Apartheid SignA common part of the contemporary South African narrative is that the National Party and its policy of Separate Development – Apartheid – were ‘capitalist’ in nature. In fact, when commentators speak in favor of free market economics, they are quickly labelled as being defenders of white capitalist interests and seek to defend the white privilege which the capitalist Apartheid system has given white South Africans. As is so often the case, these statements are usually made without further elaboration, and are assumed to be true by default.

In this article I hope to show why this is a patently incorrect idea, with reference to the seven most obvious reasons explaining why Apartheid was not a capitalist system. The most substantive reasons will be listed last, and the less obvious reasons will be listed first.

7. Labor regulation

Under the current mass of misconceptions, an ignorant outsider will probably see Apartheid South Africa as a completely unregulated economy where laborers could be fired and ‘exploited’ by their evil employers on a whim. But upon further investigation, one comes across the Industrial Conciliation Act (28 of 1956), later renamed the Labour Relations Act (our modern-day equivalent bears the same name), which put many of the restrictions we experience today under the “workercentric” labor regime upon businesses in those days.

According to Leon Louw and Frances Kendall’s South Africa: The Solution, amendments passed in 1984 made employment contracts unenforceable in court unless they met specific criteria found in the Act. These criteria included “details of constitutions, accounting, office-bearers and so on.” The government was, obviously, and as will be seen in the following six reasons, a major player in the labor market.

Certainly, unlike in a capitalist dispensation where employment agreements would be the business of only the employer and the employee, the Apartheid government did not respect this relationship. The labor market was not a free one.

6. Job reservations and union restrictions

Continuing with the aforementioned Industrial Conciliation Act, which was one of the major pieces of legislation pulling the government into the economy to act as Racialist in Chief, it is notoriously known for its job reservation clauses. Many skilled jobs were reserved exclusively for white individuals as a result. The Black Building Workers Act (27 of 1951) was also an example of job reservation legislation, applying specifically in the construction industry. The Act further also prohibited the existence of interracial trade unions. All trade unions, black or white, were effectively weakened by the government as a result of this.

Contrary to popular belief, capitalism, or free market economics, is not anti-union. Employees’ associations, like employers’ associations, are natural and perfectly acceptable entities in free markets. While they will lack statutory authority and the ability to sow death and destruction wherever they please (as is the case today), they will have the opportunity to negotiate on behalf of workers and exploit their strength in numbers, to peacefully pressure the employers into positive action. The Apartheid government did not condone this, and like the Germans less than two decades prior to the passing of the Act, severely restricted the ability of unions to operate.

Whether or not the job reservations benefited whites at large is irrelevant for purposes of this article. Privilege can definitely exist in a controlled economy, and certainly, I believe some of this did go around in those bad old days. But unlike how many other South Africans react, I believe this is all the more reason for us to have a free market economy today, instead of doing exactly what the Apartheid government did.

5. Group areas

The effect of the group area laws on Cape Town.
The effect of the group area laws on Cape Town.

The hallmark of Apartheid was racial separation. In especially urban areas and “white areas”, something commonly referred to as “petty Apartheid” was practiced. In the heyday of Separate Development, blacks and whites under the Reservation of Separate Amenities Act (49 of 1953), could not use the same beaches, bathrooms, buses or benches (although this was relaxed from the late 1970s onward). Under the several Group Areas Acts, different racial groups had to live in separate residential areas and had to do business in separate business sections. Whites couldn’t establish businesses in Indian areas and Indians couldn’t establish businesses in white areas. Notably, this Act in particular forced especially black people to commute great distances from “their areas” to their places of work, often located in “white areas”. The pass laws regulated entry and exit from the different racial areas.

On the other hand, there was what was called “grand Apartheid”. Grand Apartheid envisaged a complete and total separation of the races of South Africa, with black South Africans confined to their “homelands” and white and colored South Africans in the remainder of the nation. Indians were for a long time merely regarded as temporary residents and were not part of this grand plan. Grand Apartheid was, however, soon discarded as a fantasy. Cheap labor was required and black South Africans had become deeply integrated into the “white economy”. While the homelands remained in existence until the election of the African National Congress in 1994, grand Apartheid was never to come even close to realization.

