Capital Accumulation and Capital Controls in South Africa: a Class Perspective

Ilias Alami

The University of Manchester

Politics, School of Social Sciences

Arthur Lewis Building, Oxford Road

M13 9PL, Manchester, UK

Email: ilias.alami@manchester.ac.uk

Accepted version: 25 sept 2017

Abstract (150 words)

The paper analyses capital controls (CC) in South Africa in light of the historically- and

geographically-specific social relations of production. It highlights the role that CC have historically

played in reproducing particular forms of capital accumulation, and sheds light on the CC currently

implemented by the state. The analysis draws upon quantitative data from the national accounts,

descriptive data on CC from policy documents, and interviews conducted during a period of extensive

fieldwork. The paper makes three main arguments. Firstly, CC have played a key role in facilitating

the reproduction of essential capitalist social forms, namely the state and money, and have been

instrumental in the management of class relations. Secondly, the concrete forms that CC have taken

are inseparable from the historical-geographical specificity of accumulation and the uneven unfolding

of crises and social class struggles. Thirdly, working classes have had an active (though indirect) role

in shaping CC policies.

Keywords: capital controls, capital flows, finance, class analysis, state theory, South Africa

1

Introduction

The recent global financial crisis sparked renewed debates, both within academia and policy-

making circles, about regulating highly mobile cross-border money-capital flows. A particular type of

policy tool has received considerable attention: capital controls (CC). Within mainstream economics

and policy-oriented circles (including policy-makers in central banks, finance ministries, and

international organisations such as the IMF and the G20) there has been a growing recognition that

unregulated cross-border money-capital flows can considerably disrupt capital accumulation, and

debates have accordingly focused on the potential role and effectiveness of temporary CC in limiting

the destabilising potential of those flows, while maintaining a long-term commitment to an open

capital-account and free capital mobility (IMF 2012). By contrast, the Left (including organised

labour, progressive economists, and civil society organisations) has been largely critical of capital-

account liberalisation, and has denounced its detrimental effects in terms of constraining policy

options for development and long-term industrial development (Chang & Grabel 2004; Epstein 2012;

Gallagher 2015). Consequently, there has been a growing consensus on the Left that CC can play a

key role in designing more progressive and development-friendly forms of financial governance, and

in empowering labour vis-à-vis capital.1 While those debates are welcome, participants have to a large

extent refrained from engaging in historical analyses of CC grounded in the social relations of

production prevailing in specific national contexts. This is particularly problematic, given that CC are

not neutral, technical measures, which fulfil similar objectives irrespective of where they are

implemented. By contrast, CC have historically played an important role in broader class-based

strategies and in sustaining particular forms of capital accumulation, as Soederberg has shown with the

examples of Malaysia and Chile (2002; 2004), and Alami in the case of Brazil (2016). In fact, the lack

of critical analyses of CC sensitive to class dynamics is quite surprising, given the now widespread

view on the Left that curbing the power of capital over labour will involve CC. The starting point of

this paper is therefore that if progressive forms of CC are to be designed in the future, it is necessary in

the first place to understand the role and function that CC have played in particular national contexts,

and to uncover the class dynamics associated with them. This is especially important in those countries

which have a long history of CC, and where there have recently been some debates on implementing

new forms of CC, like South Africa.

Indeed, during the post-global financial crisis boom in private capital flows to South Africa (late 2008-

mid 2011), a variety of social actors including organised labour (COSATU and NUMSA), progressive

economists and intellectuals on the Left (Ashman et al 2011a,b; Mohamed 2012; Pons-Vignon &

McKenzie 2012), some segments of the manufacturing sector (the ‘Manufacturing Circle’), but also

voices within the Economic Development Department and the Department of Trade and Industry, have

been increasingly outspoken about the need for a more active regulation of cross-border money-capital

2

flows. More recently, in the context of the 2016 #FeesMustFall protests, students – drawing on the

work of Patrick Bond and others – have argued that CC could be instrumental in channelling resources

towards education. While the case for CC in South Africa has been increasingly well articulated by

those social actors, it has so far failed to convince the National Treasury and the Reserve Bank, which

have continued apace with the policies of lifting CC on outflows, and transforming remaining ones

into macroprudential regulations.

The present paper offers a historical analysis of CC in South Africa with particular reference to the

historically and geographically specific social relations of production and material conditions of

capital accumulation. The objective is to make sense of the role that CC have historically played in

reproducing particular forms of capital accumulation and capitalist class rule in South Africa, but also

to shed light on the CC policies currently implemented by the National Treasury and the Reserve

Bank.

More generally, the issue of South African CC and how they mediate international money-capital

flows is also crucial to understand broader dynamics of accumulation and dispossession across the

African continent, for at least two interrelated reasons.2 Firstly, money-capital flows have been

instrumental in what has been termed the ‘new scramble for Africa’, that is, the contemporary

practices of primitive accumulation that prey on Africa’s land and natural resources (Shivji 2009;

Moyo et al. 2012). Given the strategic positioning of South Africa as a financial hub for the continent,

the implications of South African CC have been much wider than the sole South African economy.

Secondly, the problem of large-scale capital flight, which, as the paper will discuss at length, has

plagued the South African economy, is not a phenomenon restricted to South Africa. In fact, recent

research has shown that it has been an endemic issue for the whole continent, and especially for

natural resource-rich countries (e.g. Ajayi & Ndikumana 2014). Understanding South Africa’s CC and

the class dynamics associated with them has therefore significant implications for understanding the

broader political economy of the continent.

The first section of the paper briefly reviews the existing literature of CC in South Africa. The main

argument is that most of the contributions (due to their largely descriptive character and/or their

empirical focus on measuring the effectiveness of CC) have largely failed to develop an understanding

of CC grounded in social relations of production. This is in sharp contrast with a variety of political

economy perspectives which have developed analyses of financial policies in South Africa, grounded

in the particular form of South African capitalist development and sensitive to class dynamics. The

present paper is therefore positioned within this latter body of literature. The second section introduces

the key components of the theoretical framework to study CC developed by Alami (2016). This

framework, grounded in materialist state theory and the Marxist theory of money, conceptualises CC

as concrete historical political forms through which the capitalist state mediates the contradictory

3

character of global money-capital flows. Section 3 then puts the framework to work and provides an

analysis of CC in South Africa since the 1930s. The analysis draws upon a range of sources:

quantitative data from national accounts, descriptive data on CC from policy documents released by

the Reserve Bank, and interviews conducted during a period of extensive fieldwork between

September and December 2016.3 My key arguments are the following. Firstly, changing forms of CC

have played a key role in facilitating the crisis-led reproduction of essential capitalist social forms,

namely the state and money, and have been instrumental in the management of class relations.

Secondly, the concrete forms that CC have taken in South Africa are inseparable from the historical-

geographical specificity of accumulation and the uneven unfolding of crises and social class struggles.

