South Africa’s prospects
Apartheid was beyond parody. Black and white South Africans were ordered by law to live separately, but whites employed several million blacks to clean their houses, cut their lawns, nurse their children, lay their bricks, and pick their grapes. Inequality before the law produced cruel absurdities. On one occasion a black woman was convicted of sleeping with a white man on the basis of her own confession and jailed. The white man was found innocent, however, because the only evidence against him was the testimony of his black lover.1
No one could come up with a foolproof definition of “black” and “white” (unsurprisingly, as it is not possible) but the authorities devised tests for borderline cases. If a pencil, placed in the subject’s hair, stayed there, he was deemed curly-haired and therefore “Native.” If he played rugby rather than soccer, he was possibly “colored” (mixed race) rather than black. Each year, hundreds of South Africans were racially re-classified.
No satirist could create fiction more grotesque than the reality of white supremacist rule. But some tried.
Tom Sharpe, a British writer who was deported from South Africa in 1961, wrote Indecent Exposure, a blood-flecked farce set in what is now KwaZulu-Natal. What would happen, Sharpe asked himself, if one took the thinking behind apartheid to a preposterous extreme? Take the apartheid leaders’ horror of inter-racial sex, combine it with the brutality of the old South African police force, and you have Luitenant Verkramp, the policeman anti-hero of Sharpe’s novel. Verkramp tries to cure his constables of their habit of raping black women – not because he feels sorry for the women but because he believes it immoral for black and white to breed together. His solution is gruesome. He has his men strapped into chairs, shown pictures of naked black women, and given electric shocks to make them associate black womanhood with pain.2
It was an outrageous parody. But what Sharpe could not have known was that it was not far from the truth. The South African army really did use electric shock treatment – to try to make gay soldiers straight. They used pictures of naked men rather than black women, but the principle is the same.3
A paradise, for some
I arrived in South Africa in 1998, as Nelson Mandela’s presidency was entering its final year, and was struck by all the things that usually strike new arrivals. Perhaps more so. My previous jobs were in London, Tokyo, and Seoul: three cramped, crowded, costly, safe, efficient cities with iffy weather. Johannesburg is rather different.
The weather is perfect, for a start: warm and sunny, but never humid. South Africa is huge and sparsely populated, so space is cheap. My wife and I rented probably the largest house we’ll ever live in, eight minutes from the Economist’s office, with a kitchen bigger than my whole apartment had been in Tokyo and a swimming pool and a lemon tree in the garden. The food is great, too. In season, hawkers at traffic lights sell boxes of avocados, softer and more flavorsome than the little cannon-balls sold in British supermarkets and one twentieth of the price. Shop shelves groan with fresh asparagus, Knysna oysters, and unfeasibly large ribs. A bottle of good Cape chardonnay in a Jo’burg restaurant costs slightly more than a large can of beer from a Japanese vending machine. All in all, life in South Africa’s commercial capital is pretty comfortable.
Except that I’m only describing the northern suburbs, an island of middle-class indulgence surrounded by grim workers’ townships and plastic-shack squatters’ camps. It is one of the worst travel-writing clichés to describe a country as a “land of contrasts,” but the phrase is hard to avoid when describing South Africa. It is like a European archipelago dropped into an African ocean. The Third World lives in a shed at the bottom of the First World’s garden, which he weeds on Wednesdays.
South Africa is Africa’s best hope. It has by far the continent’s largest and most sophisticated economy. If South Africa prospers, it could pull the rest of the continent in its wake, as Japan did in Asia. If it were to stagnate, or revert to tyranny, it would be as if someone had poured sugar into the continent’s gas tank. So what are South Africa’s prospects?
A gentler kind of government
In many ways, the leaders of the African National Congress, the party that has governed South Africa since 1994, have behaved well. Many senior ANC members were imprisoned and tortured by the old regime, but they have not sought revenge. South Africa is no longer a country where ordinary citizens are terrified of their government, although the police can still be rough. The death penalty has been abolished, as has corporal punishment in schools.
