of foreign trade financing can
furthermore be explained by comparing assets and liabilities of all the
commercial banks to that of the NBSA and its share in foreign trade
92
financing. According to Tables 5.2 and 5.3, the ratio of the NBSA's
assets in 1947 was only 3.82 per cent to that of all the commercial
banks and in 1965 it was 7.25 per cent. The ratio of the bank's
liabilities in 1947 was 3.6 per cent to that of all the commercial banks,
and in 1965 it was 7.23 per cent. The NBSA's 8.5 per cent and 14.5 per
cent share in import and export financing respectively in 1947,
compared to an asset liability position of about 3.7/3.6 per cent,
shows that the bank took business in this respect from other banks
where the latter should have entertained it, according to their position
amongst commercial banks. The same situation as far as imports and
exports are concerned existed in 1963: the NBSA had an asset/liability position of 7.8717.79 per cent as compared to a 9.1 per cent and
12.7 per cent share in imports and exports respectively.
This type of comparison cannot be made for the period 1964--73 due
to a lack of statistics. As stated in note 33, banks' figures on foreign
bills, advances and acceptances (and local advances, as advances
locally could also be used to accommodate foreign trade) does not
exclusively explain foreign trade activity (Table 5.7, 5.8, 5.9, 5.10). It
does give an indication of foreign activities in general, including trade
activities. 36
Table 5.7 Total bills discounted or bought, 1965-73 (Rand thousands)
Year
NBSA
foreign
1965
1967
1969
1971
1973
7
91
335
284
620
Commercial NBSA %
banks
of
foreign
total
3100
3000
2900
4000
8000
0.22
3.03
11.5
7.1
7.75
NBSA
total
bills
21254
20747
15996
50117
64 065
Commercial NBSA %
of
banks
total bills
total
132400
106500
107900
153000
295000
16.05
19.48
14.82
32.75
21.7
Grietjie Verhoef
Table 5.8
Year
NBSA
foreign
1965
1967
1969
1971
1973
81
12
155
12
2626
93
Commercial NBSA %
banks
of
foreign
total
2200
2100
4400
4000
4000
3.68
0.57
3.52
0.3
65.65
Total
NBSA
advances
71972
54481
80696
94773
224081
Total
NBSA%
commercial
of
banks
total
advances
1145900
1116300
1432100
1569000
2689000
6.28
5.23
5.63
6.04
8.33
Year
NBSA
All commercial
banks
NBSA as %
of total
1971
1973
59518
102276
89000
129000
66.87
79.28
Table 5.10
Year
1947
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
3048
6770
35450
59518
96135
Foreign acceptances
Total
26
208
289
488
1301
1989
573
873
1232
26
208
289
488
1301
1989
573
873
1236
3048
6770
35450
59518
102276
6141
94
194~3
(Rand thousands)
Year
Local bills
Foreign bills
Total bills
1945
1947
1949
1951
1953
1955
1957
1959
1961
1963
664
4408
7548
14352
10721
12302
17482
12565
14214
16736
5
229
540
1125
2675
2919
5105
2927
2819
3513
670
4636
8088
15477
13 396
15221
22588
15492
17033
20249
The general inference that may be drawn from the bank's figures of
acceptances, bills discounted and advances, as compared to that of the
other commercial banks, is that the bank's foreign business grew
steadily between 1965 and 1973. This was a remarkable achievement
for such a small commercial bank like the NBSA, in the light of the
strict import and exchange control measures and credit ceilings
imposed on commercial banks after 1964, which hit the bank hard, as
its main credit activities were foreign directed. The bank's foreign
financing via London was especially hard hit, as advances to London
also fell under the credit ceilings imposed on the banks. Even in 1960
the Reserve Bank suspected that the advances made to the bank's
Grietjie Verhoef
95
29.6
41.2
41.4
30.8
27.3
28.3
31.8
112.4
129.8
121.2
100.3
107.7
107.9
122.4
1952
1954
1956
1958
1960
1962
1964
18.9
24
24.1
23.1
23.2
24.8
30
26.3
31.7
34.2
30.7
25.3
26.2
26
I
expor~
SA total
hides and
skins
2as
% of
10.1
9.2
8.5
9
9.3
9.9
13
NBSA
hides and
skins
exports 4
53.4
38.3
35.2
40
40.1
40
43.3
4as
% of
3
NBSA
wool
exports}
SA total
Year
NBSA
diamond
exports 6
6
7
11.9
14.5
12.2
15.9
15.5
SA total
diamond
exports5
46
54.4
64.6
62.1
64.2
73.2
9.5
13
12.9
18.4
23.3
19
21.7
16.3
6 as
% of
5
97
Grietjie Verhoef
Table 5.13
Cut
%
Uncut
%
1960
1961
1962
1963
1964
74.5
66.7
61.8
71.2
66.5
0.24
1.9
3.5
2.1
2.2
1952
1954
1956
1958
1960
1962
1964
72
73.2
73.9
63.6 - Record level of 74.1 % in 1957
56
48.2
48.5
98
and behind the Iron Curtain. This was done on a basis of credit cover by
the client at the bank in London, on which ground advances, bills
discountable, and later on acceptances, were granted. 46 Wool
transactions with countries behind the Iron Curtain were done on a bill
basis under Letters of Credit, but when other English banks started
doing transactions on a credit basis, the same facilities were demanded
from the bank's London branch. The NBSA was not very interested in
this proposition, as trade with those countries normally carried credit
risks. When the bank stood to lose this lucrative business, it agreed to
extend credit facilities to its correspondent banks, through which its
clients could be helped. The bank did its foreign trade business with
Czechoslovakia through Nardoni Banka Ceskolslovenska, Slovenska
Tatra Banka and Zivnostenska Banka. These banks were all taken over
in 1956 by the Statni Banka. 47 In Poland, the bank's business went
through Bank Handlowy. 48
The markets to which the bank financed most exports were the
United Kingdom, West Germany, the USA and the Netherlands. 49 In
1952, the NBSA financed 6.2 per cent of the total imports of South
Africa from the UK and 14.6 per cent of South Africa's total exports to
the UK. In 1964, it financed 9.52 per cent of South Africa's imports
from the UK and 18.94 per cent of South African exports to the UK. 50
Because the UK was South Africa's main trading partner throughout
the period 1945-73, the presence of the NBSA London office (and in the
Haymarket since April 1971) was vital for the share of the bank in the
foreign trade between the two countries. It must be remembered that
the two big commercial banks in South Africa, Barclays and Standard
Banks, still had their head offices in England and handled the lion's
share of the trade themselves.
The NBSA also financed a relatively small share of South Africa's
total foreign trade with the USA. In 1952, the bank financed 6.3 per
cent of total SA imports from the USA and 15.5 per cent of South
Africa's exports to the USA. In 1964, the position was 7 .23 per cent and
12.53 per cent respectively. The share of the bank in South Africa's
foreign trade with the USA gradually improved after January 1954,
when the import restrictions from dollar countries were lifted and the
bank opened a representative office in New York, in 1958. This
relationship became increasingly important when the USA replaced the
UK as South Africa's principal foreign trade partner after 1974. 51
The bank financed a very large portion of the total South African
exports to West Germany until about 1958. In 1952, the bank financed
35.4 per cent of the total SA exports to West Germany and in 1958 this
Grietjie Verhoef
99
was 38 per cent. In 1964, the bank only financed 18.2 per cent of the
total SA exports to West Germany. The main reason for this decline
was the change in the composition of West Germany's imports away
from wool, hides and skins to more foodstuffs, metals, metal products,
machines, vehicles, jewels and musical instruments, products which
received little financial assistance from the NBSA. Furthermore, the
Hamburg office of the old Amsterdam bank remained part of the
Netherlands business and became more inclined to European than
South African related business. The pattern of imports moved in an
opposite direction from that of exports, with NBSA increasing its
share of total SA imports from West Germany from 9 per cent in 1952
to 16.03 per cent in 1964. 52
The NBSA achieved its strongest position in financing trade
between the Netherlands and South Africa. In 1952, the bank
financed 22.3 per cent of South Africa's total imports and in 1964 the
figure stood at 36.8 per cent. Out of the total South African exports to
the Netherlands the bank financed 13.5 per cent in 1952, but this
improved to 23.3 per cent in 1964. The bank was weaker in exports to
the Netherlands than in imports from the Netherlands because it had
difficulty in obtaining Dutch business in South Africa. Dutch business
often went via the two big English banks. 53
CONCLUSION
The NBSA played a characteristic role amongst the other commercial
banks in the country. It very reluctantly expanded its branch networkand then only to business centres, very seldom to the country - and
therefore could not rely on local resources to supply the working
capital. The bank had a strong international heritage and its
management remained chiefly Dutch until 1971. That meant that the
Dutch preference for trade rather than for agriculture or mining
strongly influenced the bank management's decision to rely on foreign
trade and foreign business. After 1973, the bank relied on foreign
capital borrowings to strengthen its local capital base. Further
expansion of the bank relied heavily on its foreign activities and up to
1973 very little change had come about in this position. Although the
bank developed new products and services aimed at assisting
businessmen and their prospective foreign needs, by 1973 it had not
yet succeeded in achieving local acceptability as a full South African
bank. This was the result of its emphasis on being an international
100
bank, but did not mean that the NBSA did more international
business than the other commercial banks. However, it seems likely
that NBSA was more dependent on it than the other banks reflecting its relative weakness within South Africa.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
4l.
Grietjie Verhoef
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
101
102
32.
33.
34.
35.
36.
37.
38.
Grietjie Verhoef
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
103
excludes all foreign branch activities of the bank from 1965 onwards and
thus reflect only the activities of the bank in South Africa. Information
on the activities of foreign branches is confidential and Nedbank has
until the time of writing not given permission that it may be consulted by
the author.
Discussions with General Management, 1 September 1960.
NV/4:72, Memorandum by W. Koster on the NBSA share in imports
and exports, 1962-3.
See e.g. JV/10/3, Confidential Annual Report, 1958-9, pp. 1-5.
RK/14:6, Letter NBvZA, Amsterdam-Chief Agent, no. 349, 5 April
1946.
RK/14:8, Letter NBvZA, Amsterdam-ChiefIAgent, Confidential,
no. 60/86, 10 March 1947; RK/14:39, Letter NBvZA,
Amsterdam-Chief Agent, Confidential 1269, 6 October 1949.
RK/14:83, Letter NBvZA, Amsterdam-Chief Agent, no. 1801, 18
February 1953; RK14/98, Letter NBvZA, Amsterdam-Chief Agent,
Confidential, no. 66/503, 5 June 1953.
RKl14:118, Better NBSA-NOB, strictly confidential, no. 68/41, 5
December 1954.
RKl14:76, Letter NBvZA, Amsterdam-Chief Agent, Confidential,
792, 7 December 1951; RKl14:89, Letter NBvZA-NBSA Confidential, no. 66/501, 6 June 1953; Discussions with General Management, 1
April 1964.
RKl20:335, Letter NOB-NBSA, 3 July 1956; HK/S Discussions
with General Management; 69/71, 10 June 1971; HKlS, Discussions
with General Management, 57171,13 May 1971.
OIl3:255, Letter NOB-NBSA, no. 4/142, 8 February 1958;
Discussions with General Management, 25 October 1960 and 21
February 1962.
Coherent complete figures of the banks share in imports and exports
according to markets, are also not available (see note 33). The figures
quoted are from the Confidential Annual Reports and are no longer
regarded as reliable by the current bank management.
