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The History of Business in South Africa

by Lisa-Anna Kolwa

 

The history of business in South Africa is both dynamic and fascinating, and includes the establishment of European settler communities, economic policies in the periods of segregation, the discovery of precious resources, rapid industrialisation, and the construction of bustling world-class cities. These and other factors have led to South Africa becoming a competitive player both with regard to global trade and the global economy.

 

In the 15th Century, the economy of South Africa was dominated by subsistence agriculture and hunting. Land was occupied by Bantu tribes under chiefs and wealth was measured by the number of cattle men owned. The 17th Century saw the landscape of the region beginning to change. In 1652, an expedition of the Dutch East India Company (VOC) reached Cape Point

and established a colony led by Jan van Riebeeck. The VOC was a trading house whose ships sailed the spice route to the East.

 

Settlement at the Cape was not its intention, for it merely wanted a port where passing ships could restock and find fresh food supplies en route to the East. Barter trade with the Khoikhoi people of the Cape included fresh meat and planted vegetables for farming. Relations among the Khoikhoi, the San people and the Dutch were not fluid and migrant labour had to be brought to the Cape in the form of slaves from Malaysia. These slaves were artisans and contributed to the developed clothing industry found in the Cape today. British, French and German migrants began to settle in the region, with the French Huguenots engaging in the production of wine. In Natal, the British colony began the production of sugar using indentured labourers brought from India.

 

In 1866, diamonds were discovered in the Northern Cape, with gold being discovered on the Witwatersrand in 1886. These discoveries were made inland in the independent Afrikaner republics of the Transvaal and the Orange Free State. This changed the economy of the region, attracting foreign interest. Diamond and gold rushes began and there was an influx of migrants of different nationalities from all over the world. With the arrival of Cecil John Rhodes, De Beers and Anglo American were formed. In 1894, he secured the passage of the Glen Grey Act, which imposed the payment of taxes, specifically among peasant farmers. The underlying intention of the Act was to force people to move to the mines. In the 20th Century, the British invaded the republics of the Orange Free State and the Transvaal, bringing them under British control and eventually integrating them into the Union of South Africa in 1910. As a result of this, there was an influx of international capital into the country for, among other things, financing the mines.

 

Black Africans were trained as skilled labourers on the mines and came from across Southern Africa. This conflicted with the interests of white miners, triggering a rebellion in 1922 around the gold mining centre of the Witwatersrand. This rebellion, known as the Rand Rebellion, was swiftly crushed, with many of the miners being sentenced to death. The Great Depression hit in 1927 and all sectors of the economy and South African society were heavily impacted. During the 1930s and 1940s, there was rapid industrialisation, which bolstered the mining industry. Gold, diamonds, coal and iron were mined and the importance of the agricultural sector diminished as the mining industry boomed. The white elected government that came to power in 1948 introduced the policy of apartheid, legislating racial divisions that maintained white economic and political supremacy and black subservience. This structure was proposed with the alleged intention of allowing each racial group to prosper amongst themselves but it also placed whites in positions of economic favour and political power, making the social structure and income hierarchy of the country a racially divided one.

 

Trade unions were allowed in industries, but blacks were only allowed to form such unions in the 1970s. The unravelling of apartheid began with international sanctions being imposed on the country, paving the way for liberation. However, the gold industry boomed in the 1980s, with the price of gold reaching record levels. The drying up of investments by influential institutions began to negatively affect the economy. Currency restrictions were imposed and companies were unable to invest abroad. They therefore used surplus funds to buy up businesses in numerous sectors of the economy. With the continuing decrease in international resources flowing into the country, the financial benefits of supporting the apartheid system and government began to prove detrimental. The economic and political system was no longer sustainable, and black liberation fighters were released from detention to guide the country to peaceful democratic elections in 1994.

 

The African National Congress (ANC) won the election, with Nelson Mandela being elected as the first democratically elected president. Historically, the ANC was a socialist party, but it chose to maintain a mixed economy and relaxed foreign exchange restrictions. The new government also embarked on reconstruction and development plans to improve the conditions of blacks. The system of black economic empowerment was introduced to balance the position of black Africans in the economy and employment. It required the transfer of certain white-owned businesses, including mining companies, to black ownership. The infrastructure developed for the needs of the mining industry and for maintaining internal security under white rule served as a vital platform for the further development of the country, making it a globally competitive nation. South Africa now has a sophisticated financial system that renders services to the rest of Africa. Foreign investment continues to flow into the country, and several of its major companies, including South African Breweries and Old Mutual, are listed on the London Stock Exchange.

 

annelizew@ceomag.co.za 

 

 

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