South Africa has become a freer, more tolerant place. Black South Africans are no longer barred from traveling where they please. Young white men are no longer conscripted to go and strafe neighboring countries. Anti-apartheid guerrillas have found jobs in government and started eating at smart restaurants instead of bombing them.
Abortion and gay sex are now legal. The constitution of 1996 promises freedom of expression, information, movement, and association, not to mention the rights to privacy, access to adequate housing, and a clean environment. For a country that until recently deprived nine tenths of its population of full citizenship, this has been a dramatic change.
Some of South Africa’s new constitutional rights are harder to guarantee than others. The “right” to adequate housing implies that someone has a duty to build adequate houses for people who don’t have them. In practice, this has been interpreted to mean that the government has to make reasonable efforts to provide the roofless with shelter. This it has tried to do: between 1994 and 2002, 1.4 million neat new brick houses were built with government subsidies of about $2,000 each. One study found that only a third of these houses were of a “suitable standard”; but they were still much better than the hovels they replaced.4
The government has done several other things that have greatly improved the lives of poor South Africans. By 2003, it was supplying free piped water, up to a modest limit, to 26 million of South Africa’s 45 million people. The state has also brought electricity to many who previously relied on paraffin to light their homes and cook their food. Between 1996 and 2000, the proportion of homes with electric power rose from 55 percent to 70 percent.5 This has meant fewer lethal fires in crowded slums.
Not only has the government brought services to the poor, but it has given them money too. Pensions, mostly. Having converged in the last years of apartheid, state pensions for black and white South Africans were equalized. In many townships and rural villages, old women have become the most reliable breadwinners for large extended families. The monthly pension was only about $80 in 2001, but for many households this meant the difference between eating and not eating.
A safer place to do business
All this was achieved without printing money. A glance over the border at Zimbabwe shows how important this is. South Africa’s public finances under the ANC have been more carefully managed than they were under the old regime. Macroeconomic policy has been better than in living memory.
The government still spends a bit more than it receives in tax revenues, but the budget deficit shrank steadily from a worrying 9.1 percent of GDP in 1993 to an estimated 2.4 percent in 2003.6 Inflation fell too, from a peak of 18 percent in 1986 to 5 percent by late 2003, although it crept back up to 12 percent by late 2002. Trades unions and left-wingers within the ANC put tremendous pressure on the government to spend more and let inflation rise, but the party leaders understand that the gains from fiscal irresponsibility would probably be fleeting.
With sanctions ended, South Africa has become, in many ways, an easier place to do business. Fiscal and monetary policies have been consistent and conservative. Trade barriers, once towering, have been lowered several notches. Currency controls have been relaxed and may yet be abolished. Corporate governance has improved: companies have been obliged to publish more transparent accounts, and insider trading has been curbed.
As I write, however, all these reforms have yet to spur much growth. Average incomes have not fallen under the new regime, but they have not risen much either. Between 1994 and 2002, economic growth averaged 2.8 percent a year, outstripping population growth of 1.8 percent. This was much better than the previous twelve years, during which growth was a wretched 0.6 percent a year. But many black South Africans actually grew poorer under black rule, mainly by losing their jobs.
Can’t fire? Won’t hire
Although the black middle class expanded swiftly in the early years of ANC rule, so did the number of poor South Africans, almost all of them black. Joblessness exploded. Using a strict definition (counting only those who actively sought work in the last month), the number of unemployed black South Africans rose from 1.6 million in 1994 to 3.6 million in 2001. Using an expanded definition, including those who want to work but have given up looking, the number rose from 3.2 million to 6 million over the same period. Put differently, between 31 percent and 43 percent of black South Africans were jobless in 2001.7 Among unskilled rural black women, the figure was more like two thirds.
The rise in joblessness has largely been a consequence of the government’s efforts to protect workers. Besides all their racial laws, the ANC, urged on by its union allies, has passed a series of laws obliging firms to treat their employees more generously.
