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  • 9 - How Mineral Discoveries Shaped the Fiscal System of South Africa

  • Edited by Ewout Frankema, Wageningen Universiteit, The Netherlands, Anne Booth, School of Oriental and African Studies, University of London
  • Book:
    Fiscal Capacity and the Colonial State in Asia and Africa, c.1850–1960
    Published online:
    15 November 2019
    Print publication:
    05 December 2019, pp 264-298

  • Summary

    South Africa made remarkable progress from 1850 to 1961 with the establishment of a ‘modern’ fiscal state. This chapter shows that the discovery of diamonds and gold in the second half of 19th century facilitated the modernization of the country's fiscal system by providing the impetus for modern economic growth and by generating vast resources for the financing of infrastructure and essential social services. It also identifies two consequences of apartheid that negated vital potential benefits of the fiscal modernization process: the state could not achieve the legitimacy needed for political stability and long-term economic development, and the economic diversification that is essential for sustained economic progress in economies built on the extraction of exhaustible resources was thwarted by the debilitating effects of apartheid on policy priorities and the country's skills base. The main conclusion of the chapter therefore is that apartheid prevented South Africa from capitalizing on the opportunities afforded by its mineral wealth and otherwise solid governance foundations.