labour apartheid in south africa: a rent-seeking approach to discriminatory legislation*

LABOUR APARTHEID IN SOUTH AFRICA: A

LEG I SLAT1 0 N “ RENT-SEEKING APPROACH TO DISCRIMINATORY

BRIAN DOLLERY

University of New England

The agonising drama being played out on the human stage of modern South Africa continues to attract both media attention and popular sentiment in Australia and elsewhere. Largely overshadowed by current developments, including the ferocious political battle surrounding the question of economic sanctions, scholars of South African political economy have been examining the origins, nature and consequences of apartheid. The ensuing debate has been characterised by the development and refinement of two broad schools of thought. In crude terms, a conventional or ‘‘liberal’’ perspective attempts to provide a coherent account of South African history by construing the “irrational” racist policies of apartheid as dysfunctional to the “rational” forces of South African capitalism (Butler, Elphick and Welsh, 1987). A competing marxist or “revisionist” body of opinion tries to explain the historical evolution of events on the premise that the institutions of apartheid facilitate and enhance the expropriative power of South African capitalism (Murray, 1988).

The present paper attempts to provide an alternative third view of South African political economy by drawing on recent developments in the literature on public choice, and more specifically on the theory of rent-seeking behaviour. In essence, this approach seeks to extend the economic analysis of rational decision-making to the domain of political economy on the assumption “. . , that people should be treated as rational utility- maximisers in all of their behavioural capacities” (Buchanan, 1978, p. 17). Given constitutional arrangements in South Africa which have deliberately excluded black citizens from participation in the legislative process for most of the twentieth century, and the increased opportunities consequently afforded economic interest groups competing with, or employing black labour, a rent-seeking analytical framework appears to possess certain distinct advantages in an investigation aimed at explaining the evolution of discriminatory labour legislation. Thus, in common with the liberal thesis, such an approach would stigmatise the net outcome of statutory racial discrimination as welfare reducing for society at large, and in this sense characterise apartheid as dysfunctional to capitalism. However, insofar as asymmetrical access to political power along racial lines occurs in South Africa, unique scope existed for white economic interest groups to pursue their rational interests through rent-seeking aimed at securing special privileges in the use

”1 should like to thank the editors, a n anonymous referee, and Professor Malcolm Treadgold for very helpful comments on an earlier draft, as well as participants in a seminar a t the University of New England for their useful comments.

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of black labour. Consequently, viewed from the perspective of these white interest groups, the legislative edifice of apartheid functionally assisted rational maximising behaviour. In this latter sense, a rent-seeking approach shares some elements with the revisionist interpretations of South African historiography. Moreover, since it can be argued that in recent years both liberals and marxists have increasingly recognised the role of interest groups in South African political economy, a rent-seeking analysis attaching central importance to the rational behaviour of such interest groups forms part of the natural progression of the debate.

A number of scholars have already applied a rent-seeking framework to various unsettled issues in economic history with some success, and there exists an embryonic but nevertheless growing literature (Anderson and Tollison, 1984; Bates, 1981; Brock and Magee, 1984; David and North, 1971; DeLorme, Icamerschen and Mbaku, 1986; Ekelund and Tollison, 1982; North, 1979; North and Thomas, 1973; Olson, 1982). However, apart from some indirect allusions to rent-seeking in a few public choice oriented works on economic sanctions and disinvestment (Icaempfer and Lowenberg, 1986; Lundahl, 1984), the present paper constitutes the first tentative effort at providing an historical analysis of labour apartheid specifically in terms of rent-seeking behaviour.

The paper itself is divided into four main segments. Section I1 provides a brief overview of the two major approaches to South African political economy, and attempts to demonstrate a growing awareness by scholars from both schools of thought on the importance of interest groups. Section I11 surveys the nature and origins of the theory of rent-seeking. The analysis of the application of a rent-seeking framework to the historical metamorphosis of labour legislation in South Africa contained in Section IV is sub-divided into two components for expository and analytical convenience; more specifically, the investigation into vertical discrimination or the colour bar is separated from the examination of horizontally discriminatory legislation often termed influx control. The paper ends with a short conclusion which seeks to evaluate the relative efficacy of a rent-seeking explanation of labour apartheid.

