The Decline of the South African Economy

The Decline of the South African Economy

Edited by Stuart Jones

South Africa’s leading economists adopt within this volume a sectoral approach in their analysis of the drastic changes that have occurred within the South African economy since 1970. The book illustrates how, despite its sophisticated infrastructure, the South African economy has shared in the economic decline – resulting from misguided economic policies – that has been the experience of Sub-Saharan Africa.

Chapter 8: The financial sector, 1970-2000

Stuart Jones

Subjects: development studies, development economics, economics and finance, development economics


Stuart Jones INTRODUCTION In the last third of the twentieth century major developments occured in the financial sector, when both the functions and ownership of traditional institutions were transformed. Market forces were the driving force behind these changes, technology the instrument that made them possible and determined their timing. These 30 years may accordingly be divided into two periods, the years of comparatively little change from 1970 to 1990 and the years of more rapid change from 1990 to 2000. In the first period, banks, building societies and insurance companies continued along their traditional paths. In the face of declining real per capita incomes there was little pressure to innovate, though the growth of the previous decade made possible a functioning money market and an increase in the number of merchant banks. The commercial banks were also impinging more and more upon the traditional business of the building societies, and these changes in their functions, accentuated by the development of wholly-owned merchant banking and hire purchase subsidiaries led to changes in their structure. Bank holding companies became the norm. Life insurance companies were also increasingly making loans to their policy holders and looking for new ways to employ their assets, the most spectacular of which was the development of shopping centres and the most far-reaching, the ownership of the commercial banks. Tight exchange controls were responsible for many of these developments at a time of sustained poor monetary management. Yet, overall, the muted performance of the Johannesburg Stock Exchange in...

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