Firms must grant maternity leave, increase overtime rates, and pay a “skills levy” that is reimbursed only if the firm spends money on the kind of training that the government thinks its workers need. How a bureaucrat might know the answer to this question is not explained. Minimum wages are negotiated between unions and the larger firms in an industry and then extended to smaller firms in the same industry, whether they were party to the agreement or not. Since larger firms can usually afford to pay more, this makes it harder for small businesses to get started. Jobless South Africans tell pollsters that they would be willing to accept pay packets roughly half the typical minimum wage, but union leaders insist that they should not be allowed to.
To a European, some of these rules might sound unremarkable. But South Africa is not Europe. The ANC has tried to grant First-World legal privileges to a workforce with largely Third-World skills. The trouble is, workers with few skills do not produce enough to enable their employers to pay them generously – which is why the South African government has found its own laws impossible to obey. In 2000, the minister in charge of the civil service sought an exemption from some of the rules, as did the state-owned airline.
Some labor laws only apply to firms with more than fifty employees, so firms try hard to keep their headcount below this figure, by sub-contracting, for example. Thabo Mbeki, the president, sees this as quite a big problem. He once recounted how he had visited a factory and asked the boss how many employees he had. “About fifty,” was the answer. But Mbeki could see 300. Most of them were contract workers, explained the boss, employed by labor brokers, and therefore not his responsibility.8 The government later passed new rules restricting the use of sub-contractors.
When sacking staff or retrenching, bosses must follow long and complex procedures to the letter. A small technical violation of these procedures can lead to awards of up to a year’s salary to each employee involved. Most businessmen I talked to in South Africa felt that the labor courts were biased against them. For small employers, sacking unwanted staff can be an excruciating hassle, as a friend of mine, Michael, found out. He was the Johannesburg bureau chief for a British newspaper, which is to say, he was in charge of a two-man office, consisting of himself and an assistant who was supposed to run errands and generally make life easier for him while he struggled to meet deadlines.
Michael told me that, shortly after he arrived in South Africa, he discovered that his assistant had borrowed the company car without permission or a driving license, crashed it, and tried to cover up his tracks. When Michael was out, he ran up a bill on the office phone that exceeded his salary, including 258 calls in four months to friends and relatives in Zimbabwe. Michael said he gave him five written warnings to stop and countless spoken ones, but to no avail. Eventually, he decided to fire him but found that he could not. After a year of preparing for hearings, attending hearings, and paying legal fees, he was ordered by a labor arbitrator to give the man another chance.
If you fire him, the arbitrator said, he won’t find work again – which was doubtless true. But if workers are this hard to fire, employers have a strong incentive not to hire them in the first place. South Africa’s labor laws are supposed to be pro-poor, but their effect is anything but. They may benefit those who already have jobs, but they also make it harder for the jobless, who are mostly much poorer, to find work.
A rough nation
Those with no other means of earning a living sometimes turn to crime. Joblessness can lead to alienation, and poverty gives people an incentive to steal. With guns easily available, plenty of rich people worth robbing, and a tradition of revolutionary violence that dates back to the days when the ANC called for the townships to be made “ungovernable,” you would expect South Africa to be a dangerous place. It is.
According to one survey, an incredible 11 percent of fifteen-year-old boys think that “jack-rolling” (recreational gang-rape) is “cool,” and one South African man in four admits to having raped someone.9 The average South African is five times more likely to be murdered than the average American. (This rate is slightly better than it was in the early 1990s, largely because political violence has almost stopped.)
The popular mood seems to be that brutality should be met with brutality. Most South Africans want to bring back hanging. In 1999, a front page of the Sunday World, a black newspaper, showed a photograph of a dead man sitting in a lavatory cubicle, his brains smeared on the wall. The caption explained that he had stolen a mobile telephone and then shot himself rather than face the lynch mob outside.
The same year, the BBC aired footage of South African police officers, who knew they were being filmed, kicking, stubbing out cigarettes on, and goading their dogs to bite some carjacking suspects. The item attracted a volley of complaints from South African viewers, several of whom fumed that the BBC’s reporter should have left the officers alone, as they were only doing their job.
