The industrial development corporation under apartheid: financing the industrialisation of South Africa 1940 to 1990

Abstract

As an agency of the state formed to finance industrial development, the IDC was an integral part of the South African variant of developmentalism and its abandonment. However, the IDC was required by its founding act to support enterprises that exhibit ‘economic merit’ when extending credit to clients. Relative to development banks in developmental states that were catalysts in the shrinking of the gulf between early industrialisers and their economies, the IDC was reliant on private capital and retained earnings for funding constraining its ability to offer concessionary funding which speeds-up industrialisation. Largely as an outcome of the compulsion by the corporation to maintain a strong balance sheet to please its funders, the IDC’s role in promoting industrial development without state funding was limited. The developmental impulse which was underpinned by solid economic growth in South Africa was most evident from the 1940s to the mid-1970s. By and large the IDC was an obedient agency of the state used as conduit for funding developmental projects like SASOL, FOSKOR and the textile industry. The textile industry was eventually included in the import substitution programme which began in the mid-1920s issuing from pressure applied by aspirant textile manufacturers coupled with interest coming from established foreign manufacturers. The state grudgingly altered its approach in favour of providing protection and entrusted the IDC to develop the industry through financing, supporting and transforming the industry. The formation of SASOL by the state underwent a challenging and costly phase which largely confined the IDC to the side lines except as a conduit for state financing of the project. The second phase, arguably the most developmental, saw the IDC in partnership with the state and SASOL, expand and diversify the chemical industry. The third and final phase was the creation of giant synthetic fuel plants in Secunda motivated by security concerns and financed by the state with the IDC playing the role of a facilitator. The rising levels of African urbanisation impelled the state to shift its focus away from developmentalism towards the security of the apartheid state. For three decades the IDC was a central state institution through which the state financed the industrial decentralisation programme. A key project of apartheid in the 1980s was the militarisation of South African society which extended to the economy as the state further strayed away from the developmentalism of the past. Partly conditioned by international isolation and sanctions the state and the IDC conspired to establish industries in support of the project. The IDC played a key role in the attempt by the state to transform the South African economy from the one governed by the logic of import substitution to an export-oriented one. Particularly after the 1960s the IDC increasingly became interested in boosting industrial exports as the iv state and the corporation sought to transform the manufacturing sector into an export-oriented one. However, the export promotion programme was overshadowed by security priorities and largely ineffective partly because it was poorly designed and starved of funding.