NV/l:73 Minutes of Board Meeting, 22 December 1953, NBSA
Confidential Annual Reports, 1951-65.
NBSA Confidential Annual Reports, 1951-65; OIl3:19, Letter
NBSA-NOB, Confidential, no. 67/83, 2 February 1954; NB/4:157,
Memorandum on N BSA Share in Import and Export Financing, 1963-4.
OIl3:19, Letter NBSA-NOB, Confidential, no. 67/83, 2 February
1954; NB/4:157, Memorandum on NBSA Import and Export
Financing, 1963-4.
NB/l:107, Minutes of Board Meeting, 15 February 1955.
The role of the South African Reserve Bank in the country's economy,
past and present, comprises a range of traditional central banking
functions performed continuously, but punctuated by decisive intervention at critical junctures. At such times the Bank is most clearly
visible as an agent in our economic history. The establishment of the
Bank itself in 1920 may be taken as an obvious first example. A clear
need had arisen by that time for a central bank to regulate the note
issue following the wartime inflation and to conserve the country's
stock of monetary gold. Other examples, from among many, are the
momentous decision, urged on the government by the Bank, to
maintain the gold standard in South Africa when the United Kingdom
suspended it in September 1931; the Bank's active part in the
establishment of the National Finance Corporation in September
1949, which pioneered South Africa's money market; and the
imposition of deposit rate control in March 1965 which, together with
attendant control measures, profoundly altered the channels of credit
and the methods of financial intermediation during the next fifteen
years.
The adoption of market-oriented methods of monetary management since early 1980 was another policy turn of great significance for
the course of the South African economy. It consisted of a series of
interrelated measures to liberate and develop the financial markets.
The steps taken to that end are described in detail in the de Kock
Report? Rather than repeat these here, I propose instead to illustrate
the Reserve Bank's role in the economy by showing how its current
market-oriented methods were applied in dealing with the unfortunate
conjuncture in 1984 of a plummeting gold price, runaway government
spending and a devastating drought.
105
106
D. W. Goedhuys
107
net inflow of capital, stimulated by the higher gold price, and this in turn
helped to fuel the demand for assets - real and financial. The Rand's
exchange rate appreciated until July 1983, despite the sharp fall of the
gold price since February, but then entered upon an almost continuous
descent.
The worrisome tendencies that took shape in 1983 worsened as the
year 1984 progressed. The drought intensified and became more
damaging to the economy. It transformed maize exports into maize
imports. The gold price continued its slide throughout 1984. With
domestic demand, including the demand for imports, remaining
buoyant, the current account of the balance of payments swung into
deficit during the third quarter of 1983 and recorded continuing deficits
throughout the first three-quarters of 1984. The Rand's exchange value
fell back rapidly. By July 1984, the effective rate was 27 per cent below
the level of September 1983.
As in 1983, the government's finances in 1984 aggravated the effects
of the external accounts. In spite of the correctly designed Budget of
March 1984, unforeseen and heavy outlays on drought relief, defence,
sharply increased salaries and other items swelled government
spending at a high rate, particularly as from the second quarter of 1984.
An increase in the General Sales Tax in February and again in July 1984
failed to stem the government deficit.
What had started a year earlier as a gold-led economic recovery
turned into a consumption-driven upswing on the back of a rapid
expansion of bank credit. Undeterred by the drought and the declining
gold price, consumer spending was rising, in the second quarter of 1984,
at an annual rate of 12 per cent. Inflation advanced from an annual rate
of 10 per cent in February to 12.4 per cent in July 1984. In view of the
country's much reduced export earnings, it became clear that the rising
trend of government and personal spending had to be arrested firmly.
THE RESTRICTIVE 'PACKAGE' OF 2 AUGUST 1984
In an unusual procedure, a joint annoucement was made by the
Ministers of Finance and of Industries, Commerce and Tourism, and
the Governor of the Reserve Bank. It comprised the following remedial
measures:
1. The Reserve Bank raised its discount rate for Treasury bills from
18314 per cent to 21314 per cent; for Land Bank bills from 19 per
108
cent to 22 per cent; and for bankers' acceptances from 19 1/2 per
cent to 221f4 per cent.
2. Hire purchase conditions were tightened in the sense that the
maximum allowable finance charges were raised by 5 percentage
points to levels of between 30 per cent and 32 per cent, according
to the amount involved; the minimum deposit on delivery of the
merchandise was raised by varying amounts, but for most goods
from 10 per cent to 25 per cent of the purchase price; and the
maximum repayment period shortened, in the case of most goods,
from twenty-four months to twelve months.
3. The Minister of Finance promised renewed efforts to curb public
sector spending. Though it was not part of the statement, it was
understood to be impracticable to adopt an adequately restrictive
stance before the March 1985 Budget. (The General Sales Tax had
meanwhile been increased from 10 per cent to 12 per cent in July
1984).
There was debate at the time whether the seriousness of the
situation did not warrant the Reserve Bank's closing the discount
window entirely, that is, to decline to meet the clearing banks' need for
additional cash reserves accordingly as their balance sheets expanded
in line with the growth of bank credit and of the liabilities reflecting
that growth. Had the Bank done so, however, the clearing banks
would have had to cut back abruptly the growth of their balance sheets
by not undertaking any new net lending or by selling off financial
assets. The ensuing disruption of business and sharp increase in
interest rates would have done much more harm and little good to the
economy. A more even, yet powerful effect was achieved by raising
the official discount rates by a record 3 percentage points.
THE RESULTS
The immediate effect of the higher official discount rates was to raise
the banks' prime overdraft rate from 22 per cent to 25 per cent. In a
seeming paradox, money market rates (for interbank loans, call
money, bankers' acceptances and negotiable certificates of deposit)
entered on a slow downward trend, having already reached peak levels
of between 18 and 18314 per cent at the end of July, in response to the
strong demand for credit in the inflationary and overstrained conditions of the proceeding months. Because the August action was
D. W. Goedhuys
109
rightly expected to depress business activity and, with it, the demand
for credit, money market rates eased off from then onwards.
These depressive effects were exacerbated by the capital outflow as
from September 1984. It consisted mainly of shifts in the placing of
trade credit from overseas to local sources, as the Rand was expected
to depreciate further, and of substantial repayments of other
short-term foreign debt.
The policy actions did succeed in checking, albeit temporarily, the
depreciation of the Rand. Measured against the currencies of our
trading partners, the Rand depreciated by 13 per cent in the fourth
quarter of 1984, but then gained 5 per cent in the following quarter.
The results of the policy were most clearly observable in the marked
turnaround of the trends in aggregate spending and the current account
of the balance of payments - the two main objects of the intervention.
Gross Domestic Expenditure registered a sharp decline as from the
last quarter of 1984 and remained at a low level right through 1985. As
an unhappy, but unavoidable corollary, employment also contracted
from late 1984. By the time of the Reserve Bank's annual report of
August 1985, the governor was able to state that overspending had
been eliminated, that personal savings had recovered from the earlier
dissaving, and that the growth rate of the money supply (M3) had been
brought down from an annual rate of 18 per cent in the first half of 1984
to 13 per cent in the first half of 1985.
The balance of payments on current account showed an even more
dramatic improvement: a surplus reappeared soon after August 1984
and mounted throughout 1985, in spite of the gold price averaging only
$311 in the first half of 1985. The amount of the current account
surplus, stated at an annual rate, was RO.6 billion in the fourth quarter
of 1984, followed by R4.3 billion and R5.4 billion in the two
succeeding quarters, respectively. The factors contributing to this
remarkable turnaround were the falling-off in imports as domestic
demand contracted and growing exports, both in volume and
particularly in Rand value, as the Rand depreciated.
The government deficit remained high at approximately 4 per cent
of GDP during the rest of the 1984/5 fiscal year, but thanks to
effective public debt management it was financed without resort to
bank credit. In the Budget Speech of March 1985, the government
provided for a reduced growth of public sector spending and a lower
deficit.
Given the long lag in the monetary transmission mechanism, the
rate of inflation inevitably continued rising during the remainder of
110
1984 and the first half of 1985, before it responded to the throttling of
aggregate spending and began to moderate as from June 1985.
REFLECTIONS
The successful intervention by the Reserve Bank in August 1984,
followed later (as from May 1985) by a gradual easing of the pressure
applied, averted the threatening onset of hyperinflation and the total
collapse of the Rand when the current account deficit mounted and
capital inflow dried up and then reversed from mid-1984. It came none
too soon, nor did the accelerated repayment of foreign banking debt,
for less than a year later certain socio-political developments severely
shook confidence in the South African economy. Without the earlier
corrective action, the economy would not have been able to weather
the storm well enough to have a chance of revival in 1986.
The adaptation of policy from mid-1983 onwards, culminating in the
August 1984 statement, can indeed be regarded as a classic instance of
central bank intervention to alter the course of the economy. The
policy achieved what was required and what it set out to do. The cost in
unemployment and lost output must be judged against the ultimately
much greater loss if the economic trend in evidence since mid-1983 had
been allowed to continue unchecked.
Particularly to be noted is that the policy succeeded in its aims by
operating with and through market forces, instead of by suppressing or
thwarting them. No recourse was had to import control, ceilings on
bank credit or other interference with the working of the economy.
Depressive the action needs had to be, but disruptive of the economic
system it was not. The tightening of hire purchase conditions is in a
different category; consumer credit sales are regulated for the
protection of the poor, and varying the terms can be a useful assistant
to general credit policy, even though consumer credit is the minor part
of total credit outstanding in the economy ..
In the interest of optimal economic growth - not to be confused with
stable growth, which is unattainable - the central bank is at times
called upon to loosen the reins and stimulate, and in other circumstances to depress economic activity temporarily in order to prevent
runaway inflation and economic breakdown. The concurrence of fiscal
policy is a great help, but more often in practice an adverse fiscal trend
is one additional problem for monetary policy. The appropriateness or
otherwise of monetary action must always be seen, therefore, in the
D. W. Goedhuys
111
112
Notes
1.
2.
3.
4.
References
7 Monetary Policy,
Commercial Banking and
the Political Imperative,
1965-85
1
Katherine Munro
INTRODUCTION
This paper focuses on the relationship between monetary policy,
economic and political conditions, and commercial banking functions
and practices in South Africa over the period 1965 to 1985. Changes in
banking functions have been numerous and have occurred at a rapid
rate, but these changes have not been solely the result of market
forces. Instead monetary policy distorted market forces significantly
because monetary policy over the period considered was not politically
neutral. Thus the shape of commercial banking was a response to and a
reaction against monetary policy and distortions in market forces.
114
Katherine Munro
115
The 1965 Banks Act defines a commercial bank as 'a person who
carries of a business on which a substantial part consists of the
acceptance of deposits of money withdrawable by cheque'. A
commercial bank is thus a financial intermediary, facilitating the
provision and transfer of money fron sources of savings into channels
for investment, and providing an efficient and fast clearing system.
The commercial bank creates credit and augments the money supply
of the economy by making advances to clients, and in the process
derives a profit from these loan activities. In addition to current
account deposits, the commercial bank also accepts notice, term and
savings deposits. Income is also derived from fees earned on a variety
of services and commissions. Traditionally the commercial bank
concentrated on the provision of retail services for the individual
client. During the 1970s emphasis switched to the corporate sector
with the provision of specialist wholesale services. Recently, there has
been a revived interest in retail banking, in part the consequence of the
revolution in technology and in part the response to increased
competition from other types offinancial institutions. The credit card,
automatic teller machines (ATMs) and networked computers are
radically changing consumer banking.
