Nelson Mandela: His economic legacy

Workers at a clothing factory near Johannesburg While South Africa's economy has grown since 1994, more employment opportunities need to be created to reduce high unemployment

When Nelson Mandela stood in front of the Union Buildings in Pretoria 19 years ago to be sworn in as South Africa's first democratically elected president, he embodied the hopes of a nation.

Apartheid was vanquished, and in its place the rainbow nation was born. It was a time of great optimism.

There was much work to do, but there was a feeling that if everyone pulled together, a post-apartheid dream could be realised.

Much of that dream in economic terms was based on the Freedom Charter - the document signed in 1955 by Mr Mandela and others opposed to apartheid. It promised work and education for all, and a sharing of the country's vast natural resources.

Start Quote

The infrastructure was neglected, and slowly state inefficiency and corruption became serious problems.”

End Quote Dawie Roodt Economist

By the time apartheid came to an end, the South African economy had spent years being battered by sanctions. The infrastructure was, and remains, the most highly-developed in Africa, but the years of economic isolation were taking their toll.

In some senses, Mr Mandela and the African National Congress (ANC) inherited an economy that was heading for bankruptcy.

So, it was to prove a difficult task to create a silk purse of an economy from the pig's ear that Apartheid had left behind. However, many analysts point out that great strides were made in delivering some of the Freedom Charter aspirations in the early years of the new South Africa.

Dawie Roodt, chief economist at the Efficient Group, says: "Many millions of people got running water, electricity, etc.

"But the infrastructure was neglected, and slowly state inefficiency and corruption became serious problems."

A good start

On the surface, at least, things looked good at the start. Inflation, which was running at 14% before 1994, fell to 5% within 10 years.

South Africa's budget deficit, which was 8% in 1997, fell to 1.5% in 2004. Interest rates dropped from 16% to under 9% in the first decade of the ANC government.

Chart showing average wealth in Brics countries

Once sanctions were dropped, South African exports blossomed. Before Mr Mandela took the oath of office, just 10% of the country's goods were earmarked for export. By the turn of the century nearly a quarter of them were.

It wasn't just economic numbers on sheets of paper. In the 14 years after 1996, the proportion of South Africans living on $2 (£1.22) a day fell from 12% to 5%.

Start Quote

We basically don't know where we're heading. Everything is expensive. How do we survive? The opportunities are very limited”

End Quote Lerato Kabwe Businesswoman

Annabel Bishop, group economist at Investec, says South Africa's economy has "essentially doubled in real terms" since the fall of apartheid, growing at an average of 3.2% a year since 1994, as opposed to only 1.6% per annum for the 18 years prior to the end of white minority rule.

She also points out that the real tax revenues have effectively doubled since 1994, which has enabled the government to expand social welfare.

"The state provision of basic services has been extensive," she says.

But the early years still had to contend with huge problems. Apartheid had created rampant unemployment among the black population, an albatross that continues to hang around the economy's neck almost two decades later.

South Africa's official unemployment rate has hovered around 25% for years, and youth unemployment is much higher. By some measures half of those under 25 are out of work.

President Jacob Zuma is acutely aware of this. It's a situation that, combined with falling education standards and a skills shortage, is storing up problems for the future.

"We have developed a number of sectoral strategies especially focusing on skills development to meet these challenges," Mr Zuma has said.

Chart showing unemployment in South Africa

While overseas companies scrambled to get into the newly open economy after 1994, the foreign direct investment (FDI) didn't transform into the millions of jobs that were needed.

The general secretary of the trade union organisation, Cosatu, Zwelinzima Vavi, recently said: "While we have made huge gains since 1994... on the economic front workers' lives have not been fundamentally transformed. We still face massive problems in our economy."

Wide inequality

One of the massive problems is the gap between the rich and the poor, which in South Africa is one of the highest in the world. In fact, by some measures it's actually greater than it was under apartheid.

Under the commonly-used Gini coefficient for measuring inequality, South Africa scored 0.63 in 2009. Under the coefficient, 0 is the most equal and 1 is the the least equal.

Back in 1993, the country's rating was 0.59, which has led many to the conclusion that the gap between the rich and poor is actually getting bigger.

Meanwhile, the United Nations regularly ranks South Africa's cities as some of the most unequal in the world.

