Jim Peron is the author of Exploding Population Myths (Heartland Institute). He is executive director of the Institute for Liberal Values in Johannesburg, South Africa.
When Nelson Mandela left prison in 1990, the entire world was watching. This act was viewed as the final nail in the coffin of apartheid: an odious system of racial segregation that was combined with state socialism and called Christian Nationalism by the National Party (NP) government.
What was apparent long before Mandela’s release was that, from the ruling party’s perspective, apartheid wasn’t working. The economic benefits of interracial trade were too great, and market forces were constantly undermining the state regulations that served as apartheid’s foundation.
In its last term of office the National Party government had become irrelevant. The populace knew the government was on the way out and that reform was inevitable. For that short period South Africa became a de facto highly deregulated system. Censorship laws and the Board of Publications still existed, but the people ignored the laws, and films and magazines, long banned, suddenly were everywhere. Casinos popped up as well—not Vegas-style casinos, but something we might call mom-and-pop casinos with a few slot machines and the like. The various agricultural marketing boards were being ignored by the farmers and collapsed under their own dead weight. Unlicensed, unregistered, and untaxed businesses sprang up around the country.
The economy, which had generally been in decline from about 1982 to 1992, started picking up. In 1993 the country saw an increase in real GDP, which had declined six out of the previous ten years. Growth in GDP was only 1.2 percent in 1993, the year before Mandela became president of South Africa. But by 1996 it had risen to 4.2 percent. All in all, this wasn’t considered too bad a performance for a third world country. But in 1997 the growth rate almost halved, and in 1998 it dropped again—from 2.5 percent to 0.5 percent. By 1999 the economy was once again losing GDP. Things looked worse on a per capita basis since the population was continuing to grow at an annual rate of 2 percent.
The government of Mandela’s African National Congress (ANC) was imposing policy on the country. The de facto deregulation of the last years of NP rule gave way to the re-regulation of the ANC. Censorship laws that had been declared unconstitutional were rewritten, and the Board of Publications was once again in operation. In some ways its powers were expanded. The new board can also place legal restrictions on films, videos, and computer games for material that is deemed to be stereotypical or prejudiced regarding race, sex, ethnicity, or religion. The mom-and-pop casinos were replaced with a few licensed operations favoring ANC supporters. And while the marketing boards were dead, the ANC had a plethora of new legislation waiting in the wings.
The government decided to concentrate on unemployment and working conditions. Officials thought that high unemployment meant wages were too low. The ANC had to consider political realities: its partners in government were the Congress of South African Trade Unions (COSATU) and the South African Communist Party (SACP). The closeness of this alliance was again made clear at a May Day rally organized by COSATU. At the rally ANC Secretary General Kgalema Motlanthe urged workers “to intensely hate capitalism and engage in a struggle against it.” Responding to press queries, Motlanthe said the ANC is “not a bourgeois organization. The country’s leading socialist minds are in the ANC. Anyone who argues for socialism will find allies in the ANC.”
New labor laws were introduced to satisfy the Marxists in all three groups. A keystone measure was the Employment Equity Act of 1998 (EEA), which bans “unfair discrimination” on 19 grounds including race and sex. It also reverses the onus of proof and requires employers to prove their innocence if accused of violating the law. The law applies to all companies with more than 50 employees or that has financial turnovers over a specified amount. Once a company qualifies for the law it is required to draw up and submit to government its plans for affirmative action, including the setting of numerical goals for equitable representation of specified categories of people.
Reversion to Apartheid?
More than one commentator noticed that the new legislation was quite similar to the old apartheid laws, with the favored categories changing places with the previously unfavored groups. Apartheid legislation had light-skinned blacks seeking reclassification as “coloureds” (mixed-race) and coloureds seeking to be classified as white. Under the new legislation the racial migration was reversed. Suddenly very light-skinned Indians and coloureds publicly called themselves black. And many coloureds complained that while under the previous government they were “too black,” now under the ANC they are “too white.” The Chinese Association of South Africa has also complained about the law, saying that under apartheid laws they were excluded as nonwhites but are now excluded because they are nonblack. When Phil Ah Hing applied for a shop at the new Emfuleni Casino her application was rejected. The casino said that at least 30 percent of the businesses in the casino had to be black owned. She commented, “But we didn’t count before [under apartheid] and I don’t understand why we don’t count now.”
Companies that did not comply with EEA regulations faced stiff fines that could rise to almost 1 million rands per violation. Other new laws increased overtime wages, mandated retirement plans for domestic workers, and made it extremely difficult to fire dishonest or nonproductive workers. The results were predictable: over 1 million jobs disappeared from the economy during the first term of ANC governance. And in a population of just over 40 million this is a sizable drop.
Even the government has recognized that its labor policies are destroying jobs and recently said it would investigate “reforming” the laws to exempt small businesses. But so far the investigation has not borne fruit, and the raw numbers of jobs continue to decline. Finance Minister Trevor Manuel confessed: “It’s a terrible admission but governments around the world are impotent when it comes to creating jobs.” But they certainly know how to destroy them.
Government Health Care
Another area put under the government’s spotlight was health care. The ANC announced that the most appealing health-care model was that of Fidel Castro’s Cuba. Cuban medical personnel were imported into South Africa to work with the government, and for the most part they are still here. One Cuban doctor left the country in a hurry when his ineptness resulted in several deaths, and another was quickly deported when he married a South African and asked for political asylum.
Mandela announced free health care for children, and the government reallocated resources away from hospitals to rural clinics, which basically offer treatment for splinters, colds, and other minor problems. The result was an obvious drop in health-care standards at all the major government hospitals in the country.
