Mbeki's South Africa

A TALE OF TWO COUNTRIES

In the 11 years since it abandoned white minority rule, South Africa has become two different countries. The first is a dramatic success story: once wracked by violence and synonymous with human rights abuses, this South Africa now boasts a stable political system based on a liberal constitution defended by honest courts. It holds regular, free, and fair elections, and the ruling African National Congress (ANC) enjoys enormous support. This South Africa boasts an economy that, encouraged by a pro-business government, is growing much faster than it did under white rule in the 1980s and is attracting ever-larger amounts of foreign investment. The country's activist president, Thabo Mbeki, has presided over what he calls an "African renaissance," helping the continent resolve some of its worst crises without meddling from the Western world.

The other South Africa barely resembles the first. In this country, the dominant ANC holds such a commanding lead in parliament that it effectively rules the country on its own, viewing any kind of opposition with suspicion. The economy is not growing fast enough to lift the population out of abject poverty or to address the huge structural inequalities. In this South Africa, former Marxist activists turned top government officials remain highly ambivalent about the private sector and foreign investment, and many of their attempts to improve the fortunes of their constituents have resulted in little more than the enrichment of a few black patriarchs. Meanwhile, this South Africa is being ravaged by AIDS, thanks in part to the government's bizarre refusal for years to acknowledge the link between HIV and AIDS and its insistence that the disease can be treated with a homemade remedy. President Mbeki responds to criticism by playing the race card. And he has pursued a questionable foreign policy, coddling local dictators while failing to pay enough attention to critical problems at home.

Paradoxical as it may sound, these countries are one: both visions accurately describe South Africa today, at least parts of it. In many respects, the country has indeed made enormous progress since its last white president, F. W. de Klerk, left power in 1994. In its 11 years in office, the ANC government has refrained from pursuing retribution, and the country is now enjoying an economic upswing, thanks to conventional economic policies that feature strong curbs on government spending and the liberalization of trade and capital flows.

At the same time, the government's attempts to narrow South Africa's severe wealth inequalities have largely failed, serving mainly to enrich a small black elite. President Mbeki frequently resorts to the language of class and racial struggle to lash out at his critics. He has made enormous diplomatic contributions to Africa, helping end the civil wars in Burundi and the Democratic Republic of the Congo. But he has refused to criticize the disastrous policies of Robert Mugabe next door in Zimbabwe. And his policies on AIDS have been bizarre at best, severely negligent at worst.

These glaring contradictions in South Africa's politics are unlikely to disappear in the near future. Trying to understand them is thus the best way to gain insight into the country's leaders. The ANC government and Mbeki bring together several hard-to-reconcile forces: the imperative to continue the struggle against racism; the need to enforce the solidarity of the liberation movement; the exigencies of participation in a multiparty democracy; and the desire to govern in a manner that promotes the interests of all South Africans. Somehow synthesizing these various impulses is critical for Mbeki's government. Only by burying the ghosts of the past can the ANC capitalize on its achievements thus far and lead South Africa out of the crises that threaten to overwhelm it.

LIFE OF THE PARTY

Any discussion of contemporary South African politics must start with the ANC, since all important policy decisions these days are made within the party. The country is formally a multiparty democracy, and lively debates do take place in parliament. But the ANC commands such a large percentage of the popular vote (nearly 70 percent) that opposition parties are practically irrelevant. This is in part because no one outside the ANC has yet figured out how to appeal to the country's black majority. Although some opposition politicians have outstanding antiapartheid credentials, because most were not part of the struggle against the past regime, they are still generally perceived as representing white interests.

As for the ANC, much of its conduct still reflects its history as an armed liberation movement. This vestigial behavior may be understandable: the ANC spent over 75 years fighting minority white rule. Its officials were forced to place group solidarity above all other values; facing imprisonment, torture, exile, or assassination, they came to rely on one another intensely and forged extraordinary bonds of personal loyalty. It was thus not surprising that Nelson Mandela, on his release from prison in February 1990, chose to use the occasion to declare, "I am a loyal and disciplined member of the African National Congress. I am therefore in full agreement with all of its objectives, strategies, and tactics." Nor is it surprising that some in the ANC still seem to believe that they are fighting the same battle, albeit on a different terrain.