Thirdly, my analysis shows that by contrast with existing historical accounts of CC in South Africa,

working classes have had an active (though indirect) role in shaping CC policies. It is important that

those findings inform the design of more progressive forms of CC for South Africa and beyond, that

is, CC that aim at transforming social relations and class configurations, and that empower labour vis-

à-vis capital. While more policy-oriented research is needed to elaborate the appropriate policy

instruments, the conclusion will sketch a series of key objectives that CC would need to meet in order

to fulfil this ‘transformative’ role.

I – The literature on capital controls in South Africa4

It is possible to identify three bodies of literature on CC in South Africa. Firstly, a series of

policy documents and statements released by the Reserve Bank provide historical reviews of the CC

that were deployed in South Africa (Stals 1998; Farrell & Todani 2004; SARB 2015). Even though

some of those contributions locate the deployment of CC within the unfolding of key historical events

and within debates between South African policy-makers (Kahn 1991), these papers remain largely

descriptive: rather than investigating CC with reference to the material conditions of accumulation,

their purpose is to review the different forms of CC that were deployed, as well as to provide in-depth

explanations of how these worked. For instance, Gidlow explains how the ‘blocked rand’ functioned

(1976). Garner provides an analysis of the ‘financial rand’ mechanism (1994). These papers, however,

constitute valuable sources, which I exploit in the analysis performed in section 3.

A second body of literature consists of publications, released in large parts by researchers at the

Reserve Bank and the Treasury (or by academics mandated by those institutions), that develop

neoclassical economics models and econometric analyses in order to empirically investigate the

effectiveness of South African CC at different historical junctures. For instance, Farrell looks at the

impact of CC in reducing the volatility of the exchange rate (2001). Havemann looks at the impact of

CC on policy-making in light of the ‘macroeconomic trilemma’ (monetary independence, exchange

4

rate stability and capital-account openness) (2014). This literature also pays particular intention to the

longer-term ‘economic distortions’ and/or ‘unintended consequences’ associated with CC (ibid;

Schaling 2005).

A third body of literature is mainly concerned with the impact of capital-account liberalisation (i.e. the

lifting of CC) in the 1990s-2000s on the South African economy. While mainstream approaches have

debated the impact in terms of economic growth (Khumalo & Kapingura 2014; Tswamuno et al.

2007), heterodox perspectives have been largely critical of capital-account liberalisation. The latter

group of scholars argue that capital-account liberalisation has had a poor impact in terms of growth,

has contributed to unsustainable patterns of financialisation, has rendered the economy extremely

dependent on money-capital inflows, and has generated deep financial fragilities and vulnerabilities

(Ashman et al 2011a; Bond 2013; Mohamed 2012; Pons-Vignon & McKenzie 2012). Accordingly, an

important political conclusion of that literature is that the process of capital-account liberalisation

should come to halt, and new forms of CC on inflows should be implemented. These contributions are

doubly important: they have both challenged the rationale for capital-account liberalisation on

theoretical grounds, and have sought to explain capital-account liberalisation policies by examining

the configuration of social forces in South Africa (Habib & Padayachee 2000, Ansari 2017, Isaacs

2014). The present paper is positioned as a contribution to this line of research. In particular, it follows

a similar approach as that developed by Ashman & Fine: it provides an historical analysis of financial

policies and dynamics in light of the historically and geographically specific form of accumulation and

the associated configuration of social relations and struggles in South Africa (Ashman & Fine 2013).

The next section outlines the theoretical framework deployed in the analysis.

II – A theoretical framework to study CC from a class perspective

Capital controls are commonly defined as regulations that restrict cross-border private capital

flows, registered in the capital-account of the balance-of-payment (IMF 2012). Exchange controls are

measures that restrict the external convertibility of the currency as well as trade-related flows of

money (flows registered in the current account). In the rest of this paper, the term CC will be used to

designate both types of measures. While those ‘accounting’ types of definition are useful for

descriptive purposes, I argue that they are poorly suitable for analytical purposes. This is because these

definitions don’t say much about what states actually do (or aim to do) when they deploy CC. This is

problematic, since, as mentioned in the introduction, historical case studies (Chile, Malaysia, Brazil)

have shown that those regulations have played a particular role in reproducing class-based strategies

and in sustaining particular forms of capital accumulation. What is needed, then, is a framework that

allows examining CC within the broader role of the capitalist state in the antagonistic and crisis-ridden

5

process of capital valorisation, and with specific reference to the historically and geographically

specific dynamics of capital accumulation prevailing in the country studied. Alami argues that such a

framework can be developed by drawing upon materialist state theory and the Marxist theory of

money (2016). This framework, which insists upon the social constitution and the class character of

the state and money-capital flows, can be briefly summarised as follows.

Given that the state is a historically specific political form assumed by antagonistic class relations

(Clarke 1991; Bonefeld 1992), Alami argues that CC should be conceptualised as (national) political

mediations of global money-capital flows. This mediation is inherently unstable and contradictory.

This is because, from the perspective of the capitalist state, there is a contradiction immanent in the

form of money-capital: money-capital constitutes a source of social wealth that can be distributed to

various social subjects through diverse state policies for the purpose of fostering accumulation and

managing class relations, but the movement of money-capital also shapes the modalities through

which the state politically contains and integrates labour within its national space of valorisation.

Accordingly, CC should be conceptualised as the concrete historical political forms through which the

capitalist state mediates the self-contradictory mode of existence of money-capital, that is, money-

capital as a source of social wealth that can be distributed to various social subjects, and as the

expression of the disciplinary power of capital-in-general.

The following section applies this theoretical framework to the case of South Africa, in light of the

historically and geographically specific form of accumulation and the associated configuration of

social relations and struggles. This specificity, a vast political economy literature has shown following

the seminal work of Fine and Rustomjee (1996), is that capital accumulation since the discovery of

gold and diamonds in the 1860s has been driven by the Minerals-Energy Complex (MEC). The MEC

is not only a set of sectors with particularly strong backward and forward linkages, it is also a ‘system

of accumulation’. Fine and Rustomjee’s argument is that South African industrial capital accumulation

has been continuously dependent on the appropriation of surplus (in the form of ground-rent, and

mediated by a series of state policies and institutions) generated in the mining and energy sectors. In

other words, the essence of South African capitalist development, despite changing concrete

historically-specific institutional forms, is a particular case of nature-dependent capital accumulation

through ground-rent appropriation.5 The following section provides an analysis of CC in South Africa

since the 1930s, in light of this historical-geographical specificity, and associated class configurations.

The analysis draws upon a range of sources: quantitative data from the national accounts, descriptive

data on CC from policy documents released by the Reserve Bank, and interviews conducted during a

period of extensive fieldwork between September and December 2016.

