Indian Business in South Africa After Apartheid 16 November 2006

With

Vishnu Padayachee

Professor of Economics, School of Development Studies
University of Kwazulu Natal, Durban

Introduction

We consider here what has happened to one segment of South African capital since the demise of apartheid, the Indian businessmen of Kwazulu Natal [i] and especially of its principal port city, Durban. During the long nightmare of apartheid, South Africa’s Indians, a small minority constituting only 3% of the national population, suffered many restrictions on their development. They came to Natal a century and a half ago. For almost all of their time in South Africa they were victimised as non-whites (if not on the same terms as indigenous Africans), but they managed to build up a commerce which thrived within the limits of an inward-looking apartheid economy. In the 1990s, South Africa has become a representative democracy. Our investigation of some leading Indian businesses today shows how they have responded to this dramatically new situation, as well as to the changing conditions of a world economy entering a phase of major restructuring.

Our case study has its origin in a unique confluence of the two streams of migrants from Europe and Asia whose movement defined the formation of the modern world economy. Over a century ago, poor whites and Indian labourers, along with some British and Indian merchants, came in roughly equal numbers to live together in Natal. The discriminatory measures subsequently taken there were a pioneering example of that racial segregation which found its culmination inthe apartheid regime of the late 20^th century. Now, as spectacular evidence of the changed world of the 1990s, almost as impressive in its way as the fall of the Berlin Wall, the apartheid system in South Africa has been replaced by democratic government in the interests of the mainly black majority. The barriers separating rich and poor, black, brown and white, have come tumbling down, at least in theory. How South Africa fares in this abrupt transition has enormous implications for the rest of us. Divisions of wealth, race, age and gender are juxtaposed at close quarters in South Africa without the social insulation of geographical distance which permits indifference to global inequality.

Although the Indians of Kwazulu Natal have long taken on the character of a closed corporate community, they have been internally differentiated by religion, occupation and politics. By focusing on the detailed activities of some leading personalities of the 1990s, we hope to draw attention to this variety of circumstance, as well as to the new regime of economic possibility inaugurated by the demise of apartheid. A good number of Indian businesses have suffered reverses in the 1990s by failing to adapt to the conditions of a liberalised economy, as indeed have many working class Indians. But some individuals have responded with extraordinary success to the new opportunities of the post-apartheid era, forming alliances with old white money, black political power, foreign Asian capital and diaspora connections throughout theworld to dominate the home market and move aggressively abroad. For South Africa is both a hi-tech, financially sophisticated economy and an African country with a large reserve of relatively cheap labour. The Indian businesses that are emerging at this time reflect this dualism, adopting old and new strategies of accumulation.

In trying to make sense of this contemporary phenomenon, we have had in mind a much wider context of time and space, the trajectory of the Indian community, not only within South Africa, but in world history over a period which we think of as ‘the long twentieth century’, from the 1860s to the present day. [ii] South Africa has often been treated as exceptional, both by insiders and outsiders. But the country has been an integral part of world society, exhibiting some of its general characteristics in an extreme form. In the period of the modern world economy’s formation, South Africa not only supplied the gold that for a time underwrote international trade, but also was a pioneer of that imperialist racism whose legacy has not yet been expunged. Subsequently, the apartheid state became an exaggerated case of a worldwide pattern in which states acted to maintain the division between rich and poor by restricting their movement. Finally, the prominence of its leading politicians from Gandhi to Mandela owes a great deal to South Africa’s centrality in modern world history.

South Africa in the long twentieth century [iii]

We have found it helpful in organising our historical narrative to relate the local affairs of Kwazulu Natal to a periodisation of modern world history. We hold that the dominant social form of the 20^th century has been ’state capitalism’, the attempt to manage markets and accumulation primarily through the bureaucratic institutions of the nation-state. It is only possible to summarise our broader theoretical position here.

State capitalism originated in a series of political revolutions of the 1860s, embracing among other related phenomena the American civil war, Italy’s Risorgimento, Japan’s Meiji Restoration and German unification. At the same time a revolution in transport and communications (steamships, continental railways and the telegraph) opened up world markets as never before. [iv] The first world war revealed the powers of centralised bureaucracy to an unprecedented degree, so that the issue now became which form of state ö fascist, communist, welfare state democracy ö would rule the world. The co-ordination of economic policy between the leading states after the second world war gave rise to a general boom which faltered in the 1970s. Since then state capitalism has been subjected to the assault of neo-conservative liberalism and global money markets which culminated in the much more open world economy of the 1990s. The end of the Cold War and the revolution in digital communications [v] have further undermined the ability of states to regulate their national economies, so that we are entitled at the millennium to ask whether state capitalism is now on its last legs and what its successor is likely to be. This story may be summarised in the following periodisation:

1. 1860-1914 the formation of state capitalism

2. 1914-1945 the hot war to rule the world

3. 1945-1973 the golden age of state capitalism

4. 1973-2000 the stagnation and decline of state capitalism

The great contradiction of world society at the end of the 20^th century is that humanity is growing closer together and more unequal at the same time. According to the United Nations Human Development Report, [vi] the world’s 225 richest men (and they are men) own more than one trillion dollars, the equivalent of the annual income of the world’s 47% poorest people. The rate of car ownership in industrial countries is 400 per thousand, 16 in all developing countries. The rich pollute the world fifty times more than the poor; but the latter are more likely to die from the pollution. World consumption has increased six times in the last 20 years; but the richest fifth account for 86% of it. South Africa has some claim to being such a world in microcosm, being the Southern counterpart of an America which is itself currently setting new records in inequality. [vii] The traditional method for dealing with inequality has been to inject as much distance as possible between rich and poor. This was, after all, the aim of apartheid. As internal and external barriers crumble, South Africa offers a crucial test of our ability in the 21^st century to resolve the contradiction between social integration and escalating inequality.

After the second world war, South Africa’s ruling National Party set out to institute what they calledapartheid. [viii] Despite the close integration of people of European and African origin in the country’s economic system, they decided to separate the ‘races’. Establishingand maintaining such a system required the systematic use of force, although collaborators were, as usual, not hard to find. Internal resistance built up gradually and the rest of the world expressed variable degrees of outrage, eventually translated into an intermittent boycott. The South African experiment was ugly, but not the most extreme form of inhumanity known to the 20th century. Stalin and Hitler between them were responsible for much worse.

The apartheid principle is to be found everywhere in local systems of discrimination, more or less blatant. But there are also grounds for asserting that 20th century world society has been constructed along the same lines. Sir Arthur Lewis (1978) makes a plausible case for this as follows. In the decades leading up to the first world war, 50 mn Europeans left home to go to the lands of temperate zone new settlement and a similar number of Indians and Chinese (’coolies’) were shipped to the colonies as indentured labourers. These two streams of migrants had tobe kept apart since, although their work was often similar, whites were paid on average 9 shillings a day, Asians 1 shilling a day. And in the areas where Asian workers were allowed to settle, the price of local wage labour was driven down to the same level.

