Financial and Corporate Structure in South Africa

McKenzie, Rex A. (2016) Financial and Corporate Structure in South Africa. (Discussion Paper) Kingston upon Thames, U.K. : Faculty of Arts and Social Sciences, Kingston University. 25 p. (Economics Discussion Papers, no. 2016-05)


Concentration in the South African financial sector has its origins in three main influences that are all historical (i) the legacy of domination by a small number of large imperial banks, (ii) the struggle between English and Afrikaner capital and (iii) the statutory legislation that framed the operation of banks. In this paper we describe the part played by these three historical influences in the formation and development of the corporate sector in South Africa. One recurrent theme throughout the history is the relative position of the foreign bank and domestic bank in the local market place. We take up this theme and argue that the scale and extent of foreign bank operations in South Africa is far greater than estimates provided by the local authorities. We have found that the main vehicle in deepening the concentration of the sector has been the merger. In later sections of the paper we lay out how the amalgamation by absorption approach to expansion that has been a constant feature of the country’s business life comes together with a merger frenzy in the late 1980’s and 1990s that succeeds in further deepening concentration within banking, finance and industry. Last, we end with an analysis of industry structure by Johannesburg Stock Exchange (JSE) capitalisation between 1994 and 2011.

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