6

III – CC in South Africa since the 1930s

CC in the 1930s

The Great Depression, followed by Britain’s abandonment of the gold standard in 1931, triggered

massive capital outflows from South Africa. Despite the fact that South Africa weathered the crisis

relatively well, due to large flows of ground-rent generated in the gold mining sector, ‘investors were

shifting enormous amounts of money out of South Africa (£20 million in 1932)’ (Bond 2003: 264-

265). This put pressure on the gold standard in South Africa, leading to its abandonment in 1932 by

the Hertzog administration in order to avoid deflationary adjustment. Indeed, a brutal deflationary

adjustment ‘would have compromised the civilised labour policy’, which was instrumental for the

management of class relations by the Hertzog government: it made important concessions to the ‘poor

white workers, (“civilised workers” by opposition with Black proletarians)… to avoid their

radicalisation’ (Davies et al 1976: 11-12). In that context, a legislative framework for CC was

developed. In 1933, the Currency and Exchange Act established a framework for foreign exchange

intervention by the South African Reserve Bank (SARB) in order to ‘prevent undue fluctuations’ of

the South African pound ‘in relation to the units of currency which are legal tender in the United

Kingdom of Great Britain and Northern Ireland’.6 It also allowed the SARB to deploy CC ‘in regard to

any matter directly or indirectly relating to or affecting or having any bearing upon currency, banking

or exchanges’ (Union Gazette, 1933: lxviii-lxx). In 1939, CC were implemented to restrict outflows to

non-Sterling Area countries, and ensure the free movement of funds, emanating mainly from the

United Kingdom, within the Sterling Area (Stals 1998).

CC and ISI development (1940s-late 1960s)

The post-war period saw the acceleration of accumulation through Import-Substituting

Industrialisation (ISI), characterised by some significant levels of industrial capital accumulation,

higher capital intensity in mining and agriculture, and relatively high growth rates (Fine & Rustomjee,

1996). The material basis for this boom was provided by large flows of ground-rent (resulting from the

discovery of new gold fields in the Orange Free State during the 1940s and from the boom in primary

commodity markets associated with the Korean War as shown on chart 1 below) as well as by large

money-capital inflows.

*Insert Chart 1*

7

The Smuts government deployed a series of policies to channel these flows, and the Sterling Area CC

were gradually phased out and tailored to proceed with the ISI strategy (Davis et al. 1976: 27). The

development of sophisticated financial markets and new financial institutions by the mining houses

and by the state (the National Finance Corporation) played a key role in mediating money-capital

inflows, largely sourced from British financial institutions. The large flows of external wealth were

also important for managing class relations. The Nationalist Party, which won power in 1948,

favoured the emergence of a class of financial industrial and commercial Afrikaner capitalists, by

centralising and channelling ground-rent generated in agricultural sector. It also institutionalised

existing racial practices, and officially established the apartheid regime. Rapid financial development,

partly due to large inflows, allowed financing the construction of urban areas and townships such as

Soweto (Bond 2003).

The reversal of money-capital flows in the late 1950s marked an important step in CC policies: the

state deployed a tighter and more pervasive framework to prevent large-scale capital flight (Farrell &

Todani 2004) in a context of intensified and brutally repressed African working-class struggles which

culminated with the 1960 Sharpeville massacre, and the declaration of a state of emergency by the

Nationalist Party. When outflows accelerated in the aftermath of the Sharpeville massacre, leading to a

collapse of gold and foreign exchange reserves, CC were further tightened, restricting for the first time

‘the repatriation of non-resident investment funds from the country’ (Stals 1998). The Nationalist

Party government decided to block the repatriation of the proceeds of sales of South African securities

by non-residents (the ‘blocked rand’ mechanism). Those CC, promulgated in Government Notices

R1111 and R1112 of 1 December 1961, and issued in terms of the Currency and Exchanges Act 9 of

1933, were at the time considered to be emergency crisis measures, but the act still provides the basis

for the existing legislative framework for CC. Importantly, it states that ‘the control over South

Africa's foreign currency reserves, as well as the accruals and spending thereof, is vested in the

Treasury’ and that ‘the [SARB] is responsible, on behalf of the Minister of Finance, for the day-to-day

administration of exchange controls in South Africa’ (SARB website).

In the 1960s, money-capital inflows recovered, predominantly under the form of direct investment by

transnational corporations (TNCs) through the establishment of subsidiaries in South Africa in

industries producing for the domestic market and industries processing primary commodities. This

process was ‘intimately connected’ to the intensification of racial oppression (Clarke 1978). Indeed,

the period saw the extension of apartheid policies and spatial control of Black population through the

development of Bantustans, and mass eviction and forced removals under the Group Areas acts, in

order to form a disciplined urban labour force. The flow of ground-rent also expanded, with rapid

growth in both mining and agriculture, and the apartheid state scaled-up policies to channel part of it

to industrial capitals, including through heavy investment in electricity and transport (Fine &

8

Rustomjee 1996: 160-168). This provided the conditions for the mid-1960s economic boom and

significant levels of accumulation, as shown on chart 2 below:

*Insert Chart 2*

CC and ISI development (1970s-1985)

In the early 1970s, the ISI growth model reached its limits. These included: the limited character of

industrialisation; the relatively small domestic market for manufactured goods showed growing signs

of chronic overproduction; a dependence on gold as a source of foreign exchange. The model was also

dependent on relatively cheap black labour, which was increasingly insubordinate. Indeed, the 1970s

saw sharp outbursts of African working-class resistance in many forms, including spontaneous strike

action in 1973 by workers in the textile and metal industries around Durban, the emergence of the

Black Consciousness movement, and the intensification of student and community protests after the

1976 Soweto riots. The situation got worse after the 1972-1975 commodity boom came to an end, and

the mass of ground-rent available for appropriation decreased due to a sharp decline in gold prices, as

shown on chart 1 hereinabove. As a result, there was a marked decrease in industrial capital

accumulation and a decline in growth rates. Moreover, with the flow of ground-rent drying up, large-

scale capitals, state-owned companies, and the state increasingly relied on money-capital inflows in

the form of syndicated bank loans and public bond issues on Euromarkets, which became the most

important source of funding over the period (Clarke 1978; Padayachee 1988).

