Sunday, January 03, 2016

South Africa - It could have been different

Julius Malema, leader of South Africa’s Economic Freedom Fighters, challenged Nelson Mandela’s post-apartheid legacy. Malema accused Mandela of “turning against himself” in abandoning elements of the Freedom Charter during the democratic transition in the early 1990s. The charter was drawn up by a coalition led by the African National Congress (ANC) in the 1950s and is still viewed as the blueprint for an equal, non-racial and democratic society. Mandela, he noted, was hosted by a rich white man after his release, and attended “the club meetings of those white men who owned the South African economy”. Established business interests mounted a concerted campaign to maintain the existing structures of the economy. This was a key item on the agenda of a series of meetings with ANC and other opposition leaders in the 1980s and early 1990s. This demonstrated short-termist defensiveness and a lack of imagination about South Africa’s future.

The ANC’s promised economic transformation has been disappointing. Poverty hasn’t reduced quickly enough, inequality remains at world-beating levels, and the pace of growth has, on average, been pedestrian. It is currently glacial. Poverty remains persistently high at over 40%.

Growth in South Africa since 1990 has been very slow compared with other middle income developing countries such as Malaysia, Turkey and Brazil. In per capita terms, South Africa is clearly the poorest performer. Exports over this period have been the weakest, investment levels have been the lowest.

 Compared with similar middle income countries, the gap between the richest 20% and the rest is considerably greater in South Africa. Of the 50 richest Africans in the Forbes Africa’s 50 richest list, 16 are South Africans, and only two of the South Africans are black. Three of the four richest Africans are white South Africans.

Had the ANC in 1994 acted differently assets such as wealth and land could have been more radically redistributed; the Reserve Bank could have been given a full-employment mandate (like the Fed in the US); competition policy could have attacked oligopolistic structures, not only anti-competitive behaviour; a more vigorous industrial policy might have been introduced; small businesses could have had more committed support; and the apartheid structure of cities could have been more urgently addressed. South Africa’s capacity to transform the economy was also undermined by poor thinking, or the by-products of political horse trading. Examples of these include: the excessively radical liberalisation of agricultural markets and structures; some very poorly conceived reforms in basic education in the first two post-1994 governments; the very poor design of privatisation of some state owned enterprises; and the constrained and complex designs for the liberalisation of some key network industries, especially in the ICT and energy sectors.

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