Leading article: The violent price of inequality

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When you need an explanation of xenophobic or tribal violence in Africa look to the money. The shocking wave of violence against foreigners in South Africa which has seen more than 20 people killed, hundreds injured and 10,000 fleeing their burning and looted homes has its roots in the country's economic woes.

Growth has been robust in South Africa in recent years thanks to the macroeconomic stability produced by the policies of its finance minister, Trevor Manuel. That, and a global commodities boom, has brought growth exceeding 5 per cent along with low inflation and high levels of foreign investment. The problem is that too little of the benefits have filtered down to South Africa's poorest people despite the use of state-owned enterprises to deliver basic services like housing and water to low-income areas. Daunting economic and social problems remain from the apartheid era. Outdated infrastructure has constrained growth – roads are overcrowded, cement has to be imported, and power shortages are a growing problem. Unemployment has fallen but not at the bottom of the market; there were nearly 3 per cent more jobs in South Africa's well-developed financial, legal and communications sectors in 2006 but only 1 per cent more in manufacturing, where the less skilled jobs are. So South Africa has one of the highest rates of income inequality in the world. The vast majority of its people remain poor, though the solutions proposed by South Africa's left and trade unions would almost certainly have only made things worse.

The plain fact is that post-apartheid South Africa faced a huge task building a new mass-based economy. Aids has made that more difficult. So has the high drop-out rate from black schools. But the final straw has been the huge burden of immigration. One in 10 of the population are now foreigners. Some are immigrants from Mozambique and elsewhere who take jobs in South Africa's mines and farms that many blacks in the urban townships will not deign to take. But 60 per cent of the foreigners – some three million people – are refugees from the chaos of neighbouring Zimbabwe.

President Thabo Mbeki should have addressed that much earlier by taking a more robust line with President Robert Mugabe's systematic destruction of the Zimbabwean economy and polity. Instead, he followed a softly-softly policy of appeasement. And now his country is paying the price. The violence has already caused a sharp fall in the rand and there are fears it could frighten away tourists who provide 8 per cent of national income. Most analysts already expected growth in the South African economy to slow this year. Unless Mr Mbeki acts decisively, a vicious circle will only grow tighter.

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