Lewis goes on to argue that this division of the world by western imperialism into countries of dear and cheap labour had profound consequences for their subsequent economic development. For high wage economies sustain higher levels of demand than their low-wage counterparts. Moreover, world trade has been organised ever since in the interests of the better-paid, with tax-rich states subsidising their farmers to dump cheap food overseas at the expense of agricultural development there and preventing the imported manufactures of poor countries from undermining the wages of home industrial workers. South Africa and the United States were two countries which allowed heavy immigration of working class Europeans, while seeking to retain a reserve of poorlypaid, mainly black labour. The resulting dualism is inscribed on their shared 20th century history of racist urbanisation. [ix]

South Africa has, throughout the period from the 1860s to the 1990s, been at the centre of world historical trends. When the worldmarket was opening up under the stimulus of imperialism (1860-1914), South Africa not only contributed the gold which underpinned its monetary mechanism, but sustained two British wars, against the Zulus and the Boers, which led to the white compromise and racial exclusion of the Union in 1910. If the world turned inwards to state capitalism between the wars (1914-1945), so too did a South Africa which now adopted racial segregation even more explicitly as a way of managing its social contradictions in theface of large-scale African migration to the cities and global economic depression. In 1948, the Afrikaners achieved their own version of the anti-colonial revolution, claiming its privileges exclusively for their own use. The subsequent economic boom, building to remarkable growth rates in the 1960s, was accompanied by escalating repression, with opposition being effectively crushed after the Sharpeville massacre. [x] But from 1973, the South African economy went into a decline exacerbated by increasing global isolation and internal resistance. The crisis came to a head in the late 1980s with the result that we all know, a government dominated by the ANC since 1994.

The open world economy which stimulated so much international migration in the period before the first world war found in South Africa one of its engines and one of its most contradictory crucibles of imperialism. When state capitalism turned inwards and encouraged the myopia of national consciousness all over the world, this was particularly true of South Africa, the pariah state which dared to be different, while actually furnishing an uncomfortable reflection of universal social principles. If the second half of the 20^th century has seen a contrast between a period when state capitalism was strong and one marked by its decline, this contrast has been exemplified by the history of the apartheid state and its economy. Now, as the ANC faces the challenges of redressing the apartheid legacy in a world once more opening up to global markets, South Africa’s example is critical. We will return to this question in our penultimate section; but first we consider the history of Durban’s Indian community and the businesses they have launched in the 1990s.

The Indian community: politics and economy [xi]

The Indians of Natal came as temporary international migrants, settled in South Africa and, for some time now, have begun to leave as settlers elsewhere. For more than a century they endured a racial politics of segregation which forced them inwards to become a closed corporate community, a small minority squeezed between South Africa’s whites and blacks. The questions they face today, as individuals and collectively, have to do with rediscovering the capacity for movement in a more open world after having adapted to the institutions of closure for so long. Some elements of the Indian community are well-suited to this new phase; but many find themselves facing greater uncertainty with fewer resources than before.

The Indian people of Natal have always been stratified by language, religion, ethnicity and class. Early immigrants also belonged to various castes from Brahmins to Pariahs. The bulk of indentured sugar workers who came in the late 19^th century were Hindus, often Tamils, whereas the few independent merchants (who paid for their own passage and hence were known as ‘passenger Indians’) were mainly Muslims from Gujarat, habituated to the world of Indian Ocean trade. At the same time, the missionaries brought in, developed or converted from the ranks of indentured workers, a small clerical class of Christians who formed the bridgehead for what became a growing body of professional, educated Indians. Large numbers of labourers soon left indenture, but (despite pressure to do so) not South Africa. A class of ruralshopkeepers grew up (dukawallahs) serving poor whites as well as Indians and Africans; and the urban share of the Indian population rose sharply, especially in and around the port city of Durban. Some Indians found work in the mines of Northern Natal and various occupations in Transvaal; but eventually they were prevented by law from moving across provincial borders, thereby ensuring their concentration in the smallest of South Africa’s provinces.

Despite these differences in caste, class and language, mounting pressure from small white retailers and poor whites led to a situation where, legislatively, all Indians came to be classified in one ‘race’ category well before Union in 1910. And although the process was extremely complex, uneven and incomplete, their political and cultural resistance to an increasingly common oppression also led over the next century to a disintegration of caste differences and to closer co-operation and respect across class, language and religious divides.

From the beginning, what made the situation in Natal unique was the juxtaposition of Europeans and Indians of similar class and in similar numbers. [xii] While indentured Indian labour was vital to the wealthy European sugar barons of Natal, once Indians began to spread out from their initial seclusion in the sugar fields, they ran into Europeans in large numbers at all levels of society, but especially the smaller white retailers and poor whites whose skill levels were inherently no better than theirs. This was exacerbated by the fact that, for a variety of reasons, indigenous Africans, mainly Zulus, were on the whole detached from the colonial economy at this time, leaving the sugar industry and other wage employment opportunities to a minor stream of migrants from other provinces. In consequence, the race problem in Natal was at the beginning mainly one of whites versus Indians. Experiments in racial segregation pioneered there became the basis during the 20^th century for more thoroughgoing national legislation aimed principally at blacks.

The history of discrimination against Indians in Natal began early. Their merchants and shopkeepers were always able to undercut the prices of white commerce, since they worked harder and did not find it necessary to maintain a ‘civilised’ lifestyle. The Dealers’ Licences Act of 1897 was just the first of several measures aimed at reserving sectors of commerce for whites. At the same time a discriminatory £3 tax was levied on workers who finished their indenture contracts and refused to go home. Whereas the 1856 Charter of Natal gave the franchise to all adult males with some property, in 1865 all Africans were excluded from voting and the Franchise Amendment Act of 1896 froze the number of eligible Indians at the existing level of 250 men; 9,300 whites had the vote at that time. [xiii] Indians never had full citizens’ franchise before 1994 and the municipal franchise was soon removed from them in 1924, [xiv] even though they continued to pay rates which were often higher than those in white areas and receivedmuch lower levels of services. After Mohandas K. Gandhi arrived as a lawyer, at the request of the Porbander branch of a Durban merchant in his civil suit against another one in Transvaal, [xv] it took him over a decade to realise that the issue of discrimination was one affecting all Indians and, eventually, Africans as well. Thereafter, until he left South Africa for India in 1913, Gandhi was, of course, an important figurehead in the burgeoning resistance to racist rule. [xvi]

In the interwar period, the politics of segregation in Natal moved into the areas of residence and jobs. [xvii] The rhetoric of racism was always couched in terms of hygiene, that the civilised whites were in danger of pollution by ‘dirty coolies’; and this manifested itself as a sequence of ethnic cleansing initiatives in residential districts. The Indians, despite their legal insecurity, tended to invest in family housing and education (often building and maintaining community schools); but they were frequently moved out of where they had chosen to live in order to clarify the boundaries of ‘white neighbourhoods’. Many jobs too were reserved for whites of little or no skill, while others, usually the most menial, were reserved for blacks, confining Indian businesses into a shrinking sphere over which they had next to no say. The 1926 Industrial Conciliation Act (job reservations) was passed, whereas a 1923 Class Areas bill (residential segregation) was dropped after a change of government (and a measure of opposition from the South African Indian Congress). The Cape Town Agreement of 1926 allowed for the appointment of an Agent General from India, one of whose tasks was to supervise voluntary repatriation. Few people left.

The Indian people’s experience of the apartheid state in the period, 1948-1973, was ambivalent. Once again, residential areas in Natal were rearranged and large townships such as Chatsworth and Phoenix were built exclusively for Indians. But the community’s drive towards self-improvement through education and commerce was boosted by postwar economic conditions, especially in the 1960s which saw the establishment of an Indian university at Durban-Westville. It was one of the boasts of the National Party regime that the Indians were a great success story for apartheid [xviii] and this myth haunts the Indian community today, when they form a highly visible, but small minority of South Africans. Like most myths, there is some truth in it. Indian professionals and businessmen achieved a great deal in this period, although, as we will see, the conditions of the last quarter century have gone some way towards undermining the economic achievements of the postwar boom period. The establishment of a republic in 1961 did grant Indians full citizenship for the first time, although freedom of movement across provincial borders only came in 1972 and the establishment of a tricameral parliament excluding blacks in 1984 divided the Indian community.