Woman pushes her cart in Alexandra township (file photo) Poverty still remains a problem in South African's townships

But coefficients and reports aside, the most casual of observers only has to drive the few miles across Johannesburg or Cape Town to go from views of stunning mansions with German cars, to shacks and open sewers.

Lerato Kabwe, a business woman in Johannesburg, says she felt more economically confident during Mr Mandela's presidency than she does today.

"We basically don't know where we're heading," she adds.

Economic snapshots

South Africa's unemployment rate rose from 15.6% in 1995 to 25.6% in 2000

The average per capita income declined from 13.2% of the US level in 1995 to 8.5% in 2000

On average, a white household in 2013 earns six times more than a black one

Nearly one in three blacks is unemployed, compared with one in 20 whites

More than 25% of South Africans benefitted from social grants in 2010 - up from 13% in 2002

"Everything is expensive. How do we survive? The opportunities are very limited.

"We're far from economic freedom because the minority that was previously empowered - they still have economic power. When will the equality happen?"

Bank employee Peter says he's "hopeful, but at the same time, negative towards the economic outlook".

"Nevertheless I think, right now, we are getting more opportunities, as opposed to prior to Mandela being elected as our president," he adds.

While much was done and planned in the early post-apartheid years to right the wrongs of the previous era, analysts say that many policies faced insurmountable problems.

Initially, Black Economic Empowerment (BEE) was a "quick fix" - giving black South Africans a stake in the nation's industries from which they had so long been excluded.

However, in the first 10 years of the new ANC administration, the fruits of the BEE policies tended to end up in the pockets of a politically well-connected elite.

Even though the BEE policies expanded over the years and helped create a rapidly expanding black middle class, they still largely failed to improve the lot of the majority.

Marikana mine shootings

A case in point in the inequality picture is South Africa's mining sector. 2012 was the most turbulent year for the country since the end of the apartheid, with violent wildcat strikes across the sector, and 34 miners shot dead at Lonmin's Marikana platinum mine in Rustenburg.

Striking Lonmin miners in Marikana May 2013 The problems at the Marikana mine could be seen as a microcosm for the country

In a way the Marikana mine is a microcosm for the country. The workforce is split, largely between the National Union of Mineworkers (NUM) and the Association of Mineworkers and Construction Union (AMCU).

The board of Lonmin is mostly white, although until recently the ANC's new deputy president Cyril Ramaphosa had a seat. Mr Ramaphosa is often tipped as a successor to President Jacob Zuma. He's also a former head of the NUM.

Start Quote

"He [Mr Mandela] has done a lot. It's up to us to take it forward. It's up to us now”

End Quote Chris Nkasa Worker for a computing firm

A combination of factors meant the lowest-paid and least-skilled workers at Marikana began to slip behind. In an industry where the average wage supports 10 people, these men were on the wrong side of the wealth gap. They also began to view the NUM as being too close to Lonmin to efficiently look after their interests.

So, they downed tools in an unofficial, wildcat strike to increase their wages. That culminated in the dreadful events at the Marikana mine on 16 August of last year.

So, Marikana has a militant, disaffected and divided workforce. It has one union that is seen as being too close to the management. It has another that has severed ties, and is hostile to both the white owners and the long-established union. It may be a case of "so goes Marikana, so goes the nation".

'Self-enrichment'

Forward Mutendi, a consultant in Johannesburg certainly doesn't want Marikana to become a mirror for his country's economy.

"I've never seen a country, I've never seen a situation, where unions are fighting against each other," he says. "This is really showing that there's no longer discipline and now everybody's individualistic.

Shoppers in a branch of Zara in Johannesberg South Africa's economy continues to grow

"Right now, this is deterring investors from coming back to invest in the country and a lot of people are losing jobs."

Corruption is often put forward as a serious hinderer of economic growth in South Africa, not just from the corporate sphere, but from organised labour as well.

Cosatu's Zwelinzima Vavi says it's a scourge that's doing "untold damage on the moral fibre" of South Africa.

"We are moving towards a society in which the morality of our revolutionary movement... is being swept away [by] a culture of individual self-enrichment and 'me-first'," he recently told a gathering at the University of Cape Town.

Brics membership

Yet other analysts think the current pictures being painted of South Africa's economy are far too bleak. Yes, there are big problems they say, but that doesn't mean that South Africans are incapable of finding big answers.

South Africa's economy remains the largest on the continent, even though there's evidence that Nigeria is catching up fast. Together with Brazil, Russia, India and China, South African is a member of the Brics grouping of emerging market nations, with all the potential that brings.

