Chasing the rainbow A survey of South Africa April 8th 2006 Republication, copying or redistribution by any means is expressly prohibited without the prior written permission of The Economist The Economist April 8th 2006 A survey of South Africa 1 Chasing the rainbow Also in this section From revolution to evolution The ANC is becoming a more ordinary party. Page 3 Africa’s hegemon Thabo Mbeki’s many foreign-policy successes, and his one big failure. Page 4 Righting the wrongs of apartheid But armative action has its limitations. Page 6 Ladders out of poverty No education, no future. Page 7 The view from the shacks Since the end of apartheid, South Africa has moved closer to Miserable but not quite hopeless. Page 8 becoming the rainbow nation of Nelson Mandela’s vision. But not nearly close enough yet, says Richard Cockett All together now N THE 12 years since the African National leviate the poverty and degradation of the Public-private partnerships have worked ICongress (ANC) party triumphantly victims of apartheid without resorting to wonders in ghting crime. Page 9 took power in South Africa’s rst multi- counterproductive populism. Despite racial democratic election, there have been inheriting an economic mess from the out- plenty of reasons to be disappointed, even going National Party in 1994, the post- Keep chasing disillusioned, with Africa. The aid dar- apartheid government has managed to If South Africa pursues its rainbow vigorously lings of the West have come and gone. build 1.9m new homes, connect 4.5m enough, it may nd a pot of gold. Page 10 Yoweri Museveni of Uganda changed his households to electricity and provide 11m constitution to win a third presidential homes with running water. Its targets for term in dubious circumstances, and Meles raising the living standards of its people Exchange rates Zenawi, Ethiopia’s prime minister, ruined are the most ambitious on the continent. South African rand, March 27th 2006 his reputation when his police shot dead Yet a drive from Cape Town airport into scores of opposition supporters last year. the city’s almost exclusively white suburbs US$1= 6.25 ¤1= 5.20 Robert Mugabe, the last of the original big at the foot of Table Mountain demon- ¥100= 5.37 £1= 10.93 men of Africa, seems bent on impover- strates that South Africa is still deeply ishing what was once one of the conti- scarred by the legacy of apartheid. Here nent’s most prosperous countries, and the the cars rush through miles of shanty Acknowledgments government of Sudan continues with its towns and townships on the Cape Flats, The author would like to thank all those who gave gener- ously of their time, ideas and hospitality in the preparation genocidal military campaigns against its the geography of apartheid very much in- of this survey. Particular gratitude is due to the following: own people. Nor has the continent yet tact. It is a similar story throughout South Heidi Holland, John Battersby, Antony Altbeker, Karen conquered famine: in the Horn of Africa, Africa. Yes, the shacks in Cape Town now Borcher, Alfonso Botha, Richard Pithouse, Lawrence Schlemmer, William Gumede, Nikhil Bramdaw, Joel Net- parts of Kenya, Somalia and Ethiopia are have electricity. But what else has really shitenzhe, Adam Habib, Ashwin Desai, Elizabeth Sidiro- currently facing critical food shortages. changed? Yes, the giant township of So- poulos, Steven Gruzd, Rick Dillon, Aubrey Matshiqi and Tara But through all this, South Africa has weto, ashpoint of apartheid, now also O’Connor plotted its own course to relative stability, has electricity and smart paved roads. But A list of sources can be found online democracy and prosperity. It has even has its upgrading not further entrenched been trying to nudge the rest of Africa to- the separation of 3m blacks from the city www.economist.com/surveys wards emulating its own success. In that of Johannesburg, from which many were An audio interview with the author is at sense, South Africa is beginning to lead the forcibly removed 50 years ago? www.economist.com/audio continent in an entirely new way. When the apartheid regime fell apart in Why are we waiting? A city guide to Johannesburg is at 1990, South Africa, remarkably, did not There is now a sense of impatience over www.economist.com/johannesburg erupt in ames. That it did not was due the pace of change in South Africa. For largely to the leadership of Nelson Man- many, the country’s advance towards Mr A country guide to South Africa is at dela. No less remarkable since then has Mandela’s vision of a rainbow nation www.economist.com/South Africa been the ANC’s relentless campaign to al- has slowed to a crawl. The government is1 2 A survey of South Africa The Economist April 8th 2006 