Since the economic downturn of 1973, Indians have suffered some setbacks, although there has been substantial upward mobility. The squeeze on the South African economy described above affected Indian commerce and professional labour markets disproportionately. Since the 1970s, many Indian families have been pursuing a policy of selective or wholesale emigration, not back to India, but to Britain and the lands of white settlement, especially Canada, Australia and New Zealand and recently the United States of America. Many Indians have been to universities in the North and some of them have stayed there, othersreturning, as we will see. A few Indian businesses were able to benefit from close political relations with the apartheid regime to gain preferential terms for the conduct of enterprise in South Africa. This adds up to the formation of a substantial professional and commercial class which has been particularly prominent since the arrival of democracy in the 1990s. But there is also a large lower class of Indian workers whose jobs in vulnerable manufacturing industries have been undermined by the neo-liberal trend of tariff reduction and who fear the consequences of affirmative action favouring the African majority. It is not surprising, therefore, that Natal’s lower-class Indians have voted against the ANC twice in the 1990s (much to Nelson Mandela’s disgust), while the more educated middle classes have been more supportive of the new majority party. [xix]

From Gandhi’s time onwards, Indian politics in Natal have pointed in two directions: towards compromise, even identification with the whites and towards resistance and protest, sometimes in alliance with the African majority. It must be remembered that the Indian community is internally stratified by class, as well as by other cultural factors, and that the actions and words of leaders have a tenuous relationship to behaviour on the ground. The merchants who dominated the Natal Indian Congress (NIC) from the 1890s were mainly struggling for the right to be considered as honorary whites on grounds of wealth, education and class separation from the indentured sugar workers. [xx]

From its formation to the mid-1940s, the NIC remained an organisation dominated by this merchant class. Then in 1945 it was taken over by a radical faction looking to form a non-European alliance opposed to racial segregation. This was soon followed by a second passive resistance campaign (the first having been led by Gandhi) and in 1947 by the so-called Doctors’ Pact between the leaders of the NIC, the Transvaal Indian Congress and the African National Congress. [xxi] Defiance campaigns in the 1950s led to the Treason trial of 1956-60 (in which Indians were disproportionately represented) and government repression on a scale which drove the NIC into dormancy during the 1960s. Union unrest in 1972, among other factors, provoked the NIC’s revival and many of its members joined the United Democratic Front in 1984 to oppose the tricameral parliament which had separate chambers for Indians and Coloureds, but excluded Africans. [xxii]

Indian workers had formed their own unions, mainly in the sugar industry, and by the 1930s gravitated towards the Communist Party. Non-racial industrial unions were formed in the late 1930s with a largely Indian leadership. A series of strikes in the period 1937-42 were beaten back, leaving their leaders free to launch a takeoverof the NIC. Indian working class organisations were not seriously affected by the NIC’s subsequently radical politics which largely by-passed the grassroots. [xxiii] Indeed both NIC and union branch activity declined throughout the post-war period, a trend to which the long economic boom may have contributed. Whereas early segregationist laws in Natal were aimed principally at regulating Indians, from the formation of the Union onward, the latter found themselves affected by national legislation concerned mainly with policing white-black relations. Indians were both positively and negatively affected by this legislation, which led to uneasy relations between them and Africans. These occasionally erupted into violence, most notably in the 1949 Durban riots (when 87people were killed).

In the meantime, the conservative elements displaced from the NIC’s leadership at the end of the war formed the Natal Indian Organisation and much later in 1963 many among these readily joined the South African Indian Council created to ‘advise’ the apartheid government on matters affecting Indians. These formal links with the apartheid regime proved profitable to some businessmen and obviously found a measure of support within the Indian community. But the radicals allied with the ANC, whose numbers were boosted by graduates of the University of Durban-Westville, ensured that Indians played a prominent part in negotiations culminating in the unbanning of the ANC in 1990 (the NIC was never banned). After the ANC victory in the 1994 elections, six Indian ministers were appointed to the cabinet (a proportion many times higher than Indians’ share of the national population). Some prominent Indians are wont to label themselves ‘black’, invoking that non-European alliance which won some measure of radical support half a century ago. But the conditions of the 1990s on the whole have revealed how far the average life chances of Indians and Africans have diverged in the twentieth century, when the system of racial segregation forced them to live apart.

For the purposes of summarising the economic history of Kwazulu Natal’s Indian people since their arrival in the 1860s we follow our periodisation of world history above: before the first world war (1860-1914); the two world wars (1914-45); and thepostwar period since 1945 which itself may be divided into phases of economic expansion and stagnation by the year of the OPEC price rise, 1973.

1860-1914

Immigrant sugar workers were normally indentured for three years. Between 1860 and 1911, over 150,000 Indian indentured labourers came to Natal. Most of them did not stay in the sugar fields for long, moving into market gardening, domestic service and municipal employment. From 1872 a small number of merchants (the so-called ‘passenger Indians’) arrived, mainly Gujarati Muslims. [xxiv] The leading members of this class were already established in the Indian Ocean trade at several points, including home ports like Bombay; they included, for a time, the first of them to arrive, Aboobaker Jhaveri and, more durably, the Moosas. The Indian trading economy of Natal was thus constituted at the top by large international wholesalers importing goods from Britain and India and exporting to the world. Below them were wholesale merchants who supplied retailers within South Africa, especially small Indian traders in Natal. The latter, shopkeepers who spread out to form a network in both rural and urban areas, were known as dukawallahs. They often started out as assistants to the larger merchants, but some of them entered trade from indenture. At all three levels, these Indian merchants and traders came into competition, at varying degrees of intensity, with white commercial interests who, as we have seen, influenced the Natal government (by virtue of their overwhelming dominance of the franchise, if by no other means) to restrict that competition in their own favour.

The biggest Indian success story in this period was the firm established by the Moosas. They imported goods from England and India and bought their own ships toservice the triangular traffic with South Africa. But on the whole, Indian merchants did not establish major houses which were in a position to dominate trade in the 20^th century. This was mainly for three reasons. First, of course, they were harassed anddiscriminated against by the British. Second, many of them spread their interests between a number of places in the Indian Ocean and did not stay in South Africa for long, given the more adverse conditions there. Finally, the first decade of the 20^th century was witness to substantial economic reverses, especially the depression of 1903-08, in which assets were wiped out and many traders failed. [xxv]

1914-1945

The international dimension of Natal’s Indian commerce declined in the period defined by the two world wars and the Great Depression. The Moosas, for example, abandoned shipping and turned inward to concentrate on servicing the South African wholesale trade. This shift towards the home market led in their case to the establishment from 1939 of a cinemachain throughout South Africa (eventually 21 theatres). And this constituted a general trend from which some sectors of Indian commerce have only recently begun to move away. This was the period in which some Indian merchant houses with genuine staying power emerged, including the Lockhats (three brothers), the Paruks and N. Bhoola and son. The interwar period also saw the consolidation and expansion of the network of dukawallahs throughout rural Natal. And small urban commerce, mainly in Durban and its surrounds, took the form of many laundries, butchers and their like. This was a time when the so-called ‘Kaffir trade’ became the mainstay of successful Indian businesses, providing transport and money-lending services to Africans, the offspring of indentured Indians and even Afrikaner farmers.

