Restrict, regulate and reduce corporate power in South Africa’s food system

By Dr Stephen Greenberg

Dr Greenberg looks at the issue of corporate control and its impact on South Africa’s food system.

I attended a dialogue on corporate ownership in South Africa earlier this month, in Tshwane, hosted by Trade and Industrial Policy Strategies (TIPS). There was strong government representation at the dialogue, including from Treasury; Trade and Industry; Minerals and Energy; and Planning, Monitoring and Evaluation. Someone from the European Union was also there.

Corporate concentration is a topic close to my heart and to the work of the African Centre of Biodiversity. Simply put, my view is that corporations have way too much power. This has allowed them to place themselves beyond democratic control, to hoard resources and capital, and to stunt the development of a broad-based domestic economy rooted in individuals and small economic collectives. It is evident that, in the era of neoliberalism since the 1970s, corporations have increased their power. They can dictate terms to states, and finance capital, especially, is free to flow with limited controls. Hence the often-cited “race to the bottom”, where states clamber over one another to create conditions conducive to capital investment, including flexible labour conditions, free and state-subsidised access to natural resources, and elimination of barriers to wealth extraction.

The stock market is often considered a proxy for the health of the economy, but Duma Gqubule from the Centre for Economic Development and Transformation, showed how the SA stock market does not have much to do with the national economy. He cited stats that over 70% of the revenues of the FTSE/JSE Top 40 companies are generated outside South Africa, and only a third of the assets of the Top 100 are in SA.

While the stock market is booming, the domestic economy is stagnating. Between them Gqubule, Neva Makgetla from the Trade and Industrial Policy Strategies (TIPS), and Thando Vilikazi and Simon Roberts from the Centre for Competition Regulation and Economic Development (CCRED) at University of Johannesburg indicated that the largest companies in South Africa are hoarding capital reserves, while domestic investment is stagnant: investment is mostly outside the country. According to CCRED, foreign ownership in the JSE Top 50 was 42% in 2016, up from 4% in the 1990s. Wealth is being siphoned out of South Africa, without many obstacles.

One of the big questions is whether there is anything that can be done about this. According to Makgetla, South Africans should get real about what is possible. She refers specifically to the limits of states forcing their will on corporations, and says corporations have institutional capacity and economies of scale which South Africa needs. Further, many of these corporations are external multinationals for whom South Africa is a relatively small market. They do not have to invest in South Africa, there are other potential destinations.

At the same time, corporations operating in South Africa are compelled by global market discipline to adopt practices that maximise profits for shareholders. They need to do this to be fit for purpose for a globalised, neoliberal economy; they need to be efficient conduits for the circulation of capital to maximise extractable added value. In such conditions the state has relatively limited power.

We should break down the concept of corporation in order to assess their ability to move out of the country. It has different parts that are more or less amenable to being moved outside the country. Physical infrastructure cannot move and is therefore open to expropriation without compensation as a point of leverage. The technical skills network cannot move either, because it is embedded in the society in which it has developed. However, key individuals within these technical networks with specialised skills can leave, others need to be paid, and facilities must be maintained and developed. This means they can decay.

There are questions about how appropriate the corporate technostructure would be in conditions where the corporation ceased to operate it. In the seed sector, where the Africa Centre for Biodiversity does most of our work, rather than a centralised biotechnology infrastructure to produce GM seed for large-scale commercial production, it may be better to have decentralised, farmer-based community colleges, linked with in-field experimentation and staffed by farmers and professionals from the locality and beyond. These skills are available in South Africa and the region to be shared, and it would mainly cost travel and time. Corporate physical assets and technical networks are also more than just biotech, and certainly some of the technical skills (e.g. plant breeding, quality control) can be adapted for use in more localised contexts.

Another consideration regarding corporate capability to move out of the country is flows of finance, which is more challenging. If a corporation leaves, it also removes a flow of finance capital, including that invested in commodity production. This is probably the biggest power held by the corporations, even if they are not entirely in control of the global processes themselves. Therefore, any alternative plans must also consider alternative sources of finance or other means by which to facilitate production.

It was clear from the dialogue that there is no unified vision in government. The solutions discussed in the dialogue were in the black economic empowerment (BEE) framework, specifically black share ownership of corporations, formation of challenger firms to dominant incumbents, and supplier development. The corporate sector is the only game in town. No interventions were discussed outside the corporate core. This is the position even amongst the more progressive elements in and around government.

On ownership of listed corporations, Gqubule showed that black ownership in the JSE is very low, at less than 3%, after much effort. BEE Charters are not working, even on this measure. I would agree that deracialisation of corporate ownership is preferable to racialised ownership as we currently have it. But we also need to recognise the limits to change of ownership on its own. Corporations are structured into a ceaseless cycle of commodity production, extractable value added, and reinvestment of an expanded amount in production. This is the motor of capitalism, as Marx pointed out. Corporations are part of institutionalised global circuits of capital. Ownership changes will not change the logic.

Another idea was nurturing and developing (black- and women-owned) challenger firms to dominant incumbents in different sectors. This is still on the same corporate platform, unless the size of corporations is capped with a long-term goal of diverse small and medium businesses as the basis of the economy, rather than a few very large ones. This implies a different economic and technical structure for sure, but it is not impossible. Medium businesses can also pay taxes as a source of government revenue. This could feasibly be tested on the basis of proposed amendments to the Competition Act that seek to limit the negative impacts of corporate concentration and open opportunities for new enterprises.

Supplier development through integration into corporate value chains was the only suggestion with an SMME element. But there are limits to this model. Small suppliers are generally adversely incorporated, on corporate terms. The Walmart supplier development fund can be used as an example. Although they tried to support black smallholder farmers as suppliers, they eventually abandoned supplier development in agriculture. They could not realise the needed economies of scale, and it was costly to set up and manage. Ultimately, it was not conducive to the concentrated economic structure.

The government could adopt a three-pronged approach to corporations to restrict, regulate and reduce their power and domination in the economy.

Restrict means contain corporations to limited areas of operation. In the seed sector, this could mean restriction of corporate ownership of living materials to genetically-modified (GM) and hybrid varieties (and then later a programme to phase GM out of agriculture). Everything else could be released for royalty-free public use.

Regulate means ensuring there are tight regulations within the restricted areas of corporate operation, including health and safety standards, social and ecological sustainability, and knowledge sharing wherever possible. There could be a commercial threshold, under which royalties from intellectual property rights do not apply.

Reduce means cap the size of economic entities in a given sector to create space for the growth of domestic SMMEs, and economic activity outside the large-scale commercial core.

For me what was missing from the dialogue was what can be done by the populace and the government to build an alternative to the corporate model, looking at what is already there in the so-called informal sector as a material base, and building and nurturing diverse links rooted in justice, equity and sustainability. Surely this must be possible. I do not believe that, as a species, humanity is yet at the point where we cannot imagine the conscious construction of different ways of organising production and exchange. However, from what I gather, this view is not yet even part of the debate in decision-making circles.

The Africa Centre for Biodiversity is an NGO that looks at food and seed sovereignty issues from the perspective of the rights of the smallholder farmers in South Africa and other Southern, Eastern and West African states.

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Contributors

Dr Stephen Greenberg

Dr Stephen Greenberg has been doing research with the ACB since 2004, before joining the organisation part-time in 2013 and then full-time from 2017. He has a PhD from the Institute of Development Studies (IDS) at Sussex University, with an MA from Wits University. Dr Greenberg has more than 20 years of research and policy […]

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