11. PREVIOUS APPROACHES TO THE ECONOMICS OF APARTHEID

Scholars of South African historiography have conventionally adopted the perspective that the panoply of racial legislation embodied in apartheid would come into conflict with the rational market forces of modern capitalism as economic growth steadily increased the modern sector of South Africa’s dual economy. As Davenport (1977, p. 371) has argued, writers in this tradition are “. . . economic liberals who believed that the pull of the market would crush ideological racism and its supporting structure of pass laws and colour bars . . .”. While some envisaged this conflict in almost mechanistic terms (Hutt, 1964; O’Dowd, 1977), others were less optimistic and tended instead to view the process as ad hoc and piecemeal (Bromberger, 1977). The 1970s witnessed the emergence of a competing revisionist or marxist school of thought which essentially reversed the previously postulated relationship between apartheid and capitalism. Revisionists, like Johnstone (1970), Legassick (1974), Davies (1979), Yudelman (1984) and others, argued that capitalist development and apartheid policies formed a collaborative partnership which maximised the extraction of surplus value from the labour repressive South African economy.

1990 LABOUR APARTHEID IN SOUTH AFRICA 115

However, several recent contributions, especially Greenberg (1980) and Lipton (1986), adopt a rather more eclectic approach which may indicate that these hitherto rival explanations are not entirely mutually exclusive. Indeed, Lipton (1986, p. 365) explicitly recognises that the complexities of modern South African political economy require a synthesis of a t least some elements of the liberal and revisionist interpretations:

Apartheid cannot simply be explained as the outcome of capitalism or of racism. Its origins lie in a complex interaction between class interests (of white labour as well as sections of capital) and racism/ethnicity, reinforced by ideological and security factors.

The putative confluence of the two major paradigms has not gone unnoticed by some commentators on the current state of debate. Helliker (1986, p. 93), for instance, observes that “in many ways, Lipton’s historical analysis is similar to Greenberg’s . . . both writers using a top-down approach to history, focus primarily on the dominant classes”. One reason for the apparent convergence of the two approaches in some respects may reside in the difficulties both have previously experienced in conceptualising the role of the state in South African political economy. Moreover, there appears to be a growing awareness that capital (and labour) cannot be treated simply as monolithic in explanations of racial legislation and labour policy, and may often reflect divergent (and even opposing) interests. Thus, Lipton (1986, p. 5) appears justified in noting that “. . . the issue is now widely perceived as being a political struggle between different sets of economic interests, rather than a battle between archaic and progressive economic forces”. The revisionist tradition in particular has invested a good deal of effort in attempting to model the state satisfactorily within the framework of marxist analysis. The resultant debate between Poulantzians and “state derivationists”, which revolved around the notion of fractions of capital and the relative autonomy of the state, has not yet been resolved.’ This has led one disenchanted observer to remark on the similarities between the liberal and marxist perspectives as follows:

Nevertheless, a large proportion of the British neo-Marxists writing about South Africa are, to some degree, Poulantzas disciples, many of them self- avowed. The result has been a heavy emphasis on the struggles of ‘fractions’ for ‘hegemony’, which, though the terminology is different, is basically indistin- guishable from bourgeois part-political and interest analysis.

(Yudelman, 1984, p. 32) (italics added)

It can thus be argued that the considerable emphasis both traditions place on the variety (and often competing nature of) of interests contained within the conventional entities of capital, labour and the state provides prima facie evidence of their importance in any convincing account of South African political economy. Moreover, if such a conclusion is justified, then it provides implicit support for the use of a rent-seeking framework for the analysis of apartheid.

‘It can be argued some recent contributions to marxist literature on the state have yielded new insights which go beyond this debate, notably Bozzoli (1981), James (1984) and Yudelman (1984). The latter’s notion of “symbiosis” is illustrative of this contention. However, “such foci d o not, by necessity, take us fully beyond the Poulantzian-State derivationist debate” (Helliker, 1987, p. 121).


111. THE THEORY OF RENT-SEEKING

In orthodox economy theory the concept of economic rent is defined as that part of the reward accruing to the owner of a resource over and above the payment the resource would receive in any alternative employment. Given the assumption of maximising behaviour on the part of economic agents, and an absence of constraints on resource mobility, competitive markets will ensure the dissipation of rent in a manner which produces socially desirable outcomes. Under these circumstances, maximising behaviour by resource owners is no different from any other wealth maximising behaviour. However, once we adjust the social mechanisms within which this process occurs, the consequences of maximising behaviour motivated by the possibility of positive economic rent may be quite different from the perspective of society at large. According to Buchanan (1980, p. 4) “the term rent- seeking thus investigates the origins of, and competition for, artificially created rent, and not short-lived or quasi-rents which characterise dynamic market processes”. The existence of contrived rent implies the possibility of wealth transfers between individuals and groups in society, and rent-seeking behaviour encompasses attempts by economic actors at creating and competing for these wealth transfers. Rent-seeking consequently refers to “. . . the expenditure of scarce resources to capture an artificially created transfer” (Tollison, 1982, p. 579). Given the massive extension of state intervention in modern times, the primary source and focus of rent-seeking activity has not surprisingly been government- generated monopoly power.

