Leadership and Democracy LabWestern Social Science

The South African Military and FinTech: Unlikely Relations

Primary Article Contributor: Aman Kular

Team Leader: Jake MacDonnell

24/11/2016

Fintech is an industry that will drastically change and improve the South African economy. Though the industry and the military have no direct correlation, as the economy develops it will affect all other industries, since money is a universal measure of value. This article will explore historical implications pertaining to answering the question of whether or not the military will support the South African government’s decision to encourage the development of this new industry in the country. Furthermore, it explores potential avenues where the industry can either directly hinder or support the military and its economic actions.

The South African Army abandoned ties with the Commonwealth after World War II and became associated with the National Party who rose to power in 1948. The National Party was essentially a mix of two parties: a party for white supremacy that introduced apartheid and a party that sought to mobilize Afrikaners—those descended from Dutch settlers. Many clashes occurred between residents and the police force. However, during the 60s and 70s the state became increasingly militarized as it relied more and more on the army to maintain control.

The army played a huge role in the destabilizing policy the government adopted to prevent neighboring countries from supporting apartheid liberation movements. This included raids and supporting guerilla groups. Furthermore, in the 80’s, troops were stationed in townships to suppress the growing resistance. This meant more men were needed to serve; thus, the government introduced compulsory conscription for white men aged 18 and over, lasting for two years.

Upheavals in the 1990s such as internal protests, insurgency, and boycotts from Western nations and institutions were catalysts for a regime change. The 1994 elections brought about a new political party in power for South Africa: The African National Congress. This change in power also brought into question the role of the army. A Joint Military Coordinating Committee (JMCC) was mandated to draft policies pertaining to establishing a new Military of Defense and to tackle issues relating to integration and future defense policies. The South African Army and many other segregated forces came together to became a part of the new South African National Defense Force (SANDF). As the name entails, it a primarily a defense force for the nation and nowadays works as a peacekeeping force internationally.

During World War II armaments were manufactured locally and notable achievements include the MK1 armoured car and the JB1 Radar. In the 1960s the government decided to expand the industry because of the threat of isolation as a consequence of apartheid. This threat became true as Western nations continually sanctioned off South Africa because the rest of the world was trying to move away from racist attitudes through various movements and policies. Segregation entrenched in law was what the world was trying to rectify while South Africa enacted those types of policies.

 In the 1960s, armaments production was in the hands of private industry. In 1994, the Government of National Unity was faced with the decision to either dismantle or preserve this export industry that employed tens of thousands. President Mandela and the Minister of Defense Joe Modise decided to maintain a high level of defense manufacturing with an increase in exports. They believed in the industry’s ability to improve civil society and infrastructure. This would be done by employing civilians to raise standards of living and the exporting would increase the nations revenue which would would then be put into public works projects, including hospitals, roads, schools, etc.

Today, South Africa’s defense-related industries are made up of organizations in the public and private sectors. Furthermore, these armaments and technologies are designed to sell to domestic and international buyers. Though South Africa’s government recognizes the benefits of having a local defense industrial capability, the budget has limitations. They are very selective of what technologies and capabilities they choose to deem a national asset. Thus, the defense industry is subject to government control.

For strategic purposes, preference is given to obtaining defense products and services from locals as long as they have good value for money. The expansion of online payments from different FinTech companies will allow these transactions to proceed efficiently, saving time and resources. However, the predicament the SANDF and local industry face is that their capabilities are favoring a high technology orientation seen in developed countries. This is a problem because the continent of Africa as a whole is characterized by developmental backlogs. Until African nations have a strong industrial and technological base, advanced military capabilities will not be sustainable. The SANDF has been looking to develop their technology, but with the African continents’ political, social, and economic environment it has been hard to initiate these improvements as instability is a major concern. Fintech may be a stepping stone for these advancements by promoting technology within the overall South African economy

With online technologies there is always the possibility of security breaches. These require investigation which cost money, a commodity that is limited. South Africa’s economy is growing marginally and a big challenge for the country is the unemployment rate. With key sectors such as agriculture, mining, electricity, gas, and water supply shrinking, the top priority for the government is investing in projects to help the economy develop equitably and for jobs to be created. Security breaches would be taking away money from the development of the South African economy; however, if Fintech becomes the stepping stone for more development in the entire region, the benefits may outweigh the costs.

Finally, after exploring the military’s history it can be concluded that subordination to the government will be natural to the SANDF because both agencies respect each other. The South African government has a Department of Military Veterans that supports those who have previously served and their dependents. This includes addressing socioeconomic needs, empowerment issues, and stakeholder relations. Furthermore, they look to reduce unemployment of veterans with support from a variety of agencies. On the other side, the SANDF supports government peacekeeping operations like the one in Sudan dubbed UNAMID. Their main priority was to ensure that agencies were protected and supported. As stated, the SANDF will support the South African government in any decision made because of mutual respect and understanding. Thus, there is a strong possibility that Fintech could actually be beneficial to the South African arms industry, SANDF and its military personnel past and present.