Preliminary findings and thinking on the financial system allocation of capital in South Africa

What role should the financial system and the intermediary structures play in national economic development? This presentation takes the position that, in order to be developmental, financial structures in developing economies must serve the productive structures of industry i.e. towards more rapid accumulation of fixed capital in productive industries.

And what role does the financial system play in the South African economy? It will be argued that the South African Economy has embarked upon a ‘financialised growth path’ which is directly at odds with the idea of sustainable economic development. Using a flow of funds analysis, we map out the allocation of capital across broad sectors of the South African economy to show that increasingly, private corporate businesses have been oriented towards the acquisition of financial assets over productive, employment generating,  investment.  South African Corporate Business increasingly resemble financialised corporations in the U.S  and other advanced industrial economies with a reorientation towards shareholder value, downsizing to core activities, internal financing of capital expenditures (which have fallen in aggregate) and increased borrowing for the acquisition of shorter term financial assets.

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Annet van Geen or Bram Buscher Roy Huijsmans