The genesis of the modern theory of rent-seeking may be traced back to the theoretical framework provided by Gordon Tullock (1967) in a celebrated analysis of the welfare losses caused by theft. Further impetus came from Anne Krueger (1974) who christened the term rent-seeking to describe the generic range of behaviour exemplified by her investigation into competition for premium fetching import licences. Since that time, the literature on rent-seeking has been developed in three broad directions. On the one hand, public choice thinkers have pursued the manner in which rent-seeking arises through the political process, and considered how legislative and constitutional adjustments may limit the extent of rent-seeking behaviour (Buchanan, Tollison and Tullock, 1980; Colander, 1984). Secondly, international trade theorists, using the largely synonymous but possibly more universal term directly unproductive profit-seeking (or DUP), have adopted a more formalistic approach and sought to integrate DUP activity into the existing body of trade theory (Magee, Brock and Young, 1983; Frey and Schneider, 1984). And thirdly writers from the Chicago school have focussed attention on the process of regulation, and the impact of rent-seeking in this context (Posner, 1975; Stigler, 1982). By examining the ways in which economic interests have sought material advancement through the political mechanisms of the apartheid state, the present analysis falls squarely into the first tradition.

The employment of a rent-seeking perspective as an analytical device to explain the maximising behaviour of interest groups in the context of South African political economy is open to at least one serious philosophical objection which hinges on the relationship between rational individuals and interest groups.* In essence, this criticism represents a variant of the fallacy of composition insofar as it revolves around the problem of

*I am indebted to an anonymous referee for pointing out this problem by drawing attention to the inherent dualism implicit in modelling rational self-interest on the level of the individual and on the level of the group.


aggregating individuals with a similar maximand into a composite interest group. The problem possesses at least two dimensions. Firstly, individuals may be qualitatively different from those groups who share their given self-interest (Pirsig, 1974). And secondly, there is the question of the link between individual action, based on self-interest and guided by “narrow rationality”, and collective action necessary for the efficient operation of interest groups. This problem, which has plagued theorists from a wide range of social disciplines, represents the central problem of collective action “. . . or the Prisoner’s Dilemma, or the free rider problem, or the condition of common fate, depending on the context or discipline in which it is used” (Hardin, 1982, p. 7). Indeed, despite concerted efforts at solution, for instance, Hardin (1982), Margolis (1982), Olson (1965), Riker and Ordeshook (1968) and Schelling (1978), the problem remains unresolved. Nevertheless, numerous scholars including those in the rent-seeking tradition (Rowley, Tollison and Tullock, 1988) continue to employ interest group analysis as a means of explaining and predicting economic, political and social outcomes. The present study similarly adopts the concept of interest groups as a useful instrumentalist analytical device.

IV. RENT-SEEKING AND RACIAL LABOUR LEGISLATION

Perhaps the most important single feature of apartheid from a rent-seeking perspective resides in the systematically reinforced, racially segmented, asymmetrical access to political power in South Africa. With some notable exceptions prior to the gerrymandered Separate Representation of Voters Bill of 1956, all but white South Africans were excluded from representation in Parliamant until the constitutional reforms of 1983. Moreover, even during periods of representation from the time of Union in 1910 onwards, the political power of non-white groups remained severely constricted. Consequently, the nature and purpose of legislation emanating from the South African Parliament may be explained by the complex interplay of various interest groups drawn from segments of the white population. Although it is possible to identify numerous factions within the major interest groups, following Lipton (1986) we employ a fivefold classification for analytical convenience which comprises agriculture, manufacturing, mining, the state bureaucracy and white workers.