Brics leaders meeting 2011 South Africa is the 's' in the Brics group of leading emerging nations

While its mining sector may be going through turbulent times, its financial services sector is highly developed and thriving.

Economist Dawie Roodt says: "We still have time to fix certain negative trends, with strong political leadership we can turn the ship around, but strong leadership often lacks.

"We also have significant policy uncertainty because of weak leadership."

Mr Mandela's economic legacy stems from the political freedoms for which he fought and won. It's a framework where, in theory at least, all South Africans have the right to pursue their economic dreams.

As the busy lunchtime pedestrian traffic bustles around him in downtown Johannesburg, Chris Nkasa, who works at a computing firm, ponders the question of Mandela and his economic legacy.

"He has done a lot [on economic freedom]," he says. "It's up to us to take it forward. It's up to us now."

More on This Story

Mandela's death

More Business stories

RSS

BBC Business Live

  1.  
    PUBLIC SECTOR FINANCES 09:52:

    Usually, public finances for July show a surplus due to tax payments, but this year the Office for National Statistics says the government had to borrow £200m in the month. That's still quite a bit down on July last year when the government had to borrow about £1bn but economists had been expecting a surplus - albeit a tiny one - of £50m.

     
  2.  
    RETAIL SALES 09:39:

    British retail sales grew in July at a slower pace than forecast, according to data from the Office for National Statistics. Retail sales volumes rose 0.1% in July compared to June and 2.6% growth was seen year-on-year.

     
  3.  
    PUBLIC SECTOR FINANCES Breaking News

    Public sector net borrowing for April to July was £32.4bn compared with £23bn for the same period a year earlier, official figures show.

     
  4.  
    AIR BERLIN PROFIT 09:26:

    Air Berlin, Germany's second-biggest airline, said it returned to profit in the second quarter, up 8.6m euros compared with a loss of 38m euros a year before. It also promised a restructuring programme later this year, which it will describe in September.

     
  5.  
    CHINA MANUFACTURING 09:07:
    Workers in a manufacturing plant in Chengdu

    China's manufacturing growth slowed last month, indicating a recovery in the world's second-largest economy has yet to fully take hold, HSBC said. The Purchasing Managers' Index fell to 50.3 in August from July's 18-month high of 51.7.

     
  6.  
    GIVE PEACE A CHANCE 08:53: World Service

    On the BBC World Service's Newsday, reporter Tony Bonsignore has just interviewed Sir Richard Branson, who along with 15 other global business leaders has written an open letter to governments urging them to find a peaceful solution to the conflict in Ukraine. The conflict has led to bans on everything from French pears to German sausages in Russia in response to Western sanctions. Branson said people in Russia, Ukraine and the West are "incredibly sad that after the fall of the Berlin Wall, when so much hope was taking place, we seemed to be reverting to a cold war situation".

     
  7.  
    MARKET UPDATE 08:38:

    European markets are flat as investors await economic data due out later this morning. They are looking for indicators as to the health of the eurozone with many wondering how much longer it will be before the European Central Bank is pushed into launching quantitative easing. The biggest rise on the FTSE 100 so far today is Schroders which is up 0.86% to 2,350.00p.

     
  8.  
    JACKSON HOLE 08:23: BBC Radio 4

    More from Pippa Malmgrem. She says central banks want to argue over inflation. In the developed world, there isn't enough of it and in emerging markets there's too much. So the debate, she says, will be about whether "we keep our foot on the gas pedal with all the free money or should we start to take it away?" She suggests the data is behind what is really going on in western economies, particularly on wage rises and that inflation is already a problem for emerging markets.

     
  9.  
  10.  
    MOTORING ON 08:07:
    Nissan working on the Qashqai

    Almost 8 out of 10 cars built in the UK is exported to another part of the world - who said we don't export anything these days? That's according to the latest data from the Society of Motor Manufacturers and Traders (SMMT). It adds 5m cars have been made and shipped out of the UK since 2010, which is the best performance of any decade.

     
  11.  
    CHARITY GIVING 07:53: Radio 5 live

    "People aren't motivated by the tax element," of giving to charity, says Anne-Marie Huby of JustGiving. Charities qualify for a number of tax exemptions and reliefs on income and capital gains, and on profits for some activities.

