State Institutions and Development in South Africa: The Case of Two State-Owned Enterprises

Abstract

The debate on state institutions in the economic development of developing countries has been ongoing for the past three decades. In the 1980s, the debate was dominated by the importance of state-owned enterprises (SOEs) and transitioned to the privatisation of SOEs in the early1990s. The debate re-emerged in 2010 due to the increasing influence of Chinese SOEs in the global economy. While the corporatisation of SOEs led to financial results being the core measure of good governance and performance, balancing financial performance with societal socio-economic impact is necessary for developing nations as SOEs are established to stimulate social and economic development. This article uses secondary data to explore the social and economic impact of two South African SOEs—the Industrial Development Corporation (IDC) and the Development Bank of Southern Africa (DBSA)—to contribute to the ongoing debate on the importance of state institutions on the development of developing countries. The article demonstrates the criticalness of the IDC in stimulating the country’s industrial development capacity and structural transformation, whereas the DBSA provides infrastructure investment to enable structural transformation through an enabling development ecosystem. While contributing to the merits of the state and development, failures and areas of interventions are also discussed.