In order to explain one of the key elements of discrimination in South Africa, namely racially based labour legislation, it is instructive to examine the metamorphosis of labour law in modern South African history in terms of the efficacy of rent-seeking by the five major groups, given their changing interests and relative political power. As a means of reducing the material complexity of the analysis to manageable proportions, we employ Lipton’s (1986, p. 18) classification whereby racially discriminatory labour legislation may be categorised into two broad components.’ Thus, a distinction is drawn between vertical discrimination, colloquially known as job reservation in South Africa, and horizontal discrimination stemming from restrictions on the geographical mobility of labour. Before proceeding with the historical analysis, three caveats should be noted at the outset. Firstly,

’In fact, Lipton employs a more extended tripartite classification. More specifically, she uses the following classification: “A key feature of apartheid was the extensive system of controls over black labour. They can be divided into: (i) controls over movement, or horizontal controls; ( i i ) controls over the allocation of jobs, or vertical controls; (iii) other measures restricting workers’ rights” (Lipton, 1986, p. 18).


given the nature and diversity of the competing interests of the various rent-seeking and rent-defending entities, it is simply not possible to provide direct empirical estimates of the magnitudes involved. Consequently, indirect means of inferring the intensity of interest, and the ability to propagate these interests must of necessity be employed. Secondly, it should be stressed that rent-seeking per se can at best provide only a partial explanation for the evolution of discriminatory labour legislation; ideological, ethnic and other conside- rations cannot be entirely discounted. And thirdly, the analysis is confined to the rent- seeking and rent-defending activities of the five major white economic interest groups within the racially exclusive constitutional context of the South African legislature. Thus rent-seeking behaviour by black groups is specifically excluded from the investigation despite the historical existence of attempts by black South Africans to influence legislative outcomes by extraparliamentary means.4 The primary reasn for the omission of maximising behaviour by black interest groups resides in their singular lack of success (until fairly recently) in affecting the legislative process. Nevertheless, the exclusion of blacks from the analysis serves to emphasise further the partial nature of the present attempt at explaining the metamorphosis of South African labour legislation in terms of a rent-seeking perspective.

(a) Vertical Discrimination

Vertical discrimination in the labour market intended to preserve various occupations for members of specific racial groups has long been an important feature of South African employment patterns. Historically, vertical discrimination has appeared in two distinct forms. Firstly, direct discrimination embodied in colour bar or job reservation laws which expressly forbid people of defined racial groups from performing certain functions, like the Mines and Works Act of 1911 which reserved categories of work for white people. Alternatively, indirect vertical discrimination seeks to limit entry to particular skilled occupations by reducing the access of some population groups to the requisite training programs or by setting minimum educational standards disadvantaged groups find difficult to attain, such as the Apprenticeship Act of 1922. Generally, job reservation laws were employed to “protect” unskilled white workers whereas indirect vertical discrimination was usually enacted in order to reserve skilled occupations for whites.

The economics of both forms of vertical discrimination is straightforward. By artificially restricting entry on the basis of racial characteristics, the legislature effectively transfers wealth from employers and black labour to white workers in the shape of contrived rents. Consequently, on u priori theoretical grounds we can anticipate rent-seeking activity from white trade unions aimed at securing vertically discriminatory legislation, and rent- defending behaviour from employer groups with the opposite intent. Moreover, insofar as the state bureaucracy acts as an enforcement agency, it can be expected to form an alliance with unions to reap subsequent employment gains. The ensuing historical metamorphosis

4Modern South African history contains numerous instances of action by disaffected black groups which may be construed as attempts at influencing the legislative process. Notable examples in the post-war period include the “resistance” campaigns of the 1950s, the Sharpeville episode in 1961, the Soweto disturbances in 1976-77, and more recently, the 1984-86 civil unrest.

It is, however, difficult to discern the impact of these events on legislative outcomes in labour law. Indeed, with some exceptions, both liberals and revisionists have avoided explicit inclusion of the influence of black groups (Wright, 1977; Lodge, 1983).


of colour bar legislation should then depend on the relative political power of these various white pressure groups.

Unique amongst the European settler communities on the African continent, a substantial proportion of white South Africans belonged to the working class. In the aftermath of the “scorched earth” tactics of the Anglo-Boer War, the rindepest plague, several severe droughts, and the subsequent migration of poor white Afrikaners to the cities, a significant unskilled but nevertheless enfranchised white urban population came into employment competition with similarly unskilled black migrants, particularly on the goldfields of the Witwatersrand. The magnitude of this urban drift may be illustrated by the fact that whilst only36 per cent of whites were urbanised in 1890, by 1921 the figure stood at 56 per cent (Nattrass, 1981). Concurrent with the massive relocation of (unskilled) white labour, the structure of the South African economy was undergoing correspondingly dramatic changes. Consequent upon the discoveries of diamonds and gold, developments from the 1860s until the end of World War I witnessed a transformation from a n almost exclusively agrarian economy to a capitalist economic structure based o n mining and with growing manufacturing and service sectors. Thus, a t Union, mining, agriculture and manufacturing produced 28 per cent, 21 per cent, and 4 per cent of gross domestic product respectively (Nattrass 1981).