THE RESERVE BANK AND THE COMMERCIAL BANKS
The credit creating ability of the commercial banking sector has been a
source of strength and profitability to the individual banking
institutions, but at the same time a reason for concern on the part of
the monetary authorities at the Reserve Bank in Pretoria. For it is the
job of the latter to coordinate economic growth and economic
stability. Monetary policy is the total complex of measures applied by
the monetary authorities, aimed at influencing the money stock and its
rate of growth and/or the cost and availability of credit in the
economy. This is part of the broader goal of a consistent and coherent
macroeconomic policy enunciated by the State. 4 Credit creation by the
banking sector can influence money supply and can and has on
occasion disrupted government monetary policy. At the same time,
the existence of a branch banking network and the highly concentrated
structure of the banking sector makes it crucial for the five major
banking groups to retain the confidence of the public. For these
reasons a symbiotic relationship has developed between the commercial banks and the Reserve Bank. In addition, the official Registrar of
116
Katherine Munro
117
118
Katherine Munro
119
the pressures of fiscal needs and the onset of an inflationary era. But at
the same time, it can be arged that these very controls provided a
ready, easy and cheap means of finance for the burgeoning public
sector, and in particular provided the financial underpinning for such
sacred 'White cows' as the Land Bank and the parastatal institutions.
Cash and liquid asset reserve requirements adversely affected the
cost structure of the banks. The primary responsibility of the banks
was to their shareholders, thus continuing profitability and the healthy
glow of the balance sheet at the end of each financial year does help to
explain why the banks sought escape mechanisms through the maze of
regulations. On the other hand, the monetary authorities had few
alternatives to direct control networks, in view of Treasury dominance
and comparatively underdeveloped financial markets in South Africa.
But the Reserve Bank saw itself as a neutral body, with its objective
being the attainment of overall financial stability and a coherent
monetary policy and direct controls were only a means to this end. Dr
M. H. de Kock, in a paper to the Economics Society of South Africa,
as long ago as 1957, argued that the principal objectives of monetary
policy should not be confined to the maintenance of long-term price
stability and a relatively stable standard of value, but should extend to
'general economic stability in the sense of orderly and balanced
economic progress'. 8 This was a fine objective in an ideal world. But
South Africa in the 1960s and 1970s was not an ideal world and clearly
there was something fundamentally wrong with banking legislation,
and the philosophy underpinning that legislation was flawed. The
ideological divide between government and business remained a
chasm.
THE DE KOCK COMMISSION AND MONETARY REFORM
However, it was not until 1978 that the government initiated moves to
dismantle the 1965 banking framework, when it cautiously appointed
the Commission of Inquiry into the Monetary System and Monetary
Policy in South Africa under the chairmanship of Dr G. P. C. de Kock,
then Deputy Governor of the Reserve Bank. In the event the
Commission sat for eight years, producing a first interim report in 1979
and a second interim report in 1982. But it was not until the middle of
1985 that the third and final report of the de Kock Commission was
published. 9 The Commission ranged widely in its investigations; its
first report on exchange rates in South Africa set the stage for the
120
What had changed between 1965 and 1985? The goal of a rational
monetary policy remained, although under the leadership of Gerhard
de Kock the emphasis had broadened from the control of credit
extended by the banking sector to the private sector, to a global
approach to money management in the economy. By the 1980s
monetary policy was seen to extend not only to money supply and
interest rates but also to exchange rates, the financing of the State
budget and total spending, thus having a crucial impact on income,
output, prices and the balance of payments. Stable price levels and
balanced economic growth remain the ultimate goals. What has clearly
altered has been both the definition of the appropriate focus of
monetary policy and the methods and techniques that ought to be used
in creating a rational monetary policy. The question is why? Can we
answer in simple terms and reply that we are all 'monetarists' these
days, that is, far more conscious of the importance and role of money
and that the need for flexible and market-related interest and
Katherine Munro
121
122
During the 1950s and 1960s the dominant position of the commercial
banks was challenged by the entrepreneurial innovations on the part of
merchant banks, discount houses, building societies, hire purchase
and general banks. All these newer institutions responded more
energetically and actively to the growing demand for new financial
services in a buoyant economic environment. It has been argued, for
example, by Meier that the commercial banks took a traditional view
of their function and continued to prefer to make short-term loans
and provide working capital. 13 During this period this conservative
attitude meant that new approaches to finance (hire purchase,
personal loans, leasing and credit card facilities) were launched by
institutions not directly connected with the commercial banks. Thus
the total assets of commercial banks, expressed as a percentage of the
assets of all financial private deposit-taking intermediaries fell from 69
per cent to 41 per cent between 1946 and 1981, although in absolute
terms commercial bank assets increased from R726 million to
R19487 million over the same period. 14 Furthermore, the original
1942 Banking Act did little to retard these developments and indeed
accelerated the trend by labelling the commercial banks as the main
intermediaries in the financial system and thus subject to the most
strenuous monetary controls. The 1965 Act broadened the definition
of banks or bank-like institutions subject to credit controls, but by the
very nature of such specific regulations, the network of controls could
not be comprehensive, and hence the stimulus to what has been called
'the grey market' and the process of 'disintermediation'. Disintermediation took several different forms. One was increased intercompany
borrowing and lending. Another method was the selling by banks of
assets on repurchase agreements to the private non-banking sector.
Another technique was the increased utilisation of acceptance
facilities and their rediscounting outside the banking system by
companies seeking to invest their liquid funds. Similarly, the
discounting of bank endorsed trade bills outside the banks was another
form of disintermediation. It is not surprising that as a result direct
control measures were largely ineffective. 15
The second notable change was the long-term reduction in the share
of non-interest bearing demand deposits in the total deposits of the
commercial banks. The share of this category of deposit declined from
89.1 per cent in 1950 to 39.2 per cent in 1980. In contrast,
interest-bearing time deposits increased sharply, from 11 per cent of
total deposits to 50 per cent by 1973. 16 The cost of deposits placed
within the commercial banking sector rose. This development was the
Katherine Munro
123
124
Katherine Munro
125
126
be responsible for the marketing of the South African gold output but
that the dollar proceeds be released to the gold mining companies by
the Reserve Bank. This was implemented.
THE RESERVE BANK AND THE FOREIGN EXCHANGE
MARKET
During the last decade, the Reserve Bank has increasingly been drawn
into stabilising the foreign exchange market, for the Bank, acting on
behalf of the Treasury, has had to underwrite the exchange risk and
aggregate losses incurred by the Reserve Bank on forward exchange
account over the decade has amounted to several million Rands. For
example, in the year ended in March 1983 forward exchange losses
amounted to R892 millions, and in the year ended March 1984 losses
amounted to R654 million. 21 The crucial question was how forward
exchange rates could be determined by the market without the
Reserve Bank serving as a backstop. Expectations of a depreciating
Rand and the structure of South Africa's international trade became
central in the Reserve Bank and the Treasury's structuring of
monetary policy. In 1979, the First Interim Report of the de Kock
Commission recommended that the Reserve Bank should cease its
involvement in the forward exchange rate market and should instead
promote the development of a fully fledged private market in forward
exchange. This has proved to be a far more difficult goal to implement.
BANKING IN THE 1980s
These exogenous developments have been part of the backdrop to
relations between the Reserve Bank and the commercial banking
sector and together with the endogenous factors affected the evolution
of monetary policy. What then were the major developments in
commercial banking in the 1980s? The competitive environment has
been sharpened. The oligopolistic structure of banking has not
reduced competition but has rather accelerated it. (A parallel might be
in the performance of the zaibatsu in Japan.) Diversification and the
provision of a comprehensive range of financial services has
broadened competition from merchant banking to general banking,
from leasing to hire purchase, from factoring to credit cards, from fleet
management to instant cash. The emphasis on banking in the 1980s
Katherine Munro
127
128
housing finance, and by 1983 the major banking groups had forged
specific alliances with individual building societies thus broadening the
range of cash outlets open to both bank and building society
clients. 22
Computerisation, electronic transfer networks, automatic teller
machine systems constitute the information revolution of the eighties.
These are all information systems designed to speed up the transfer of
information, reduce costs and provide a more efficient service - speed,
accuracy, efficiency and throughput or volume spell profits. Again it
offers a competitive technique to those who are either first in the field
or who offer the most efficient transfer mechanism. However,
sophsiticated equipment of this type costs money and the larger the
branch network put on line, the higher the costs of the system. Thus it
is not surprising that Nedbank was the first bank to introduce
computers and so over the years this development, together with a
tight network, definitely contributed to the greater profitability of the
group.
Standard Bank pioneered automatic telling machines in the banking
sector. By 1983 Standard Bank had invested R13 million in 278
Autobanks and 14.4 million transactions were processed in 1983. In
the year ended 31 December 1984, Standard's early entry into
self-service electronic banking was given ina stock broking company's
analysis as one of the reasons for Standard's outperformance of other
banks. 23
FOREIGN INDEBTEDNESS IN THE 1980s
Finally, I now turn to the most vexed question of the decade to date,
namely, the foreign debt situation and crisis of short-term indebtedness. Obviously all this is very contemporary and the picture is
incomplete. What I wish to suggest rather tentatively is that in the saga
of foreign short-term debt and foreign exchange ventures we see a
development that was the combined result of monetary policy, as on
the statute books (the situation that led to the ongoing search for new
sources of profitability), expectations of a change in monetary policy
(that grew out of periodic liberalising pronouncements of the Reserve
Bank and the work of the de Kock Commission), a lack of constraints
on banking operations by South African banks abroad, the readiness
of the part of overseas banks to lend to South Africa and the fluid,
volatile state of the forex markets. Anyone of these factors viewed in
Katherine Munro
129
130
Katherine Munro
131
unrest. A high-risk environment suddenly developed and the vulnerability of the financial sector was evident.
These developments, though, were also a function of deeper
perhaps even more basic trends at work over a period of time. The
financial crisis has highlighted the continuing importance of the
commercial banking sector and has underlined its vulnerability.
Clearly it is still possible for a weakness or a drain of funds from the
commercial banking system (some might even argue bad management
practices, others might say bad luck) to undermine and threaten both
the overall stability of the economy and monetary policy. The political
crisis has thrown up questions about priorities and it appears that the
government is currently opting in favour of expansion, reflation and
job creation. The inflationary consequences are rapidly sliding into
second place. Have the monetarists again been forced to become
neo-Keynesians? The financial crisis has thrown up questions about
future monetary policy. Despite the recent enthusiasm for free market
philosophies and approaches, the realities of changing priorities in
politics appears to thwart much movement in that direction at the
moment. Those 'sacred White cows' I have discussed in my paper (and
others I have not even mentioned) are clearly on their way to the
slaughterhouse. Perhaps other sacred cows are being nurtured in the
stable.
2.
3.
4.
5.
6.
I wish to thank the Standard Bank librarian and her staff for their help
and my husband, Keith Munro, for his comments. All opinions and
errors remain my own.
H. B. Falkena, L. J. Fourie and W. J. Kok, The Mechanics of the South
African Financial System, Financial Institutions Instruments, Markets.
London, Macmillan, 1984. p. 64.
The third Report of the Commission of Enquiry into Fiscal and
Monetary Policy in South Africa: RP 87/1970, November 1970, p.
