Deconstructing Profitability under Apartheid: 1960-1989

This paper discusses trends in South African profitability between 1960 and 1989 (the last peak year before the release of Nelson Mandela in 1990). It is argued that where distributional conflict is a persistent feature of the economic historical landscape, or is claimed to be of central importance (as is the case with regard to the radical 'cheap labour' theory of capital accumulation and growth under apartheid), examining trends in profitability and the underlying forces behind it may be of some assistance to economic historians. Trends in the profit rate can be linked to institutional transformation, and deconstructing the profit rate can help isolate the relative importance of the profit share and productivity in shaping the rate of return for capitalists. The empirical analysis finds that there were different economic factors at work behind trends in profitability between 1960 and 1989, and that Marxist claims about cheap labour being the basis for supposedly rising profitability and growth under apartheid are not supported by the data. Rather, the paper highlights the role of falling capital productivity as the key determinant of falling profitability - developments which suggests that investment in the late apartheid period was misdirected in significant ways.