Financialization and neo-liberal policies: A recipe for the high unemployment rate in South Africa


Despite South Africa being the largest or most economically dominant country in the continent, it is also the country most affected by triple challenges, namely unemployment, poverty, and inequality. These triple challenges are the legacy of apartheid and financialization, which has also played a pivotal role in deteriorating the socio-economic challenges the historically disadvantaged majority of people of South Africa are facing. South Africa has become a victim of Financialization, which led to a high unemployment rate in the country.


Contextualising Financialization in South Africa

Financialization refers to the increase in size and importance of a country’s financial sector relative to its overall economy. Financialization occurs as governments shift away from industrial capitalism. The increasing importance of financial markets, institutions and motives in the world economy has led to de-industrialization. Epstein defines Financialization as “the increasing role of financial motives, financial markets, financial actors and financial institutions in the operation of the domestic and international economies”. South Africa is not entirely regarded as part of the advanced industrialized states but as a ‘middle power’; it has been a casualty of Financialization, especially from the 1980s to the present. 

Financialization channels funds into financial market speculation, increases short-termism and prioritizes shareholders, all of which reduce productive long-term fixed investment. He further demonstrates that with such investment, the economy can branch out away from its reliance on minerals, energy and finance and grow in a manner that creates decent jobs. These processes also pressure management to cut costs, leading to retrenchments and wage reduction. 


Non-financial corporates (NFCs) Versus Financial corporates

Multinational Corporations instead choose to invest in the financial market sector because, in a short-term flow of capital or funds from one country to another, they can make a greater profit rather than engaging in the hard work of building industries and factories which create employment.  Western economies no longer revolve around the industrial corporation venturing its prosperity on vertical integration and internal growth; he further stipulates that both states and firms subordinate to financial markets dominated by large universal banks and institutional investors. Foreign Direct Investment (FDI) in the context of Financialization has failed to address the high rate of unemployment in South Africa and has led to Deindustrialization; hence they focus on investing in financial markets corporates rather than in non-financial corporates (NFCs) (such as manufacturing industries).



Policy change is required to tackle the triple change in South Africa. It is the unemployment problem that derives inequality and poverty consequences. If South Africa had an environment with full employment, poverty would be history, and inequality would diminish as households’ incomes would be more stable. But because of financialization, investments are driven more by profits making productive long-term fixed investments. Most companies these days are involved in Financialization because they can earn greater profits by investing in the financial market than NFCs rather than in industries that have the potential to create more jobs. In South Africa, the financial sector is one of the most significant growth sectors in the economy. These are the consequences of neoliberal policies.

Abel Semosa


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