185.
D. J. Wilson, 'A Survey of the Banking Sector: An Examination ofthe
Sector as a Whole and the Groups Within It With Respect and
Background and Strategies up to 1982', unpublished MBA Research
Paper. The Graduate School of Business, University of Cape Town, p.
14.
Ibid., p. 31-4.
Gerhard de Kock, 'New Developments in Monetary Policy in South
Africa', South African Journal of Economics, December 1981 vol. 49,
no4, p. 324.
132
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
In recent years very considerable progress has been made in the field
of business history, which, as Alfred Chandler points out, has moved
from the writing of historically specific descriptive history to comparative institutional history that can generate non-historically specific
generalisations and concepts. I Not surprisingly, Amercian scholars
have led the way. Harvard appointed the first professor of business
history over half a century before England took up the challenge. Yet
though the origins of modern business history go back to the early
years of the century, it was in the second half of the century that
seminal developments occurred on both sides of the Atlantic with the
publication of Gras's monumental work on Standard Oil and Charles
Wilson's work on Unilever, works that were to be the forerunners of a
stream of major publications on the modern business corporation.
Significantly most of these works were the product of historians rather
than economists. This occurred because of developments within the
field of economics, where the school of institutionists was out of favour
and Keynesian macroeconomics in favour, supported by a growing
interest in econometrics. The former were not interested in micro case
studies of historical firms: the latter denied the importance of
individuals, whose thoughts and actions simply disappeared from the
scene. As a consequence, economists had little to offer and contributed little to the emergence of modern business history. The whims of
eccentric entrepreneurs could not be put into neat mathematical
equations. So business history borrowed from sociology in the 1950s
and 1960s2 but placed it firmly within the framework of institutional
history. From then on progress was rapid, and in the 1970s business
history experienced both a qualitative and quantitative leap forward,
culminating in the publication in 1977 of Alfred Chandler's The Visible
Hand: The Managerial Revolution in American Business. 3
This is a monumental work of synthesis built around the concept of
administration coordination. Its generalisations have relevance to a
number of different disciplines; to the growing field of transaction cost
133
134
Stuart Jones
135
would have felt more at home with a late medieval firm that he would
in one of the giant corporations that burst on to the scene in the 1880s,
and which in little more than a decade transformed business practice
permanently. The great break with the past, therefore, occurred not at
the time of the First Industrial Revolution but at the time of the Second
Industrial Revolution! Out goes a fundamental belief of the Marxists,
and economically oriented historians such as Hartwell, and historically
oriented economists such as Rostow. This modern business enterprise
that emerged in the 1880s possessed two main characteristics. It
contained many distinct operating units and it was managed by a
hierarchy of salaried executives.
Rational economic forces determined the timing and place of the
modern multiunit business enterprise. It appeared for the first time
when the volume of economic activities reached a level that made
administrative coordination more efficient and more profitable than
market coordination. 8 Administrative coordination permitted greater
productivity, lower costs and higher profits than coordination by the
market mechanism. In effect hitherto separate and independent
services, such as wholesaling and the provision of an adequate supply
of the necessary raw materials to keep the production unit going, were
internalised within a single enterprise; but the advantages to be
obtained from this development could not be realised until a
managerial hierarchy had been created. However, once a managerial
hierarchy had been formed and had successfully carried out its
function of administrative coordination, the hierarchy itself became a
source of permanent power and continued growth. As this multiunit
business enterprise grew and its managers became more professional,
management of the enterprise became separated from ownership and
the era of managerial capitalism had arrived. There were, of course,
exceptions that proved the rule, Fords in America, Oppenheimers in
South Africa, but in general salaried professional managers were not
the owners of the new large enterprises that developed in the 1880s.
Moreover, these salaried managers preferred policies that favoured
long-term stability and growth rather than those that maximised
current profits. Managerial capitalism quickly came to dominate those
sectors of the economy where continuous process machinery led to an
enormous increase in output and to the need for mass marketing. One
hundred years later the enterprises that emerged in these sectors in the
1880s were still dominant and their names had become household
words. By the second half of the twentieth century managerial
capitalism had become the norm throughout the developed world,
136
though in the West, where it was subjected to the ultimate test of the
market, it was far more efficient than in the East, where managerial
capitalism was subject only to the control of a centralised political party.
COMPANY COMPARISONS
The new centralised multiunit enterprises that developed in the United
States in the 1880s grew out of experience acquired in managing the
railroads. This centralised functionally departmentalised structure
dominated big business for about three-quarters of a century. Then the
increasing complexity of modern business led to decreasing efficiency
and reduced profitability, creating the need for new structures to
coordinate the expanding volume of goods involved. The type of
structure developed in the 1880s, called the U form, was pioneered first
by industries processing liquids and then by those dealing with tobacco
and grain. 9 Metal working and metal processing came later because in
these cases high volume production required further technological
breakthroughs. In these newer industries, using more complex
technology, the mass producer, not the mass marketer, took over the
role of coordinating the flow of goods through the economy. Their
coming, like that of the mass marketers who preceded them, depended
upon the completion of the railway and telegraph network; but unlike
the mass marketers (department stores, mail order firms, chain stores
such as A & P and variety stores such as F. W. Woolworth) who
remained essentially entrepreneurial capitalists in which ownership was
not separated from control, the new mass producers were the pioneers
of managerial capitalism. They adopted the continuous process
machinery and built the factories in which material flowed continuously
from one stage to another, with enormous increases in productivity.
The Bonsack cigarette-making machine revolutionised the making of
cigarettes and the two firms that first adopted it, Duke in the USA and
Wills in England, very quickly dominated the industry in their
respective countries. Procter & Gamble's crusher for soap-making led
to their having the same impact on the soap industry, and Eastman's
photographic negatives led to his dominance of the photographic
industry. Carnegie's pre-eminence in the steel industry was the result of
his commitment to technological change and of his imaginative transfer
to manufacturing of administrative methods and controls developed on
the railways. In the process cost, capital and financial accounting were
perfected.
Stuart Jones
137
138
Stuart Jones
139
140
Stuart Jones
141
142
firms, but it was the internalisation of the functions of the former that
was one of the major characteristics of the multiunit, very large firm
that emerged in the 1880s. Nevertheless, we can obtain some idea of
relative similarities and the major contrasts by looking at the pattern of
the largest enterprises in South Africa, Britain, Germany and
America.
The outstanding feature of the 200 largest firms in the United
States in 1973 is how little change there has been since 1917. The very
large firms have clustered in food, chemicals, petroleum, metals and
machinery (Table 8.1). Within these categories some small changes
have occurred as a result of mergers and take-overs among the very
large firms. In this way, for instance, the number of firms in primary
metal working and fabricated metal working has been reduced, but
Table 8.1
Food
Tobacco
Textiles
Apparel
Lumber
Furniture
Paper
Printing and publishing
Chemical
Petroleum
Rubber
Leather
Stone, clay and glass
Primary metal
Fabricated metal
Machinery
Electrical machinery
Transportation equipment
Measuring instruments
Miscellaneous
Diversified/conglomerate
Total
1917
1930
1948
1973
30
6
5
3
3
0
5
2
20
22
5
4
5
29
8
20
5
26
1
1
0
32
5
26
5
22
3
0
4
1
7
3
18
26
5
2
18
24
22
5
21
2
1
0
0
1
1
6
2
24
24
5
2
5
24
7
24
8
26
3
1
0
0
4
0
9
1
29
22
5
0
7
19
5
18
13
20
4
1
15
200
200
200
200
10
Stuart Jones
143
against that can be set the increase in the number of firms making
electrical machinery. The only persistent decline has been among
industries processing the products of American fields, in food and
tobacco production, as a result of mergers; and in leather and textiles,
as a result of not growing as swiftly as the newer more technologically
oriented industries.
Table 8.2 Distribution by industry of the 200 largest manufacturing firms:
United Kingdom (firms ranked by sales for 1973 and by market value of
quoted capital for other years
Standard industrial classification
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
Food
Tobacco
Textiles
Apparel
Lumber
Furniture
Paper
Printing and publishing
Chemical
Petroleum
Rubber
Leather
Stone, clay and glass
Primary metal
Fabricated metal
Machinery
Electrical machinery
Transportation equipment
Measuring instruments
Miscellaneous
Diversified/conglomerate
Total
1919
1930
63
3
26
1
o
o
1948
1973
64
4
52
33
18
3
o
o
24
3
4
5
11
3
3
5
10
9
2
35
3
3
6
7
15
3
2
7
18
14
1
4
5
28
8
7
13
22
4
3
200
200
200
8
11
20
o
o
18
4
10
o
7
7
21
8
6
16
14
7
26
14
16
3
1
2
200
144
food processing almost halved and in textiles they more than halved.
In primary metal processing a similar reduction occurred, though most
of this took place in the depressed 1920s. The modernisation of the
British economy revealed itself in the doubling of the number of firms
in the chemical and petroleum industries, and in the trebling of the
number of very large firms fabricating metal and making machinery.
Compared with the United States and Germany, Britain was dragging
her feet in the electrical industry and was possibly overcommitted to
transportation equipment. The relative decline in the dominance of
food processing firms in Britain has been a feature of the second half of
the century.
Germany has traditionally been strong in producer goods and this is
at once apparent in Table 8.3. Primary metal working, machinery,
electrical machinery and fabricating metal accounted for half the very
large firms in 1913. Sixty years later the number in the last three
categories had increased, reflecting the post Second World War
economic expansion in Germany, with its great strength in mechanical
and electrical engineering. Consumer goods of the perishable variety
held their own, but in textiles there was a sharp drop in the second half
of the century. Neither Germany nor the United States show
comparable strength to Britain in printing and publishing before 1953,
but since then this particular industry has made great strides in
Germany, where six of the largest 200 firms now fall into that
category. No printing and publishing firm has ever reached the top
200 in the United States, but in Britian they have occupied an
important place since the first appearance of the popular penny daily
newspapers in the early years of the century.