Both crime and the response to it seem to be fired by a palpable anger in South African society. This anger may have political roots. Many whites are furious that they no longer run the country, while many blacks are frustrated that they are not yet rich. The least intelligent whites, for whom apartheid job reservation was most beneficial, are probably the angriest now that it has gone. A couple of white security guards used to patrol the street where I lived in Johannesburg in a state of permanent rage that they no longer had nice jobs working for the state railway firm. One used to cradle his pistol and say things like: “I hate the fucking kaffirs. I fucking hate them. I want to fucking shoot them all.” He was soon fired and replaced with a more personable black guy.
In most parts of South Africa, but especially in rural areas, people assume that the police are powerless to catch criminals. So vigilante groups, including a couple of large, well-organized ones, are uncomfortably popular. I once arrived at a little hotel near Kruger National Park with a British friend, who saw a snarling leopard logo on the wall and asked me what it was. I explained that it meant that the place paid protection money to the local vigilante group, Mapogo a Mathamaga, which was notorious for dangling suspected thieves over crocodile-infested rivers until they confessed.
“No, really,” he said, “what is it?” I assured him that I wasn’t joking. Our guide, a kindly middle-aged lady, chipped in, recounting with approval how vigilantes “catch criminals, give them a bloody good hiding, and sometimes they don’t get up again.”
Under apartheid, the police’s job was to crush subversion, and their main obstacle was that everyone hated them. Black policemen were deemed traitors and liable to be “necklaced,” which meant having a burning tire filled with gasoline placed around their necks. At a police station in Soweto, officers told me how, in the 1980s, they sometimes awoke to the sound of hand grenades being lobbed through the window.
In the new South Africa, the same policemen are supposed to catch common criminals, and their main hurdle is their lack of detective skills. The ANC government, many of whose leaders have vivid memories of bleeding in police cells, have made it clear that police are no longer allowed to kick confessions out of suspects. The trouble is, many police are unfamiliar with more modern ways of securing convictions.
Some are barely literate and have trouble processing the paperwork on which they spend roughly two-thirds of their time. Even when charge sheets are properly filled in, they can vanish if the right person is slipped a few hundred rand. Courts are gridlocked. Prosecutors and police have not figured out how to cooperate smoothly. My reason for visiting that police station in Soweto was to see a new computer system, paid for by local businesses, which was supposed to help the police share and analyze data. But when I got there no one knew how to work it. The result of all this muddle is that for every fifty carjackings, only one hijacker is jailed.10 The knowledge that they probably won’t be caught emboldens criminals.
In 1999, the government launched an FBI-style elite detective corps called the Scorpions. The unit has enjoyed a few high-profile successes. But South Africans will not start laying off their security guards or disbanding their vigilante bands until ordinary policemen become effective.
The mind of the ANC
One of the less sensible tricks the government tried to ease citizens’ fear of crime was to stop publishing crime statistics for a while, on the grounds that they were inaccurate. It’s a minor, but revealing, example. Many within the ANC are comfortable with the constraints of an open, liberal democracy, but many are not. Officially, the party subscribes to all the ideals of the constitution, for example that “anyone has the right of access to any information held by the state.”11 But when such information makes those in power look bad, they are sometimes tempted to suppress it.
When a report by the respected Truth Commission mentioned that, while the ANC was a rebel movement, it had tortured and killed some of its own members who were suspected of treachery, the party tried to block its publication.12 This was foolish. Had the party not drawn attention to this (well-documented) allegation, few people would have noticed it. The bulk of the report dealt with atrocities committed by the apartheid regime. The passages criticizing the ANC were shorter and less grisly. But because the then-deputy president, Thabo Mbeki, did not want his party to be criticized at all, he made it look less tolerant and democratic than it was. Fortunately, he was overruled by his boss, Nelson Mandela, and by the High Court.
How significant this incident was will become clear only with hindsight. Optimists dismiss it as an unthinking error by a party with less than five years experience in government. Pessimists fear that it could be an indication of how the ANC might behave if its grip on power were ever threatened, which currently it is not.
