Try, Beloved Country

Rumors of South Africa's decline are greatly exaggerated.

John Blundell from the August/September 2004 issue

(Page 5 of 5)

"Getting it right" was the theme of a think-in with President Mbeki on my last evening in South Africa, at the Little Brenthurst home of the Oppenheimer diamond dynasty. (That's little as in Robin Hood's Little John. British understatement transplanted.)

Nicky (a third generation Oppenheimer) and son Jonathan (fourth generation) addressed the two-hour gathering of the South African elite: businessmen, academics, political leaders, and the like. A year earlier, the African National Congress had made a well-intentioned but economically disastrous move to introduce a Mining Charter, which mandated that hiring in South Africa's mines be based on race, regardless of actual ability to do the job. Billions of rands exited the country, and now the Oppenheimers, at the prompting of an Mbeki emissary, were considering the question, "How does one transform an economy like ours?" By transform, South Africans mean, among other things, changing the country's economic profile from mostly whites in boardrooms and executive suites to 80 percent or more blacks in the upper echelons, in order to reflect the wider population.

The Oppenheimers told this gathering that transformation should be portrayed as an opportunity for the established economic powers rather than a threat to them. They said the goal is a bigger economic pie over all, with a bigger portion going to blacks.

The Oppenheimers' proposed carrot to entice companies to engage in transformation is a reduced corporate tax rate: Those that make a middling attempt to change their demographic profile would stay at the current rate, while those that failed totally would face tax penalties. The view of many in the room was that it's better to incentivize than regulate.

A lone pure libertarian voice called out from the audience: "Why can't we just let growth in and of itself transform the opportunities of the great majority of South Africans?" It was Brian Kantor, a former professor of economics at the University of Cape Town, who works for Investec, an international specialist banking group that started in South Africa in 1974 and now operates in 11 countries.

"Unemployment will doom us to a downward spiral -- we just don't have the time," came the answer.

Transformation has its critics. Nobody I met defended the current distribution of income. But there are many who claim that reform has helped only a handful of elite blacks while neglecting the masses. "Every white company is trying to buy a black one," the Free Market Foundation's Emerick said. That creates instant "transformation," of a sort. "There are a small group of blacks on many boards, usually the same people!"

There are the optimists of all races who have elected to stay on and tough it out. But there are still many pessimists. A great debate is raging over how to stop newly trained white doctors and dentists from skedaddling to Australia and the U.K. upon graduation without paying back one rand to the government that provided their education. "Those of us who are left are united on transforming the economy," President Mbeki told the Oppenheimer group.

What's really needed are the sort of popular Thatcherite measures that will bypass the tiny in-crowd and truly empower the tens of millions of poor people. After Britain's 1980 reforms, the number of people owning shares catapulted from 6 percent to 30 percent; South Africa, too, needs to open up ownership to the masses. The Law Review Project's Louw is very clear: "The fundamentals are in place. Apart from thousands of new statutes we call 'petty' regulation, the rhetoric is right and so is the policy. We have a good constitution that protects the people, and we have a surprisingly good Constitutional Court that upholds the rule of law. Other than the nationalization of mineral rights, capitalism is rampant and socialism completely defeated."

His colleague Eustace Davie added: "While we are subject to crime, we are all freer from government. After 20 years of no growth, and even negative growth prior to 1994, we are now going up." The annual growth rate in South Africa is estimated at 3 percent.

In the end I went with my eyes, and my training as an economist, in judging South Africa's prospects. Yes, there is crime, unemployment, and AIDS. But from my perspective on the street, in the heart of it, I don't believe the problems are as big as the reports make them out to be, or as insurmountable as the naysayers would have them seem. With a black majority that is stunning in its patience, understanding, and willingness to find a way, South Africa will not only survive but thrive.