Although most consumer goods apart from fresh foods were still imported from Britain at this time, urban manufactures took off on a small scale during the interwar period. Prominent among these pioneers was a certain Mr. Chetty who set up both a cigar factory and a printing works. In 1924 Universal Printers were established, forging a direct line between Gandhi’s propaganda efforts before the war and the company’s modern successor which operates the largest printing press in the world (see below). Indian printers supplied domestic, commercial and political customers, but were minimally engaged in news. The proudly-named Durban Electrical Mineral Water Works was Indian-owned. There were also a number of furniture manufacturers, but, despite the growth of Indian urban settlement, there do not seem to have been many large building contractors.

The black markets of the second world war and the period of austerity and rationing immediately after it offered many chances for profiteering, on both a large and a small scale. This fed into a durable stereotype, exaggerated by racist politics, but with some basis in reality, of the unscrupulous Indian trader who makes profit by cheating his customers and society at large. The white authorities were also exercised about tax evasion, believing with some justification that the dukawallahs under-reported their earnings, stuffing banknotes in the mattress, concealing receipts in illegible Gujarati account books and hiding it all beneatha miserable standard of living. This issue has resurfaced recently in stories about shopkeepers failing to report burglaries and of banks going bankrupt without customers making claims for what were in effect undeclared earnings. [xxvi]

1945-2000

The postwar South African economy was, like many others at the time, driven by a move towards import-substituting industrialisation supported by high tariff barriers. [xxvii] In the case of Natal’s Indians this was manifested principally as the rise of clothing and textiles manufactures aimed at the national home market. Here the most prominent example was A.M. Moolla’s Kingsgate company, formed in 1955. At the same time, the Lockhat Brothers diversified from wholesale trade into clothing manufactures. P.P. (Pakkiri) Pillay started a modern food processing factory combining Indian and western tastes in the 1940s. We will return to each of these examples when we consider Indian business in the 1990s below.

The decisive feature of the postwar Indian economy in Natal was that a gradual process of urban concentration culminated in the construction of two large segregated Indian townships on the outskirts of Durban, Chatsworth and Phoenix. [xxviii] This stimulated demand for a wide range of Indian products and services, especially sincebusinessmen associated with the South African Indian Council (SAIC, formed in 1963) were able to prevail on the National Party government to keep white businesses out of these areas. This was the first time that many Indian families lived in homes supplied with electricity; and the market for domestic household goods (no longer just furniture) mushroomed. The economic boom of the 1960s saw Indian commerce benefiting considerably from the peculiar conditions engineered by apartheid. This was also when the University of Durban-Westville was established, thereby giving an enormous push to the Indian drive into the professions. If the decade after Sharpeville was also a time of intensified repression, these economic trends must have amplified the retreat from radical politics.

Indian businesses moved into hotels, the manufacture of metal products and the transport industry in general, owning petrol stations, buses, taxis, travel agencies and haulage firms. In view of the international publicity given to South Africa’s taxi wars (following deregulation in the mid 1980s), [xxix] it is worth noting that Durban’s Indian gangs sponsored violent protection rackets in the taxi industry from the 1950s. Indian capital was also encouraged to invest in property, a move which made many people rich until the upheavals of the 1990s redrew the residential maps of Natal and undermined property prices. A prominent example of this period is the businessman, J.N. Reddy who at one time was chairman of the SAIC. [xxx] He expanded his business into freight and insurance, later turning to banking and property development. Reddy was a key figure in the establishment, and the first managing director, of the New Republic Bank set up in 1970 to finance Indian businesses and consumer credit. Both the freight company and the bank ran into major financial problems in the mid-1990s, although by that time NRB had been taken over by a Malaysian company and Reddy had little or nothing to do with it.

The year 1973 was a turning point for South Africa as much as for the world as a whole. Before it, the economy was stable and booming, afterwards turbulent and stagnant. Political repression in the 50s and 60s kept labour unrest and wages down, while militancy and rising wages have characterised the unravelling ofthe apartheid system. This has affected many Indian businesses adversely in the last quarter century and accounts partly for the rise in emigration rates since 1973. The commercial monopolies established in Chatsworth and Phoenix have gone, as has residential segregation. The dukawallahs and taxi owner/drivers have been exposed to rising competition from African shopkeepers, transport operators and the like.

The tariff regime which protected Indian manufacturers has been progressively removed in the 1990s. Even before this, manufacturers (of clothing and other mass consumption goods) received incentives from the government to seek out growth points contiguous to the bantustans where African labour could be hired more cheaply and with less threat of militancy than the residents of Durban’s townships. [xxxi] Much of the profit generated by apartheid commerce went not into asset and business diversification and innovation, but into property speculation and a more conspicuously luxurious lifestyle. The conditions of the 1990s proved to be a difficult time for those who chose this option. Indian businessmen who were relatively untainted by collusion with the apartheid regime were taken up by the ANC leadership as soon as they came to power. Vivian Reddy, who started out as an electrical contractor and now owns a chunk of the South African Post Office, as well as a substantial gambling enterprise, was one of those who found himself adopted warmly by the new African political elite (see below).

Few ethnic groups have been as constricted in their development during this century as Natal’s Indians. A white business magazine wrote in the early 1980s: ãIndian business here has been hemmed in by escalating state pressures and private sector practices almost since its beginnings, more than a century ago·Many Indians operate through white nominees in white areas ö in some areas estimates are that as many as 40% of all Indian businesses operate behind a white front· Between 1885 and 1969 at least 26 laws were passed at the behest of white traders and workers which fettered Indian business·The Group Areas Act (1950) has directly affected 65% of the country’s Indian traders. By 1978 25% had been moved from white CBDs to Indian townships and another 40% are set to be moved.ä [xxxii]

This kind of harassment of South Africa’s Indian businessmen led to their acquiring a remarkably corporate identity, despite religious and class differentiation, and an inward-looking character reinforced by restrictions on movement, residence, jobs etc. As apartheid unravelled in the last quarter of the 20^th century, they have begun to shake off the limits on their development, through emigration, upward mobility as educated professionals and hesitant commercial expansion. In the 1990s, there are new conditions for economic activity, new possibilities of alliance with whites and blacks, as well as with overseas partners and institutions. It is even possible, but not yet widespread, to abandon Indian identity altogether as citizens of the new South Africa and indeed of the world. This leads us to the story of how some leading Indian businessmen have responded to the more open conditions of the last decade.

The case of the Indian clothing and textiles industry in the 1990s

Whenever the human economy progresses beyond the quest for food, people next turn their attention to clothes. This is why, from the commercial empire of the ancient Phoenicians to Manchester’s industrial revolution, textiles and clothing have been central to economic development. [xxxiii] We have alreadyseen that, when the Indian businessmen of Natal raised their sights above wholesale trade, they often turned to the manufacture of clothing. As part of our investigation into Indian business during the 1990s, we interviewed a number of leading businessmen in Durban. [xxxiv] Here we present three examples from the clothing and textiles manufacturing sector, who between them indicate some of the diversity of Indian responses to the end of apartheid.

Rajen Pillay

U.P. (Rajen) Pillay grew up near Durban and, now in his late 30s, is the Managing Director of Coastal Group, a fashion fabric manufacturing company registered offshore in Mauritius. He was educated at public school in England and the University of Natal. Mr. Pillay was the first ‘black’ stockbroker on the Johannesburg Stock Exchange (JSE); and before that he worked for the Small Business Development Corporation in Durban. In 1992 he set up the Afro-Asian Trading Company with the intention of improving South Africa’s links with Asia; and his efforts were focused on Indonesia. Coastal, formed in the following year, is 88% owned by an Indonesian multi-national, PEP (Polysindo Eka Perkarsa); everyday business decisions often involve an international network of partners in London, Miami and Djakarta. The company has entered a joint venture with the Botswana Development Corporation to set up a garments factory there (Botswana as a member of the Lome convention [xxxv] has privileged access to European markets denied to South Africa). It grows its own cotton in South Africa’s Northern Province, imports its polyester yarn from Indonesia and maintains large factories in Kwazulu Natal.

