/ 26 September 2022

Clear vision led SA’s industrial revolution

Iscorsaldanhagi 0070415
Powerful plan: Saldanha Steel was originally formed as a partnership between Iscor and the Industrial Development Corporation and was arranged by Jan Smuts, below. Photo (above) : Dori Moreno

The troubles besetting Eskom raise questions about South Africa’s industrial future. A stable energy supply is an essential fuel for growth and prosperity. The prospects for expanding manufacturing are dim under the current climate of power cuts. Yet, without growth in the productive sectors of the economy, there can be no new jobs created sustainably. 

This year marks 100 years since the promulgation of the Electricity Act that came into force on 1 September 1922 to establish Eskom for the purpose of stimulating industrialisation and improving the welfare of the Afrikaner community. 

Before Eskom, mining companies had their own generation capacity, and power generation, in general, was decentralised at the local level, used mainly by coal and gold miners and for municipal services and tramways.

Jan Smuts had dreamt of South Africa as an industrial powerhouse that was not just known for its minerals. He was fixated on the idea of reducing dependence on the English-dominated mining sector. In the immediate, he was troubled by the “poor white problem” and sought to find a permanent solution that would confine this problem to the ash heap of history. 

In envisioning Eskom, his goal was to promote integrated industrialisation through cheap electricity, create full employment among Afrikaners, and ignite entrepreneurial activity among this community to ensure they permanently escaped the clutches of poverty. 

It is inconceivable that South Africa would have built any industrial capacity of note without cheap electricity.

The skill to create a complex energy utility was outside the country. Smuts turned to Hendrik Johannes van der Bijl to shoulder the task of creating the new utility and overcoming the fragmented generation of electricity, to the anxiety of municipalities, which would lose their revenue. 

Van der Bijl studied in Germany, where he obtained his PhD. At the time Smuts called him, Van der Bijl was plying his trade in America. He accepted the call to return to South Africa and aid its industrial development. 

It is worth noting that this industrial civilisation had its dark underbelly — it excluded the majority of Africans from electricity. The patterns of electricity consumption were skewed in favour of a tiny white community, and the gains of industrial production were distributed in favour of white-owned businesses.

In his book, Electricity, Industry and Class in South Africa, Renfrew Christie reflected on the inequities of that period: “Power reaches almost every corner of South Africa except the homes of most of the black workers and peasants”. 

Yet the creation of the power utility was revolutionary for its beneficiaries at that point in history. So successful was Van der Bijl in powering households and industries that the government asked him to start another state-owned company — a steel manufacturer. 

According to Alice Jacobs, his biographer, Van der Bijl persuaded the government to introduce a Bounties Act, which would effectively inject subsidies into state-owned steel production. In 1923 the Bounties Act was promulgated and paved the way for large-scale steel production. The ultimate goal of the government subsidy was to accelerate the development of local content. 

Today there is strong pushback against local content and a belief that South Africa can build new industrial capacity, including in new green industries, by becoming reliant on imports instead of developing a sound plan for local capacity. No doubt, it takes a while to build industrial capacities, but there has to be a burning intent to produce this with a clear, time-bound plan. 

Five years after Eskom was formed, a new bill establishing state-owned Iscor was promulgated and by 1928 Iscor was in business. Iscor stimulated many other steelworks in the country, especially components and intermediate products. These included bolts and nuts, pipes, chains, agricultural implements, ferro-alloys and plenty of others. 

At the time of the establishment of Iscor, the private sector was sceptical and hesitant to contribute to this endeavour. Business leaders held the view that South Africa would not succeed as a steel producer, that its climatic conditions were unfavourable, the country was uncompetitive, and it would not be able to weather the deluge of dumped steel, especially from Britain and Belgium. 

Dumping did occur, but this galvanised the state to impose tariff measures to protect steel production in South Africa. 

Thus import substitution industrialisation became the centrepiece of industrial development protecting infant industries from steel to chemicals, clothing and textiles, and, later, the automotive sector.

It is worth noting that Iscor came to life during inauspicious times — the world was going through depression and the poor-white problem in South Africa was intensifying with worrying signs of more political upheavals, especially against the backdrop of the 1922 labour strike that the Smuts government had quelled violently, and which cost him politically in the elections two years later.

The macro-economic conditions were inclement with high interest rates threatening to put brakes on capital formation. Yet there was no stopping the Afrikaner elite from pursuing its mission.

So determined was the government to build industrial capacity in South Africa, it reached out to the German government to send technical expertise to South Africa. The idea was that foreign experts would train South African workers so that the country would not be perpetually dependent on foreign skills and technologies. 

By the time World War II broke out in 1939, South Africa was in an advantageous position to be a pivotal actor in supplying goods to the battlefront. Van der Bijl assumed the powerful role as director general to coordinate supplies through a new state-owned enterprise, War Supplies, which, at the end of the conflict, helped to drive production for civilian use, producing items from electronic goods to clothing and textiles. 

This state institution also paved the way for medical science as the country expanded into the production of vaccines. 

Less than a decade after the end of the war, Van der Bijl was again asked by the government to create an industrial financing instrument to support the entrepreneurial activities of Afrikaners so that they would not be wholly dependent on the state. In 1940 the Industrial Development Corporation was formed, and it became instrumental in creating various industry initiatives, including Sasol. 

Some of the important lessons in this industrial trajectory included a commitment to a clearly defined vision. This was to create rival capital to the English businessmen who were hogging the mining sector, eliminate poverty among whites, restore their dignity and create a new class of entrepreneurs. 

The Afrikaner political elite imposed heavy taxes on the English mining industry to support an Afrikaner-led development path. 

Ideas and human capital played a vital role in this project. Afrikaner nationalism was hitched to a long-term industrial vision rather than as an idea for its own sake. Ethnic consciousness was mobilised to realise a grand industrial vision.

While history cannot be reconstructed, especially given its highly racialised nature, the state has a major role to play in forging economic inclusion and nurturing conditions for wealth creation among black industrialists and small and medium enterprises that are supported to integrate meaningfully into mainstream economic activities. 

For the state to succeed, those who run it must be motivated by a clear vision to overcome economic deprivations facing the black community and to build a thriving society, rather than be fixated on extracting rents for their personal benefit. 

They must also take seriously the importance of building bureaucratic efficiencies in the state by sourcing and deploying skills that are not defined by narrow party political affiliations. 

Mzukisi Qobo is head of the Wits School of Governance at the University of the Witwatersrand.

The views expressed are those of the author and do not necessarily reflect the official policy or position of the Mail & Guardian.