2 well aware of this, and is now intervening foreign investment that some thought usually amounted to the same thing. Its in more and more areas of national life to would never come. Barclays, a big British answer was the GEAR (Growth, Employ- try to speed up change. bank that withdrew from South Africa in ment and Redistribution) programme, Yet those interventions could do more 1986 under pressure from anti-apartheid launched in 1995, which committed the harm than good. As this survey will argue, campaigners, has just bought its way back government to an orthodox, prudent South Africa has some good stories to tell into South Africa with the $4.5 billion pur- economic package. about change, but few of them are entirely chase of a majority stakeholding in Absa That prudence paid o, bringing econ- the ANC’s doing. From education to for- bank, the country’s biggest retail lender. omic stability and launching a consumer eign policy to crime-ghting, the South Af- That is the largest foreign direct investment boom. But as the government has con- rican people have found creative solutions ever made in South Africa. And Britain’s ceded, GEAR did not create enough jobs, to many of their problems. That creativity Vodafone has recently made a substantial nor did it produce the hoped-for invest- is South Africa’s most impressive asset, investment in Vodacom, a South African ment, domestic or foreign, that might have and increasingly comes from the poorest mobile operator. generated more of them. So now the ANC and historically most disadvantaged of Yet for all the good economic news, the leadership is looking more over its left South Africa’s communities, who are now government is looking politically more shoulder, at the disgruntled activists who building their own ladders out of poverty. vulnerable than at any time since 1994, for feel let down by the government. a simple reason: little of this growth has Since the early 2000s, the scal stance The frustrating economy beneted its own core supporters, who are began to move into a more expansionary By rights, the government should be bask- overwhelmingly poor and black (a term phase, as Alan Hirsch, the head of the ing in the glow of an outstandingly suc- used in this survey to describe people of president’s economic policy unit, puts it. cessful economic performance over the black African descent only, whereas the That meant, in the rst instance, more past decade. Having inherited a pile of ANC applies it to all people of African, In- money for a programme of social grants, trouble from the disintegrating apartheid dian and mixed-race origin). The problem mainly for child support and pensions, government, the government has since is summed up by the unemployment rate, which go to about 10m people (out of a presided over an impressive 87 straight which even on the narrowest ocial de- population of 47m). But now Mr Mbeki is months of growth (currently running at nition stands at about 27%, a slight increase embarking on a more ambitious pro- about 5% a year), low budget decits and on a year earlier, despite the 5% GDP gramme to nd the jobs that have so far low ination. growth (see charts 1 and 2). The economy is eluded him: the Accelerated and Shared The Johannesburg Stock Exchange, rid- generating jobs, but not enough to keep Growth Initiative for South Africa (AS- ing the wave of the commodities boom, pace with the number of new entrants into GISA). According to Joel Netshitenzhe, the has been making record gains. Consumer the labour market. government’s chief spokesman, this is demand has been buoyant, with the signs The government’s other big problem is very Keynesian, with a bit of Roosevelt’s of conspicuous consumption all around, rising inequality. There is a lot of talk New Deal. It will involve spending 370 from the gaudy new gated housing estates about a growing black middle class, but billion rand over the next three years on to the increasing numbers of sleek Euro- the number of people living on the pov- public works, mainly infrastructure, to pean sports cars on the roads. House prices erty line may actually be rising. Thabo boost jobs and create more demand that rose by 21% in 2005 (a welcome slowdown Mbeki, the country’s president, has spo- will also be spread more evenly. Some sec- from 32% in 2004), and new-car sales in ken of the gaping divide between South tors, such as tourism, will be specially tar- January this year were 22% up on a year Africa’s rst economy and second econ- geted. The longer-term aims are to raise the earlier. For 2006 as a whole, the National omy, echoing Benjamin Disraeli’s analy- growth rate to 6% by 2010 and to halve un- Association of Automobile Manufacturers sis of early industrial Manchester.