Although perhaps understandable, these attitudes are anachronistic; the ANC is no longer a resistance movement, but the ruling party of a proudly democratic country. As such, its tendency to respond to challengers by accusing them of racial bias is worrisome. So, too, is the fact that Mbeki spends so much of his time lashing out at his critics -- even though the ANC has consistently achieved some of the largest electoral margins of any party in any democracy in the world. Mbeki sometimes seems actually to go out of his way to find people he can accuse of opposing his goal of eliminating racism.

Another concern is the way the ANC makes key decisions. To be fair, since forming the government, the party has managed to transform itself to a remarkable degree. It is largely transparent, holds many public discussions and meetings, and hosts a vibrant Web site (www.anc.org.za). On important questions, however, the ANC still reverts to the relatively closed process it used during the long years in exile: decisions are debated and decided within an extremely limited circle.

Still, for all its flaws, the ANC does get many important questions right. Mbeki's decision in June to "release" Deputy President Jacob Zuma from office (after one of Zuma's close associates was found guilty of corruption), for example, was a milestone event in South Africa's history. Faced with a painful decision he would have preferred to avoid, Mbeki chose to take a dramatic stand against corruption -- even though it cost him a close colleague with significant support in the ANC. It should also be noted, however, that Zuma's replacement, Phumzile Mlambo-Ngcuka, is another senior black ANC leader -- thus racial solidarity, at least, was preserved.

As such conflicting signals suggest, the ANC is a work in progress, in the midst of transforming itself from a resistance movement to a political party. Few organizations in history have survived such fundamental changes to their goals, strategies, and environments; that the ANC has made it this far is a testament to its discipline and its importance to South Africa. To remain relevant and effective in the future, however, the party must continue adapting, replacing its primary focus on resistance to apartheid with greater emphasis on the development of nonracial politics and socioeconomic equality.

THE BOTTOM LINE

Above all, the ANC must improve its ability to promote economic growth. Roughly 45 percent of South Africa's 44 million people are impoverished. Unemployment has increased by more than 3 million since 1994; the overall unemployment rate is now approaching 40 percent and is even higher among the 75 percent of the population that is black. Meanwhile, the economy has grown by roughly 3 percent annually in the last 10 years, a significant improvement over the record of the apartheid governments of the 1980s but far from the 6 percent needed to reduce chronic unemployment and poverty. And in recent years, many of South Africa's largest companies have left Johannesburg's stock exchange for London's or New York's. As the government concluded in an October 2003 review of South Africa's first decade of freedom, economic growth has been "mediocre" compared with that of other developing countries such as Malaysia, Thailand, and South Korea -- countries South Africa hopes to emulate.

Mbeki's government is not primarily responsible for this disappointing performance; the main culprit is apartheid, which saddled the newly democratic South Africa with millions of illiterate and poorly trained citizens, an economy that catered to a small racial minority, and a resource sector that had already been fully exploited. The ANC's macroeconomic management has actually been far superior to that of its white predecessors: the ANC has sharply reduced the deficit, liberalized the economy, and made economic management far more transparent. Still, the changes have not been sufficient, and the ANC must try harder if South Africa is to lift its citizens out of poverty. After years of insisting that its economic performance was adequate, the party has recently begun to acknowledge that it needs to achieve higher growth rates. But it has yet to announce any concrete measures designed to reach this goal.

Instead, the ANC has tended to direct most of its frustration outward rather than inward and to attack all who dare question, even implicitly, any aspect of its performance. In September 2004, for example, after confidence in South Africa's mining sector had been badly shaken by the earlier release of a draft law that suggested the government might force significant ownership changes in the industry, Tony Trahar, chief executive of Anglo American (a giant natural-resources conglomerate), said that political risk in South Africa was actually starting to improve, although it was not yet eliminated. Mbeki immediately went on the attack. In the weekly address he e-mails across the world, the president lashed out at Trahar, writing, "The poor and the despised ... have chosen reconciliation rather than revenge. Rather than reparations, they have asked for an opportunity to do a decent job for a decent wage. Do they deserve to be computed as a political risk?"

ANC officials subsequently tried to mitigate the damage the president had done. But the incident betrayed Mbeki's lingering preference for acting like the head of a resistance movement, not the leader of a country with serious economic problems. Other corporations that have expressed similar qualms about South Africa's business environment have met similar fates. In 2003, the major energy company Sasol applied for a secondary listing on the New York Stock Exchange, noting in its application that the South African government had mandated that 25 percent of the company be owned by nonwhite shareholders by the year 2010 and adding, "we cannot assure you that these transactions will occur at fair market terms and that this will not have a material adverse effect on our future business, operating results, cash flows and financial condition." Mbeki responded, in another of his weekly letters, by accusing Sasol's leadership of being unable to free themselves from "the chains of bigotry."

