OWNERSHIP AND CONTROL IN SOUTH AFRICA UNDER BLACK RULE

Abstract

An article published in this journal three years ago defended the South African corporate ownership system with its five largest “groups” then exercising effective control over companies representing nearly 80% of the value of the Johannesburg Stock Exchange–as “an efficient outcome of a largely voluntary market process in which owner‐managers compete for capital supplied mainly by South African institutional investors.” This article extends the earlier analysis by noting that, since the beginning of black majority rule in 1994, the South African group system has adapted by finding ways for black entrepreneurs to participate in the control and ownership of major South African businesses. And such experiments in “black empowerment” have produced a number of notable successes. At the same time, the idea of investing in shares has now become widely accepted in black communities that once viewed the Stock Exchange as a bastion of exclusive white interests.The larger import of such changes is their apparent success in “legitimizing” the established financial structure for the new South Africa, thereby protecting a fundamentally market‐based system from potentially damaging intervention by the State. But if that system is to prosper over the longer run, economic efficiency must remain the primary goal; and, as share ownership spreads among the black community, it must become a more important source of black wealth than the successes of a small group of black entrepreneurs controlling large stakes on the JSE.