An essential part of capitalism is freedom to trade. Freedom to trade cannot exist without freedom of movement. The Apartheid government would not have this, though. Excusing the separation laws as being integral to “protecting” the culture and independence of every race, the Apartheid government placed ideology over economics. They made it impossible for persons to compete with one another in specific areas. This did not only mean whites and blacks couldn’t compete, but also meant blacks and blacks couldn’t compete. Under a draconian leasehold policy, black South Africans could acquire a piece of State owned property in a township and run a general store there – as an effective monopoly. No other general store could be established within several kilometers.

Arbitrarily segregating and separating individuals who would otherwise cooperate and compete with one another in the marketplace is not capitalist. It is also not necessarily fascist, socialist or communist. It is simply arbitrary racialist thought which cannot rationally be regarded as ‘capitalist’ or free market orientated.

4. Price control

Most politically conscious South Africans can at least name the racial legislation of the colonial and Apartheid eras of our history: Native Land Act, Immorality Act, Group Areas Act, etc. What is seen less often, though, are people familiar with a little thing called the Price Control Act (25 of 1964), which was passed two years after another less often cited law, called the Income Tax Act (58 of 1962). It is funny that the Apartheid government beat around the bush with the former – they may just as well have called it the Communistization Act.

That’s right, ladies and gentlemen, the Apartheid government controlled the prices of several goods. The Act even established something called the Price Controller’s Office, which was responsible for enforcing this unashamedly anti-market policy. In 1976, more than 200,000 prices were controlled. Luckily, many businesses were able to use the loopholes in the Act to escape their prices being set according to political considerations, by among other things, changing the name of their products as soon as their prices were set by the Price Controller.

With the custom of revolutionary governments adopting the methods of their predecessor oppressive governments in mind, the Price Control Act still exists to this day. It has been amended and now has a much more politically correct name (considering nobody wants to be labelled communist or fascist), the Sale and Service Matters Act. It is part of what is today known as the South African consumer protection law – now who can object to such a nice, people-friendly field of law?

3. Control boards

South Africa had around 25 agricultural control boards in the late 1980s. This is in addition to all the other industrial boards outside of the agricultural sector. These “[granted] insiders the statutory power to regulate the market to their advantage”, according to Leon Louw and Frances Kendall. South Africa also had a wealth of agricultural regulations. Permits, for example, were required to cut, process, transport or sell trees and timber. These served the interests of existing businesses and effectively killed small business competition. In addition to these industrial control boards, South Africa also had rent control, a distinctively social welfare statist policy, and undeniably anti-capitalist.

Thankfully, as one of their few good stories to tell, the African National Congress, after it was elected in 1994 along with President Nelson Mandela, dismantled much of the control board infrastructure. The ANC had pretty good market liberalization program at the time, which has since been watered down as more and more of South Africa’s problems are blamed on capitalism and “market failure.”

2. State corporations and monopolies

Many (basically all) of the state owned “enterprises”, or parastatals, of today were established by the Apartheid government. The Electricity Supply Commission (ESCOM, today know as Eskom), the Iron and Steel Corporation (ISCOR, today known as Mittal Steel), SA Transport Services (SATS, today known as Transnet), Department of Posts and Telecommunications (split up, still exists in the form of Telkom and the SA Post Office), and of course our two massive and most obvious leeches on the public purse, South African Airways (SAA) and the South African Broadcasting Corporation (SABC).

Most of these “companies” were also endowed with monopolies (something which is irrationally often blamed on the private sector) – the Department of Posts and Telecommunications, for example, had basically absolute control over all media-related matters in the country, along with the voice of the people, SABC. The SA Transport Services was responsible for controlling various national transportation networks – rails, airlines, harbors, roads and pipelines. In fact, no railway could be built without the consent of Parliament (pretty capitalist, huh?).

1. The National Party was elected on an anti-capitalist platform

It is the early 1920s, and the United Party of General Jan Smuts is in power. A socialist political party which most today don’t know ever existed, known as the Labour Party, and its leftist allies, are deeply upset. After the end of the First World War, material motives had dominated the political scene in South Africa; and black South Africans were becoming integrated into the economy at an unacceptable rate while white unemployment was rife. With many blacks having adopted European (“white”) customs and ways, they were no longer exclusively unskilled labor. This sent leftist chills down the spines of many a English and Afrikaner South African, who lobbied the government to defend their standardized wages and keep pay for blacks down.

With white labor being too expensive, the Transvaal Chamber of Mines – the capitalists – decided to lower costs of production in 1921. In practice, this translated into black miners being brought into traditionally “white jobs”, while the whites were sent packing. The unions and the left did not take kindly to this idea. Queue one of South Africa’s largest and most violent historical labor strikes: 20,000 white and 180,000 black workers put down their tools.