There are several reasons for optimism. The constitution, for one. South Africa also has a vibrant press that does not fear to lampoon the mighty (although the public broadcaster, which dominates radio and television, is tame and turgid). The judiciary shows no sign of kowtowing to the executive. Opposition parties in parliament energetically savage policies they think unwise and loudly complain about corruption.
But there are reasons for pessimism, too. One is the government’s choice of friends. ANC leaders tend to be blind to the faults of anyone who chipped in to assist their fight against white rule. ANC MPs gave Fidel Castro a standing ovation when he made a speech in the South African parliament in 1998. On a state visit to Havana in 2001, President Mbeki praised Cuba’s “passionate humanism.” His foreign minister, Nkosazana Dlamini-Zuma, who had spent her life struggling for universal suffrage in South Africa, dismissed the idea that Cubans might also want it. “Would you rather be … lying in the gutter with a vote, or a poor person in Cuba?” she asked.13
The ANC’s apparent support for Robert Mugabe is even more worrying. It is not universal, by any means. Nelson Mandela has made it clear he thinks that Mugabe is a despot and even made a veiled call for Zimbabweans to overthrow him by force.14 Tito Mboweni, the central bank governor and an ANC stalwart, said in 2001 that “the wheels have come off” in
Zimbabwe.15
But Mbeki and his inner circle take a different line. To Western diplomats and journalists, they say that they find the events of the last few years in Zimbabwe very troubling, but they are working quietly behind the scenes for a diplomatic solution because it would be foolish to provoke unrest by criticizing Mugabe too explicitly.
Fair enough. But there seems to be more to it than this. South Africa’s official observer missions at the elections Mugabe brazenly stole in 2000 and 2002 declared both to have been “free and fair.” They did not have to do this. Nor were they forced to invite one of Mugabe’s most thuggish lieutenants, Emmerson Mnangagwa, as a guest of honor to an ANC national conference in 2002. The crowd greeted him with tumultuous applause. Mbeki hugged him and described Zimbabwe’s ruling party as “our ally and fellow liberation movement,” which he said was doing everything it could “to address the challenge of ensuring a better life for all the people of this sister country, both black and white.”16
Can he possibly believe this? I hope not. There are other plausible explanations for Mbeki’s reluctance to criticize his neighbor. Mbeki’s brother, Moeletsi, outlined a fairly cynical one during an interview. He argued that the South African government “doesn’t want to take responsibility for the undoing of the present government in Zimbabwe, because if it undoes the present government, then it has a moral responsibility to reconstitute a new government.” No one, he said, “wants to pay the price … of the clean up.”17
Another possibility is that President Mbeki sees Zimbabwe’s problems as primarily a clash between a black liberation leader and an old colonial power, Britain. He does not want to take the white man’s side, according to this argument, partly out of racial and comradely solidarity, and partly because he fears black South African voters would disapprove.
Then again, perhaps Mbeki does not want to lean too hard on Mugabe because he does not want to see power won by an opposition party like Zimbabwe’s, which has roots in the trade union movement. The most likely future threat to ANC dominance will come from South Africa’s trade unions, which are currently part of the ruling alliance but are growing restless.
I suspect that all of these explanations are true. Mbeki could easily topple Mugabe, simply by turning off the electricity in Zimbabwe, much of which comes from South Africa. But he does not, because it would be too much trouble and might dent his African nationalist credentials. And he will not even talk to the Zimbabwean opposition (i.e., the rightful government of Zimbabwe) because that might give heart to the South African opposition.
