Big Mac and Coke? Not so fast . . .: Most South Africans will not see new-found wealth overnight, says Richard Dowden

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The Independent Online
TWO of the main stories in the business section of South Africa's Sunday Times last weekend were the announcements that Coca-Cola and McDonald's were poised to begin operations in South Africa. These reports, next to another about the soaring Johannesburg Stock Exchange, are examples of the almost euphoric optimism that has blossomed here this week.

Economics here is a matter of faith and perception. The given facts about the economy are completely at the mercy of politics. If the politics are seen to go well, outside investors will come and the economy will grow. If they go badly, investors will stay away.

Right now, the economy is enjoying a boom and bankers are hinting that dollars 5bn is waiting to be invested. Many American companies, such as Coca- Cola - which pulled out under pressure from the anti-apartheid lobby in the Eighties - are considering coming back. Other US companies, keen to be seen making the politically correct investment now, are bringing 'conscience money' to the new South Africa. The outflow of capital, estimated at pounds 10bn since 1985, has been reversed; and economic growth, which has been almost zero for the past few years, is expected to be around 2.5 per cent this year.

But the success or failure of the new South Africa will not depend on Big Macs and Coke. The new government, which takes office next week, will set as its priorities jobs, land, housing, water, electricity, health care and education.

The needs cannot be denied: 6 million people are unemployed; 9 million are technically destitute; 10 million have no access to running water; 23 million have no electricity; and in some areas a whole generation that became caught up in the protest politics of the Seventies and Eighties is uneducated. Unless these problems are dealt with rapidly, and tangible rewards delivered to the highly politicised black population soon, the country will tear itself to pieces.

How soon is soon? Nelson Mandela and other leaders of the African National Congress have been anxiously telling their supporters not to expect too much too soon. 'You cannot have liberation on Monday and a house on Tuesday,' says Thabo Mbeki, the ANC's chairman. Derek Keys, the well- respected finance minister, who may well retain his job in the new government, says that the ANC's reconstruction and development programme should be seen as a 10- to 15-year project. Yet young people in the townships persistently talk of change within months, not years.

So the ANC has to tread a tightrope. On the one hand it has had to promise change to its supporters, while on the other it has to reassure the business community and whites in general that they are not going to lose. Is this balancing act possible?

The new government is expected to be made up of the same people who have been sitting together in the Transitional Executive Council. It will draw on the experience of Mr Keys and other senior officials from the de Klerk government. Investors who have waited cautiously for the election before putting their money down are ready to move in, as long as the politics stays on course. They are reassured that the ANC has abandoned the Marxist slogans it adopted in exile and dropped references to nationalisation. The movement, which still has Communists among its senior members, appears to be a reluctant convert to free- market economics. White fears that farms, businesses, even homes would be seized and handed over to the black masses have evaporated.

Even the anxiety that the ANC may raise taxes to pay for the reconstruction and development programme has been allayed in recent weeks by assurances from Jay Naidoo, one of the ANC's top economic policy-makers, that 80 per cent of new projects can be funded by shifting the existing budget around. For example, the huge defence budget, no longer needed for the maintenance of apartheid, is being drastically reduced. The ANC is, however, still committed to a 'reconstruction levy', which has been vaguely formulated but which can only be a tax by another name.

Backed by international goodwill and genuine admiration for Mr Mandela, there are substantial aid funds from Europe, Japan and America. This week President Bill Clinton is expected to announce aid amounting to dollars 200m a year, which may help to satisfy some of those needs that the private sector is unwilling to fund, such as education and housing.

Mr Keys also stresses the resilience of the economy in the past few years in the face of adverse factors such as a fall in mineral prices, political uncertainty, capital flight, debt repayments and drought. That economic strength should in theory be enhanced by the liberation of millions of black people now free to live where they want, work where they want, send their children to better schools.

Militating against these factors is the possibility that the economy will simply not be able to deliver in time - or at all. Some businessmen argue that South Africa's wages and employment profile was shaped not by apartheid but by an economy based on mining and agriculture. The implication is that even if apartheid had never been imposed, the numbers of rich and poor would be the same as now, although they would be more racially mixed. If that is true, South Africa may look more like Brazil in a few years' time, with vibrant industries and wealth existing alongside widespread destitution.

South Africa's manufacturing and processing industries, the ones which add value to its prolific mineral and agricultural resources, are comparatively high-waged and heavily unionised. Skills and productivity are low compared to the Asian Tigers, and the state bureaucracy is flabby, corrupt and unresponsive. In the short term, the political necessity for affirmative action campaigns, aimed at recruiting blacks into civil service and managerial ranks, will result in inexperience and, inevitably, resentment, further demoralising the civil service.

The ANC's plan is to try to provide the basic necessities of life for all: free primary education, free health care for the unemployed, pensions and a host of other measures. At the same time, the ANC is trying to maintain South Africa's 'first world' status and encourage the 'third world' part of the country to develop itself. In practice, the plan is most likely to mean that the well off, mostly white, will keep their lifestyle and the poor, mostly black, will be asked to be patient. With the radical voices of the likes of Winnie Mandela in the ears of the township and squatter-camp dwellers, the question is: how long will their patience last?

(Photograph omitted)

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