From his 27^th floor penthouse office Rajen Pillay commands a stunning view of Durban’s waterfront and central business district. He moves easily in the highest circles of white-dominated finance and black-dominated government. He aims to make Coastal ãthe largest fabric producer on the continentä and in only five years annual output has already reached 56 mn metres of cloth. In 1998 the company made capital expenditures of $44 mn and earned $8 mn. Operations are divided half-and-half between cotton and polyester products. Whereas most South African textile plants have a maximum capacity of around 3,000 metres a run, Coastal’s runs are 10,000 metres. After meeting local demand (ãa home market of 40 mn is too smallä), the remaining 7,000 metres is sold abroad, mainly in Europe and America. The marketing strategy is based on high volume and lower unit costs, linked to fashion designs and techniques taken from the most advanced centres of global production. Coastal’s slogan is ‘Globally Oriented-Locally Dominant’or GOLD. The means to this end are scale of production, sophisticated design and financial clout. Expansion is expected to take place through mergers and acquisitions. In the last year, Coastal’s takeover bid for the A.M. Moolla group, perhaps the leading Indian clothing manufacturers of the apartheid era, was rejected; but the general intention was signalled.

In 1993, as South Africa prepared for its first democratic elections, Rajen Pillay bought a defunct company listed on the JSE and proceeded to build up a textile firm using his personal resources. This was done with the collusion, but not the participation of M. Sinivasan, the owner of PEP, a large Indonesian corporation with worldwide interests, himself also of Indian descent. Within a year Mr. Sinivasan bought a controlling interest in Coastal, leaving 12% of the shares in Rajen Pillay’s hands. Cash transfers in the form of loan capital were converted into share capital; and this in turn has since been used as leverage to raise $70 mn in loans within South Africa. We asked Mr. Pillay why he opted for life as an ‘employee’ when he had started as the sole owner of his enterprise. He said, ãI know that I could have been the 100% owner of a corner shop, but I chose instead to be the biggest slave, so that I could learn from the big boys.ä He has no contract with Mr. Sinivasan and banks instead on making himself indispensable to the larger enterprise. Southeast Asia’s financial turbulence of the late 90s wiped out a large part of the parent company’s nominal assets, but it could not touch its immobile investment in Coastal.

The idea at first was to invite share participation by South Africaninstitutions up to 50%; but Rajen Pillay argued against that option in favour of building up the company first before selling off shares at a higher value. Now he aims to raise local participation to 25% in the hope of getting Coastal reclassified as a South African company and listed with the home players on the JSE main board, instead of as an offshore listing at present. He knows that he needs political cover for the ambitious programme of acquisitions he envisages; and, however ’small’ the home market is, it remains essential to corporate strategy (GOLD). He has already recruited the former head of the ANC in Natal to Coastal’s board; and his former position as a JSE stockbroker gives him ready access to the traditional white institutions.

Rajen Pillay speaks with some passion on the need to make a break with the old pattern of Indian business in Natal, referring to the widespread failure in the 1990s of ãthe Indian micro-economy tied to apartheidä. Indians, he claims, have not learned to exchange the trader’s outlook for that of the industrialist or the corporate businessman. Instead they remain locked into family businesses with their eyes fixed on the past, having been made vulnerable to the collapse of property values in the political turbulence of the early 90s. He believes that the way forward lies through a modern bureaucratic approach which allows for the increased mobility of business leaders and the delegation of accountable responsibility to hired specialists.

Mr. Pillay thinks that economic and social conditions in South Africa have become much worse than he anticipated when he launched the business. His optimism for the future is hedged with a determination to use his political contacts to promote the idea in government of a more aggressivecompetition policy. He is contemptuous of the time wasted in tinkering with the constitutional framework of South African politics. However relations between the central government, the provinces and the cities might be adjusted, he believes there could never be sufficient economic benefits to justify the effort. Rather he wants a strong centralised state committed to breaking up the conglomerates which, in his view, still obstruct the progress of newer South African capitalists like himself. Many of the leading banks are tied to traditional producers (such as the major mining companies) to whom they offer preferential interest rates, passing off the costs to other customers. Low interest rates and more effective competition are more or less all that Rajen Pillay would ask the ANC government to deliver.

He is equally contemptuous of a business outlook which is fixed on maintaining the selling price and all the petty manoeuvres associated with that: manipulating tariffs, holding down wages and cheating customers. In his view, he just has to do everything possible to operate below the current world price,knowing that the world market cannot be influenced by any firm or country. Cost reductions to this end are achieved by a globalised corporate structure whichcan deliver capital resources, technical and marketing support and above all economies of scale in production and distribution.

Rajen Pillay is a symbol of the new South African capitalism. He seems to have dropped into the stagnant world of Natal’s clothing industry, out of the sky and on cue for the 1994 elections, armed with a vision of an African-Asian alliance to revolutionise global production. In fact, his father, Pakkiri Pillay, was a pioneering industrialist in his own right, establishing Pakco, a processed foods manufacturing company in 1942, which he relocated later to Verulam, North of Durban. [xxxvi] He sold up Pakco to Anglo-Vaal for over $3 mn in 1980. So Rajen had his father’s example as a businessman to learn from, not to mention a substantial inheritance of capital from him. But there was no formal continuity between Coastal Group and his father’s business. When asked to comment on his father’s personal legacy, he mentioned his honesty, his outstanding business ethics. But it is also clear that Mr. Pillay senior, at a time when Indian business in Natal was inward-looking and over-adapted to the apartheid system, had a global outlook, travelling around the world several times, always on the lookout for new technology and marketing his products as far afield as Japan. Indeed, it was Pakkiri Pillay who first established a relationship with Mr. Sinivasan in Indonesia in the 1960s. In 1998, within a decade of Mr. Pillay senior’s death, former employees bought back his company from Anglo-Vaal and have renamed it Pakco.

Mohamed Lockhat

The head office of I.M. Lockhat is located in the middle of Durban’s busy Indian commercial district. Mohamed Lockhat is about 50 and a third generation South African. His grandfather was one of three brothers who came to Natal just after the turn of the century and before long established a shop selling clothes in the Field Street area. They prospered as wholesale merchants of clothing in the postwar period; and in the mid-50s they founded a manufacturing company called Reunion Clothing. In the 1960s, the second generation formed three separate companies: I.M. Lockhat (Mohamed’s father) specialised in children’s clothing; Lockhat Brothers made ladies’ and children’s clothes; and S.M. Lockhat manufactured men’s shirts. Mr. Lockhat started out working in the dispatch department of his father’s firm, but has been one of its bosses since 1967.

I.M. Lockhat produces clothes under license for prominent American and European firms, such as Oshkosh B’Gosh and Pierre Cardin. Today 70% of the business is located in Qwaqwa, formerly a bantustan created by the apartheid regime in the Free State province, where over 800 workers are employed; 20% of the firm’s output is produced by 300 workers in Durban; and the remaining 10%, also employing 300 workers, is outsourced to independent businesses in Natal. Twelve years ago all the firm’s production was located in Durban, but the shifting economic landscape of the late 20^th century has led to an ongoing search for more favourable conditions which Mr. Lockhat believes may lead him to abandon Durban altogether before long. The firm is not an exporter: 60% of its products are sold on the home market through its Johannesburg office, 20% in the Cape, 10% in KwaZulu Natal and the rest scattered around the country. Two-thirds of its raw materials are produced within South Africa and the rest in China, India, Indonesia and Korea.

