Financialisation and the finance–production nexus in South Africa: Bidirectional dynamics in mining and manufacturing

A long-standing concern in debates on financialisation is that the growth of financial activity comes at the expense of production. This paper asks whether that concern holds at the sectoral level in South Africa, where deep and internationally integrated financial markets sit with a weak manufacturing sector and a broadly stagnant mining sector. Using quarterly data on mining and manufacturing from 1993 to 2023, the paper traces the relationship between the flow of funds into financial assets and sectoral production, with methods that separate short-lived movements from lasting relationships and allow finance and production to shape each other. Financial flows and production rise and fall together in the short run, clearly so in mining, while the evidence for manufacturing is weaker. Over the long run, the two drift apart, and neither sector shows evidence that financial accumulation durably displaces production. In annual data, financial flows and fixed investment move together, the opposite of what displacement would imply, and the influence of production on financial flows cannot be established with confidence. The paper provides sector-level evidence that the displacement often attributed to financialisation is conditional, and it directs attention to the macro-financial conditions, including the monetary policy stance, under which finance and production co-evolve in a resource-rich middle-income economy.