What Went Wrong in South Africa?


1994, Nelson Mandela was elected the first black leader of what
was hailed as a new multiracial, multicultural, and democratic South
Africa. Now in 2003 in Soweto, one of the central battlegrounds
in the antiapartheid struggle, people get their electricity cut
off and no longer have ready access to water. Private security firms
evict them from their inadequate housing. 

1999 and 2000, protests grew against unemployment and privatization
of basic services. Crackdowns by the ruling African National Congress
(ANC) became increasingly repressive. In 2002, private security
guards fired live ammunition to disperse around 100 people demonstrating
over electricity cutoffs outside the home of Johannesburg’s
executive mayor, Amos Masondo, in the swank Johannesburg suburb
of Kensington. The ANC, aiming to make an example, arrested the
demonstrators, denied them bail, and held them in Sun City, a notorious
maximum security prison, which formerly held anti-apartheid activists.
The new South Africa has rapidly regressed into the South Africa
of old. 

in the new South Africa the repression is not to enforce a rigid
racial hierarchy. Now, the ANC is suppressing opposition to its
policies, which have led to a marked stagnation in economic development.
Annual total gross domestic product (GDP) has stagnated at about
1 to 3 percent since the early 1990s. Unemployment figures in most
of the country’s provinces have hovered near the 50 percent
mark since the late 1990s. Social services have suffered massive
cuts despite South Africa’s national health emergency due to

forces of neo-mercantilist globalization responsible for South Africa’s
continuing economic and social chaos were entrenched years before
apartheid collapsed. Indeed, when the apartheid government was clearly
doomed, faced with overwhelming international protests and a strong
sanctions regime at the climax of the Cold War in 1989, the international
financial institutions (IFIs) stepped in. They were determined to
influence the forces of social and economic change in the interests
of international finance and business. In the early 1990s, the World
Bank sent advisors to South Africa to recommend neo-liberal ideology
and policies promising economic growth. In 1993, the International
Monetary Fund (IMF) granted South Africa a $750 million loan conditioned
on the adoption of neo-liberal policies. 

IFI’s neo-mercantilist policies emphasize centralized corporate
control over under-developed economies through trade agreements
while only allowing liberalization in areas that the developed economies
and their multinational corporations already dominate, such as international
capital flows. The globalization currently being imposed through
the World Trade Organization (WTO), regional trade agreements, and
IFI Structural Adjustment Programs (SAPs) hark back to 19th century
imperialism. Now, as then, the resources of the imperial possessions
in the periphery are directed towards the core developed economies—these
days Europe, North America, and Japan. 

Nelson Mandela and the new ANC establishment in South Africa adopted
elements of the neo-mercantilist agenda enthusiastically in the
first post-apartheid national economic program called the Reconstruction
and Development Program (RDP). The RDP did retain some redistributive
elements, but these were rapidly abandoned in favor of the Growth,
Employment and Redistribution (GEAR) program in 1996, due to the
growing influence of the neo-liberals in the ANC.

was drawn up almost solely by 15 economists picked from the World
Bank, neo-liberal think tanks, and various African development banks.
The GEAR program emphasized commercializing and then privatizing
all of South Africa’s public companies and services. It drastically
cut government spending and secondary taxes on corporate profits.
It meant substantially and prematurely reducing tariffs designed
to protect South Africa’s key infant economic sectors, including
textiles and value-added manufactured agricultural goods. 

also liberalized capital controls and foreign exchange rates that
left the value of South Africa’s national currency, the Rand,
and South Africa’s import and export economic activity highly
susceptible to the volatile and rapidly changing nature of international
capital markets. Thus South Africa, a newly emerging semi-developed
economy, was forced to adopt economic standards of liberalization
that no developed economy, including the United States, has been
able to implement successfully. 

GEAR Turns The Screw 


Africa’s next president, Thabo Mbeki, elected in 1999, was
even more enthusiastic about neo-liberal policies than Nelson Mandela
and was one of the main political forces behind the adoption of
GEAR. The GEAR program has accomplished the exact opposite of its
stated aims. While the International Monetary Fund (IMF) praises
the fact that the GEAR programs have resulted in an economic growth
rate of around 3 percent for 2003, the Congress of South Africa
Trade Unions (COSATU) and the ANC estimates that South Africa will
need an economic growth rate of at least 6 to 8 percent to achieve
even minimal reductions in unemployment. 

GEAR promised 120,000 new formal sector jobs in its first year of
implementation, South Africa lost more than 100,000 formal sector
jobs by the end of GEAR’s first year. For the remaining 11
million employed people in South Africa in 2003, at least 4 million
are employed in the volatile, low wage informal sector and engage
in temporary, subcontracted economic activity ranging from prostitution
to street hawking. 

Africa, under the ANC, has the dubious distinction in 2003 of having
a larger income gap between the rich and poor than any other country
in the world except Guatemala. The most surprising aspect of South
Africa’s post-apartheid economic programs was that the ANC
embraced these programs so wholeheartedly. South Africa, with its
comparatively low foreign debt of only around 5 percent of its total
budget deficit in the 1990s, was under no pressure from the IFIs.
While highly indebted states throughout Africa were having neo-liberal
programs imposed on them, South Africa adopted them willingly. 