South Africa's industrial base is much younger than those of Britain,
Germany and the United States and, as yet, much narrower. This no
doubt reflects the small size of the market and the prevalence of an
open economy until the 1960s. South Africa is unusual, too, in the
degree of foreign ownership of large portions of secondary and tertiary
sectors of the economy. In particular, South Africa has been unique in
permitting foreign ownership of financial institutions. This is now
ending, as the banks and insurance companies pass into South African
ownership. Along with this development an increasing proportion of
the secondary sector is now subject to local control. However, while
the old order persisted, the drive to industrialisation was retarded, as
so many of the vested economic interests stood to gain more from the
continuance of the open economy. Only in the 1930s, and then for
nationalistic reasons, did the country seriously embark upon a policy
Stuart Jones
145
Food
Tobacco
Textiles
Apparel
Lumber
Furniture
Paper
Printing and publishing
Chemical
Petroleum
Rubber
Leather
Stone, clay and glass
Primary metal
Fabricated metal
Machinery
Electrical machinery
Transportation equipment
Measuring instruments
Miscellaneous
Diversified/conglomerate
Total
1913
1928
1953
1973
23
1
13
0
1
0
1
0
26
5
1
2
10
49
8
21
18
19
1
1
0
28
0
15
0
1
0
2
1
27
5
1
3
9
47
7
19
16
16
2
1
0
23
0
19
0
2
0
3
0
32
3
3
2
9
45
8
19
13
14
4
1
0
24
6
4
0
0
0
2
6
30
8
3
1
15
19
14
29
21
14
2
1
1
200
200
200
200
146
147
Stuart Jones
exchange control in a small economy. Capital has been locked into the
economy and this has tended to give a certain incestuous colour to
developments. Mergers, take-overs and amalgamations have been
common and this has made it difficult to classify a large number of
enterprises. For example, some that are involved in electrical
engineering or general engineering are also engaged in large-scale
wholesaling and in the property market. Such enterprises have been
put into the diversified/conglomerate category in Table 8.4, even
though by international standards their size is often very small. Also
because the South African Top 100 includes stores and building and
construction firms I have added these, together with sundry transport
undertakings, varying from car and lorry distribution and sale to Cape
Table 8.4 Distribution by activity of the 100 largest industrial firms in South
Africa (firms ranked by assets)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
Food
Tobacco and matches
Textiles
Apparel
Lumber
Furniture
Paper and packaging
Printing and publishing
Chemical
Petroleum
Rubber
Leather
Stone, clay, glass and cement
Primary metal
Fabricated metal
Machinery
Electrical machinery
Transport equipment
Measuring instruments
Miscellaneous
Diversified/conglomerate
Stores
Building and construction
Transport services
1964
1974
1984
22
3
4
1
2
1
4
15
3
2
12
1
3
1
2
5
1
8
3
5
1
7
2
2
3
1
1
8
2
1
4
6
6
4
7
1
2
4
3
5
3
7
9
5
4
2
19
10
4
4
1
15
12
11
3
4
2
7
Source: Financial Mail 29 October 1965, 6 June 1975 and 24 May 1985; and
Stock Exchange Handbooks 1967-1984.
148
Stuart Jones
149
150
Stuart Jones
151
152
Yet within these very obvious and very serious limitations, the
progress of industrial concentration is following a similar path to that
of the large corporations in America, Britain and Germany. In 1984,
the Top Ten companies were all multidivisional enterprises organised
on the M plan and eight of them either were not in existence in 1964 or
were not then in the Top Ten. To an extent, therefore, the two decades
after 1964 in South Africa seem to resemble the two decades after 1880
in the United States. Clearly South Africa does not have a balance
between producer goods and consumer goods comparable to that of
the United States and Germany and in some ways is more similar to
Britain with its strength in consumer goods and distribution. America
historically impeded the movement of capital by its peculiar banking
laws, but the emergence of three or four large banks has been a feature
of Britain, Germany and South Africa; and in all four countries large
insurance companies have emerged, though it is only in South Africa
that these have become major shareholders in banks and owners of
huge industrial enterprises. The industries in which the very large
firms clustered in America at the turn of the century are the same ones
in which the big South African firms clustered in 1984. Between 1964
and 1984 the number of food firms in the Top Ten was reduced by one
and department stores were eliminated, while the number of firms
working with metal rose from two to three of which two, Barlows and
C. G. Smith, were new entrants since 1964, and one, Stewarts and
Lloyds, dropped out; and two of the Top Ten are now in chemicals and
oils, Sasol and AECI, neither of which existed in 1964. Food
processing, tobacco, engineering and chemicals were the same
industries that experienced transformation in the United States in the
decades after 1880. There is, therefore, every reason to think that
general economic laws are at work here and that, notwithstanding all
the political ideology masquerading as scholarship, the South African
experience is not so very different from that of other market
economies in the late twentieth century.
2.
3.
Stuart Jones
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
153
9 Multinational
Corporations in SADCC
(Southern African
Development
Coordination Conference)
Jacqueline Matthews
155
156
Jacqueline Matthews
157
The terms 'multinationals' and 'transnationals' are used widely and will
be used here synonymously. Current literature favours the former
whilst the United Nations Centre for Transnational Corporations
prefers the latter. Some authors argue that there is an important
difference between the two: that while transnationals have their parent
company in a specific home country, multinationals have no such base,
but operate equally in many countries. This is indeed a rare occurrence.
Characteristics of MTN
MTN will be defined here in a broad sense to include any enterprise with
production locations in more than one country. Production includes
goods and services. In the current literature, more stringent definitions
are sometimes used, for instance regarding the size of the company, its
ownership pattern and so on.
The foreign subsidiary is owned (either wholly or in a large part) by
the parent company which has its headquarters in the home country.
Moreover, the operations are ultimately controlled by the parent
company and the aim of the subsidiary is subordinate to that of the
enterprise as a whole. A MTN must not be confused with international
portfolio investment, where individuals or financial institutions simply
buy shares in foreign companies.
There are great variations in the characteristics of MTNs, their
development, modes of operations, amplitude and activities. Ownership arrangements also vary and the parent company may share the
158
159
Jacqueline Matthews
Table 9.1
Rank
Economic entity
1
2
3
4
5
6
7
8
9
10
United States
USSR
Japan
West Germany
France
United Kingdom
Italy
China
Brazil
Canada
Spain
Netherlands
India
Australia
Poland
Mexico
East Germany
Sweden
Exxon
Belgium
Switzerland
Czechoslovakia
Royal Dutch/Shell
Nigeria
Argentina
South Africa
Austria
Indonesia
Mobil Oil
Turkey
Denmark
Venezuela
General Motors
South Korea
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
Product
($ billion)
2639.1
1208.0
1053.9
758.5
601.5
476.9
359.2
267.8
255.1
243.8
195.7
155.7
153.3
147.1
139.6
137.6
121.3
114.3
110.4
109.6
101.4
89.0
77.3
73.5
71.8
71.6
70.6
66.3
63.7
61.6
61.5
58.4
57.7
56.9
Product
Rank Economic entity ($ billion)
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
Yugoslavia
Norway
Texaco
Rumania
British Petroleum
Finland
Standard Oil of
California
Greece
Bulgaria
ENI
Ford Motor
Colombia
Thailand
Gulf Oil
Standard
Oil
(Indiana)
IBM
General Electric
Pakistan
Atlantic
Richfield
Fiat
Unilever (GBR)
Compagnie
Fram;aise des
Petroles
ITT
VEBA
Portugal
Hungary
Petroles
de
Venezuela
All other developing
countries: less
than
56.6
52.2
51.2
50.9
48.1
46.3
40.5
39.9
37.3
37.2
37.1
32.5
31.6
28.4
27.8
26.2
25.5
25.5
24.5
24.2
24.1
23.9
23.8
23.1
22.4
20.6
19.7
19.7
Source: Gross national product figures from the World Bank Atlas
(Washington, DC: World Bank, 1983). Corporate sales figures from United
Nations, Department of Economic and Social Affairs, Transnational
Corporations in World Development; Third Survey (New York): United
Nations, 1983) Annex table 11.31; and World Development Report 1980.
160
Jacqueline Matthews
161
162
Jacqueline Matthews
163
19.8
72.2
74.4
39.7
73.3
80.5
58.0
68.2
63.0
19.5
8.7
6.2
5.2
34.9
7.3
11.4
8.2
9.0
7.4
17.1
Australia
Austria
Belgium
Canada
Denmark
Finland
France
Germany, Fed.
Rep. of
Italy
Japan
Home country
Europe
5.2
3.5
5.2
1.2
3.3
27.9
2.8
2.2
8.1
4.9
Other
a
82.4
73.9
41.8
93.1
69.5
56.5
81.2
81.8
82.7
85.5
9.2
15.0
13.4
3.2
7.7
1.7
9.8
6.1
12.6
4.9
Latin
America
Host region
Subtotal
1.3
3.0
6.7
2.2
1.6
18.7
3.5
0.7
1.2
9.7
Africa
0.8
1.1
0.8
1.2
1.1
0.7
3.5
0.6
0.4
1.0
West
Asia
4.4
2.6
41.7
0.8
2.9
40.5
3.5
1.5
2.8
4.9
0.2
0.7
0.1
0.8
0.2
0.2
0.2
South and
East Asia Europe
Developing countries
17.6
26.1
58.2
6.9
30.5
43.5
18.8
18.2
17.3
14.5
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Subtotal Total
Distribution among regions of foreign affiliates of companies from selected home countries (percentage)
North
America
Table 9.2
.s:..
a-,
1.0
4.5
5.6
26.5
9.7
9.1
24.9
10.9
6.2
62.1
73.1
72.7
35.2
42.6
56.9
16.3
29.1
8.7
2.4
9.4
8.1
14.1
12.9
Spain
Sweden
Switzerland
United Kingdom
United States
Average (Developed
Market Economies) 9.2
Hong Kong
Malaysia
Singapore
44.8
40.0
16.8
76.1
75.8
65.3
65.5
87.0
86.5
90.8
82.2
76.7
86.2
57.2
4.3
2.3
1.2
9.6
27.7
7.1
6.9
4.7
21.4
7.9
6.7
0.9
3.6
21.4
19.5
2.3
0.5
4.9
7.7
2.3
4.8
1.3
1.7
0.7
5.0
0.4
3.0
21.4
0.3
0.9
0.5
0.8
0.9
0.9
0.2
1.9
1.1
31.0
55.4
81.5
8.4
2.1
4.0
4.0
10.4
10.0
0.7
5.3
21.5
5.3
23.9
55.2
60.0
83.2
0.1
24.2
34.7
34.5
13.0
13.5
9.2
17.8
23.3
13.8
42.8
0.2
0.1
0.1
0.5
0.1
0.3
0.2
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Source: Transnational Corporations in World Development; Third Survey (New York: United Nations, 1980), table 11.8.
aAustralia, Japan and New Zealand.
1.9
3.6
0.6
5.0
61.7
2.8
88.8
70.9
10.8
74.6
57.2
1.4
6.3
4.2
8.8
Luxembourg
Netherlands
New Zealand
Norway
Portugal
0\
......
U1
0.3
0.1
3.5
0.8
0.6
0.1
IB.l
4.6
2.2
1.4
5.9
3.1
5.9
2.0
3.5
Finland
France
Germany, F.R.
Italy
Japan
Africa
0.3
0.2
0.9
3.2
0.4
Latin
America
0.4
6.2
7.0
2.1
3.0
0.7
1.1
1.3
1.4
1.1
West
Asia
1.3
3.2
0.4
12.6
7.2
0.1
0.3
0.8
0.4
South and
East Asia
3.2
8.2
5.0
0.4
0.9
1.4
2.7
0.9
Europe
Total
0.1
5.2
4.7
1.5
6.4
2.8
0.2
1.2
1.9
0.5
0.3
4.6
8.6
1.6
1.8
1.4
0.3
2.0
3.5
1.1
0.2
4.8
7.5
1.6
3.1
1.8
0.3
1.8
3.1
0.9
Developed
market Grand
economies total
Distribution of affiliates of transnational corporations by home country within regions, 1980 (percentage)
Australia
Austria
Belgium
Canada
Denmark
Home country
Table 9.3
g;
......
100.0
Total
100.0
100.0
2.0
3.7
26.3
36.6
0.5
5.5
0.1
1.1
100.0
l.3
1.6
25.6
33.5
8.0
2.3
1.0
0.3
100.0
1.4
1.4
56.4
10.9
0.4
6.4
0.4
100.0
1.6
2.0
21.9
42.4
4.0
2.8
0.4
0.2
*
0.3
100.0
3.4
4.2
25.4
34.3
1.9
3.4
5.0
26.8
31.2
1.0
100.0
0.2
4.5
0.5
0.5
5.1
0.5
0.6
*
0.2
Source: Transnational Corporations in World Development; Third Survey (New York: United Nations, 1980), table II 9.