Some of the ANC's frustration is understandable. The party came to power with far more constraints placed on it than it had ever imagined would be the case, and it has had only limited freedom to remake the country and its economy in the years since. Before 1994, the party had long assumed that it would take power from a weak and fractured white government. Instead, de Klerk negotiated the transition from a position of strength, severely limiting the ANC's policy options as the price for avoiding a race war. The very real constraints -- some of which are embedded in the constitution and pertain especially to the reallocation of property and assets -- remain oppressive to the ANC given how much it had once staked on redistribution.

Such constraints, along with economic realities, have forced the ANC government to abandon the Marxism of its past. Although Mandela, after being released from prison in 1990, declared that "the nationalization of the mines, banks, and monopoly industry is the policy of the ANC," the party quickly backed off of this promise once it formed the government. In the years since, ANC officials have repeatedly pledged their loyalty to free-market principles and have promised to conduct their economic agenda within these parameters. As Mbeki said in 1999, "Ours is a capitalist society. It is therefore inevitable that, in part -- and I repeat, in part -- we must address this goal of deracialisation within the context of the property relations characteristic [of] a capitalist economy."

TO EACH ACCORDING TO HIS NEED?

The ANC's most dramatic failure involves an issue that stems directly from South Africa's history of oppression: the question of income redistribution. The need for some measure of wealth redistribution in South Africa is dramatic. Although exact measurements vary, the country is thought to have a Gini coefficient of around 0.6, making it, along with Brazil, the most unequal society in the world {See Footnote 1}. Such inequality is destabilizing and dangerous; coupled with racial tension, it makes for a particularly noxious force.

Thus far, the ANC government has taken a multipronged approach to the problem. Continuing and greatly enhancing reforms that were begun under de Klerk, the government increased the number of people receiving relatively generous social grants from 2.6 million to 6.8 million between 1994 and 2003. Nine million people gained access to safe water during the same period, and the percentage of households with electricity increased from 32 percent to 70 percent. The statistics on income distribution in South Africa look significantly better once such government programs are taken into account. Still, there are obvious limits to how much government spending can do, and the continuing rise in the number of unemployed has undermined efforts to reduce poverty.

Another component of the government's plan to close income gaps and "deracialize" the economy is its policy of black economic empowerment (BEE). This strategy has many parts, including the promotion of blacks to senior management positions within local corporations. The government has also tried to shift the equity ownership of South African companies from the current (white) hands to black ones. To this end, it has changed the state procurement process so that black-owned companies (defined as those where blacks control 51 percent of the company) now receive a distinct advantage when bidding for public works contracts. Even more controversial, the government has established industry-specific charters that stipulate precise racial targets. The charters generally mandate that 25 percent black ownership be achieved within the next decade. The shares are supposed to be sold to their new black owners at market value, but because of the time limits imposed by the government, businesses have not had much leverage in negotiations.

The result of this policy, and the fact that the government seems to favor shifting shares to black individuals rather than collectives (such as trusts), has been that a small number of politically connected black South Africans have made a tremendous amount of money. For instance, 60 percent of the empowerment deals struck in 2003 (valued at 25.3 billion rand, or $4 billion at current exchange rates) went to just two individuals: Tokyo Sexwale and Patrice Motsepe. In one case, Sexwale's company received ten percent of the empowerment deal for a bank, while only one percent was reserved for workers. Meanwhile, a mere eight people -- including Cyril Ramaphosa and Saki Macozoma -- stand to gain a total of 1 billion rand ($158.5 million) from a recent Standard Bank empowerment deal. It is perhaps no coincidence that Macozoma and Ramaphosa are on the ANC's National Executive Council and that Sexwale was premier of Gauteng province. And Motsepe happens to be the brother-in-law of Jeff Radebe, another ANC heavyweight and the current transport minister.

Rather than resolve South Africa's income inequality, such deals have only aggravated it. In fact, the inequality is even worse in the country's black population than it is in the population at large. The income gap within the black community dates back to the early 1980s, when trade unions succeeded in winning significant pay raises for the relatively small proportion of black South Africans who held formal jobs. But the polarization has only grown since the end of apartheid, as unemployment has risen and only a limited number of educated blacks have benefited, and disproportionately so, from the end of formal discrimination in the labor market.