The transformation of the South African economy meant a substantial realignment of economic interests, and the migration of white voters away from rurally based agriculture towards urban mining and industry altered the political basis of power. Initially, the resultant and often violent conflict which occurred was fought mainly between white mineworkers seeking rents through the curtailmennt of black employment on goldmines, and mineowners attempting to minimise labour costs. Indeed, shortly after Union the mineworkers secured a partial victory in the form of the 191 1 Mines and Works Act which reserved certain categories of employment for white workers, a legislative measure strongly opposed by the Chamber of Mines. Following a series of strikes aimed at further entrenching the colour bar by establishing racial quotas, mineowners and mineworkers voluntarily endorsed the Status Quo Agreement in 1918.

The high point of the colour bar drama occurred in 1922. A substantial fall in the price of gold towards the end of 1921 and steadily rising production costs attendant inter alia on increased employment of relatively expensive white labour, and the subsequently sharply decreased profit margins induced the Chamber of Mines to withdraw unilaterally from the Status Quo Agreement, fire roughly one third of the white miners, lower the remainder’s wages, and hire additional black workers (Davenport, 1977). In terms of a rent-seeking perspective, this apparently provocative step can be readily explained. Given lower profits, the rewards accruing to potentially successful rent-defending activity had risen, thus justifying potentially higher rent-seeking costs. These drastic measures by the Chamber of Mines, which were accompanied by similar efforts a t lowering labour costs in both coalmining and engineering, served to ignite and unify white workers. The result was the Rand Rebellion of 1922, a n armed insurrection of the white working class which was crushed by large scale military intervention.

The demise of lawful interaction amongst the primary interest groups comprising the demand for labour regulation caused crucial rearrangements in the governing coalitions dominating the supply of legislation. Until the 1924 elections, South Africa had been led


initially by the South African Party and (in the term of office just prior to the election) a combined South African Party/Unionist Party government, the latter largely representative of mining capital interests. The events of 1922 destroyed the uneasy balance of interests between capital and labour within the governing South African Party which suffered a defection of support to the Labour and National parties representative of white labour and agriculture. The electoral victory of these parties in the 1924 election and the formation of the so-called “Pact” government marked a watershed in South African politics. From this point onwards until the 1970s, the supply of vertically discriminatory legislation was never successfully contested since the interests of white labour predominated in the deliberations of successive parliamentary administrations. Thus “after the traumatic events of 1922-24, mineowners realised that the job bar was ‘simply not an agenda item’, and acquiesced in it” (Lipton, 1986, p. 115). The subsequent enactment of the Mines and Works Amendment Act in 1926 which further entrenched the position of white workers consequently serves as a benchmark in modern South Africann political economy.

Although the primary impetus for racial job reservation originated in mining, with the 1926 legislation setting the pattern for employment for the next four decades, the incentives confronting competing interests in manufacturing approximated those in mining. In other words, white unions attempting to maximise their incomes possessed similar incentives to white mineworkers to engage in rent-seeking, and manufacturing capital endeavouring to minimise labour costs had a rational interest in rent-defending activity. Moreover, given the higher skill content of manufacturing employment and the consequently initially higher proportions of white workers (roughly 40 per cent to World War 11), it can be argued that the returns t o rent-defending by capitalists would be larger in manufacturing. It is thus puzzling at first sight that n o statutory colour bar existed in manufacturing until the 1956 Amendment to the Industrial Conciliation Act. Two factors can explain this apparent anomaly. Firstly, Lipton (1986) has demonstrated that some legislation enacted by the Pact government did secure preference for white workers in sectors other than mining. And secondly, manufacturing capital substituted relatively low return rent-defending in the sphere of labour legislation for potentially more rewarding rent-seeking aimed at tariff protection. I t can be argued that their success in this regard was largely dependent on the fact that their interests coincided with white workers in the manufacturing industry. Thus, while goldmines operated in perfectly competitive output markets, and consequently had n o alternative to rent-seeking and rent-defending in input markets, manufacturers behind tariff barriers could, and did, pass on some of the contrived rents of their white workers in the form of higher prices.

