South Africa: Tough Road to Prosperity

R. Stephen Brent

From Foreign Affairs, March/April 1996

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Summary:  South Africa's political miracle may not be followed by an economic one. Despite its claims of superiority to black governments to the north, the National Party pursued economic policies like most African countries'--import substitution, a wasteful public sector--leading to staggering black unemployment. Only slow private sector growth can lift the black majority out of poverty. But the National Unity government, while avoiding the worst populist temptations, must win citizens over to structural adjustment with gains in education, infrastructure investment, and affirmative action. Of those given little, much is asked.

R. Stephen Brent is an officer in the U.S. Agency for International Development mission in Pretoria, South Africa. The opinions expressed here are solely those of the author and do not necessarily represent those of the U.S. Agency for International Development.

CRY THE BELOVED COUNTRY

South Africa's democratic election in April 1994 was widely acclaimed as a marvel of our time. A country that eight years earlier many feared was on the edge of civil war negotiated a political compromise that transferred power from the white minority to the black majority. Majority rule will be implemented in two stages; the current government of national unity, which gives all parties of significance a place, yields to unrestricted majority rule in 1999.

Since the election, the once-feared threat of right-wing violence has faded. Although extremist Eugene Terre'blanche of the Afrikaner Resistance Movement still appears on his horse from time to time, most conservative Afrikaners accept the new government, which President Nelson Mandela has made easier for them by bending over backward to respond to white concerns. And in black communities there has been little evidence of populist factions in revolt against the compromises of the new government.

Unfortunately, economic progress has not matched this rosy political picture. The economy has turned up since the election, but growth for 1995 was still only about 3.5 percent. While that pace is a marked improvement over the early 1990s, when the economy contracted, it is not nearly enough to reduce staggeringly high black unemployment, estimated at 41 percent overall and higher among young people. Direct foreign investment has been slow. The new government is working hard to put its agenda for black social and economic uplift, called the Reconstruction and Development Program, in place, but the program is being criticized for slow delivery. South Africa has to break through the barriers of slow growth and high unemployment if democracy is to deliver the goods and secure long-term stability.

South Africa's economic difficulties reflect a number of structural problems that only deep-rooted changes can correct. There is no political or economic consensus, however, on how to make those changes. Private sector growth is the only long-term solution for South Africa's economic straits. But to generate the political capital necessary to pursue long-term growth, the government will have to combine economic liberalization with effective interventions to help the black majority.

OF THOSE GIVEN LITTLE, MUCH IS ASKED

Despite South Africa's reputation for a well-run economy under white rule, the policies of the National Party hampered growth severely. Apartheid brought about international isolation and economic sanctions, but the government's economic management was also poor. For all its criticisms of the ineptitude of African states under black rule to the north, the National Party followed policies after 1948 that resembled much of the rest of Africa. It developed massive bureaucratic and parastatal structures to provide public employment for Afrikaners, many of whom were poor in 1948. It embraced strong protectionism and import substitution. It spent lavishly on public investments, especially defense and supposedly strategic industries. And it set up puppet regimes in the so-called homelands it established that had all the elements of bad governance that the National Party criticized: autocracy, patronage, corruption, and enormous budget deficits.

These policies ...

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