South African economic miracle?by Jeffry Babb News Weekly
, June 28, 2003
If you think "miracle" is too strong a word for the South African renaissance, consider what the outlook was before the fall of apartheid - widespread civil unrest, gridlocked economy and no prospects for improvement, with skilled labour fleeing the country. The Rand went into free fall and the outlook for the country's main exports, gold, metals and other commodities, looked bleak.
However, with the gold price fairly stable at around US$300 an ounce, the gold mining industry has a new lease of life. South Africa is still a treasure house of minerals, with the world's largest reserves of gold (35%), platinum group metals (56%) manganese ore (80%), chrome ore (68%) and titanium metals (21%). Of course, it is also a major producer of diamonds, as well as iron ore and aluminium.Manufacturing base
Now some 29 per cent of South Africa's exports are manufactured products. Internationally respected automotive companies such as BMW, Ford, Volkswagen, Daimler Chrysler and Toyota use South Africa as a manufacturing base, along with many component manufacturers.
Enlightened tariff policies by the United States and European Union mean that garments and manufactured goods enter those markets on concessional terms, and business is booming.
For overseas investors, South Africa has many attractions. According to government spokesmen, South Africa "is one of the most sophisticated and promising emerging markets in the world with a unique combination of highly developed first world economic infrastructure with a vibrant emerging market economy."
South Africa can boast a stable economic policy, based on a stable political system, advanced telecommunications, transport and energy provision infrastructure, reliable electric power at one of the cheapest rates in the world, rich natural resources, modern banking and financial infrastructure.
Investors are welcome and a range of incentives exist from the national and regional governments to encourage investment. South Africa's highly developed agricultural sector mean South Africa is self-sufficient in food and major international food companies, such as Nestle, Kelloggs, Heinz and Cadbury-Schweppes have a presence in the country.
South Africa also has a major fishing industry, a strong chemicals sector, and is the world leader in the manufacture of synthetic fuel from coal.
Moreover, it is the gateway to sub-Saharan Africa and its position at the tip of Africa between the Atlantic and Indian Oceans means that it a natural transshipment point between Europe and the Far East.
For the first time in many years, immigration to South Africa is in positive territory.
South Africa's currency, the Rand, is now one of the world's best performers.
Tourism has boomed as South Africa is now seen as a safe - and SARS free - destination. Who could not marvel at the range of wildlife and other attractions, such as nightlife and award-winning wines?
What can account for this turnaround? South Africa has not descended into civil strife as some had feared. The first president of a multiracial South Africa, Nelson Mandela, set South Africa on a pragmatic path.
His successor, Thabo Mbeki, has continued this approach.Heritage
South Africa has led the continent with the formation the African Union, successor to the Organisation of African Unity, and has shown the way with far-sighted policies aimed at the reclamation of forgotten African heritage such as the preservation of Malian manuscripts from the fabled city of Timbuktu, once a great trading centre and university city.
Of course, problems remain. Unemployment remains high and AIDS is ravaging the South African population. Violence is common, overwhelmingly involving poor people attacking other poor people.
What of the future? South Africa must maintain good leadership that retains the confidence of all of its diverse population, and also, the all-important foreign investors.
Challenges remain in the area of public health - not only AIDS, but also diseases like tuberculosis which have been around for centuries, and have yet to be conquered.
But South Africa has made steady progress and should serve as an example worth emulating by the rest of the continent.