*Less than 0.1.
aHong Kong, Luxembourg, Malaysia and Singapore.
2.1
2.4
10.1
62.2
0.6
0.9
1.5
40.2
15.9
4.7
0.3
0.1
0.2
0.1
0.5
4.6
2.3
Sweden
Switzerland
United Kingdom
United States
Other countries a
Netherlands
New Zealand
Norway
Portugal
Spain
-.]
0\
97.4
100%
96.9
100%
99.7
100%
Total
94.0
100%
100%
98.3
1.7
0.6
0.6
0.7
0.7
6.0
0.3
0.2
0.7
3.9
GER'
DEN*
100%
99.7
0.3
0.1
0.2
FRA*
100%
99.0
1.0
0.1
0.7
0.2
ITA'
100%
99.9
0.1
0.1
JAP'
100%
95.8
4.2
1.1
0.2
0.1
0.3
0.8
0.2
0.6
0.3
0.6
NET'
100%
95.5
4.5
3.0
1.5
NOR'
100%
98.5
1.5
1.1
0.2
0.2
SWE*
100%
99.8
0.2
0.1
0.1
SW/*
'AUS
BEL
CAN
DEN
Australia
Belgium
Canada
Denmark
GER
FRA
ITA
JAP
Western Germany
France
Italy
Japan
NET
NOR
SWE
SWI
Netherlands
Norway
Sweden
Switzerland
Source: Extracted from Transnational Corporations (New York: United Nations, 1980) Annex table 11.17. pp. 318-9.
2.6
0.1
2.1
3.1
0.3
0.1
0.3
CAN*
0.3
0.2
0.1
0.3
0.3
2.2
BEL*
Total
SADCC
Affiliates
in other
LDCs
Angola
Botswana
Lesotho
Malawi
Mozambique
Swaziland
Tanzania
Zambia
Zimbabwe
A US'
UK
US
100%
86.0
14.0
1.4
0.3
0.7
1.5
3.1
6.2
0.4
0.4
UK'
100%
96.1
3.9
0.4
0.1
0.2
0.4
0.9
1.6
0.2
0.1
All
countries
Britain
United States
100%
99.5
0.5
0.3
0.2
USA'
Table 9.4 Distribution of foreign affiliates of MTNs from selected home countries in host SADCC countries, among all
developing countries, 1980
......
0\
00
60.7
74.3
100%
100%
88.9
11.1
3.6
4.0
3.2
3.2
25.7
2.2
1.3
GER
16.1
3.2
DEN
100%
99.2
0.8
0.3
0.1
0.2
0.1
0.1
FRA
100%
94.4
5.6
1.9
2.8
0.9
ITA
100%
94.0
6.0
1.5
4.5
lAP
100%
83.7
16.3
2.2
1.3
3.1
0.9
2.2
1.3
4.0
0.9
0.4
NET
100%
NOR
100%
84.5
15.5
2.2
11.1
2.2
SWE
100%
97.2
2.8
1.4
1.4
SWI
100%
55.1
44.9
0.1
4.6
1.0
2.4
4.7
9.9
19.3
1.5
1.4
UK
1.3
76.0
100%
85.9
100%
24.0
1.3
0.8
0.1
2.4
0.7
1.1
2.7
5.6
9.3
All
countries
14.1
5.2
4.0
1.1
0.3
0.5
0.7
0.7
0.3
USA
Source: Extracted from Transnational Corporations (New York: United Nations, 1980) Annex table 11.18. pp. 323-6.
*% omitted because companies from home country concerned have a total of less than 25 foreign affiliates in African developing countries.
100%
94.4
100%
Total
2.6
28.9
0.5
39.3
2.6
5.2
CAN
0.5
0.5
4.1
BEL
5.6
100%
AUS'
Distribution of foreign affiliates of MTNs from selected home countries in host SADCC countries, within African
developing countries, 1980
Total
SADCC
Other
African
LDCs
Angola
Botswana
Lesotho
Malawi
Mozambique
Swaziland
Tanzania
Zambia
Zimbabwe
Table 9.5
\0
,.....
0\
5.2
0.7
1.2
41.9
0.1
0.1
5.1
Netherlands
New Zealand
Norway
Portugal
South Africa
1.9
0.9
0.9
8.6
0.4
0.4
3.3
0.4
5.2
14.1
2.4
0.9
0.4
0.4
0.8
0.9
2.4
0.0
1.1
0.4
5.2
0.9
Ireland
Italy
Japan
Liechtsten
Luxembourg
Finland
France
Germany, F.R.
Greece
Iceland
Australia
Austria
Belgium
Canada
Denmark
11.4
0.2
0.7
1.9
0.9
0.4
5.2
2.1
2.1
2.2
8.0
0.1
0.9
0.8
3.0
1.3
5.0
0.3
7.2
0.6
1.5
3.7
0.8
0.8
0.1
1.6
1.1
1.7
0.4
6.9
11.7
0.4
2.6
2.1
3.9
4.8
0.5
6.0
1.5
1.1
0.4
14.9
1.5
11.4
6.4
2.8
2.0
0.6
2.9
0.3
3.9
0.3
0.3
6.7
4.4
6.0
12.4
0.2
2.6
1.9
3.7
1.7
1.7
1.3
1.0
0.2
0.2
2.5
3.0
0.6
6.2
0.4
1.2
0.2
26.5
14.6
1.2
1.1
1.6
1.1
1.6
0.7
1.2
1.2
4.7
1.6
1.1
0.6
9.0
14.7
1.0
0.2
2.2
1.5
13.6
3.7
0.8
FRA
3.0
0.1
0.5
0.9
1.1
0.6
0.4
8.0
4.6
1.5
0.2
0.5
1.8
0.4
2.6
0.1
3.3
13.8
0.3
0.1
20.8
13.1
1.5
0.5
10.9
0.4
5.6
6.9
0.3
0.2
1.4
1.8
0.2
1.1
0.2
0.2
0.2
0.2
1.4
77.8
0.7
0.5
1.1
0.6
1.1
1.1
2.3
0.2
10.8
19.9
0.5
2.2
1.5
22.3
1.3
1.3
0.7
0.9
1.7
0.2
1.7
0.7
1.2
0.7
1.7
3.9
8.6
0.4
0.2
1.2
1.7
2.9
2.2
15.8
8.1
1.4
4.4
3.7
0.7
6.6
20.0
13.3
8.1
0.7
3.7
6.0
0.2
9.6
0.9
0.8
0.5
0.5
2.8
1.3
6.6
8.4
11.5
0.2
2.7
2.6
4.0
2.8
10.4
4.5
0.5
0.7
0.8
1.6
8.2
3.8
0.5
0.6
14.7
6.6
1.9
0.6
0.2
0.4
0.2
7.6
6.8
0.3
0.4
12.0
24.1
0.4
0.4
6.8
1.7
0.5
2.8
15.6
0
3.8
8.1
1.2
2.4
5.3
9.1
2.3
1.5
1.2
0.9
0.5
2.5
5.0
1.2
4.2
4.3
0.2
0.5
0.4
7.7
8.5
0.4
4.3
19.7
1.0
1.1
6.7
0.7
5.5
1.2
1.1
5.8
2.2
2.4
3.6
2.1
0.2
0.6
8.5
9.1
0.5
8.1
2.2
5.7
9.4
1.6
All
JPN NLD NZL NOR ESP SWE CHE GBR USA countries
2.8
2.4
5.3
2.3
1.1
ITA
Home country"
Distribution of foreign affiliates of MTNs from selected home countries in host developed market economies, 1980
Host country
Table 9.6
--.J
0
.......
1428
2474
756
6087
229
3326 1136
7.6
1265
33.9
3591
6.2
Source: Transnational Corporation (New York: United Nations, 1980) Annex table 11.18.
aThe following codes are used to identify home countries:
AUT Austria
BEL
AUS
Australia
FIN
DNK
Denmark
DEU Germany, Fed. Rep.
ITA
Italy
JPN
Japan
NLD
PRT
Portugal
ESP
NOR
Norway
USA
CHE
Switzerland
GBR United Kingdom
208
8.0
2.2
3.1
3.9
14.1
404
7.9
1.4
23.7
2.9
16.5
Belgium
Finland
Netherlands
Spain
United States
348
4.0
12.0
0.2
135
2.9
3.7
22.2
2932
7.9
4.5
12.6
1.9
10.5
1.8
1.8
3.0
2.8
2.0
4.0
19.9
100.0
7.6
3.1
2.2
4.2
11.7
CAN
FRA
NZL
SWE
Canada
France
New Zealand
Sweden
7.0
9.1
3.3
1.6
1104
8.2
1.6
0.6
1.8
7.6
100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
8.0
7.5
1.3
10.4
7.4
No. of cases
6.7
9.9
1.3
7.7
14.2
Total
42.1
0.8
27.5
3.4
14.8
5.3
6.0
2.8
10.3
8.3
7.2
1.8
15.4
5.2
16.2
10.2
1.2
0.8
1.4
27.8
7.8
1.1
4.4
5.9
1.4
3.8
14.9
5.2
0.6
0.3
0.8
25.7
Spain
Sweden
Switzerland
United
Kingdom
United States
....-...l
....
'100%
46.6
15.0
3.3
15.0
100%
2.5
76.9
7.6
100%
78.0
5.2
0.8
2.6
0.8
4.3
1.6
5.0
100%
2.7
56.7
16.2
2.7
18.9
2.7
Host countries
Malawi
Moz.
0.8
5.1
2.5
Botsw.
11.6
Angola
100%
100%
100%
73.0
15.2
1.9
0.7
1.1
0.3
1.1
0.3
0.2
0.7
0.3
0.3
0.3
3.4
100%
1.1
0.2
86.8
7.1
1.1
0.4
0.2
2.5
Zimbabwe
Zambia
0.6
73.6
8.0
0.8
2.4
1.6
2.4
4.0
0.8
6.4
Tanz.
1.8
1.8
87.0
5.5
3.7
Swaz.
Source: Extracted from Transnational Corporations (New York: United Nations, 1980) Annex table II.19.
'Because of the rounding-off procedure, the figures given do not always add up to 100%.
Total
Portugal
Sweden
Switzerland
Britain
USA
France
Italy
Japan
Netherlands
Norway
Australia
Belgium
Canada
Denmark
w. Germany
Home countries
Table 9.7 Distribution of foreign affiliates of MTNs from selected home countries in SADCC host countries (except
Lesotho), 1980
......
-.I
N
Jacqueline Matthews
173
Each SADCC country has its own investment rules. For instance,
Angola enacted a law to encourage foreign investment in 1979, and
foreign investments are guaranteed against nationalisation for ten to
fifteen years; there may be tax holidays and exemptions from import
duties. In Botswana, investments of over Pula 10 000 are eligible for
grants under a scheme which began in 1982; where new projects do
not harm local firms in the manufacturing sector, there is a five-year
tax holiday and grants for up to five years for employing unskilled
labour and for training. Licences are required in Swaziland and joint
ventures with local firms are preferred to purely foreign firms. These
few examples illustrate the variety of arrangements which exist in
SADCC with regard to MTNs.
Zimbabwe is examined in more detail in the report because it has the
largest foreign investments in the region (not unexpected since it is
also the most developed of all SADCC countries) and because 'it is in
many ways typical in its ambivalent attitude to further foreign
capital'. 8 There are more than 300 foreign firms in the country, and
half of the total capital stock in Zimbabwe is foreign owned: half by
South Africa and about a third by Britain. This casts some doubts on
the data in Table 9.7, but may be explained by the point made by D. G.