This was however interrupted by a brutal episode of capital flight in 1976-1977, in the aftermath of the

Soweto Riots and the military intervention in Angola, plunging the economy into recession. The

government adjusted CC in order to mediate this pattern of money-capital flows. In February 1976, it

introduced the ‘securities rand’ to further attract inflows and curb the illegal capital flight practices

that took place under the ‘blocked rand’ mechanism. The ‘securities rand’ allowed for the conversion

of the proceeds of the sale of non-resident owned securities in South Africa into securities rand,

tradable between non-residents at a lower exchange rate (Farrell & Todani 2004). The mechanism was

tightened in response to the capital flight episode triggered by the Soweto Riots, and remained in place

until 1979. In the early 1980s, several CC on the capital-account were lifted in order to further attract

inflows, and limit outflows. This included the replacement of the ‘securities rand’ by the ‘financial

rand’ (which lasted until 1983). It established a dual exchange rate system, one for capital-account

transactions by non-residents (the financial rand), and one for current account transactions (the

commercial rand). It aimed to conciliate the need to attract inflows, a growing demand for foreign

exchange to finance imports of capital goods, and CC on outflows (Stals 1998). In a context of

9

slowing inflows in 1983 (due to the previously mentioned issues, as well as the unfolding of the Third

World debt crisis), the state abolished the financial rand, adopted a floating exchange rate, lifted CC

on non-residents, and started liberalising the financial and banking sectors.

The dependence on inflows further grew in the 1980s, and loans became increasingly short-term,

‘[enabling] a quick retreat [of international banks] in the case of adverse political or economic events

in South Africa’ (Padayachee 1988). Foreign-denominated short-term debt built up, and constituted a

growing form of financial fragility based upon currency and maturity mismatches. Besides, inflation

was growing at double-digit rates (as shown on chart 3 below), and government borrowing increased

to finance violent police repression and military expenditures.

*Insert Chart 3*

The build-up of short-term foreign debt became increasingly problematic as the rand was under

constant pressure, in a context of uttermost working-class insubordination: the early 1980s saw

nationwide school boycotts, the creation of the United Democratic Front in 1983, a national alliance of

community organizations (women, youth, cultural and civic organizations) and trade unions, huge

strike activity in 1984, the township uprisings of 1984-1985, and the intensification of national

liberation movements’ struggles. These were violently repressed, and the Botha government declared

the state of emergency in July 1985. At the same time, the international anti-apartheid disinvestment

movement increased its pressure on TNCs and international banks. It became clear, including for the

international financial community, that the apartheid state had lost the ability to manage class

relations. The rand collapsed in 1984-1985, increasing the rand value of the foreign debt and major

New York and London banks withdrew lines of credit. Massive capital flight forced the government to

suspend trading on the foreign exchange and stock markets from August 28 to September 1, 1985.

President Botha declared default and a moratorium on foreign debt; CC on outflows were deployed,

and the financial rand system was reintroduced (Mohamed 2012: 18; Farrell & Todani 2004: 17).

CC during the isolation and democratic transition period (1985-early 1990s)

The debt moratorium, the reintroduction of the financial rand, the temporary suspension of the

financial liberalisation policies, and intensifying international sanctions inaugurated a period of

relative isolation for South Africa. Inflows turned negative between 1986 and 1991, as ‘225 US

corporations, and about 20 per cent of UK firms, [departed] between 1984 and 1988’ (Geld & Black

2004: 178). Ground-rent flows also dried up in the late 1980s-early 1990s, due to falling primary

commodity prices on international markets (as show on chart 1 above), which worsened the capitalist

10

crisis. Inflation and public debt rose as the Nationalist Party government extended monetary flows to

‘compensate and protect its supporters in the face of inevitable change’ (Habib & Padayachee 2000:

247). Capital flight put serious pressure on the financial rand in the early 1990s as the large capitals

that dominated the economy started a process of restructuring and internationalisation, and shifted

portions of their assets abroad, ‘beyond the reach of the future democratic state’ (Rustomjee 1991: 89).

Profit and investment rates fell, and a huge portion of surplus was increasingly channelled into the

financial system and into speculative construction of commercial property. This contributed to

enhanced financial activity, the formation of asset price bubbles, and the development of a deep,

sophisticated, and highly concentrated financial system (Bond 2003; Ashman & Fine 2013).

The crisis also accelerated the move towards a new growth strategy, driven by the implementation of

neoliberal reforms. It is worth insisting that this shift did not signal a change in the fundamental nature

of capital accumulation in South Africa, which has remained determined by the MEC (Ashman et al.

2011a). Comprehensive measures were taken in order to restore access to global money-capital, and to

take advantage of favourable global liquidity conditions in the early 1990s. There was a turn to

monetarism to control inflation, a growing commitment to reduce the fiscal deficit, and a series of

measures to liberalise the financial system and open the capital-account were taken. It is in this context

that the negotiations over a new constitution and democratic elections started, after the unbanning of

the ANC and other proscribed liberation organisations in 1990. During this process, the question of

ensuring business confidence in order to secure money-capital inflows was central. Scholars have

argued that this concern explains the shift towards an accommodative strategy in ANC discussion

guidelines on future economic policy, as well as the continuation and deepening of the financial

liberalisation and opening policies after the election of the government of National Unity in April

1994 (Rustomjee 1991; Habib & Padayachee 2000). The views that South Africa had to be re-

integrated into the global economy in order to restore growth, and that money-capital inflows were

necessary to compensate for low levels of domestic savings became deeply entrenched amongst

policy-makers. Those views have endured to this day, as was clear from my interviews with policy-

makers at the Treasury and the SARB (Interviews 1, 3, 4).

Money-capital inflows recovered in 1991 and further accelerated after the debt standstill arrangement

of 1993, the removal of international punitive actions against the South African economy in 1994, the

abolition of the financial rand in March 1995, and the relaxing of a series of CC, as shown on chart 4

below. CC on the current account were completely relaxed, CC on the capital-account for non-

residents were lifted, and asset swap arrangements facilitated outflows for resident institutional

investors (Farrell & Todani 2004). Strict CC on residents were maintained to avoid large scale capital

flight.

11

*Insert Chart 4*

Importantly, the nature and composition of the inflows changed: they became increasingly driven by

short-term portfolio flows. This entailed a change in the form through which money-capital flows

disciplined the state, characterised by the movement of highly volatile short-term portfolio flows

exercising pressure on the exchange rate.