The dramatic enrichment of South Africa's "BEE-llionaires" has generated increasing criticism of the government. In October 2004 -- in a sign both of how badly the BEE program has worked and of how open South African society has become -- Kgalema Motlanthe, the ANC's own secretary-general, complained that "certain individuals are not satisfied with a single bout of empowerment. Instead they are the beneficiaries of repeated bouts of re-empowerment. We see the same names mentioned over and over again in one deal after another." Many of the empowerment deals, Motlanthe noted, have resulted in wealth "transfer" rather than "transformation," because they have done nothing to alter the economic structure of the country. Indeed, the major beneficiaries seem to be banks that lend individuals the money to buy stock under the empowerment deals.

Accurate as such criticisms are, they misunderstand Mbeki's strategy for transforming South Africa's economy. The president is deliberately working to create an iconic black business elite in the hope that this will improve the relationship between his government and the corporate world, extend the ANC's influence outside politics, and help win more investment in South Africa. Mbeki outlined this approach in a 1999 speech when he said, "As part of the realization of the aim to eradicate racism in our country, we must strive to create and strengthen a black capitalist class," although he acknowledged that "because we come from among the black oppressed, many among us feel embarrassed to state this goal as nakedly as we should." Creating a high-profile group of black millionaires is, in Mbeki's logic, the best way to end the "investment strike" South Africa is said to be suffering from; the white business class (according to the president's logic) will never be friendly to the new South Africa.

Such a top-down redistribution strategy may seem surprising given the ANC's former socialism and the extraordinary destitution of a large percentage of black South Africans, the party's core constituency. Critics often dismiss the BEE program as simple patronage and a sign of the ANC's loss of revolutionary zeal. Such charges may have an element of truth. But Mbeki also honestly believes that to confront South Africa's racial inequalities, the country desperately needs some truly rich blacks. The president's thinking on this point seems to have been influenced by the successful Afrikaner effort to build up an Afrikaner business elite in the 1920s as part of a comprehensive strategy to end the "poor white problem" and seize control of the state -- a strategy that Mbeki's father, Govan Mbeki (who was a colleague of Mandela's and was jailed with Mandela on Robben Island for 24 years), studied extensively. Govan's writing, with which Thabo is undoubtedly familiar, emphasizes the Afrikaners' desire to establish "business enterprises which were to be the main pillars round which in the future large concentrations of Afrikaner enterprise were to take shape."

Mbeki's thinking also seems to have been influenced by the Malaysian example. Malaysia is an attractive precedent for South Africans today because it too had an economy that was dominated by a small, racially defined elite (the Chinese, in that case) and yet has managed, despite some significant stumbles, to grow at an extraordinary rate since the early 1960s. The country has gone from being as poor as Haiti in the 1950s to boasting a per capita GDP of $9,700 in 2004. Malaysia did this in part by enacting a group of laws that, through affirmative action and the targeted use of government assets, encouraged the emergence of a class of ethnic Malaysian businesspeople. These laws were the brainchild of Mahathir bin Mohamad, Malaysia's prime minister from 1981 to 2003, who argued that it was important to change the racial composition of Malaysia's economy by creating a high-profile group of extremely wealthy Malaysian entrepreneurs. To do this, he advocated directing shares of privatized state assets to those who were already affluent: "The best way to keep the shares between the Bumiputera [indigenous Malaysian] hands," he said, was "to hand them over to the Bumiputera most capable of retaining them, which means the well-to-do."

Unlike Mahathir, however, Mbeki has not taken the other steps necessary to change the attitudes of blacks toward business. Having spent much of his adult life in exile, Mbeki seems to have neither the skills necessary to create mass mobilization nor the desire to lead such a drive. He has not, for instance, tried to develop a culture of stock ownership among ordinary blacks or attempted to encourage them to invest their savings in the formal economy. He has also done little to create a truly indigenous vision of capitalism -- despite the fact that developing such a culture was critical to the Afrikaners' economic success last century. Instead, Mbeki seems intent on leading change from above, much as he once helped formulate ANC policy while in exile. While the ANC has acknowledged the realities of running a capitalist economy, it still seems ambivalent about actively promoting market-based wealth accumulation from below.