The left accused the Chamber of Mines of “representing capitalist interests.” They however did not let the government get away scott-free. The perception was that the Smuts Government was taking the side of the mine owners – the capitalists. During the strike, many of the workers planned a revolution to establish a “Worker’s Republic [based] on the Russian model.” Tielman Roos, National Party leader in the Transvaal, called a special congress between the Labour and National members of Parliament representing Transvaal’s constituencies. Although the Nationalists rejected the idea of a worker’s republic, they agreed in principle with the grievances of Labour.

Chaos in the streets of Johannesburg during the "Red" Rand Revolt.
Chaos in the streets of Johannesburg during the “Red” Rand Revolt.

The “Committee of Action”, an extremist wing of the socialist revolution, rebelled in Johannesburg, gaining control of several neighborhoods.  “Gangs threatened and intimidated scabs, Police and Bantu alike, and sang the Red Flag” according to my major source for this section, D.W. Kruger’s The Making of a Nation. Smuts proclaimed martial law, and armed clashes occurred between the government and the Committee in Benoni, Boksburg, Brixton and Langlaagte. The last socialist stronghold of Fordsburg, was shelled by the United Government with artillery. The Committee of Action’s leaders committed suicide, and the “revolution” was over. With 230 civilians and 50 police dead and many more wounded, the Rand Revolt ended on 15 March 1922.

The National Party and the Labour Party joined hands in placing sole responsibility of the tragedy on the shoulders of the Smuts Government for its support of businesses at the expense of the common worker. The Rand Revolt “cemented the forces of Labour and nationalism.” The “Pact” was formed between the two parties: they would cooperate in the coming election, opposing Smut’s United Party. From Kruger’s book:

“Although it was apparently based on hared of a common enemy [the United Party], its real foundation was a common economic interest. […] Hertzog’s [NP leader] pact with Labour was based on common material interests which vitally affected the future of white labourers and farmers alike, by far the largest class in the European community. […] What was of even more importance, the Hertzog-Creswell [Labour leader] agreement started the process of imbuing English South African Labour with the higher ideal of nationalism, whist Labour at the same time was impregnating Afrikaans nationalism with its own economic and social aims. […] [Smuts] had estranged English South African Labour by his pro-capitalist policy. He had estranged both nationalism and labour by his failure to protect white civilised labour.”

In the general election of June 1924, 63 Nationalist and 18 Labour members of Parliament, in coalition, replaced the United Party (which gained only 53 seats) in governing South Africa.

The United Party would again come to rule South Africa briefly during the Second World War, and afterward the National Party would be reelected on the same platform of protecting white interests, especially economic interests, from overwhelming black competition. The term “Apartheid” was coined by D.F. Malan to describe this revolutionary system.

There was nothing capitalist about the National Party’s platform in 1924 nor in 1948. Whereas the United Party and the groups which would later split off from it, including the Liberal Party and the Progressive Federal Party, exhibited some capitalist policies, the National Party was all about having the State involved in matters of the economy and business to “protect” their electorate. They, along with the Labour Party in the early 1920s opposed Smuts for the very reason that they saw him to be in cahoots with the capitalist class. It should therefore not surprise you that the most obvious reason that Apartheid was not capitalist, is because the National Party was originally never elected on a capitalist platform and rejected capitalism.

Conclusion

It should be clear from this article why the accusation that Apartheid was a “capitalist system” is simply nonsensical. It is perhaps one of the stupidest and most historically ignorant things for a person to believe, especially if that person is walking around in Che Guevara shirts, telling white South Africans to “check their privilege.” The Apartheid government was certainly not socialist, as it opposed equality, but it had a definite dash of nationalist socialism in there. It is a stretch to call the former regime fascist but clearly the State played a proactive and big role in the economy. Capitalism requires, specifically, the absence of the State in the market.

* My major sources in this article were:

  • South Africa: The Solution by Leon Louw and Frances Kendall
  • The Making of a Nation: A History of the Union of South Africa 1910-1961 by D.W. Kruger
Martin is the Academic Programs Director for Students For Liberty in Southern Africa (www.studentsforliberty.org/africa/). He is a co-founder and editor of the Rational Standard and the Editor in Chief of Being Libertarian (www.beinglibertarian.com). You can find him on Facebook or contact him via email at [email protected]