CC during the 1996-2000 period

The destabilising effects of volatile money-capital flows rapidly manifested themselves. A sudden stop

in inflows triggered a brutal depreciation of the rand in early 1996, as show on chart 5 below:

*Insert Chart 5*

In that context Mandela’s government announced an orthodox macroeconomic adjustment plan, the

Growth, Employment, And Redistribution (GEAR) framework. GEAR had devastating effects in

terms of deindustrialisation and growing unemployment, which particularly hit key labour-intensive

sectors and contributed to disciplining and fragmenting the working class (Bond 2003: 49; Desai

2003). GEAR was nevertheless relatively successful in taming inflation, and was instrumental in

attracting large inflows (as described below). Mandela’s government also continued liberalising the

capital-account by gradually relaxing CC as well as by adopting a laxer attitude towards their

enforcement (Mohamed 2012). The scope of the asset swap arrangements was broadened to a larger

variety of financial institutions (insurers, pension funds, fund managers) and the limits on foreign

investments were increased. CC on short-term trade financing and inter-bank financing arrangements

were eased, and administrative procedures were simplified (SARB 2015; Stals 1998). Overall, ‘three-

quarters of the [CC] in 1994 had been eliminated by 1998’ (Gelb & Black 2004: 179). Moreover, the

1996 Constitution granted the SARB full independence, and set out that its primary goal as protecting

the value of the currency. It maintained high interest rates over the period, as shown on chart 6 below:

*Insert Chart 6*

Besides, the SARB run a growing ‘oversold forward book’, a policy instrument that aimed at ensuring

industrial and banking capitals against the risk of currency devaluation. Importantly, and despite the

fact that social spending was subordinated to fiscal discipline and inflation control, these financial

liberalisation measures were framed by the state as policies designed ‘to address the inequality,

poverty and unemployment legacy of apartheid’ (Mohamed 2012: 35). In conjunction with the ANC

government’s programme of affirmative action, Black Economic Empowerment (BEE), they would

12

also help creating a new progressive black capitalist class. These policies were clearly successful in

attracting large volumes of inflows. Nevertheless, inflows did not contribute much to industrial capital

accumulation. FDI remained very low in comparison with other emerging capitalist countries. Money-

capital inflows mainly financed consumption and booms in asset price bubbles. While rates of gross

fixed capital formation remained at very low levels (see chart 7 below), there was a boom in fictitious

capital accumulation on the stock market (chart 8).

*Insert Chart 7*

*Insert Chart 8*

This contributed to the creation of a black bourgeoisie (that the BEE strategy aimed to develop) which

wealth was increasingly derived from ownership of financial assets. By early 2000, 9% of the stock

market was black-controlled (Bond 2003). In terms of the management of the balance-of-payment,

South Africa became increasingly dependent on money-capital inflows to fund structural current

account deficits, as shown on chart 9 below:

*Insert Chart 9*

Sustained illicit capital flight continued over the period. Mohamed and Finnoff estimate that it rose to

an average of 9.2% of GDP per year, which was higher than during the politically unstable period of

the 1980s (2004: 12-15). They argue that this ‘[indicated] a multi-year effort to build up wealth

reserves outside of South Africa’ and reflected the deep lack of trust of the (mostly white) capitalist

class in the (black) ANC government’s ability to foster accumulation and control the poor.

This race dimension7 was also evident during the late 1998 brutal capital-account reversal, following

the Asian crisis. Outflows accelerated when the government announced the nomination of a new

SARB governor, Tito Mboweni, the first black South African to hold the position. Many in the

investor and business community doubted that Mboweni would be capable of continuing the tough

anti-inflation stance of his (white) predecessor Chris Stals (Handley, 2005). This put intense pressure

on the exchange rate, and the SARB massively intervened by running up the oversold forward book to

prevent a currency crash. The intervention was costly (it took more than five years to pay down the net

open forward position) and largely unsuccessful, and it is a key factor in explaining the largely ‘hands-

off’ approach of the SARB in terms of currency intervention since then. As several interviewees put it

(all using the same expression), the SARB ‘got its fingers burnt’. This was a defining experience in

terms of what South African policy-makers in the Treasury and the SARB think that they can (and

13

cannot) do to ‘lean against the wind’ (Interviews 1, 3, 4, 6, 10). The SARB publicly announced its

commitment to a floating exchange rate.

A series of measures were then taken to restore access to global money-capital flows, including tax

cuts, tighter fiscal discipline, and high interest rates. An important measure concerning the capital-

account was also implemented in order to facilitate the restructuring and financialisation of South

African large capitals (Ashman et al. 2011b). Between 1998 and 2001, several conglomerates were

allowed to shift their primary stock market listings abroad, mainly to London and Sydney. The

rationale behind that decision was that the conglomerates did not have room to expand in the South

African domestic market, needed to internationalise to become more competitive, would raise finance

at a lower cost and reduce their financial and currency risk exposure, and would in return raise levels

of investment in South Africa (Interview 8). Yet, the capitals that listed abroad have not recorded

higher levels of investment in South Africa (Chabane et al. 2006). While the extent to which the other

objectives were achieved is difficult to assess, what is also sure is that this has triggered a sustained

outflow of profits and dividends, creating a structural deficit in the income account. Chart 10 below

shows how the structural deficit in the net income account has contributed to the worsening current

account deficit in the 2000s.

*Insert Chart 10*

CC during the crisis period 2000-2003

While money-capital inflows recovered in late 1999, they remained very volatile. They rapidly

declined again in 2001, in a context of global liquidity contraction following the collapse of the

Dotcom bubble, political turmoil in neighbouring Zimbabwe, and heightened currency speculation

against the rand, triggering another currency crash as showed on chart 5 hereinabove. In that context,

CC and fiscal discipline were tightened, interest rates were risen (chart 6), and the SARB adopted an

inflation-targeting framework with a commitment to maintain inflation between a 3 to 6% target

range. Inflation-targeting was justified by the rhetoric of macroeconomic stability, and prioritised the

imperatives of maintaining low inflation and attracting money-capital inflows (Isaacs 2014).

*Insert Chart 11*

The period also saw a three-pronged landmark shift in the management of the capital-account. Firstly,

the Treasury and the SARB began transforming remaining CC into ‘macroprudential measures’ for

banks and institutional funds. Leape and Thomas explain:

14

‘The principal objective of [CC] was to limit outflows of capital. Prudential regulation is instead

concerned with the financial soundness of individual institutions and the broader objective of

systemic stability, as part of the overall framework for supporting macroeconomic stability’

(2011: iii).

This shows how the post-apartheid state adapted and transformed existing CC in order to keep on with

the long-term capital-account liberalisation strategy while ensuring against some of the risks

associated with it. As the current head of financial stability at the SARB put it: ‘We were removing

controls [CC], but didn’t want to lose control’ (Interview 10). For instance, in 2000, CC on resident

institutional funds were changed to prudential requirements allowing 25-35% of retail assets to be

invested abroad depending on the type of funds (De Jager & Kahn 2014: 110; Interviews 4, 6).

Secondly, the focus of exchange rate policy became the expunging of the SARB oversold forward

book. Henceforth, reserve accumulation (mostly funded by the Treasury) would be considered a tool

for macroprudential policy and for liquidity management, and wouldn’t be used to influence the level

of the exchange rate. Thirdly, the Treasury and the SARB began to develop a particular regime of

macroprudential CC, allowing larger outflows to African countries than to the rest of the world. The

objective has been to facilitate the expansion and of South African capitals into other African

countries, and to position South Africa as a global ‘financial hub’ for the rest of Africa (De Jager &

Khan 2014; Interviews 2, 3, 8).8 Put differently, CC policies have been instrumental in the positioning

of South Africa as a strategic hub for finance-led driven ongoing processes of primitive accumulation

across the African continent (Shivji 2009; Moyo et al. 2012).

