The effect of a mainstream approach to economic and corporate governance on development in South Africa

This paper argues that important aspects of corporate governance and economic governance have become confused and conflated in the minds of government policy makers. Focussing on the case of South Africa, it also argues that the mainstream approach to governance, with a focus on corporate governance is antithetical to development.

The importance of the role of the market and the belief that financial markets efficiently allocate capital is central to the beliefs shaping the dominant governance systems. However, the conflation of corporate governance and economic governance means that the disciplining role attributed to financial markets in the Anglo-Saxon model of corporate governance is seen as an important component of economic governance. Without any necessary theoretical justification the conflation of corporate and economic governance has created a mainstream perception that governments should not upset the market. The author says that such a perception can adversely affect economic development.

The author substantiates his argument by showing how acceptance of the mainstream approach to economic governance in South Africa has negatively affected its economic development by:

• causing government to adopt neo-liberal economic policies that have entrenched the industrial structural problems of the economy
• allowing some of the largest African corporations to list abroad and to reduce their investments in and commitment to South Africa