Clarke, quoted earlier. In 1981, the Zimbabwe government recognised the vital role foreign investment can play in development and, in
1982, a national development plan was published, assuming that
almost half of all capital flowing into the country would come from the
private sector. However, there remained uneasiness about the
'exploitative nature' of private capital. Since independence, there
have been twenty-three new agreements with foreign firms from a
dozen countries; there has been particular interest in food processing
and assembly of electric motors, bicycles and typewriters.
CONCLUSION
It appears, from the available evidence, that SADCC countries have a
positive attitude towards foreign MTNs and it can be safely assumed
that foreign investment will generally contribute towards development. This does not mean, however, that it will improve income
distribution, which depends on government policies. Thus there can
be no claim that MTN will assist in increasing the welfare of the
people. But the rejection of foreign investment and MTNS, is even less
likely to improve people's welfare. As it appears that SADCC's
174
2.
3.
4.
5.
6.
7.
8.
10 TheStandardBankand
Its Records as an
Economic Source
Barbara Conradie
176
Barbara Conradie
177
Most of the towns in the last century were dependent on the farming
community and details of their successes and failures, as well as the
growth of the town from which the branch operated, are described.
The reason for this was, of course, to determine the viability of
maintaining a branch in the district concerned. The descriptions of
general economic conditions in an area also helped to explain
exceptional results attained by the branch concerned - both good and
bad.
Obviously the quality of these reports as general information
sources differs from Inspector to Inspector, but overall these reports
give an invaluable description of the development of a town and its
environment on an almost annual basis. In the Standard Bank's
archives in Johannesburg there is a reasonably complete set of these
reports up to 1940, which can be regarded as a major source of
information on regional growth. The earliest reports are dated 1867,
but reports were only compiled once the Bank was actually established
in a centre. As the Bank was reasonably alert to any economic activity,
it is safe to say that prior to the Bank's arrival in a centre, little
economic development had taken place.
Confidentiality between the Bank and its clients precludes the Bank
from keeping records relating to individual account holders. Records
of individuals and companies having opened accounts are kept, but no
details as to the actual financial position of each. Up to 1910 the
Inspectors' reports on branches did include lists of clients who had
some kind of loan or other liability, with a brief description of the
manager's opinion of the person/company and their ability to repay
the amount. These liability lists are valuable in determining the broad
details regarding the individual account holders although exact figures
are not given. After 1910 the volume of business conducted at the
various branches made listing liabilities too time consuming and
laborious.
With the broadening of the South African economy, the spectrum of
subjects discussed in the General Manager's weekly letters to London
expanded. To make it more convenient for the Board of Directors in
England to explain trends and growth patterns in the South African
context to the shareholders, the General Manager, in 1872, began
compiling half-yearly overviews of happenings in South Africa. I These
reports summarise the events and developments of the Bank itself and
the economy in which it operated for the previous six months. Taken
together they also provide an excellent general description of the
economic history of the country - so much so that the Bank has
178
Barbara Conradie
179
Note
1. An edited version of these reports was published on the end of 1987. See
Alan Mabin and Barbara Conradie, (eds) The Confidence of the Whole
Country, Johannesburg, Standard Bank. 1986.
Index
AECI (African Explosives and
Chemical Industries), 152
A & P (Great Atlantic and Pacific
Tea Company), 136
accounting, cost, capital and
financial, 136
African, Caribbean and Pacific
countries, 156, 158
Afrikanerdom,16
agency houses, see investment trusts
agriculture
farm incomes, 14
drought, 106, 107
Marketing Act 1932, 14
productivity of, 7, 13, 14,23
Albany District, 48, 51, 56
Algoa Bay, 47,48
Aliwal North, 62
American Celanese, 39
American Tobacco, 139
Amsterdam, 28, 69, 70, 81, 85, 99
Anglo-African Shipping Co., 88
Anglo-American Corporation, 12,
22, 87, 114, 151
Anglo-American Industrial, 148
Anglo-Persian Oil Co., 39
Angola, 156, 168-9, 173
Apartheid, 18
Argentina, 159
Armaments Corporation, 146
Armour & Swift, 137, 139
Armscor,30
Asbestos, 95
Atlantic Richfield, 159
Australia, 159, 163, 164-5, 166-7,
170-1,172
Austria, 159, 164-5, 166-7, 170-1
automatic tellers, 128
bank
definition by 1965 Act, 115
definition of by Bob Hope, 27
bank rate (official discount rate),
106,107,108,111
bankers
Continental, 29
Jewish, 29, 30
private, 4
banking
amalgamation movement, 15
in Cape Colony, 5
changing functions, 115, 121-128
classic functions, 4
commercial, 113-131
marketing of, 127
networks, 4
origins, 114
statutes relating to banking: 1942
Bank Act, 122; 1965 Bank
Act, 115, 116, 117, 120, 122;
1968 Bank Act, Limitation
and Disclosure of Finance
Charges Act 1968LADOFCA, 118123; 1972
Amendment to Bank Act,
118; 1979 Bank ActAmendment to 1968 Act,
123; 1985 Bank Act, Financial
Institutions Amendment Act
1985, 120, 121
structure, 114
banks
central banks: Bank of England,
22,29; Netherlands Bank, 69;
South African Reserve Bank,
16,22,88,94-5,105-11,115,
116,117,118,119,120,
125-6, 128, 129
commercial banks, alphabetically:
Algemene Bank, 75, 76, 78;
Bankorp (see also Trust
Bank), 114, 124; Barclays, 16,
18,77,98,114,124,127,129;
British Kaffrarian Bank, 58;
Cape of good Hope, 5, 50;
Chase Manhattan, 130;
Commercial Bank of Zambia
Ltd, 74, 86; Continental
181
182
Index
Illinois, 74; Cradock Union
Bank, 58-9, 62-4; De
Haagsche Commissiebank,
72; in Eastern Cape in 1860,
58; Eastern Province, 5, 47;
Eastern Province Bank
Foundation, 50-1; Eastern
Province Bank, early
dependence upon
shareholders, 54; Eastern
Province Bank, early years,
1839-50,51-5; Eastern
Province Bank, assets, and
liabilities in the 1840s, 52;
Eastern Province Bank in the
1850s, 55-8; Eastern Province
Bank, assets and liabilities in
the 1850s, 57; Eastern
Province Bank in the 1860s,
59-65; Eastern Province
Alliance Bank, 62-3;
Frontier, Commercial and
Agricultural Bank, 55, 62,
64-5; GraaffReinet Bank,
56; Hongkong & Shanghai,
31,44; Imperial Banks, 10,
61-2,66; London and
Westminster Bank, 51;
Morgan Guaranty, 74, 76;
Natal Bank, 11; National
Bank of South African
Republic, 11; Nedbank, 22,
69-103, 124, 127-9; Nedbank,
acceptance business, 88-9,
93-4,98; Nedbank, advances,
87-8, 93, 98; Nedbank,
assets, 70-1, 83,114;
Nedbank, balance sheet,
71-3; Nedbank, becomes a
South African corporation,
71; Nedbank, branches, 83;
Nedbank, capital, 71-3, 75,
79,81-2; Nedbank, deposits,
84, 144; Nedbank, discounts,
88-9,92,94,98; Nedbank,
letters of credit, 88-9, 98;
Nedbank, liabilities, 83;
Nedbank, opening in
Pretoria, 69; Nedbank
International, 85;
Netherlands Bank of
Rhodesia, 74, 86;
Netherlands Bank in South
Africa, see Nedbank above;
Oriental Bank, 58, 65; Port
Elizabeth Bank, 55, 58, 62;
Port Elizabeth Commercial
Bank, 58; Security Pacific,
130; Societe Hollandaise de
Banque S.A., 72; South
African Central Bank, 58;
Standard, 8,10,61-4,77,98,
114,124,127-9,175-8;
Standard Bank, General
Manager's weekly letters and
half yearly and Annual
Reports to England, 176--8;
Standard Bank, separation
from London, 178; Standard
Bank, Inspectors' Reports
1866--1910, 176--7; Standard
Chartered, 22; Transvaalsche
Handelsbank, 69; Trust
Bank, 77,116,124; Volkskas,
18,22,70,77,114
Commercial banks, business;
acceptances, 93, 122;
advances, 93; assets, 92, 114,
122; branches, 114; capital,
51, 60-2, 81; credit controls,
94,117-18; deposits, 52, 55,
57-8, 114, 121-3; discounts,
53-5,58,60,63,65,92,122;
excess liquidity, 117;
liabilities, 92; note issues,
52-4,57,61-2
general banks; Credcor Bank,
124; Lease Plan
International, 124; Nedfin,
124; Nefic, 124; Neficrho, 86;
Western Bank, 124;
Santambank, 124; Stannic,
124; Syfrets, 124;
Hire purchase, 117, 122
merchant banks, 117, 121, 124,
126: Amsterdamsche
Goederen-bank NV, 72;
Bank Handlowy, 98;
Index
Bankierscompagnie NV, 74;
Barings, 28-9, 31, 34-5; Bank
en Assurantie Associate NV,
74; British, 28; German, 42;
Goldschmitts, 30; Hambros,
30--1,34-5; Heine, 30;
Mathesons, 31, 34; Mees en
Hope Groep NV, 74-6, 78;
Mees, R. en Zoonen, 74;
Mesdag en Groeneveld, 72;
Morgan Grenfell, 31, 35;
Nardoni Banka
Ceskolslovensla, 98;
Nederlandse Overzee Bank
NV, 72-4; Nedeurope, 75;
Netherlandsche Bank voor
Zuid-Afrika NV, 72;
Nederlandsche Handel
Maatschappij, 75; Nefic, 89;
Nefic Acceptances Ltd, 89;
Parish, 28; Rothchilds, 30, 34;
Schroders, 31, 44;
Slovenskatatra Bank, 98;
Statni Banka, 98; Steiglitz,
28,30; Theodoor Gilissen
NV, 72; Twentsche Bank, 75;
Union Acceptances, 87, 89;
Zivnostenska Banka, 98
mortgage banks; Eastern Province
Guardian Loan and
Investment Company, 58
Barberton, 34
Baring, Sir Francis, 28-9
Barlows (see also Barlow Rand), 148
Barlow Rand, 149-50, 152
Barnato, B., 7
Bedford,62
Beit, A., 7
Belgium, 85,159,164-7,170--2