Not that there is much hope of that. South Africa’s opposition parties, though feisty, are midgets; Nelson Mandela calls them “Mickey Mouse parties.” For now, important policy debates take place within the ANC. Disagreements are common: the ruling party is a broad church, including both communists and free-marketeers, both Africanists and liberals. All that its members really have in common is that they all opposed apartheid. With apartheid gone, so is the party’s ideological glue. Mbeki hears constant grumbling from leftists within the ANC, particularly those who are also members of the unions or the South African Communist Party. The leftists want huge increases in taxes and spending, even tougher protections for workers, and an end to privatization. Some quite senior ANC leaders make no secret of their loathing of free enterprise. Kgalema Motlanthe, the party general secretary, told workers in May 2000 that “You must intensively hate capitalism and engage in a struggle against it.”18
Such views are common within the ANC but are not party policy. Though himself a former member of the communist party, Mbeki realized several years ago that the hard left has no answers, and he has used his considerable political skills to neutralize it, co-opting the more able left-wingers with plum jobs. Mbhazima Shilowa, South Africa’s most charismatic union boss, was made premier (governor) of Gauteng, the province that includes Johannesburg and Pretoria. In the Mbeki cabinet, several of the most Thatcherite tasks were given to members of the communist party. In 2001, communists were in charge of privatizing state-owned industries, lowering trade barriers, and refusing pay raises to public sector unions. Faced with the option of either ditching their beliefs or losing their jobs, they performed these tasks adequately, or at least better than you would have expected.
A greater risk than socialism is that the ANC’s unchallenged hegemony could corrupt it. For as long as most South Africans remember apartheid, the liberators will keep on winning elections. If you are a South African who wants to get rich through politics, the ANC is obviously the party to join. If you are black, all the better. It is party policy to support black-owned firms, so you can hand out contracts to your relatives and claim to be promoting “transformation.”
The top levels of the South African government seem quite clean. But in provincial and local governments, corruption is a huge problem. “Little did we suspect,” sighed Nelson Mandela, “that our own people, when they got that chance, would be as corrupt as the apartheid regime. That is one of the things that has really hurt us.”19
Comparison with the old days is tricky, because the new regime sets itself higher standards. If an apartheid-era bureaucrat did his job efficiently and honestly, this was not necessarily a good thing because his job might have been to bulldoze black people’s houses. If, on the other hand, an ANC appointee snaffles funds intended for poverty relief, schoolchildren go without breakfast.
Chaos in local government helps crooked officials pilfer without fear of punishment. Some of this chaos dates back to the creation of black “homelands” by the apartheid government. The old regime, which was always trying to devise convoluted justifications for racial tyranny, came up with the idea that if it granted “independence” to a few blobs of South African territory, it could dump unemployed blacks there and disown responsibility for them. Pretoria spent vast sums building tinpot capital cities and propping up puppet black governments in these homelands, for the exercise was intended not merely to deceive outsiders but also to allow white South Africans to kid themselves that what they were doing was moral.
One of the results was to make South Africa more of a bureaucratic spaghetti-spill than it already was. In 1987, including all the homelands, South Africa had eleven presidents or prime ministers, eighteen health ministers and countless ambassadors sent from one part of the country to another.20 Integrating the homelands into the new South Africa has been an administrative nightmare. For example, in the Eastern Cape, one of the poorest of South Africa’s nine provinces, a white area (with a largely black population) had to be merged with two black homelands, each with their own bureaucracy, flag, anthem, army with more majors than privates, and so on. Homeland bureaucrats were notoriously slack and corrupt. White bureaucrats were notoriously slack and hostile to blacks. There were far too many of both groups, they were split between the provincial capital city and the two former homeland capitals, and they were almost impossible to sack.
