Determinants of financialisation in South Africa: a balance sheet approach

This paper focuses on the process of finacialisation in South Africa. Financialisation is defined after Krippner (2005) and Arrighi (1994), as a pattern of accumulation in which profits accrue through financial markets and channels rather than through trade or commodity production in the real economy. We examine the financialisation of the South African economy from 1990 to 2012—both before and after major financial market liberalizations. Five key features of the period emerge; first, a precipitous increase in the size of the net acquisition of financial assets (and the net incurrence of financial liabilities) on the balance sheets of all agents. Second the centrality of credit and foreign money capital in the financialisation process. Third a measureable relationship between levels of Johannesburg Stock Exchange (JSE) market capitalisation and levels of portfolio capital inflows.Fourth, credit effects that overwhelm portfolio shift effects to a far greater extent than in the euro-zone area. Fifth, and last an unusually high degree of financial intermediation (when compared with the Euro zone area) that may be explained by the high degree of concentration in South Africa‘s Monetary and Financial Institutions Sector (MFI‘s). JEL Classifications: E01, F62, 016 Key Words: Financialisation, Monetary and Financial Institutions, Flow of Funds, Balance Sheets