Unlike mining and manufacturing, or indeed any other sector of the South African economy, agriculture never experienced statutory vertical discrimination in any form. However, as we shall see, white farmers did benefit extensively from various kinds of horizontal discrimination of which they were staunch and consistent advocates. It is nevertheless surprising that the ability of agriculture to avoid job reservation has attracted hardly any attention from exponents of either the liberal o r revisionist approaches to South African historiography.’ One way of explaining this ostensible paradox lies in a n

’Generally, exponents of both the liberal and revisionist positions dismiss the question of vertical discrimination in agriculture by simply noting the chronic shortages of white labour in the agricultural sector. This ignores both the widespread existence of bywoners (sharecroppers), and the extensive urban drift by bywoners and other white farm labour consequent upon interalia wage competition with black farm labour.


examination of the supply of laws regulating black labour. From the time of the Pact government until the 1960s, the South African legislature was dominated by a coalition representative of the interests of farmers and white (especially Afrikaner) labour. Kinship relationships aside, agriculture supported white labour in its efforts to impose both vertical and horizontal controls in all other sectors, and in return received exemption from job reserwtion together with a highly favourable package of horizontal discrimination.

Sustained economic growth, particularly in the 1950s and 1960s, had a profound impact on the demographic characteristics of the various interest groups (especially white labour), and drastically altered the composition of output in the South African economy. Thus, whilst agriculture, manufacturing and mining produced 18 per cent, 18 per cent and 13 per cent of gross domestic product in 1950 respectively, the corresponding figures for 1970 were 8 per cent, 23 per cent a n 3 10 per cent (Nattrass, 1981). Similarly, the politically dominant Afrikaner population had experienced rapid upward mobility in the labour market. Giliomee (1987, p. 375), for instance, comments on this transformation as follows:

. . . [I]n the 1950s the majority of Afrikaners were insecure blue-collar workers or marginal farmers dependent on the state to maintain their living standards and social segregation. By the mid-l970s, however, a t least 70 per cent of the Afrikaners belonged to a relatively secure middle class.

A third significant development in the postwar period resides in the substantial expansion of the public sector, and concomitant growth of the state bureaucracy, largely responsible for implementing and policing the plethora of apartheid legislation emanating from National Party administrations from 1948 onwaids. Some idea of the massive extension of the state into the South African economy may be garnered from Abedian and Standish’s (1984) estimate that the public sectors’ share of national expenditure rose from 29 per cent in 1920 to 63 per cent in 1982, or a real growth rate of 6.2 per cent per annum.

The cumulative effects of these developments served to profoundly alter the nature of the demand for, and supply of, vertically discriminatory labour legislation. Firstly, significant change occurred in the composition and relative power of the interest groups comprising the aggregative demand for legislation. The decline of white labour and agriculture, to some extent offset by the heightened importance of an enlarged state bureaucracy with a distinct interest in the maintenance of discriminatory laws, was matched by a n increasingly influential manufacturing sector. Consequently, with the additional exception of mining where white unions still benefited immensely from job reservation, the demand for vertical discrimination had decreased. Furthermore, given a shift of interest of a significant portion of the (Afrikaner) electorate, public representatives would be subjected to less rent-seeking for vertical discrimination, and consequently the supply of discriminatory legislation should fall. Thus, it can be argued that a reduction in vertical discrimination should have taken place.

The new configuration of interest groups and the concomitant altered intensity of rent- seeking and rent-defending did indeed manifest itself in the sphere of vertical discrimination. A growing shortage of increasingly expensive skilled white labour prompted renewed rent-seeking especially by manufacturing capital which was partly accommodated by exemptions to colour bar legislation. Finally, the recommendations of the Wiehahn Commission regarding the notorious clause 77 of the Industrial Conciliation Act were accepted, and the clause revoked. With the demise of this legislation, the only


significant statutory job reservation which remained excluded non-whites from holding blasting certificates in the mining industry (Jowell, 1979). The latter remnants of vertical discrimination may be explained by the intransigence of the white Mineworkers Union and its pivotal position in electoral outcomes in some Transvaal mining constituencies. Indeed, after the scrapping of these remaining job reservation clauses in 1986, the governing National Party accepted the electoral consequences and lost these seats to the far-right Conservative Party.

