A Letter From Pretoria

South Africa is undergoing economic, political, and social challenges that are casting some shadows over the advances of the last four years. What has happened since 1994 in the political empowerment of the majority has been a tremendously impressive first step, but the economic empowerment of the majority is the challenge that will make or break the new South Africa. Could the South African experiment fail? It is not out of the question, but very unlikely.

South Africa’s shift in 1994 from apartheid to a new democracy was hailed around the world as a miracle. For many that had grown frustrated with the intransigence of apartheid, this was a breakthrough of enormous proportion; but the use of the word miracle may have been misleading. The word implies an act that is both extraordinary and complete. What happened in South Africa in 1994 was, indeed, extraordinary. However, it was the beginning of a process that will continue long into the future. Now that the euphoria of transition is beginning to dissipate, many South Africans are coming to realize that it takes far longer than four years of democracy to overcome more than three hundred years of social engineering.

The African National Congress (ANC)-led government continues to struggle with the legacy of apartheid and the challenges that extend far beyond the boundaries of the nation-state. Yet the success of the South African people, both black and white, in establishing a representative and functioning democracy has been remarkable. There are now representative governments at all levels: national, provincial, and local. There is a new constitution that protects human rights, guarantees equal opportunity, and provides for free and fair elections. At the same time, there are no more detentions without trial, house arrests, or bannings, and both bombings and political violence have subsided. The press is free, the far right has almost disappeared, and former ideologues have turned out to be very pragmatic.

South Africa is an African country that works. I have travelled widely in the country, listening and observing in the bush as well as in the cities, towns, and desolate rural areas. I have found that away from national media coverage, streets are being tarred, refuse collection is being improved, schools are being renovated, and health clinics are being built and upgraded. Electricity is no longer the exclusive right of the privileged, and clean, safe drinking water is now widely available.

The Economy

Despite impressive economic and social achievements during the past four years, the road forward will require stakeholders to address thorny structural problems in the economy inherited from the former government. The white apartheid regime, for all of its anti-socialist rhetoric, created a surprisingly socialist state. A startling 50 percent of South African fixed capital assets were in state hands when the Mandela government took office, and the private sector was dominated by a handful of closely-held conglomerates operating in a clubbish, loosely-regulated, and inherently anti-competitive setting. The result was a stagnating economy and rising joblessness in the lead-up to the 1994 transition to majority rule, exacerbated by a falling gold price and rising foreign competition.

The apartheid state owned the electric company, the telephone company, the national airline, the arms industry, the railroads, buses, ports, hospitals, and television stations. These were used as platforms for “white” employment and as tools of industrial development for favored industries in an inflexible and protected economy. The state drilled for gas, logged forests, ran steel mills and synthetic fuel plants, mined some diamonds, grew mangoes, and even ran amusement parks. Contract labor and rigid workplace practices inhibited investment in human resource development. The legacy of these economic structures is an endowment of capital stock and labor which today does not reflect external competitive conditions. The way forward will require substantial retooling of machinery, massive investment in education and technology, and a thorough rethinking of workplace practices.

The lifting of sanctions provided a short-term boost to the economy as South Africa reentered markets and realized a spurt of new investment sparked by lessened political risks and enhanced regional stability...