To add to the confusion, there were nowhere near enough competent accountants in the province, and few of them wanted to work for the government. In 1998–99, ten out of fourteen provincial government departments in the Eastern Cape, which between them controlled 97 percent of the provincial budget, failed to submit proper accounts to the auditor-general.21 Such laxity made it hard to catch light-fingered officials, of whom there were many. In 2000, South Africa’s main anti-corruption watchdog had 27,000 cases outstanding in the Eastern Cape.22
Even when crooked bureaucrats are exposed, not much happens to them. After a tip-off from a bank, a senior official in the accounts division of an Eastern Cape department was arrested in 1996 for allegedly embezzling a million rand. But the police docket disappeared, the case was dropped, and the woman in question kept her job. Bureaucrats caught stealing are sometimes simply made to return the loot. “In many cases this amounts to being ‘punished’ by being given an interest-free loan,” complained one academic.23
President Mbeki occasionally frets about “careerists” within the ANC but angrily disputes the idea that the party is too powerful. On the contrary, in 1998 an ANC discussion document, written by one of his closest advisers, gave the following insight into the party’s ambitions. Transformation of the state, it said, “entails, first and foremost, extending the power of the NLM [National Liberation Movement, i.e., the party] over all the levers of power: the army, the police, the bureaucracy, intelligence structures, the judiciary, parastatals, and agencies such as regulatory bodies, the public broadcaster, the central bank and so on.”24
This sort of comment fuels the worst fear about the ANC. One reason that so much attention has been paid to recent events in Zimbabwe is that some people see the place as an omen of what might happen to South Africa. Zimbabwe’s ruling party was once, like the ANC, widely respected for supplanting a white racist regime and then preaching national reconciliation. But two decades of virtually unchallenged power turned ZANU into a giant patronage machine, with leaders convinced that their role in overthrowing white rule gave them the right to govern forever.
If, in twenty years time, the ANC looked like losing power, would it do a Mugabe? ANC leaders find the question insulting. We believe in democracy, they say, which is why we fought for it for so long. Maybe, but some ANC leaders have an odd view of what democracy is. After local elections in December 2000, S’bu Ndebele, the ANC chairman in KwaZulu-Natal province, threatened all the blacks, coloreds, and Indians who voted for the opposition that there would be “consequences for not voting for the ANC. When it comes to service delivery, we will start with the people who voted for us and you will be last.” That threat was hardly in the spirit of the constitution, but it drew no rebuke from the party leadership.25
Black expectations, white fears
South Africa has changed dramatically since 1994, but blacks and whites see these changes rather differently. To oversimplify somewhat: blacks resent the fact that white South Africans are still richer and only grudgingly apologetic about the past. Whites resent the fact that they pay most of the nation’s taxes and receive little in return.
Both grievances are real. Most white South Africans live in comfort, while jobless blacks live in squalor and die young. Many black South Africans argue that since whites’ wealth was accumulated through the exploitation of voteless black workers, whites should be begging forgiveness and handing over more of their money.
Few white South Africans share this view. Many never voted for apartheid, and among those who did many feel that by handing over power without being forced to, they have settled their debt to their black compatriots. To the idea of paying reparations, many middle-class whites scoff that they already pay income tax at up to 42 percent each year, sales tax at 14 percent, dividends tax, capital gains tax, and a host of other levies. “And what do we get for it?” a white economist asked me. “The public schools are awful, so we educate our children privately. We pay for private health insurance because public hospitals are a nightmare. And we hire private security guards because the police are useless.”
Of course, prosperous blacks pay taxes too, and the richest also pay for private schools, health insurance, and security guards. But they tend not to resent it as much as white South Africans do, because so many owe their prosperity to the government.
“Black economic empowerment” has, understandably, been one of the ANC’s top priorities. Many thousands of blacks have been hired as civil servants or managers at state-owned firms. The government has also tried to create a black business class in record time.
It has tried to do this by fiat. Banks were leaned on to lend money to well-connected black businessmen, usually former ANC bigwigs, to buy chunks of white businesses. White-owned conglomerates, eager to please the government, sold mines, newspapers, and banks to black consortia. These businesses were expected to prosper under black control for three reasons. First, they would win more government contracts. Second, they would enjoy easier relations with black trades unions. Third, they would be better at selling to black consumers. The share prices of these so-called “black chip” firms were supposed to rise, and the owners were supposed to repay their bank loans out of dividends or capital gains.
The trouble with this theory was that it was nonsense. None of the new black tycoons had much experience of running large companies. Few made a success of it. When the Johannesburg stock exchange plunged after the Asian crisis of 1997, many new black businessmen found themselves unable to service the debts they had incurred to become tycoons in the first place. The banks could have foreclosed on them but decided that it would be politically unwise to do so.