Mohamed Lockhat states from the outset that his firm’s productivity is below international norms because of rising wage demands in the last decade or more. His workers have been inclined to seek wages comparable with countries like Italy, whereas he believes that he is forced to operate a sweatshop system in competition with Third World exporters like Bangladesh, Sri Lanka andVietnam. The order of the day is ãrolling up your sleeves and hard workä, muscles and sweat. There is no point, he argues, in pursuing technological progress until wage levels can be stabilised at a fairly low rate. Tariff reductions in the last three years have proceeded faster than is compatible with the maintenance of a viable South African clothing industry; import duties were until recently 30% on textiles and 60% on clothing. Moreover, the export drive is hampered by the legacy of apartheid. It is hard to recover the damage done in countries like Britain by the sanctions years.

Like Coastal’s managing director, Mr. Lockhat recognises that the world market determines the price levels which shape his strategy. Some of his immediate competitors are within the Southern African region, countries like Malawi and Mozambique who were granted favourable rates of import duty by the apartheid regime. Zimbabwe, which expected similar privileges when the ANC came to power, has so far been disappointed, mainly due to union pressure within South Africa. These matters are currently being negotiated within the Southern African Development Community (SADC). Meanwhile Mozambicans are killed in the streets of Durban for the crime of being foreign traders. In this climate of nationalist hysteria and changing rules of competition, Mohamed Lockhat, with his concentration on sales to the home market, is anxious that a ‘level playing field’ be established there. He is extremely concerned also about the volume of illegal imports. [xxxvii] In the meantime, he expects to become a nomad; and he is actively considering three options at present.

First, in order to compete with Mozambique and Malawi, he could organise his Qwaqwa women workers as independent producers supplied with machines by him in a move he describes as one of ‘gender empowerment’. Second he could move production from the Free State and Natal into the areas of cheap labour to the North, such as Lesotho or Mozambique, which he describes as a place where ãthings are looking upä. Finally, there is ‘global outsourcing’. Instead of trying to beat his cheaper competitors in Asia, he could buy finished goods from them and become just a merchant, relying on his established distribution network within South Africa. This last option, which involves a shift from production to trade and services, would in effect be a reversion to the pattern of Indian Ocean trade established by the Gujarati merchants who came to Natal 120 years ago, to the path, in effect, which his grandfather took before the National Party embarked on a course of import-substituting industrialisation. ãWe may choose to get away from labour-intensive industry and become a trading company.

Despite this evidence of his willingness to adapt to new conditions in Southern Africa and the world, Mr. Lockhat is still attached to the traditional way of conducting Indian business. He is proud of the global Indian heritage with its emphasis on the family firm and is dismissive of the vogue for American management experts peddling the corporate style to gullible South Africans. He is glad that he worked his way up from the shop floor, since this gave him invaluable experience of the men and women he would subsequently have to lead. ãThis is a people business: the I.M. Lockhat extended family includes both blood relatives of the founders and outsiders who have been knitted together into the family.ä He still finances capital expenditures by borrowing from the Indian moneylenders who have long used their privileged access to white banksto make loans at a higher cost. The three firms owned by him and his cousins are broadly speaking competitors; they do co-operate on raw materials and technology, but never in financial matters. Two of his children already work at I.M. Lockhat; the thirdis a student at the University of Natal. As far as he is concerned, the family firm will be continued by them.

We asked Mr. Lockhat what he looks for from the new government. His answer was not far from Rajen Pillay’s: stability and growth, the need to keep the cost of capital low. But, consistent with his vision of South Africa’s position as a Third World producer, he also emphasised the need to control the labour market and to reduce levels of crime and violence. These priorities come before any drive toupgrade the technology of production in the country. The contrast with Coastal’s strategy is quite stark.

The 1990s have been costly for many Indian businesses operating in Kwazulu Natal. Links to the apartheid state have been lost, of course, and with them the protection of high tariffs and export subsidies. The rising tide of black Africans has been felt at many levels, notably as affirmative action, empowerment of workers, increased business competition, the abandonment of racially exclusive schools and residential areas. Many Indian businesses have been trapped in the old pattern of family firms, remaining in the traditional area for Indian shops around the Grey Street Mosque, over-geared to property while prices have collapsed and slow to adapt to new conditions. The result has been a loss of confidence and widespread business failure, leading to a spate of selling up and emigration. [xxxviii]

Apart from the well-publicised problems of J.N. Reddy (freight, banking and property) mentioned above, the followingsubstantial Indian family-based companies are widely reputed to have experienced financial difficulties in adjusting to the conditions of the 1990s: the Moollas (clothing manufactures), the Damjees (jewellery), the Maharajs (wholesale groceries), the Mistris (property development, supermarkets and farmer’s supplies), the Popatlal Karas (imported Indian household goods) and the Naidoos (hotels). Not all family-based firms have suffered reverses. More successful firms of the traditional sort include the Mahomedys (wholesale and retail clothing), the Parukhs (ditto) and the Bhoolas (wholesale food distribution). But perhaps the most prominent example of the downward spiral experienced by many traditional family firms is that of the A.M. Moolla Group. And thisstory too concerns the Indian clothing and textiles industry.

The A.M. Moolla Group (AMMG) [xxxix]

A.M.Moolla’s grandfather came from Kathor as a Muslim passenger Indian around the turn of the century. He started a ‘native trading store’ (a dukawallah shop) some 40 miles south of Durban. His grandson was employed by Lockhat Brothers in 1927, rising to become chairman of the group until his retirement in 1976. In 1944, A.M. Moolla took over his father’s grocery business in Durban’s white CBD and in 1955 transformed the company into a clothing manufacturing concern. On his death in 1980, this had become the largest privately owned clothing company in South Africa. [xl] Mr. Moolla was a prominent conservative politician in the old NIC and subsequently the NIO; he was the first elected chairman of the state-sponsored South African Indian Council in 1974; and served as a member of the Prime Minister’s Inter-Cabinet Committee, 1975-79. When he died, AMMG’s principal shareholders were A.M. Moolla himself, his three daughters and his son-in-law, Ahmed Sadek Vahed. The last-named succeeded him as CEO.