As chart 5 shows, the rand recovered extremely quickly in 2002. The Mbeki administration further

relaxed some CC, for both private individuals and for capitals. It also introduced a foreign exchange

and tax ‘amnesty’, which objective was to regularise assets held abroad and undisclosed offshore

investments, and to include them in the tax base. It was, however, quite an explicit recognition by the

government that it would rather try and regularise the assets illicitly held abroad than tackle the issue

of sustained capital flight (Bond 2003; Ashman et al. 2011b).

CC during the 2004-2008 period

Over this period, characterised by abundant liquidity in international markets and a boom in global

primary commodity prices (as shown on chart 1 above), South Africa received large volumes of

ground-rent and money-capital flows. Large money-capital inflows were attracted by the commodity

super-cycle, a strong currency, and relatively high interest rates. While those flows, alongside ground-

rent flows, contributed to relatively high economic growth rates (as shown on chart 12 below) in

15

comparison with previous (and subsequent) years, the impact in terms of productive accumulation was

disappointing (chart 7).

*Insert Chart 12*

The acute volatility of the rand significantly deterred investment, and the sustained currency

appreciation between 2003 and 2007 considerably hurt the external competitiveness of the

manufacturing sector. Besides, the sectoral allocation of money-capital inflows limited economic

diversification. Inflows reinforced the dominance of the MEC over the economy, though in an

increasingly globalised and financialised form, and fuelled unprecedented stock market capitalisation

as well as growth in the financial and service sectors linked to debt-driven consumption (Ashman et al

2011a; Mohamed 2012). Inflows also fuelled a residential property price bubble and associated

residential mortgage bonds. Chart 13 shows the impressive rise in residential property prices over the

period:

*Insert Chart 13*

Capital flight also continued to be a major issue for the South African economy, with short-term

money-capital inflows financing long-term capital outflows. Such outflows, supported by an

overvalued currency, averaged 12% of GDP between 2001 and 2006 and peaked at 23.4% in 2007

(Ashman et al. 2011b). They largely benefited a small minority, who were the beneficiaries of

conglomerate ownership and control. In sum, the boom in money-capital inflows contributed poorly to

productive accumulation, but fuelled massive accumulation of different forms of fictitious capital

(chart 8 above) and financed a structural current account deficit as well as sustained capital flight.

However, the way money-capital inflows were absorbed by the economy and/or channelled by the

state was instrumental in the management of class relations. Firstly, money-capital flows, by

maintaining high equity and real estate prices, favoured exacerbated elite consumption. Indeed, the

largest property increases were in the prices of luxury houses in established suburbs, thereby

benefiting (mostly white) rich homeowners (Bond 2013). But price increases also concerned middle-

income properties of the middle-class (Pons-Vignon & McKenzie 2012). By maintaining high asset

prices, money-capital inflows were also instrumental in the second phase of the BEE, which started in

the early 2000s, and largely relied on financial market operations and merger and acquisitions

(Chabane et al. 2006; Ashman & Fine 2013). Secondly, money-capital inflows (and lower interest

rates until mid 2006) fuelled rapid credit extension to the private non-financial sector, most of it

directed to the household sector. This process was importantly facilitated by the state, which adapted

the regulatory framework to extend credit relations to the poor and to support the BEE policy. Key

regulations in that regard have been the 2003 Financial Sector Charter and the 2005 National Credit

16

Act, which aimed specifically at extending credit to the poor, the rural population, and other

marginalised groups. The priority of the act was much more to rapidly expand credit markets than to

protect consumers (Schraten 2014). Rapidly growing consumer debt was crucial to sustain increasing

household consumption expenditures. Households’ debt to disposable income jumped from 50% in

2005 to 80% in 2008 (Bond 2014: 181).

Money-capital inflows were also directly channelled by and through the state. They helped financing a

slightly expanded social wage, based on the expansion of the social grants programme, including

unconditional cash transfers to poor households with children, disabled people, and pensioners

(Interviews 8, 9; Bond 2014). Inflows were also channelled into large-scale infrastructure

development. These investments were responsible for the significant increase in rates of accumulation

in 2005-2008, as showed on chart 7. As the ANC government channelled large money-capital inflows,

it increasingly presented itself as a developmental state. Indeed, after 2004 the developmental state

rhetoric became omnipresent in ANC and government documents (Netshitenzhe 2011). Large-inflows

were therefore instrumental in the ideological representation of the ANC government as a pro-poor

developmental state.

In order to sustain money-capital inflows, the ANC government maintained a conservative

macroeconomic policy framework, characterised by relative fiscal discipline and high interest rates.

The strongly appreciating currency (chart 5) served as an anchor to control inflation (Interviews 1, 4,

6). The ANC government also took advantage of the boom in inflows to increase markedly the pace of

reserve accumulation, as shown on chart 14 below:

*Insert Chart 14*

Between 2005 and 2008, it continued to lift some CC, and transformed some of the remaining ones

into a system of reporting and monitoring of foreign exposures of institutional investors, moving

forward with the strategy of establishing an institutional framework for a risk-based approach to

financial regulation started in the early 2000s (Leape & Thomas 2011: ii; Interviews 3, 4, 10). The

foreign exposure limit on collective investment scheme management companies and for investment

managers was raised to 30% of total retail assets, with an additional 5% for portfolio investment in

Africa (SARB 2015).

CC during the post-crisis period

The boom in inflows, mediated by changing forms of CC, has made South Africa considerably more

vulnerable to volatile short-term money-capital flows, with far-reaching consequences for financial

17

instability and fragility (Mohamed 2012: 44; Ashman et al 2011a). These became increasingly visible

in 2006-2008, in the context of drastic currency depreciations (see chart 5), triggered by a combination

of factors: a sharp slide in gold prices, the official announcement of a record current account deficit of

7%, worrying household debt to income ratios, signals that the US Fed and the Bank of Japan were

going to end lax monetary policies, changes in the ANC’s leadership in December 2007, large-scale

xenophobic violence in May 2008, and the ‘recall’ of Mbeki in September 2008 followed by the

eruption of the global financial crisis (Dorsch 2006). Still, CC policies in the post-crisis period were

characterised by continuity and deepening (Interviews 3, 4, 5, 6, 7). A series of CC were lifted

between 2009 and 2011 in order to benefit from the global money-capital flow ‘bonanza’ of the

quantitative easing era, and continue the channelling of money-capital flows following the modalities

previously described (Interviews 8, 9). Measures mainly consisted in reducing ‘red tape’ regulations on

capitals and private individuals for outward investments as well as significantly increasing the

investment allowance abroad (with an additional allowance for investment towards the African

continent, consolidating and deepening the continental financial hub strategy). The shift towards

macroprudential regulations for institutional investors was also continued, and accompanied with the

authorisation for resident capitals, trusts, partnerships and banks to participate without restriction in

the rand futures of the stock exchange in order to manage their foreign exposure (SARB 2015). In July

2010, a second tax and foreign exchange amnesty’ programme was introduced (the Voluntary

Disclosure Programme), as part of the move to continue capital-account liberalisation (Ashman et al.