As a result of all these “empowerment” deals, the black share of the value of firms listed on the Johannesburg stock exchange rose from nothing when the ANC came to power to 9.6 percent in 1998. It then fell again, to 5.3 percent in 2001, partly because investors noticed that many of these firms were badly managed.26
The drive for black empowerment has produced some perverse role models for young black entrepreneurs. The richest black businessmen have largely got that way by parlaying political influence into a share of someone else’s business. Few new factories are built this way, and few new jobs are created. A few well-connected blacks have become honkingly rich overnight, but there is obviously a limit to how many people can be empowered this way.
What South Africa really needs is for members of the black majority to set up, starting from scratch, some firms of their own. There have been a few successes, such as Motswedi Technology Group (a computer firm) and Herdbuoys (an advertising agency). Encouragingly, the number of black franchise-holders doubled between 1995 and 2000.27 But in general black townships, even the most densely populated, have remarkably little commercial buzz. I was always struck, when walking around Soweto, how few of its 3–4 million inhabitants ever tried to sell me anything. Compared to the mobbing one receives from street vendors in Brazil, India, or Thailand, Soweto seems pleasantly calm. But its calm may not augur success.
Frustrated at the slow pace of black empowerment, a commission led by Cyril Ramaphosa, a former ANC leader who is now South Africa’s most prominent black tycoon, argued that the state should do more to speed it up. The commission recommended in 2001 that chunks of state pension funds be reserved for investment in black businesses and that white firms should be compelled to appoint more black directors and offer more contracts to black-owned firms.
Ramaphosa argues that that state-driven black empowerment will make the economy grow faster and so benefit everyone.28 This is unlikely. Where contracts with black firms make commercial sense, white firms are likely to sign them without compulsion. The marginal effect of making such deals compulsory is to force firms to sign the contracts that they would not otherwise have signed, that is, the ones that do not make commercial sense.
Under pressure from the government, firms in some industries have drawn up “black empowerment charters,” typically promising that, say, 25 percent of the industry will be in black hands by 2010. To achieve this, they will have to sell chunks of their businesses to blacks. The government insists that such deals will be made at “market” prices, but the market price of an oil firm or a mine is obviously affected by the fact that its owners are obliged to sell it. White firms submit because they fear that the alternative might be worse. They would rather surrender a quarter of their business now than have the whole thing nationalized in ten years’ time.
But black business cannot rely on handouts forever. As a proportion of the total, South Africa’s white population will shrink for the foreseeable future. The white birth rate is lower than the black one, and many whites are emigrating. Older whites, whose houses and savings are tied up in South Africa and who cannot afford the rent in London or Sydney, tend to stay. But the young and gifted, who do not see why they should be punished for their parents’ crimes, head for countries where they can learn new skills, earn hard currency, and not be discriminated against. Some will spend a few years abroad, gain marketable experience, and return to South Africa’s sunshine and cheap restaurants. But others will not.
Some South Africans rejoice at the “chicken run,” arguing that emigrants are traitors – and probably racists, too – so the country is better off without them. But if South Africa is to prosper, the dwindling number of white taxpayers needs to be replaced by a black business class that is not dependent on the government for its profits. Someone has to pay for all those public works programs.
South Africa has a better shot at creating a genuinely entrepreneurial black business class than most other African countries. The roads in South Africa are better, the airlines run on time, and all the support services that businesses need are in place, more or less. What is missing is a wider understanding that wealth is something you have to create.
In late 2002, I found myself sitting at a table with South Africa’s mining minister, Phumzile Mlambo-Ngcuka, and a group of up-and-coming black mining barons. She was trying to persuade me that a proposed forced march to black mine ownership would be good for business and good for the country. She sensed that I was not convinced.
“Why are you so cynical?” she asked.
I glanced to my left, at a suave representative of the new black entrepreneurial class who was sitting there. It was Bridgette Radebe, a cabinet minister’s wife.