Benson, Robert (see also
investment),36-9
Black, James, 51
Black socialism, 17
Boer Republics, 6-7
Boesak, A., 23
Bonsack cigarette machine, 136
Botswana, 156, 168-9, 173
Brandt Commission, 161
Brazil,159
183
184
Index
China, 159
Clarke, D. G., 162, 173
Cock, William, 50
codes of employment (see also
Sullivan Principles), 156, 161
Columbia, 159
Combined Shipping, 87
Compagnie Francaise des Petroles
159
'
Compagnie d'Importation de Laine
95
'
Companies Act, 116
computerisation, 128
confirming houses, 88
conglomerates (see also holding
companies, investment groups),
147-50, 152
consumer boom, 1984, 107
copper mining, 35
Cradock, 56-7
Credit cards, 122, 126
credit control, 108-110,117,123-4
credit creation, 115
Credit Guarantee Insurance
Corporation, 87
Cronje, DrF. J. c., 73, 76
Cullinan Holdings, 148
currency
convertibility, 125
coins, 49, 50, 53
bills of exchange, 49, 60
promissory notes, 49, 52-4, 56,
60-1
Rix Dollar, 49
Czechoslovakia, 159
Datsun-Nissan, 148-150
De Beers Industrial, 148
debenture issues, 124
decentralisation, 17
de Kock, G., 120, 129
de Kock, M. H., 119
de Kock Commission, 105, 119,
125-6, 128
Denmark, 159, 164-7, 170-2
Dewavrin A., Fils, 95
diamonds
capital formation, 7
discovery of, 4, 5, 176
as a product, 95
discount houses, 117 121
disintermediation, 122
disinvestment, 130
diversification, of banking functions
124
'
Dommisse, J., 81
Duke, J. B., 136
Du Pont, Pierre, 138
Durban, 3,175
Dutch East India Company, 1
East, the 136,
Eastern Cape, 50
banking in, 54, 58, 175
Eastern Europe, 141
Eastern Province (see also Eastern
Cape),prosperityin, 48-9, 55
East Germany, 159
East London, 6
Eastman, George, 136
Eastman-Kodak, 140
Eckstein, Frederick 41
Eckstein, H., 7
economic growth, 23, 65, 110
economic organisation efficient 1 4
23-4
' , ,
Economist, The, 32
education
in Natal, 18
national structure, inadequate, 17
electronic transfer networks 128
ENI,159
'
entrepreneurship, 122-4
Escom, see infrastructure
Esso (see also Exxon), 138
Euromoney, 129
European Economic Community,
73,85,156-7
code of employment, 161
exchange control, 86, 94, 106, 113
125,147
'
exports, of South Africa, 84, 90, 176
Exxon, 159
Index
financial crisis of the 1860s, 59
Finland, 159, 164-7, 170-1
firm
structure of, M form, 138
structure of, U form 136--7
first industrial revolution, 135
First World, 141
fiscal policy, 107-8, 110-11
Fleming, Robert (see also
investment trusts), 36, 38-9, 43
Ford, Henry, 135
Ford Motor, 159
foreign investment, 23
Fort Beaufort, 57,62
Fortrade Group, 87
forward exchange rate market, 126,
129
France, 151, 159, 164-7, 170-2
Frankel, S. H., 10
Franszen Commission, 77,114,124
Frontier Wars
sixth, 50
seventh, 52-3
eighth, 56
General Electric, 159
General Mining, 87
General Motors, 138, 159
General Sales Tax, 107-8
Ghana, 17
Godlonton, R., 62
gold mining
booms, 8, 32
early company formation, 8
East Rand, 12, 18
exploration companies, 9
Free State Gold Fields, 13, 18
investment in (see also investment
groups), 2, 7,10,12,18-20,
32,41-3
MacArthur cyanide process, 8
output, 8,9, 19,37
at Pilgrim's Rest, 31
Rand, 32, 176
taxation and contribution to
government revenue, 12
West Rand, 12
Western Deep Levels, 2
185
gold price
fall, 106--7, 129
rise, 19, 129
Goldschmidt, H. & Co., 88
Gold Standard, abandonment by
South Africa, 12
Gooch, A. R. & Co., 65
Gottheimer, Albert, 31, 42
Graaff Reinet, 56--7
Grahamstown, 47, 50-1, 56--7, 61-3
Graham's Town Journal, 50, 58, 62
Grant, Baron, see under
Gottheimer, Albert
Grant, Charles, 129
Gras, N. S. B., 133
Greece, 159
grey market, 122-3
Griqualand West, 4, 33,176
Gulf Oil, 159
Hamburg, 69, 85, 99
Hamilton Smith, 34
Hammond, John Hayes, 35
Hartwell, R. M., 135
Harvard, 133
hides, 95
Highveld Steel, 150-1
hire purchase, 122, 124, 126
Hirschmann, A. E., 4
holding companies (see also
investment groups, oligopoly),
150
Holsboer, B. H., 70, 73, 76, 86
Hong Kong, 39,162,164-5
Hope & Co., 28
Hulett's Sugar, 148-9
Hungary, 159
IBM, 159
IMEX,87
IMF,124
imperial banks (see also banks,
commercial, imperial), 55-6
import substitution, 145
incomes, per capita, 23
India, 159, 164-5
Indonesia, 159
Industrial Development
Corporation, 82,146
186
Index
Industrial Revolution, 4
industry
aircraft, 140
building and construction, 147,
148,149,150
carbide, 95
cement, 148
chemicals, 139, 142, 143, 144, 145,
147,150,152
clothing, 138, 142, 143, 145, 147
computers, 140
consumer industries, 12, 140, 143,
144, 148, 152
dynamite, 12
early developments, 11-12, 86--7
fishmeal,95
foodstuffs, 139, 142, 143, 144, 145,
147,148,149-50,152
furniture, 138, 142, 143, 145, 147
iron and steel (see also ISCOR),
12,87
Japanese, 150
leather, 138, 142, 143, 145, 147
lumber, 138, 142, 143, 145, 147
machinery, 139, 140, 142, 144, 152
machinery, agricultural, 140
machinery, electrical, 142, 143,
144, 145, 147, 148
machinery, lifts, 140
machinery, office, 140
machinery, printing presses, 140
machinery, sewing machines, 140
machinery, telephone equipment,
140
measuring instruments, 142, 143,
145,147
meat packing, 137, 139
metal, 142, 143, 144, 145, 147,
148,150,152
output, 14,20,21
paper-making, 142, 143, 145, 147,
148,150
petroleum, 137, 139,142,143,
144,145,147,150,152
photocopying, 140
printing, 138, 140, 142, 143, 145,
147
producer goods, 140, 144,148,
150, 152
Index
V. B. Robinson 42
E. D. Sassoon &, Co., 42
Wallace Bros., 40
Werner, Beit, 41 42
investment trusts, 35-9, 42-3
Bird & Co., 40, 41
Exploration Co., 34-5
Kuhn, Loeb & Co., 38
London and South African
Exploration Co., 33
Merchants Trust, 36-8
South African Goldfields
Exploration Co. 1870, 33
Transvaal, Gold, Exploration and
Land Co., 34
ISCOR, 12, 87,146,150,151
Italy, 159, 164-5, 166-7, 170--1 172
'
ITT, 159
Japan,159,164-5,166-7 170--1 172
job reservation 11 17'
,
Johannesburg,}, 7:8,9,17,22,40,
85,116
land values, 8
population, 8, 9
Stock Exchange, crash 1895, 8
Stock Exchange, early years, 8
Johannesburg Stock Exchange, 75
Kaffir ?~oms (see also under gold
mmmg, booms), trade 52
Kakabeeke,J.P.,70
Keuning, J., 70, 71, 72, 77
Kimberley, 5, 6, 34
Koeberg Nuclear Power Station, 21
Korsten, Frederick, 42
Korthals Altes, J. P., 73
Kreglinger & Fernau, 97
Kubicek, R. U., 10, 32
labour, restrictions on mobility 11
17
' ,
Land Bank, 119
leasing, 124, 126
Lesotho, 156, 162, 168-9, 174
Lever Bros, 38
Lewis, Arthur, 2
Liberty Life, 23, 114
Lome Convention, 156, 158
187
188
Index
railway bonds, 27
railways, see under infrastructure
Rand Revolt, 12
Rand, value of, 107, 109
Randle Bros. & Hudson, 149
Register of Cooperation, 127
Registrar of Banks, 71, 115
Reid, C. B. & Co., 97
Rembrandt, Group of Companies,
22,114
Renault, 151
retailing stores, 136, 147, 148,149,
152
Rhodes, C. J., 7
Rhodesia, 74, 91
Rhodesia and Nyasaland,
Federation of, 72
roads, see under infrastructure
Rockefeller, J. D., 137
ROCO,116
Rostow, W. W., 4,135
Rotterdam, 85
Royal Dutch Shell, 159
Rumania, 159
Rupert, Anton, 22
Pakistan, 159
Paris, 85-6
personal loans, 122, 124
Petroles de Venezuela, 159
Peugeot, 151
Plate Glass, 150
Poland, 159
poor white problem, 14
Poppe-Schunhoff and Stiicken, 97
population, of Eastern Province, 51,
52
economically active, 23
Port Elizabeth, 3, 49, 51,55,56,59,
61,175,176
Portugal, 157, 159, 164-5, 166-7,
170-1,172
preferential trade area, 156
Pretoria, 81,116
Proclamation R184, 1967, 118
Procter & Gamble, 136
promissory notes, see currency
Pruissen, J. D. D., 71, 73
PUTCO,146
St Petersburg, 40
Salisbury, 86
Sanlam, 22,114
SAPPI,150
SASOL, 146, 149, 150, 152
Schiff, Jacob, 38
Schroder,J. Henry, 95
Scottish-Rhodesian Finance, 86
Sears Roebuck, 138
secondary sector, see industry
second industrial revolution, 135
Second World War, 145
Sharpeville,72
Singapore, 162, 164-5
Singer, I. M., 137, 139
skins, 95
Sloan, Alfred, 138
Smith, C. G., 149, 152
social welfare, constraints on, 23
Somerset, 51
Somerset East, 62
South Africa
balance of payments, 107, 109, 129
Index
budget 1984,107
budget 1985, 108, 109
economy's dual characteristics,
114
exports, 84, 90, 98-9
foreign debt, 110, 113, 128-30
gross domestic expenditure, 109
gross domestic product, 89, 90
imports, 84, 90, 98-9
industrialisation in, 144-52
investment in Zimbabwe, 162
national income, 16, 23
national product, 159
top 10 companies, 1984, 152
top 100 companies, 146-50
South African Breweries, 149
South African Foreign Trade
Organisation, 87
Southern African Customs Union,
156
Southern African Development
Coordination Conference
(SADCC), 155, 156, 162, 163
South Korea, 159
Soweto,17
Spain, 157, 159, 164-5, 166-7, 170-1
Stafford Meyer, 149
Standard Oil, 133, 137
Standard Oil of California, 159
Standard Oil of Indiana, 159
tatist, The, 32, 37
Stewarts and Lloyds, 152
Stewart, Robert, 175
Stock Exchange, see Johannesburg
Strauss, Conrad, 129
Sullivan Principles, 161
Swaziland, 156, 168-9, 173
Sweden, 159
Switzerland, 159, 164-5, 166-7,
170-1,172
Tambo, 0., 23
Tanzania, 17, 156, 168-9
Technical Committee on Banking
and Building Society
Legislation, 117
Texaco, 159
Thailand, 159
Third World, 129, 141, 158, 160, 162
189
190
Wills, W. D. & H. 0., 136
Wilson, Charles, 133, 134
Witwatersrand, gold discovery, 2
Wolmaatschappij, NV, 95
Wood, George Jr, 64, 65
Wood, George Sr, 58, 63
wool, 48, 49, 95-8
boom of 1850s, 57
cash crop, 3, 5,7,95
exports, destination of, 95-6
exports, quantity, 4, 59,176
wool production, 1830s and 1840s,
52,158-9
wool trade, with interior, 61
Index
Woolworth, F. W., 136
World Bank, 156
World Council of Churches, 130
Xerox, 139
Xhosa, 48, 52
Yugoslavia, 159
Zaibatsu, 126
Zambia, 74,86,91,156,168-9
Zimbabwe, 156, 162, 163, 168-9, 173
Zurich,86