2011b). The Treasury also extended funding assistance to the SARB in order to slightly accelerate the

policy of sterilised reserve accumulation (see chart 14 above).

South Africa attracted large but highly volatile inflows, driven by bond flows (associated with carry

trade operations), as shown on chart 4. Their acute volatility was due to external events (such as the

FED ‘taper tantrum’ and the worsening of the Eurozone crisis in mid-2011) but also to social and

political unrest in South Africa. This included the so-called ‘service delivery’ protests (due to poor

municipal services and lack of housing for the poor), a massive (and successful) public sector strike in

2009, demonstrations against the 2010 World Cup, and shack dwellers social movements in urban

peripheries such as Abahlali baseMjondolo in Durban struggling for the right to the city (Hart 2013;

Pithouse 2009). Money-capital inflows further slowed down from 2012 onwards, as the global

commodity boom came to an end, and in a context of growing tensions within the ruling Tripartite

Alliance (ANC, SACP, COSATU), corruption scandals within government, the growing perception by

capital that the BEE policy constitutes an obstacle to accumulation, and widespread labour

insubordination in the platinum mining sector. This included the Marikana massacre and the large-

scale wildcat strikes that followed (Bond 2014). In an attempt to sustain inflows, tighter monetary and

fiscal policies were implemented, as well as a new set of measures to relax and simplify CC, for both

large capitals and private individuals between 2012 and 2014.

18

Conclusion

The article provided an analysis of CC in South Africa since the 1930s, considering the

historical-geographical specificity of capital accumulation. The high degree of dependence on the

world market (and in particular ground-rent and money-capital flows) has made accumulation weak

and vulnerable. This dependence has historically manifested itself as repeated crises under various

forms (sovereign, financial and monetary crises), with enormous influence over the modalities through

which the South African state has politically contained and integrated labour. Different forms of CC

have been deployed and adjusted to both attract money-capital flows (depending on their availability

on the world market), and to facilitate the crisis-led reproduction of money and the state (for instance,

by occasionally curtailing large-scale capital flight). Put differently, CC have been the concrete

historical forms through which the South African state has mediated the self-contradictory mode of

existence of money-capital, that is, money-capital as a source of social wealth that can be distributed

to various social subjects, and as the expression of the disciplinary power of capital-in-general. This

contradiction, immanent in the form of money-capital, cannot be solved. It can only be mediated in

different ways by various concrete historical political forms. The following quote by Mandela (from a

1992 speech), is an excellent recognition of this contradiction, and how it is experienced by policy-

makers as a trade-off: ‘In order to attract foreign investment we will abide by all internationally

recognised standards that are consistent with our objectives of growth with equity’ (emphasis added).

By contrast with capitalist elites’ usual framing of the CC debate in highly technical terms, the class

analysis has highlighted the active (though indirect) role of working classes in shaping CC policies.

This has primarily taken two forms in South Africa: 1) events of the class struggle triggered acute

episodes of capital flight, forcing the state to design and implement CC to prevent the large-scale

outflow of resources, help managing the balance-of-payment, and facilitate the regulation of money

and the public debt; 2) working classes also had an indirect influence on the design of CC, through the

various state attempts at controlling and integrating them. Accordingly, the paper has shown that there

has been nothing inherently progressive about South African CC. In fact, CC have been instrumental

in facilitating the crisis-led reproduction of essential capitalist social forms, namely the state and

money. Consequently, the challenge for the Left and working classes in South Africa and elsewhere, is

to move to a more direct role in shaping CC policies, and to push for ‘transformative’ forms of CC, i.e.

CC that aim at transforming social relations and class configurations, and that empower labour vis-à-

vis capital (Epstein 2012; Dierckx 2015). While more policy-oriented research is needed to design the

appropriate arsenal of policy instruments that would fit that purpose in South Africa, my argument is

that it is possible, based on the above analysis, to identify a series of key (interrelated) objectives that

19

the CC would need to meet. Firstly, CC should aim at changing the modalities through which the

disciplines and vagaries of the global economy are transmitted to South Africa, in order to limit the

extent to which the state can use this objective external constraint to shift the burden of deflationary

adjustment onto the working class, through contractionary fiscal and monetary policy. This would

include measures that aim at curbing the speculative determination of the exchange rate, and in

particular the impact of arbitrage and carry trade operations (CC on both portfolio inflows and

outflows and on external bank loans, tight limits on financial actors’ foreign exchange exposure, and

regulations on foreign exchange derivatives transactions), but also measures that aim at reducing the

reach and depth of money-capital in South Africa (measures to limit foreign ownership of financial

assets, tighter financial and macroprudential regulations, and controls on credit extension,) in order to

tame the impact of brutal capital-account reversals. This combination of measures would provide more

leverage for labour to struggle over the form of macroeconomic policy.

Secondly, a key objective would be to transform the mode of external integration into the world

economy. As previously shown, the high degree of dependence on short-term money-capital inflows,

which forces the state to make South Africa an attractive platform for the valorisation of fictitious

capital, has been engineered and maintained by a series of state policies, including CC. Transformative

CC would aim at reducing this degree of dependence, by preventing the sustained and long-term

outflow of resources (through profit repatriation, interest payments, and illicit capital flight), and by

changing the structure of the balance-of-payments. CC, combined with active sterilised foreign

exchange intervention (financed by taxes on financial transactions and other forms of progressive

taxation), would be instrumental in maintaining a more competitive and less volatile exchange rate for

the purpose of improving the trade balance.

Finally, the current configuration of the macroprudential regime (and the special outward allowance to

other African countries) has been geared towards absorbing large-scale inflows and facilitating the

financialisation and internationalisation of the MEC and its predatory expansion on the African

continent. While those regulations should not be jettisoned, since they have proved useful in

maintaining a certain level of financial stability and in absorbing external financial shocks, they should

be transformed into a regime characterised by continent solidarity, to create some degree of regional

isolation against the volatile movement of global money-capital, and harness regional resources for

pro-labour development.