In October 1997, the AMMG was listed on the JSE by private placing (meaning that it chose its institutional partners) with 65 mn shares at R2 (around $25 mn in all). This capital was ãto be used to offset borrowing and to pursue acquisitions within South Africa and beyondä. [xli] After this listing the family trust held 17.5% of the total shares. The group at this time had six factories in Kwazulu Natal; it employed 12% of the province’s clothing workforce, that is, 5,000 workers producing 60,000 garments a day. The listing took place when the company was beset by numerous difficulties; as described by Sadek Vahed, ãsoft domestic demand, competition from illegal imports, the abolition of GEIS (Generalised Export Incentive Scheme) and labour disputes all had a negative impact on sales and marginsä. [xlii]

In October 1998, Rajen Pillay’s Coastal Group offered AMMG R110 mn for a 100% buyout (R20 mn less than the original listing); AMMG directors were to be invited onto the Coastal board and the full 5,000 workforce was to be retained. Mr. Pillay argued in discussion with us that both companies would benefit from the common-sense business synergy to be realised by the takeover. Single-process companies like AMMG are extremely vulnerable and cannot withstand global competitionä (i.e. it made sense to combine a textiles firm with a clothing company). At the time AMMG shares were trading at 66c, a third of their original listed price. [xliii] The group’s shareholders rejected the bid. A Durban Indian newspaper alleged that the matter had come up for discussion at a prominent Durban mosque whereãMuslim brothers were asked to support AMMG and not allow Hindus to take overä. [xliv] In October 1999, AMMG shares had fallen to 27c or 13% of the original price, a fraction of the worth of Coastal Group’s 1998 offer. Coastal’s shares, R8.65 at the time of the takeover bid, had, by early October 1999, increased in price to stand at R9. [xlv] AMMG’s turnover in the first half of 1999 was down 12% on the previous year. Ahmed Sadek Vahed blamed these results on ãillegal importsäand ãthe severity of the recessionä. [xlvi]

These three examples of how Indian businesses in a traditional sector of manufacturing, the clothing and textilesindustry, have responded to conditions in the 1990s illustrate the persistence of the two paths to accumulation highlighted by Marx in the first volume of Capital. [xlvii] The strategy which Marx identified as ‘relative surplus value’ (more efficient, even if higher cost labour) is exemplified by the Coastal Group; and that of ‘absolute surplus value’ (cheap labour working as hard as possible) by I.M. Lockhat. The A.M. Moolla Group appears to have been caught between these two poles with fairly disastrous consequences. Beyond this contrast lies South Africa’s (and in particular Kwazulu Natal’s) heritage as a place where Lewis’s two streams of high- and low-cost labour once came to settle side by side.

A new non-racial capitalism in South Africa? [xlviii]

When Kwame Nkrumah was leading Ghana to independence, he used to declaim ãSeek ye first the political kingdomä. [xlix] The ANC has certainly followed his example in that respect. It is interesting to compare South Africa in the 1990s with the post-colonial regimes which emerged in the decades following the second world war. The ANC came to power almost a half century later than the first post-colonial elites, yet their political and economic strategy, including a strong centralised state, nationalisation of the commanding heights etc, came straight out of the 1950s. They too focused on seizing state power and sang about ‘marching to Pretoria’, knowing that they would soon be under pressure to meet the demands for public expenditure made by the repressed majority. They seemed initially to be as unaware as their predecessors of world conditions at the time. [l] Little or no attention had been paid to questions of economic transformation during the years of struggle, exile and banishment. When confronted with the powerful and seductive logic of international financial agencies and western governments, as well as those of local white and aspirant non-white capital, they too reacted hastily, lending some weight to critics who see them as having capitulated to foreign powers. [li]

It is not surprising that, faced with the legacy of entrenched racial inequality and conflict, the ANC has focussed on building national unity (’the rainbow nation’). Less excusable has been their rapid move to replace an initial commitment to mass mobilisation and redistribution with the neo-liberal approach of the misleadingly named Growth, Employment and Redistribution strategy (GEAR). This has been linked to an accelerated opening of the national economy to global markets in trade and finance. Laisser faire, bureaucratic inertia, growing corruption, and insufficient levels of new investment have combined to strangle economic growth, push up unemployment rates beyond the 40% mark and further skew what was, already before the end of apartheid, one of the most unequal income and wealth distribution indices in the world. [lii]

In The Wretched of the Earth (1970, first French publication 1959), written from the depths of Algeria’s own independence struggle, Frantz Fanon spoke prophetically of the ‘pitfalls of national consciousness’ which undermined Africa’s post-colonial states and especially of the weakness of the new middle class who led them:

There are, of course, huge differences between post-colonial Africa then and South Africa today. The Cold War rivalry of superpowers has been replaced with a unipolar world which resembles the more open economy of a hundred years ago more than the mid-century pattern. The world economy was expanding in the 1950s and 60s and the postcolonial states participated in that, whereas today economic expansion is more fitful and only a few countries benefit. If once there was a genuine international commitment to reduce the gap between rich and poor, now there is escalating inequality and widespread indifference to its consequences. Until the mid-70s, most states were strong; since then all have become much weaker as a result of the increased scale of the world market, the mobility of factors (especially money) and the revolution in communications. It would be tragic if South Africa’s political leadership, lacking an analysis of the historical situation they face, repeated the mistakes of their African predecessors.

As a microcosm of world society, South Africa in the 1990s is more open and connected to the rest of humanity, more unequal (at least in economic terms) and in the grip of a capitalism whose contradictions could lead to a strengthening of its global position or to massive social breakdown. The ANC, recognising this, has seemed anxious to learn from the experience of the Southeast Asian ‘tigers’ and, in particular, from Malaysia’s attempt to redress racial inequality within a strategy of rapid industrial growth. [liii] Two prominent examples of Indian business may give some indication of what has already been achieved in a very short time.

Harish Mehta and Universal Web Printers

The story of Harish Mehta and Universal is perhaps the best example of a traditional family business being transformed into a corporate enterprise of global scope. Mr. Mehta is approaching 50 years old. His grandfather, Virjee, was a Gujarati Hindu who came asa passenger from India to Natal in 1908. He is described as having been poor, jobless and homeless when he got there. But he was soon employed as a printer by Gandhi in Phoenix settlement producing the newspaper, The Indian Opinion. In 1924 he established his own Bombay Printing Works (soon after renamed Universal Printing) in Durban’s Indian CBD. His two sons joined him in the firm. One of them, Kantilal Mehta, had a heart attack in 1976 and in 1978 his three sons, including Harish, joined Universal Printing which then had a total workforce of just 22 people.

Harish Mehta left South Africa after his schooling to acquire a printing diploma in London and then he spent a decade in the USA (he is an American citizen), first at college and then working for a paper works owned by NCR. On returning to the family firm in 1978, he pushed to bring in New World technology. By the 1990s, the three brothers, with one cousin, were the owners of the company, now known as Universal Web Printers, and they decided to embark on a programme of expansion. Harish and his father, who was still alive but not active in the firm, disagreed in their vision of Universal’s future. Kantilal believed that his sons’ responsibility was to keep ownership exclusively within the family and to hand on ‘the family silver’ to their children; whereas Harish brought in an American consultant to advise on how to make Universal into a modern corporation. He felt that the company needed to regularise succession by separating shareholding from employment. Deriving an income from the firm was one thing, but employees, whoever they were, should contribute to added value through their skills.

Accordingly, Universal embarked on an expansion programme which required R300 mn ($50 mn) to be raised for new equipment. Harish Mehta brought in First National Bank (a prominent white financial institution, originally Barclays) with a 25% shareholding and two black companies, National Empowerment Corporation and Vukume Holdings, with another 25% between them. The family kept overall control with 50% of the shares plus one. The advantages of this deal, according to Mr. Mehta, are that the family was able to get others to share the risks of expansion and they added substantially to their capital fund. One partner brought the business discipline of a major bank, while the others provided crucial access to lucrative government contracts. The transformation ãnormalised us a South African company and not just as an Indian family firmä. Universal is now in the process of becoming listed on the JSE.

The strategy has succeeded spectacularly. Universal’s contracts have included the 1995 rugby world cup official programme; in 1996 the national government’s biggest ever printing tender for its mid-term report; and from 2000 Telkom telephone directories. The company already owns a huge state-of-the-art web offset printing press capable of printing 50,000 A1 full-colour sheets per hour. But, in preparation for the telephone directories contract, they have ordered what will be the largest printing press in the world.

