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World Cup and South Africa's Unmet Goals

Author: Princeton N. Lyman
June 7, 2010

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Fifteen years ago, South Africa hosted the Rugby World Cup. As depicted in the recent movie Invictus, it came in the glow of South Africa's stunningly peaceful transition from apartheid to democracy, with the almost mythical figure of Nelson Mandela, as the recently elected president, deciding to use the sporting event to help mold a new non-racial South Africa. In 2010, South Africa hosts the world's largest sporting event, the FIFA World Cup. The country will once again be on the world stage; it can boast of a still vibrant democracy and considerable economic and social achievements. But it also exhibits growing problems of corruption and inequality and stubborn levels of poverty among the majority black population.

A Democracy in Word and Deed

South Africa has held to its commitment to constitutional democracy. There has been a series of peaceful elections. There exists a multiparty parliament, free press, a strong and largely independent judiciary, vibrant civil society, and constitutional guarantees not only of political but basic economic rights. Race relations have not been without tension, but there have been no race riots, no revenge actions taken against the wielders of apartheid, or against the white population as a whole. Indeed, partly as a result of market-oriented policies followed by the new government, white-led corporations continue to be the dominant force in the economy, and whites continue to enjoy a level of income well above most blacks. Underneath, uncertainty about the future nevertheless occurs, manifested by the steady emigration of whites, especially those with higher education and skills.

From the outset, the new government surprised its critics by carrying out a fairly conservative economic policy. Warned by the economically destructive policies of some of its African neighbors, the government shunned external debt, reduced domestic debt, cut inflation in half, and lowered corporate taxes. It negotiated a free trade agreement with the European Union and met its commitments to the WTO. As a result, South Africa has enjoyed steady if not spectacular growth, averaging 3-5 percent annually since 1994 and, equally important, weathering both the financial crisis of the late 1990s that hit other emerging markets and the current financial crisis.

Once the Cup is over, South Africa must confront the issues that plague its political system and rise to the challenges of its still struggling economy.

Even with lowered taxes, the government sharply increased expenditures for education and health, has largely eliminated malaria, built or financed some three million low-cost houses, and given 90 percent of the population access to clean water. A growing black middle class is also emerging. South Africa has not attracted the level of foreign investment it had hoped, but is itself the largest investor in the rest of Africa. China's largest single investment in Africa is in South Africa's Standard Bank, giving China added entrée through South Africa to the continent as a whole.

Corruption and Inequality

With all this to its credit, there are emerging cracks in the political system and serious economic challenges. One party, the African National Congress (ANC), dominates. It has held close to a two-thirds majority in the parliament since 1994 and controls government in all but one province. In that environment, the idealism that so burned in the eyes of liberation figures has given way to fairly widespread corruption at national and local levels and a cronyism between party leaders and newly enriched black business elite that has tarnished the ANC's image.

There have been no serious investigations of corruption by the parliament, and party members who have tried to do so have been isolated. The current president, Jacob Zuma, had a charge of corruption against him dropped under political pressure from his supporters, and Zuma's appointments to the judiciary and of a new national prosecutor have raised serious concerns over the continued independence of both institutions.

Once the Cup is over, South Africa must confront the issues that plague its political system and rise to the challenges of its still struggling economy.

[T]he idealism that so burned in the eyes of liberation figures has given way to fairly widespread corruption at national and local levels and a cronyism between party leaders and newly enriched black business elite.

Despite relative economic stability and steady growth, South Africa has not addressed the fundamental sources of poverty. The vast majority of South African blacks remain poor; unemployment is officially 25 percent but probably much higher in the black population. Ironically, income inequality has increased since the end of apartheid, with South Africa recently surpassing Brazil as having the largest inequality quotient of any country in the world. The government has alleviated the pain of this poverty through an impressive social safety net, providing pensions, child support, and other grants to fifteen million people. But that means that nearly a third of the population is in such dire straits as to qualify for such help.

The government has initiated programs of affirmative action to address these disparities. But the underlying problem is the lack of education and skills in the population, a legacy of the apartheid policy denying blacks access to education in math, the sciences, or other skills that would raise their relative place in the economy. One of the saddest features of post-apartheid history is the failure to overcome this education deficit. The pass rate for matriculating students, which was 47 percent in 1994, rose to 74 percent by 2000, but has since fallen to 60.5 percent. More important, less than 20 percent of students pass the university entrance exam. And half of all students drop out before finishing twelfth grade.

At the same time protective labor laws enacted by the ANC government have kept formal wages high and employment regulations abundant. This leaves South Africa with a high-cost, low-productivity economy. That does not attract investment nor make South Africa, outside a few sectors, very competitive.

Another unsolved problem is land reform. A legacy of apartheid, the confinement of blacks to only 13 percent of the land, and marginal land at that, led to a decline in agricultural experience and a focus on urban and industrial employment that continues today. In 1994, 87 percent of rural land was owned by whites who dominated South Africa's highly successful but heavily subsidized commercial agriculture. Efforts to buy back this land for black farmers have largely failed, in part because of the cost, but also because land so transferred has not been put to agricultural use.

The ANC's Governance Problems

The ANC is an unusual political institution. It is an alliance of the ANC proper, the Congress of South African Trade Unions (COSATU), and the South African Communist Party. In 2008, feeding on the discontent described above, the latter two revolted against the economic policies of then-president Thabo Mbeki, took control of the ANC, forced Mbeki's resignation, and supported the election in 2009 of Jacob Zuma as president. Zuma has since tried to balance the expectations of his left-leaning constituencies and the interests of the business establishment that is the backbone of the nation's economy.

He did this initially by installing a cabinet that included the vast array of economic views, from that of the previous Mbeki administration to the more radical views of members of the Communist Party and its allies within the ANC. There resulted a cacophony of voices, some calling for nationalization of mines, South Africa's principal export industry, others opposing it. One minister stated that privatization would continue but was quickly forced to retract her statement under pressure from the ANC. A proposal for greater state involvement in industrial policy has been issued but with no clear links to an employment strategy, which is the province of another ministry. Zuma has not come out forcefully to resolve these matters or to provide clear direction. His supporters promise that once the World Cup closes, he will do so. The future of South Africa's economy depends on it.

When the World Cup opens, the world will see much of what South Africa is rightly proud; gleaming, modern cities, buttressed by vast new infrastructure built in advance of the World Cup; impressive members of all races leading government, corporations, and civil society institutions; a wonderfully vibrant society with musical and artistic talents of universal appeal; and a still strong spirit of non-racial democracy that was the heart of the Mandela legacy and which is embraced by virtually all South Africans today. It is the strongest economy in Africa, an important member of the G20, and the hope of all who remember the dream of 1994. Once the Cup is over, however, South Africa must confront the issues that plague its political system and rise to the challenges of its still struggling economy.

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