Structural Transformation, Economic Power, and Inequality in South Africa

Abstract

Abstract This chapter examines how economic power, understood as control over accumulation, has influenced the poor progress of structural transformation in South Africa, which, in turn, has impacted on inequality through income and wealth effects. The chapter argues that the failure to diversify and develop downstream capabilities in manufacturing in South Africa reflects, among other things, the entrenched advantages of incumbent upstream firms, as well as the lack of a policy agenda for transformation that incorporates a recognition of the economic power of these upstream firms. The inability to change the patterns of accumulation underlies the persistent inequality in income and wealth. The chapter involves an analysis of interests in the South African economy within key industry groupings (specifically the metals and plastics value chains) and how these interests have set agendas and shaped policy and regulation to set the rules of the game for the benefit of upstream firms. The analysis shows that economic structure is a source of economic power, and that the relative strength of the upstream industries means that their interests are better served than those of diversified downstream industries.