This report studies the transformation of South Africa’s monetary architecture—understood as a complex web of balance sheets that interlock via different credit instruments—from 1983 to 2024. The purpose of this investigation is to provide a new conceptual lens to investigate two large paradoxes that shape the macro-financial the post-Apartheid state: First, why is there persistent poverty and inequality in South Africa despite continuous attempts to change course since the end of Apartheid? And second, why is there persistent underinvestment and lack of infrastructure development during the post-Apartheid era despite phases of economic growth, credit expansion and financial development?
To explore these questions, we compile four idealized ‘maps’ of South Africa’s monetary architecture at four historical points in time—during Apartheid in 1983, after the original post-Apartheid settlement in 1996, after the banking crisis in 2014, and after the COVID-19 pandemic in 2024—and investigate the political-economic dynamics in between those moments. Our purpose is to get a sense of the specific ‘balance sheet configurations’ that characterized these different moments. This helps us unveil how the contemporary monetary architecture is still shaped by macro-financial path dependencies that persist despite the ‘Dawn of Democracy’ in 1994.
The report has been written with the help of a group of distinguished financial experts who have delivered working papers or given interviews. This has provided the basis to piece together the first systemic picture of the macro-financial dynamics that South Africa has been subject to. The approach involved piecing together—at a certain level of abstraction and with unavoidable simplification and idealization—how various balance sheets (and balance sheet categories—interconnect. To this end, we look at different classes of households (non-banked poor, banked poor, middle class, and elite), firms (small informal enterprises, small and medium formal enterprises, and different types of large firms), state-owned enterprises, banks, development finance institutions, pension funds, unit trusts and other shadow banks, the South African reserve bank, as well as the National Treasury.
We conclude that to alleviate poverty and inequality while triggering investment into gross fixed capital formation for the Just and Sustainable Transition, it will be necessary to reconfigure South African balance sheets in a way that overcomes the path dependencies inherited from Apartheid. As the way forward, we recommend a new policy approach to govern the monetary architecture as a complex adaptive system. We propose to start a process of ‘balance sheet reconfiguration negotiations’ with various public, private, and hybrid actors involved to generate a policy agenda that helps including more household categories into web of interlocking balance sheets; support the development of job-creating small and medium-sized enterprises; think of ways how existing cash pools can channel their funds to support domestic gross fixed capital formation as it was the case prior to the era of neoliberal financial globalization; and look for ways how existing (or new!) domestic balance sheets can positioned in a way that allows them to create credit instruments in a way that is conducive to the Just and Sustainable Transition.
Co-author:
Mark Swilling, Stellenbosch University