     
  12.  
    CHARITY GIVING 07:40: Radio 5 live

    Anne-Marie Huby, co-founder of charity donation company JustGiving, is on Wake Up to Money talking about which is the most generous town in Britain. It's Bedford. She's not sure which is the tightest, though.

     
  13.  
    SAGE OF OMAHA FINED 07:26:
    Warren Buffett

    Proof that we are all human comes from the FT this morning, which reports that Warren Buffett's Berkshire Hathaway has been fined nearly $1m (£603,319) by the US Department of Justice for allegedly breaching reporting requirements when building a stake in a construction supplies company. In fairness, it's basically pocket change to a man like Buffett.

     
  14.  
    WH SMITH 07:11:
    A man walks past a WH Smith store

    WH Smith said its high street business delivered a "good performance" for the year to the end of August. It publishes full results on 16 October. It expects earnings to meet analyst forecasts.

     
  15.  
    JACKSON HOLE 07:00: BBC Radio 4

    It's that time of year when central bank policymakers come to together to discuss interest rates, inflation general world economic matters - otherwise known as Jackson Hole. Pippa Malmgrem a former advisor to President Bush on all things economic tells Today this year's meeting could be more interesting than previous years because the private sector - the banks which have been the main beneficiaries of monetary policy in recent years - have been uninvited. That, she says, is because the central banks want to have an argument and want to do it behind closed doors.

     
  16.  
    BANK OF AMERICA FINE 06:45: BBC Radio 4

    Colin McLean of SVM Asset Management tells the Today programme that an expected fine for US bank, Bank of America, will be paid half in cash and half in customer redress. There have been rumours for days that the matter with US regulators is about to be settled, he says. We're awaiting the official announcement today. The fine is expected to be the biggest in corporate history but McLean says: "Nobody wants to put the banks out of business. They really want to draw a line under this, so this does that and will let them move forward."

     
  17.  
    INTEREST RATES 06:29: Radio 5 live

    "It's normal for there to be a slight difference of view," economist Marian Bell, a former Monetary Policy Committee member tells Wake Up to Money following yesterday's minutes on the interest rate decision. Two people wanted to hike the rate from its record low. "I agree wage growth is muted... it's not an argument for not moving interest rates to a more normal setting." She'd increase it by one eighth of a percentage point.

     
  18.  
    BALFOUR MERGER 06:17: Radio 5 live

    Colin McLean of SVM Asset Management is on Wake Up to Money talking about building firms Carillion and Balfour Beatty's will-they-won't-they merger talks. Balfour rejected another offer yesterday. "It may not be the end of it," he says. "It just depends the way people are approached... These things don't ever die".

     
  19.  
    CELEBRITY ENDORSEMENTS 06:05: Radio 5 live

    Andy Milligan, a brand consultant, is on 5 live. How come some celebrity endorsements do well and some fail? "When it goes wrong there's a problem with credibility," he says. "In some cases we've never heard of them." George Foreman and his grill worked well because boxers want to eat healthy protein, he says.

     
  20.  
    06:01: Howard Mustoe Business reporter

    Morning! Get in touch with us via email: bizlivepage@bbc.co.uk or on twitter @BBCBusiness.

     
  21.  
    06:00: Matthew West Business Reporter

    Morning folks. So what's new? Well, the Labour party is pledging this morning to give the energy regulator greater powers, while the US Federal Reserve has warned there is more slack in the labour market than first thought. We have public borrowing figures out later, while interest rates are still being discussed following the release of the Bank of England minutes yesterday. Stay with us - there'll be more.

     

Features

  • Pro Israel activists hold a banner reading 'Against Anti-Semitism and hate of Israel' at a demonstration as part of Quds Day in Berlin, Germany, 25 July 2014'Rising tide'

    Do statistics support claims that anti-Semitism is increasing?


  • Police respond to a shooting in Santa MonicaTrigger decision

    What really happens before a police officer fires his gun?


  • Child injured by what activists say were two air strikes in the north-eastern Damascus suburb of Douma (3 August 2014)'No-one cares'

    Hope fades for Syrians one year after chemical attack


  •  Marina Silva speaks during a press conference in Brasilia on 4 October, 2013. Humble origins

    Marina Silva - from rubber tapper to Brazilian presidential candidate


From BBC Capital

Programmes

  • Traffic lightsClick Watch

    From hacking cars to traffic lights - behind the scenes at a cyber-security conference

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.