A Dream Deferred

When South Africans threw off the oppression of the apartheid system, the future seemed bright. But thanks to years of government incompetence, political and economic success is far from assured.

Fifteen years after the end of apartheid, South Africa and its 47.4 million people have made great strides. A decade-long economic boom has lifted millions out of poverty.

Under the moral leadership of Nelson Mandela, Pretoria promoted racial reconciliation, prevented a massive brain drain and began to rebuild a deeply divided society.

Recently, the ruling African National Congress (ANC) held a dramatic leadership election between incumbent President Thabo Mbeki and former Vice President Jacob Zuma. But now that the populist Zuma has triumphed, he faces a number of charges stemming from a multi-billion dollar arms deal in the late 1990s, including racketeering, tax evasion and corruption.

South Africa has entered a period of uncertainty.


From Potential to Devastation

In the mid-1990s, South Africa began to encounter the tough realities of a globalizing post-cold war world. Led by the ANC, the government committed itself to increased trade and investment liberalization, while adopting a more realistic macroeconomic strategy that emphasized tight money and fiscal austerity.

By 2006, South Africa's GDP (PPP) amounted to $567 billion (ranking twenty-third worldwide, right behind Iran and Poland), while annual growth was estimated at 5 percent.

In just half a decade, average incomes have climbed from $3,050 to $5,390. However, population growth has plunged from 2.5 percent to 1.1 percent. Life expectancy is now less than forty-eight years and declining.

South Africa ranked thirty-sixth in global competitiveness in 2006, but fell eight positions last year. The country's infrastructure remains relatively solid, but health and primary education are under severe pressure. In the 1990s, South Africa's AIDS epidemic was as severe as the situation in other African nations. Today, things are a lot worse. There are 5.5 million South Africans with HIV, while the adult prevalence rate is 19 percent. Sadly, this devastation could have been averted.

There is a tradition of colossal public health breakdowns brought on by the government in Pretoria: In the late 1990s, South Africa's health minister announced that she would not permit antiretroviral therapy to be provided to pregnant HIV-positive women in public health facilities. In 2000, President Mbeki began to question the link between HIV and AIDS. Last summer he fired the popular deputy health minister, Nozizwe Madlala-Routledge, instead supporting her boss, an advocate of beetroot and African potatoes for solving the AIDS problem. For his part, Zuma has been accused of rape and recommended cold showers to prevent infection after sex with HIV-positive women.

In the coming years, this massive failure of leadership will exact a devastating toll on the people of South Africa.


Business Amidst Crime

South Africa enjoys a relatively large market, sophisticated financial system and efficiency in the goods market, but is struggling to streamline the labor market. In 2006, it ranked thirtieth among the world's leading innovators, as measured by international patenting in the United States. But translating innovation into thriving business models has become difficult.

South Africa has sophisticated companies-the market cap of listed firms rose from 154 percent of GDP to 280 percent from 2000 to 2005-but the business environment suffers from an inadequately educated workforce, crime and theft, an inefficient government bureaucracy and restrictive labor laws.

A plague of crime has hit South Africa: In 2007 it had more violent deaths per capita than Afghanistan. The number of sexual assaults has also grown dramatically.

Half a decade ago, Goldman Sachs projected South Africa's growth rate at 3.5 percent over the next fifty years, comparable to predictions for Russia and Brazil. Yet now it seems likely that the  economy will be significantly smaller than that of the BRICs in 2050 and just a fifth of the size of Russia's-not least due to the impact of AIDS on the labor force and population dynamics.


Dark Clouds

Today's succession struggle in Pretoria reflects a wider erosion of leadership. The ANC's prison-cell generation and its legendary leaders have retired (from Mandela to Mac Maharaj) or passed away (Oliver Tambo, Walter Sisulu).

Despite presiding over the longest economic boom since 1981, the increasingly authoritarian Mbeki is unpopular because most poor blacks, the alliance's core membership, have seen few benefits. Between 1975 and 2005, wealth disparities almost doubled.

In 2004, the ANC won a resounding victory with 70 percent of the vote, in a tripartite alliance with South African communists and the COSATU trade union federation. But the recent election results may contribute to the breakup of that ANC coalition.

The enormous irresponsibility of successive South African governments now mean that only dramatic change can restore the country's former promise as a global economic heavyweight.


Dr. Dan Steinbock serves in the India, China and America Institute. Focusing on issues of international business and international relations, he divides his time between the United States, China and Europe.