Notes

Interviews (anonymised)

20

1 – Head of Financial Analysis and Public Finance, Reserve Bank, 7.10.2016

2 – Senior Economist in charge of exchange controls, National Treasury, 12.10.2016

3 – Chief Director for financial markets and stability, National Treasury, 18.10.2016

4 – Senior Deputy Head of the Research Department, Reserve Bank, 18.10.2016

5 –Head of Department, Prudential Policy, Stats & Support, Reserve Bank, 18.10.2016

6 – Senior Economist, Financial Stability Department, Reserve Bank, 18.10.2016

7 – Head of Research and Policy Development, Reserve Bank, 25.10.2016

8 – Deputy Governor and Registrar of Banks, Reserve Bank, 2.11.2016

9 –Deputy Director General at the Budget Office, National Treasury, 22.11.2016

10 – Head of Financial Stability, Reserve Bank, 24.11.2016

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CHARTS

24

1945 to 1970 1970 to 1980 1980 to 2000 2000 to 2011 2011 to 2015

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Change in real prices of key mining commodities

CoalIron oreGoldPlatinumCopperSteel

Chart 1: Average annual change in prices of a series of key mining commodities 1945-2015 (source: own elaboration based on data in Jacks, 2013, suggested by Neva Makgetla, personal correspondence)

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

10

15

20

25

30

35

Productive capital accumulation 1960-1995

% o

f GD

P

Chart 2: Gross fixed capital formation as % of GDP in South Africa 1960-1995. Polynomial Trendline. (source: own elaboration based on World Bank Development Indicators)

25

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

0

2

4

6

8

10

12

14

16

18

20

Inflation rates (CPI index)

Ann

ual g

row

th r

ate

%

Chart 3: Inflation growth rates % in South Africa 1968-1996 (source: own elaboration based on World Bank Development Indicators)

26

19851987

19891991

19931995

19971999

20012003

20052007

20092011

2013

-100000

-50000

0

50000

100000

150000

200000Capital flows to South Africa 1985-2014

Inward FDI

foreign portfolio investment

Foreign other in-vestment

net capital account

R m

illio

ns

Chart 4: Net Capital Account and composition of foreign money-capital flows 1985-2014 (R million) (source: own elaboration based on SARB data)

27

01-199

4

01-199

5

01-199

6

01-199

7

01-199

8

01-199

9

01-200

0

01-200

1

01-200

2

01-200

3

01-200

4

01-200

5

01-200

6

01-200

7

01-200

8

01-200

9

01-201

0

01-201

1

01-201

2

01-201

3

01-201

4

01-201

5

01-201

650

60

70

80

90

100

110

120

130

140

Rand real effective exchange Rate 1994-2014

Inde

x 20

10=1

00

Chart 5: Rand real effective exchange rate 1994-2014 (source: own elaboration based on BIS data)

28

1994

-01-01

1994

-11-01

1995

-09-01

1996

-07-01

1997

-05-01

1998

-03-01

1999

-01-01

1999

-11-01

2000

-09-01

2001

-07-01

2002

-05-01

2003

-03-01

2004

-01-01

2004

-11-01

2005

-09-01

2006

-07-01

2007

-05-01

2008

-03-01

2009

-01-01

2009

-11-01

2010

-09-01

2011

-07-01

2012

-05-01

2013

-03-01

0

5

10

15

20

25

Nominal Interest rate

%

Chart 6: Discount rate of the SARB 1994-2013, monthly observations (source: own elaboration based on data from the IMF)

29

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

10

12

14

16

18

20

22

24

26

Productive capital accumulation 1995-2014

% o

f GD

P

Chart 7: Gross fixed capital formation as % of GDP in South Africa 1960-1995 (source: own elaboration based on World Bank Development Indicators)

30

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

Accumulation of fictitious capital 1991-2014

Market capitalisa-tion

Credit to non-financial pri-vate sector

Public debt

% o

f GD

P

Chart 8: Accumulation of the three ‘elementary forms’ of fictitious capital in South Africa (source: own elaboration based on World Bank Development Indicators)

31

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%Current and Capital accounts, South Africa 1985-2015

Current account balance

Capital account balance

% o

f GD

P

Chart 9: Evolution of the Current and Capital Accounts in South Africa, 1985-2015 (source: own elaboration based on SARB data)

32

1990/01 1992/04 1995/03 1998/02 2001/01 2003/04 2006/03 2009/02 2012/01 2014/04

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

Composition of the Current Account

Balance on Cur-rent Account

Trade Balance

Net Service, Income and Current transfer payments

% o

f GD

P

Chart 10: Composition of the Current Account in South Africa, 1990-2016 (source: own elaboration based on SARB data)

33

Q1-200

0

Q4-200

0

Q3-200

1

Q2-200

2

Q1-200

3

Q4-200

3

Q3-200

4

Q2-200

5

Q1-200

6

Q4-200

6

Q3-200

7

Q2-200

8

Q1-200

9

Q4-200

9

Q3-201

0

Q2-201

1

Q1-201

2

Q4-201

2

Q3-201

3

Q2-201

4

-4

-2

0

2

4

6

8

10

12

14

16

Inflation rates (CPI index)

Ann

ual g

row

th r

ate

%

Chart 11: Inflation growth rates % in South Africa 2000-2014, Target range of 3-6% (source: own elaboration based on World Bank Development Indicators)

34

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

-2

-1

0

1

2

3

4

5

6

Annual GDP Growth rates

%

Chart 12: Annual GDP growth rates in South Africa 1995-2015 (source: own elaboration based on data from the World Bank World Development Indicators)

35

1994

-01-01

1995

-02-01

1996

-03-01

1997

-04-01

1998

-05-01

1999

-06-01

2000

-07-01

2001

-08-01

2002

-09-01

2003

-10-01

2004

-11-01

2005

-12-01

2007

-01-01

2008

-02-01

2009

-03-01

2010

-04-01

2011

-05-01

2012

-06-01

2013

-07-01

2014

-08-01

2015

-09-01

0

20

40

60

80

100

120

140

Residential Property Prices

2010

= 1

00

Chart 13: Monthly residential property prices in South Africa 1994-2015 (source: own elaboration based on data from the Bank of International Settlements)

36

2000/01 2001/09 2003/05 2005/01 2006/09 2008/05 2010/01 2011/09 2013/050

100000

200000

300000

400000

500000

600000

Stock of foreign exchange reserves

R m

illio

ns

Chart 14: Total gold and other foreign exchange reserves of the SARB 2000-2014 (R millions) (source: own elaboration based on SARB data)

37

38

1 See for instance, the compelling case for ‘locking capital down’ in Bond (2003).2 I thank the Editors, Reviewer 1 and particularly Reviewer 3 for this crucial point.3 I conducted 42 interviews with diverse social actors from government and the Reserve Bank, different sectors of capital, organized labour, international financial institutions, and researchers. Only those cited appear in the references.4 This section does not provide an extensive review of the literature. Rather, the purpose is to identify three broad types of contributions, and to position the present paper within those.5 For a general characterisation of such form of accumulation, see Caligaris (2016).6 The Union of South Africa was part of the British colonial Sterling area.7 Interviewees 5 & 10 have called this ‘Afro-pessimism’.8 Particularly towards countries of the South African Development Community.