(b) Horizontal Discrimination

In contrast to vertical discrimination, horizontally discriminatory labour legislation sought to regulate the stocks and flows of primarily unskilled black labour within and between the various sectors of the economy. Historically, horizontal discrimination has assumed two distinctive forms. Firstly, legislation aimed a t controlling the movement of economically active black labour from legally-created tribal homelands to various areas of the South African economy. The statutory mechanism for this kind of discrimination lay in the 1913 Native Land Act (and the updated 1936 Bantu Land and Trust Act) which defined the land rights of the African people. And secondly, enactments seeking t o determine the allocation of non-homeland blacks between the different productive sectors, notably the infamous “pass laws”.

It was argued earlier that the electoral victory of the Pact government in 1924 represented a watershed in the historical metamorphosis of labour legislation in South Africa. From that period until the 1970s, the demand and supply of vertical discrimination substantially lowered the potential returns to capitalists engaged in rent-seeking and rent-defending behaviour in this area. Consequently, it is not surprising that employers in the major sectors focused their attention on horizontal discrimination in a n effort to lower labour costs. Subsequent rent-seeking occurred largely between the various fractions of capital as they competed for cheap labour. The relative success of capital vis-2-vis white labour in the domain of horizontal discrimination may be explained on the basis of two factors. In the first instance, white workers had already secured some protection for their artificially contrived rents through vertical discrimination, and secondly, the employment prospects embodied in the administration of the panoply of horizontally discriminatory legislation enhanced the interests of the state bureaucracy. Thus, the incentives for these powerful groups to indulge in rent-seeking over horizontal discrimination were correspondingly low.

Whilst mining capital, with its labour intensive production techniques and (in goldmining) fixed output prices, had an acute interest in securing a politically contrived cheap supply of black labour, the same is true of agriculture, which, in addition to its characteristic labour intensity, also required substantial quantities of seasonal labour. The resulting clash of interest was therefore inevitable. Given the preponderance of relatively skilled coloured, Indian and white labour in manufacturing in the prewar period, it is assumed to have possessed a lower propensity to recruit unskilled black labour, although nevertheless desiring a cheap supply of urbanised black labour.

Given the vector of forces operating in the demand side for vertical discrimination, the resultant supply of such legislation represents a classic case of political optimisation in the face of rent-seeking. In effect, the consequent legislation attempted to create three segmented labour markets for unskilled black workers. Under the Natives (Urban Areas) Consolidation of 1952, a legal wedge was driven between black labour in urban areas, who

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enjoyed the right to work in these areas in accordance with section l O ( 1 ) of the Act, and blacks in rural areas, who were restricted to employment on white farms. Similarly, black workers resident in the tribal homelands could secure temporary employment as migrant workers in either mining or agriculture. And finally, foreign blacks from the nations surrounding South Africa were largely restricted to employment on the mines. Thus mining had to rely on homeland and foreign black workers, agriculture possessed near monopsonistic power over rural recruitment, and manufacturing could employ relatively more expensive (but also more skilled) urban blacks. Lipton (1986, p. 47) has provided an apt description of the black labour market prior to the 1970s:

Instead, there was a highly fragmented and rigid labour market, with the state intervening in a n attempt to channel labour from the reserves in three separate streams (to white farms, mines and towns) and to prevent movement between them, especially from white farms to the urban streams. The state also attempted to keep separate a fourth stream of foreign black labour which, from the 1960s, was channelled almost exclusively to the mines.

A proximate equilibrium between the demand and supply of horizontally discriminatory legislation along these lines prevailed until the early 1970s. The subsequent changes may be explained in terms of various pressures which altered the economic interests of the central interest groups involved, together with exogenous shocks affecting the competing parties.

The rapid economic growth which transformed the South African economy in the post- war era served to alter the interests of the dominant coalition in the demand for horizontal labour controls. The mining industry experienced three significant exogenous factors which modified their demand for black labour, and consequently the objectives of legislative rent-seeking. Firstly, the price of gold held constant a t US$35 per ounce since 1934, rose from 1970 onwards reducing the critical cost awareness in gold mining. Secondly, artifically low wages and the uncongenial social circumstances of migrant labour finally resulted in a series of riots in mine compounds over the period 1973 to 1975, and the departure of thousands of miners. And thirdly, the decision of both Malawi and Tanzania to stop recruitment, and the political turmoil following the withdrawal of the Portugese from Angola and Mozambique, forced a drastic reduction in the employment of foreign black labour; the number of black South Africans employed in mining rose from 81,000 in 1973 to about 230,000 in 1982 (Lipton, 1986). The Chamber of Mines thus confronted a substantially modified labour environment. More able, and now obliged to compete more vigorously for domestic black labour, mineowners moved to more capital intensive production which required a stable and relatively skilled workforce. Consequently, optimisation meant higher wages and a diminution in the use of migrant labour. It can thus be argued that mining capital n o longer possessed a rational interest in horizontal discrimination and accordingly engaged in rent-seeking aimed a t its demise.