Bond, a professor at Witwatersrand University in Johannesburg, termed
these ANC policies “homegrown structural adjustment.”
South Africans are now forced to deal with self-imposed corporate-controlled
globalization in increasingly desperate ways that meet with increasing
repression. Even though all South African citizens are constitutionally
guaranteed “sufficient food and water” in South Africa’s
Bill of Rights, the ANC, encouraged by World Bank advisors, embarked
on a nationwide campaign to privatize South Africa’s public-owned
and operated water systems, contracting the management of water
systems to large multinational bidders. 

ANC ignored more realistic, viable, and legal methods of ensuring
water access to South African citizens. They might easily have funded
small-scale local service providers and maintained overall regulation
of the national water system to ensure water access to the low income
groups that would not be able to afford the new privatized water
rates. Nor did the ANC contractually obligate the water-MNCs to
provide water to the poor. The results of this privatization without
corporate accountability in a country in which the majority of the
workforce is unemployed was disastrous. 

2001 there was a massive cholera outbreak that spread from rural
areas in Kwa-Zulu Natal Province to the outskirts of Johannesburg.
It sickened hundreds of thousands and killed at least 300 people
who had to turn to polluted, cholera-infected water systems after
they could no longer afford the water charges of the new privately
owned water companies. The cholera epidemic cost the South African
government millions of dollars as it sought to treat infected people
and contaminated river systems. 

prices increased by 300 percent in the town of Fort-Beaufort and
to similar heights in other urban areas throughout South Africa.
In 2003, the village, town, and city councils tried to cancel the
contracts with the water multinationals (MNCs). The urban councils
are contractually obligated to pay the debts to the MNCs. Nevertheless,
the ANC continues to illegally restrict access to water despite
the constitutional right of all South Africans to water. 

government also continues to arrest individual citizens and members
of community organizations. Prominent among these are the Anti-Privatization
Forum (APF) and the Soweto Electricity Crisis Comittee (SECC). In
addition, anti-housing eviction campaigns risk arrest and detention
as they try to restore electricity to residences, prevent housing
evictions from taking place, and destroy prepaid water meters, installed
so water can only be accessed by those who can pay.

chairperson for the APF, Trevor Ngwane, is a former ANC member who
was expelled from the party for opposing its privatization policies.
He was arrested and held without bail in 2002 for protesting outside
Johannesburg Mayor Masondo’s property. Ngwane has said, “Corporations
seeking profit from a natural resource will never create a product
or system that will benefit the disadvantaged.” 

“Free Trade” Straitjackets 


of taking South Africa’s status as a low-income country and
the needs of its impoverished majority into account, the ANC governments
embarked on a system of complete privatization of its essential
services. This centralized corporate-mercantilist control of South
Africa’s resources will become even more entrenched under trade
agreements whether already completed or on the table with the United
States and the European Union (EU). The World Trade Organization
(WTO) recognizes that semi-developed economies like South Africa
need “special” and “differential” terms permitting
trade tariffs and other trade protections to shield their developing
economies. But the current bilateral negotiations have undermined
those WTO prescriptions as well as South Africa’s industry,
agriculture, and labor force. 

example, the trade agreement with the EU forces South Africa to
open 90 percent of its trade to the EU. The EU in return only allows
the South African economy access to 50 percent of its market. The
EU has also enacted further non-tariff barriers (NTBs) to trade
with South Africa, such as strictly enforcing health and safety
regulations that block many South African goods from entering the
European market. 

EU trade agreement also encourages South Africa to export only cheap
raw materials instead of more value added manufactured goods, which
reinforces South Africa’s position as a dependent, periphery
economy. South Africa has also entered into trade negotiations with
the United States, along with the other semi-developed southern
African states that belong to the Southern African Customs Union
(SACU), such as Namibia and Swaziland. These negotiations are due
to conclude at the end of 2004. 

trade agreement with the U.S. will increase corporate control of
southern Africa’s economies, resources, and labor. Indeed,
in order for southern Africa to qualify for “free” trade
with the United States, all southern African states must “liberalize”
all sectors of their economies, including social services. Corporate
taxes have to be reduced or eliminated. Corporations must be allowed
to purchase social services, land, and resources wholesale from
African governments. At the same time, duties and tariffs on manufactured
goods from the U.S. must be substantially reduced. 

U.S., EU, and large multinationals aim to gain as many concessions
as possible from South Africa through these trade agreements while
simultaneously seeking to avoid even limited concessions and access
to markets in return. South Africa cannot compete with the developed
economies, so economic development within South Africa has collapsed.
While there is economic growth in assets such as stocks and property,
these assets are concentrated among the wealthy minority. The ANC
government remains unenthusiastic about national development strategies
designed to lift the poor black majority out of wrenching poverty.
According to the Landless People’s Movement (LPM) of South
Africa, the government, although constitutionally obligated to do
so, has not initiated even small-scale land redistribution to impoverished
black South Africans. In 2003, 86 percent of the land in South Africa
is owned by around 120,000 white farmers and the central government. 

economic policy has favored rigid, narrow growth strategies designed
to increase corporate profit and roll back the state. South Africa’s
economy depends overwhelmingly on the economies of the developed
countries. The extreme concentration of wealth, the collapse of
social services, the explosion in social problems like prostitution,
crime, urban terrorism, and gang warfare, and the rapid spread of
AIDS, mean the end of hopes for a better future. The dreams of millions
of South Africans, which rose to such heights after the collapse
of apartheid, have turned into a national nightmare with no end
in sight.

Andrew Nowicki
is a social justice advocate based in Washington, DC.