In 1997 Harish Mehta joined First Asian Investment Corporation (FASIC) as its founding chairman. This is South Africa’s first listed empowerment corporation for people of Asian descent; [liv] other directors include Indianbusinessmen, Vivian Reddy and Ahmed Sadek Vahed, as well as a number of prominent white and black personalities. In 1998 FASIC acquired 70% of Lion Match from South African Breweries for R584mn (just under $100 mn). Lion’s factory is located in Durban where raw materials and finished products are floated efficiently in from and out to the world. The matches are sold in all Southern hemisphere countries of Africa and Latin America. Mr. Mehta openly aspires to turn FASIC into a giant global corporation to rival companies like Proctor and Gamble. And of course Universal Web Printers is well on the way to monopoly control of the home market in its field.

It is interesting to compare Harish Mehta with the example of Rajen Pillay above. Both have fathers who owned substantial family businesses and spent a good part of their early lives in England or America. Both have strong roots within Kwazulu Natal’s Indian community and have built major industrial plants in the Durban area. They each have strong links to South Africa’s elites, old (white financial institutions) and new (black empowerment). FASIC is similar to Coastal Group in that it is a wholly new company of the 1990s with global ambitions; and both men have embarked on a corporate strategy based on large-scale production. But whereas Pakco went out of family hands, Universal has survived to become a dominant producer for the home market. Moreover, Rajen Pillay has relied heavily on international partners, while Harish Mehta has so far looked inside South Africa for partners. Both men offer remarkable illustrations of the continuities and discontinuities typical of the contemporary trajectories of Indian business. The last of our examples is of an Indian businessman who started out in the late apartheid era without the benefit of a previous family tradition. He could be said to represent the entirely new face of South African capitalism in the ANC years.

Vivian Reddy

Vivian Reddy was born in a Durban suburb in 1953; he has recently built his company headquarters on the site of his original family home. He took a local electrical technician’s diploma and soon afterwards found work with a white-owned electrical company. He clashed with his boss over what he took to be discriminatory promotion practices and walked out in 1983 to form his own company, Edison Power. In the next 15 years he acquired electrical contracts to the sum of around R 1 bn (under $200 mn at today’s exchange rates, but worth a lot more in the past). Much of this work came from the government of the day, before and after the demise of apartheid.

The 1990s have been extraordinarily kind to Mr. Reddy. In 1990-91 he accompanied Nelson Mandela and other ANC worthies on several overseas trips, most notably to Malaysia. As a result he became the best-known local facilitator of a Malaysian investment surge, leading that country to become the number one foreign investor in South Africa by 1997, above the United States and well above the U.K. He formed and owns 80% of a holding company called SAM Sisonke, which means ãSouth Africa and Malaysia togetherä in a pidgin blend of acronym-English and Zulu. SAM Sisonke then bought a Gauteng radio station (Jacaranda) and transformed it into ‘Youth FM’ which has a predominantly young black audience of one millionlisteners a day. The holding company later formed a consortium which holds the first casino licence in KwaZulu Natal. The casino opened in September 1999. As well as being well-connected to the highest echelons of the ANC, Vivian Reddy makes sure that the Zulu King and Chief M. Buthelezi, the Inkatha leader, are prominently associated with his businesses.

In the shape of Provtel Telecoms Holdings, Vivian Reddy has become a major shareholder in NextCom Cellular Consortium which is bidding for South Africa’s third cellular phone licence. Other members of the consortium include The Communications Workers Union Investment Company, The Postal Workers Union, Union Alliance Media and DistaCom, an international network with operations in India and China. But perhaps the most staggering evidence of SAM Sisonke’s scope as a player in South Africa’s communications industries came in 1999 when it bought the South African Post Office (40%) in partnership with the Royal Mail and New Zealand Post. The South African Post Office’s turnover is R5 bn (almost $1 bn) and Vivian Reddy aims to raise it by, among other means, bringing in 15 top international experts to manage the new company. ãAll this is part of the African Renaissanceä, he says, referring to President Thabo Mbeki’s aim to lead a continental revival. ãWe want eventually to manage 50% of Africa’s postal services and we were last month awarded the contract to handle the Botswana Post Office. We have also been invited to look at Nigeria’s postal services.

From the examples we have drawn on in this paper, it is apparent that South Africa’s new national middle class is not weak and has exceedingly plural antecedents. The flight of white civil servants and capitalists following black majority rule in Africa earlier this century has not been as damaging here. Moreover, the Indian commercial tradition, whose strength was admittedly ãits aptitude for trade and small business enterpriseä, has thrown up some remarkable large-scale initiatives. Sections of the emancipated African majority have moved from consolidating political power to making alliances with white, Indian and foreign capital, building wholly new patterns of business aimed at the home market, the region, Africa as a whole and the world. The government’s new macroeconomic policy (GEAR) is widely regarded as a retreat from its own redistributive premises. But, in failing to give immediate priority to the manifest hardships that still afflict so many South Africans, the ANC may, intentionally or otherwise, have made it more likely that a robust national business class will play a significant part in the current phase of global capitalist restructuring. If there are pitfalls to the national consciousness espoused by the ANC, at least it is not encumbered by a weakmiddle class. In that case, perhaps Thabo Mbeki’s vision of an African Renaissance, with South Africa in its vanguard, may take on some flesh after all. [lv]

Conclusion: South Africa’s Indians in world historical perspective

We have placed the story of Indian business in Kwazulu Natal during the 1990s within a context of its own community and South African history from the beginning of indenture in the 1860s. These local and national histories participate in the movement of world history, of what we have called ‘the long twentieth century’. South Africa, far from being exceptional as has often been claimed, has been an extreme example of some of the central tendencies of that history. The world economy may now be returning to a more open phase, after a centuryin which an often repressive state capitalism turned society inwards, thereby restricting, even breaking up the potential for a shared human consciousness. The racial divisions imposed by western imperialism in the late 19^th century are still with us in the form of sharply segregated sectors of high- and low-paid work, sustained by vastly discrepant scales of investment and technology. This dualism is striking within South Africa, which essentially constitutes a microcosm of global inequality at close anduncomfortable quarters; yet this juxtaposition of opposites may offer more hope for progress than the previous version of a closed and more divisive political economy.

By entering national and world history through the lives of the Indians of Durban and Natal, we have sought to emphasise the diversity which enriches these more abstract accounts, the internal divisions, the proliferating networks, the personalities. The Indian diaspora is a highly dynamic aspect of world society today. In many cases its origins lie with the merchants and indentured workers who helped to build the imperial economy out of which modern state capitalism grew. Our story has emphasised the confinement suffered by Kwazulu Natal’s Indian people during this century; but, if we wish to understand how a few businessmen could emerge with such force in the 1990s, we must realise that these Indians, like people everywhere but more than most, have been actively participating in global society even during the darkest days of apartheid. Theybring to the world of the 21st century a rich cosmopolitan history all of their own.

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Appendix on Sources

Interviews:

Mahomed Lockhat, 6 August 1999; 11 September 1999
Harish Metha, 25 June 1999
Rajen Pillay, 5 May 1999; 9 September 1999
Vivian Reddy, 20 July 1999

Interviews conducted with Yunus Akoo (17 May 1999) and Logan Naidoo (5 July 1999) and earlier with Ahmed Sadek Vahed (22 October 1997) and JN Reddy (8 October 1996) for Padayachee’s City of Durban Project also informed the analysis of this paper.

Newspapers and Magazines:

Business Day, Daily News; Fiat Lux; Financial Mail; The Independent on Saturday; Indian Opinion; The Independent on Sunday; Indigo; The Leader; Natal Mercury; Post Natal.