Economic pressure also existed in agriculture. In particular, it is possible to identify two mutually reinforcing forces which served to alter the nature of the demand for labour. Embodied technological progress in agriculture increased the degree of mechanisation in the industry which, together with rising black labour costs attendant upon increased competition with mining, lowered the quantitative demand for labour and raised the qualitative or skill content. Thus, agricultural capital had a reduced need for influx control, and a consequently decreased interest in rent-defending.


Of the three major fractions of capital, manufacturing had all along possessed the least interest in the system of horizontally discriminatory labour legislation. Indeed, as the fastest growing sector of the post-war South African economy forced to recruit relatively expensive urban black labour, manufacturing had engaged in rent-seeking against horizontal discrimination long before either mining or agriculture. Moreover, higher wage levels in the latter sectors substantially increased the demand for manufacturing output and hence the derived demand for labour, intensifying manufacturing’s desire for the demise of influx control.

It is thus clear that by the early 1970s a realignment of interest had taken place amongst three of the four main elements comprising the demand for horizontal discrimination. The only major interest group still benefiting from this legislation was the politically crucial state bureaucracy which enforced it. The subsequent rather slow reduction in the supply of horizontal discrimination may be explained in terms of rent-defending by this white bureaucracy. It is thus not surprising that, beginning with the abolition of the Masters and Servants Act in 1974, it was only in 1985 with the report of the Presidents Council that horizontal discrimination finally ended.

V. CONCLUSION

The preceding explanation of the historical evolution of both vertical and horizontal discriminatory labour legislation employed the concept of maximising interest groups within the analytical framework of the theory of rent-seeking. In so doing, it was argued that rent-seeking and rent-defending by well-defined white economic interest groups generated a demand for, and supply of, statutory labour discrimination.

In the absence of any direct empirical estimates of the magnitudes involved, of necessity this implied the use of indirect inference about the intensities of interest of particular groups and their abilities to propogate these rent-seeking interests. Analytical procedures of this kind are open to charges of being simply exercises in ad hoc and ex poste rationalisation, rather than exemplifying predictive propositions (which are in principle a t least) capable of empirical refutation. To some extent, this problem is endemic to many areas of applied microeconomics including applications of the relatively youthful theory of rent-seeking, which presently possesses n o acceptable measure of rent-seeking activity (Tullock, 1988, p. 465). Moreover, with some exceptions (O’Dowd, 1977), the same charge may be levelled mutatis mutandis at other theoretical modes of explaining the evolution of the apartheid state and its panoply of discriminatory legislation. Thus far, neither liberal theorists nor their marxist contenders have, in general, provided testable hypotheses about South African political economy which are not capable of ad hoc salvation. Indeed, this may at least partially account for the continued co-existence of alternative paradigms attempting to explain a given set of historical circumstances. Moreover, if the central purpose of historical theorising is perceived as essentially storytelling consisting largely in the use of theory as a n organising device, then the problem itself may not be too acute.

Nevertheless an explanation of the metamorphosis of both vertical and horizontal labour discrimination which employs the theory of rent-seeking as its basic analytical vehicle appears to enjoy a certain degree of comparative advantage over the rival liberal and marxist interpretations. Unlike liberal approaches which emphasise the fundamental economic irrationality of the institutions of apartheid, the rent-seeking perspective demonstrates that despite the obvious aggregative misallocation of scarce productive


resources, the constitutional underpinnings of apartheid provided organised groups with appropriate political avenues for pursuing their rational interests. In this sense it provides a superior account of the longevity of racial legislation in South Africa. Similarly, in contrast to revisionist explanations, a rent-seeking approach experiences no difficulties with either racial competition within the South African working class or with parallel forms of conflict between different fractions of capital.

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labour apartheid in south africa: a rent-seeking approach to discriminatory legislation*

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