Unfortunately, Mbeki's top-down approach is unlikely to succeed; simply creating a number of black capitalists will not, by itself, improve economic growth in South Africa. There is no reason to believe, and certainly no evidence to date, that black businesspeople will do anything but seek out the best business opportunities for themselves and their companies. Furthermore, if Mbeki keeps forcing firms to diversify their ownership, this could discourage outside investors, who will worry that their equity could be lost in the near future as the result of government-mandated sales or transfers.

BLACK AND WHITE

Apart from a failed economic strategy, Mbeki and the ANC face another basic problem: too often, they continue to view all politics through the lens of the national liberation struggle, identifying racism as the basic problem and solidarity as the only answer. In their worldview, formed by years of struggle and unaffected by over a decade of democratic politics, racism is the driving force behind all social dynamics, and racial solidarity is usually the best response.

Unfortunately, although racism no doubt persists in South Africa and elsewhere, fixating on race to the exclusion of everything else can have tragic consequences. For instance, Mbeki has refrained from publicly criticizing Mugabe's disastrous rule in Zimbabwe because Mugabe portrays himself as fighting white racism. Even when the Zimbabwean authorities destroyed the houses of hundreds of thousands of black Zimbabweans in June 2005, the South African government said nothing. The reality that Mugabe's war against white landowners is destroying the economy and impoverishing millions of black people seems less important to Mbeki than the ideological cause. As he wrote in 2001, "The response to events in Zimbabwe has confirmed what many of us suspected, that the negative stereotype of black people in many white minds is firmly implanted in these minds." Racial solidarity trumps human rights.

Even Mbeki's stance on AIDS has been determined by the logic of racial solidarity. For several years -- during which South Africa made little progress fighting the disease, despite its relatively sophisticated public health system -- Mbeki refused even to acknowledge the link between HIV and AIDS. In an infamous letter that he sent to various world leaders in 2000, Mbeki argued for an indigenous response to the illness: "I am convinced that our urgent task is to respond to the specific threat that faces us as Africans. We will not eschew this obligation in favor of the comfort of the recitation of a catechism that may very well be a correct response to the specific manifestation of AIDS in the West." His government has responded slowly to the epidemic, delaying the distribution of antiretroviral drugs and the creation of education campaigns. Other African countries with far fewer resources than South Africa that embraced a more vigorous approach, notably Uganda, have made far more progress in fighting the disease.

Only recently has Mbeki come around -- or at least started keeping his idiosyncratic opinion to himself. Yet even now, Dr. Mantombazana Tshabalala-Msimang, the country's health minister, continues to insist that a homemade concoction of olive oil, lemon, beets, and garlic is a legitimate treatment for the disease. Precious time and perhaps tens of thousands of lives are being lost in the meantime; an estimated five million South Africans are already infected. South Africa had the potential to be at the vanguard of the fight against aids in the developing world. Instead, it has lagged far behind, and even now, Mbeki has not attempted to generate the kind of massive mobilization of society that is necessary to fight a disease that will eventually kill a significant portion of South Africa's adult population.

INTO THE PROMISED LAND?

Of course, as Mbeki's eventual shift on AIDS and his dismissal of Zuma suggest, there are limits even to ANC solidarity and the government's preoccupation with racial struggle. It remains to be seen, however, whether Mbeki's party can change course fast enough to avoid being left behind by the new, nonracial South Africa that it did so much to create.

As for Mbeki himself, it seems very unlikely that he will change his ways before he leaves power in 2009; the man is too much a product of his own and his party's history. It will therefore be up to his successor to build on the many positive developments that have occurred in South Africa since 1994, while developing a political approach that goes beyond racial solidarity. A successor will also have to repair the damage that Mbeki has done through his misguided approach to black empowerment and through his policies on Zimbabwe and AIDS. South Africa needs to accelerate its economic growth by increasing the incentives for investment and private savings. It should also take a much more active stance on AIDS prevention. And Mbeki's successor will have to cope with the catastrophe wrought by Mugabe next door. These will be difficult tasks, especially while the historical imprint of institutionalized white racism continues to mar the structure and function of South Africa. But the country's potential to improve matters domestically and throughout Africa remains enormous.

[Footnote 1] The Gini coefficient, a number between 0 and 1, measures inequality. A society with a perfectly even distribution of income would have a Gini coefficient of 0. A perfectly unequal society -- where one person owned everything -- would have a Gini coefficient of 1.