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South Africa seizes new economic opportunity

In the nearly quarter-century since apartheid ended in South Africa, the dominant African National Congress party has lost some of its moral authority as a vessel for lifting the fortunes of black people. To judge from furious street protests that have swept the nation, the party devolved in the eyes of many into a patronage network enriching a well-connected few.

The newly installed president, Cyril Ramaphosa, inherits the historic challenge that has evaded post-apartheid leaders — how to transform and reinvigorate an economy that long funneled most of the spoils to a narrow, predominantly white slice of the populace into a source of progress for the masses, elevating the country’s overwhelmingly black population. And how to eliminate protections for South African conglomerates forged during apartheid.

It will not be easy.

Overall economic growth is slow. By the end of 2016, South Africa’s economy was still roughly the same size it was in 2009, according to the World Bank, which anticipates growth of about 1.1 percent this year. That makes the country one of the weakest economies on earth in a time of global expansion.

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And despite the formal eradication of apartheid, South Africa remains a land of stark economic inequalities that break along racial lines. Within the nation of 55 million people, just a tenth of the population, mostly white, controls more than 90 percent of the wealth, according to research by South Africa’s Stellenbosch University. The vast majority of the rest owns nothing at all.

Roughly half the country lives in poverty. The official unemployment rate sits above 27 percent. And in the townships ringing cities, where the apartheid-era government forced black people to live, as many as two-thirds of young people are jobless. There, families hunker down in shacks lacking toilets and clean water, enduring rampant violent crime.

“The crucial issue for South Africa is jobs and growth,” said Ian Goldin, who served as a senior economic adviser to Nelson Mandela when he was president of South Africa, and is now a professor of globalization at the University of Oxford in Britain. “Both have been palpably dismal in recent years.”

With the end of Zuma’s tenure, international investors upgraded South Africa’s prospects, sending the nation’s currency, the rand, to a three-year high, while bidding up shares of South African companies.

Longer term, the challenges confronting the incoming administration are enormous.

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For decades, a succession of governments led by the ANC have sought to bridge inequality with programs targeted at improving the lives of black South Africans. Townships have gotten electricity and more modern housing. Government contracts have been set aside for black would-be entrepreneurs.

These programs have had an impact, improving material conditions and generating jobs.

They have also been riddled with corruption.

At local governments across South Africa, bureaucrats have abused their authority to steer contracts to companies that put cash in their pockets. At every level of society, people have grown accustomed to kickbacks and political connections determining who prospers, and who goes without.

Zuma’s demise resonates as a sign of a potential new order taking shape. He will forever be linked to his association with the Guptas, three Indian-born brothers who effectively bought key levers of governmental power, amassing influence so comprehensive that it became known as “state capture.”

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His resignation has raised hopes that South Africa is finally contending with its epidemic of corruption. That view gained momentum when an elite police unit raided a home belonging to the Guptas nearly at the same moment that Ramaphosa was assuming office.

The new president is a hero of the anti-apartheid struggle, a former deputy president and chairman of the National Planning Commission, a focal point for thinking about how to engineer economic growth. As a former trade union leader and protégé of Mandela, he enjoys credibility among a range of interest groups, while carrying a reputation as a savvy and strategic operator.

He has had his brushes with controversy, most notably after a 2012 police massacre of striking platinum miners that killed 34 people. At the time, Ramaphosa occupied a seat on the board of Lonmin, the company that owned the mine. Emails soon surfaced showing that, a day before police opened fire, Ramaphosa had been urging senior government officials to take strong action to end the strike.

Still, no corruption charges have stuck to the new president, who now claims a mandate to clean up the toxic mess left behind by Zuma.

Some doubt whether the ANC can be salvaged as an effective vehicle for egalitarian policymaking. The party’s executive ranks include many figures implicated in corruption. Ramaphosa, 65, may champion new initiatives aimed at generating economic growth, yet he finds himself relying on his party brethren to execute his visions, with no certainty the money will land where intended.

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“I don’t necessarily think that taking the president out does much to dismantle the patronage network,” said Ayabonga Cawe, a development economist at Xesibe Holdings, a research and advisory firm in Johannesburg. “You’re going to need a lot more than taking out the guy at the top.”

Above all, Ramaphosa must contend with the structural defects that have long constrained South Africa’s economy, a legacy of apartheid.

Beyond its systemic discrimination against black people, apartheid severed the country from much of the global economy. It ensured that huge numbers of uneducated black South Africans were available at poverty-level wages within major sectors of the economy like mining, agriculture and textiles. That cushioned domestic companies from the pressure to modernize.

International sanctions isolated South Africa, shielding its firms from competition against multinational rivals. Sanctions also denied South African companies the ability to operate abroad, giving them an incentive to focus on the domestic market. The apartheid-era government obliged with subsidies for favored firms while allowing companies to pursue oligopoly, free of nuisances like antitrust law.

The result was a system in which large industries, from retail to furniture-making to chemicals, were dominated by huge enterprises whose core strength was the ability to protect themselves against competition. That system has largely prevailed, with smaller companies and startups facing often-impossible odds.

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“Apartheid was a system that lends itself to large conglomerates and concentrations of wealth in the hands of a few,” Cawe said. “It’s not just about the corruption. It’s about all of these parallel networks in big business that you need to dismantle. Most of those are white.”

Here is a world that Ramaphosa knows keenly, having achieved extraordinary affluence by running South African companies with interests in mining, banking, real estate and telecommunications. His fortune has been estimated at $450 million.

If he is serious about reinvigorating the economy and creating a space for black-owned small businesses, he will need to take on the prevailing structure that made him so wealthy.

His success on that front may be even more decisive than whether he can tame corruption.

“This is certainly the most optimistic moment for South Africa in a very long time,” said Goldin, the former adviser to Mandela. “In a way, it does feel like a new beginning. But the jury is out.”

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This article originally appeared in The New York Times.

PETER S. GOODMAN © 2018 The New York Times

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