Health Minister Nkosazana Zuma decided that health care needed a dose of coercion to achieve her goals. She banned smoking in all public workplaces, prohibited tobacco advertising and sponsorship of sporting or cultural events, and conscripted medical practitioners. When conscription was first proposed it was vigorously opposed, and Zuma dropped the measure. But she then replaced it with another measure mandating one year of service to the state, this time calling the service “training.”
Zuma fired hundreds of qualified doctors from their positions and replaced them with students fresh out of medical school. At Chris Hani-Baragwanath Hospital in Soweto, 42 foreign doctors were fired, including pediatric specialists, and replaced with inexperienced graduates serving involuntarily. Many of the doctors who were fired had long records and wanted to work in public health care. The students typically stay for one year and then, by most reports, a huge percentage of them pack up and emigrate permanently. The policy forced doctors who wanted to work in South Africa to leave the country, to be replaced by doctors who didn’t intend to stay. Dr. Arthur Manning, superintendent of Coronation and Helen Joseph hospitals, said: “In a country where we don’t have enough skills, we are saying good-bye to our medical staff and leaving them no option but to go overseas.”
New legislation will conscript pharmacists and dentists as well. And doctors who stay in South Africa will have to apply for permits to practice in specific areas. The government will use the permit process to force doctors into working in areas favored by the government as opposed to areas favored by the doctors themselves. The obvious results of such polices were completely ignored by the government. The medical brain drain continues unabated, and countries around the world are now benefiting from the skills of South African doctors, nurses, and dentists. In hopes of reversing the brain drain, Mandela, now retired, has asked the British government to pass a law forbidding South African-trained nurses from working in the United Kingdom—some 14,000 have already left the country.
Brain Drain: From Trickle to Torrent
The number of skilled South Africans leaving the country has been steadily increasing. One business journal wrote: “Five years after the dawn of majority democracy and the end of international pariah status, the reservoir of skilled people is still oozing out of the country. The so-called brain drain, or ‘chicken run,’ widely believed to have run its course, now appears to have shifted from a trickle to a torrent.”
Data from the United States, Britain, Canada, Australia, and New Zealand showed that from 1989 to 1997 some 233,000 South Africans emigrated to those countries. Official South African statistics showed only a third of that number “officially” leaving the country. Emigration attorney Hilliard Kassel said: “There is still a net out-flow of skills, and it has increased since 1994. Information technology people are in the forefront. They are mostly white, but there are Asians, coloureds and black people as well.”
According to a study by the Trade and Industry Monitor at the University of Cape Town, “Post 1994 annual immigration of professionals was 56 percent higher than for 1989-94. It is likely that between one eighth and one fifth of South Africans with tertiary education now reside abroad.”
While goodly numbers of skilled workers are leaving, it is mainly the young who are fleeing the country. A British program, which allowed young people to work there for two years, had some 30,000 South Africans apply for it in 1999 alone. Many use the program as an intermediary step before seeking residency in the UK. One youth told the press: “People find it difficult to compete in the affirmative-action job market.” Australian immigration agent Neil Hitchcock says that many school-aged South Africans are now studying in Australia: “What’s also happening is that some families who are not yet ready to migrate are having their kids educated in Australian tertiary institutions, as a preparatory step.” One report mentioned a Jewish school in Australia that has only one Australian student—the rest are South African emigrants.
The net losses of skill are compounded by the fact that capital is leaving the country just as quickly. John Kane-Berman, chief executive of the Institute of Race Relations, said, “Capital continues to leave South Africa in greater quantities than it arrives.” To make matters worse both trends have been accelerating. “Our direct investment abroad was only 10 percent higher than foreign holdings here in 1986, the margin had risen to 85 percent in 1998,” Kane-Berman said. “One two-year period—1986 to 1988—saw an actual decline in foreign direct investment in South Africa.” He added that 1999 was the sixth year in a row that saw a net loss of people: “This has never happened before during the period (from 1924) for which official statistics are available.”
The ANC government early on committed itself to the privatization of the massive amount of state assets it inherited. But the rhetoric has far surpassed the reality. One problem is that the large element of avowed Marxists within the government opposes these measures vehemently. What measures were implemented were processed slowly and often amounted to nothing more than window dressing. The state-owned telephone company was turned into a private corporation owned by the state, as opposed to a government department. Eventually 30 percent was sold off but the government is still the majority stockholder. The government-owned South African Airways was privatized, but only in the sense that 20 percent of the company was sold to SwissAir. The remaining 80 percent remains government-owned. In other privatization schemes so-called “black empowerment” companies (which tend to be owned by former ANC officials or the trade unions) were given preference, even when their offers were below those made by others.
International financial bodies and experts tend to believe that privatization is now running at least a couple of years behind schedule. One financial columnist noted that government pronouncements on privatization are now ignored by the markets because “we have all heard the same words too often in the past few years.” The government recently released another plan to step up privatization, but opposition members of Parliament have pointed out that the plan is long on promises and short on implementation.
While the general climate still leaves much to be desired there have been some areas of improvement. Fiscal and monetary policies have remained relatively steady. The change in the consumer price index, which had been in double digits throughout the 1970s, ’80s and early ’90s, is now running in the 6-7 percent range. Interest rates, which were quite high (up in the mid-20s in 1998) have been dropping and now sit around 14 percent. But economists say that no further drops are expected and that the rates may begin to climb. Personal saving, which was 10 percent of personal disposable income in 1985, is now down to 1.4 percent.
Indecision and Uncertainty
One problem the ANC has is deciding what policies to pursue. Its intellectual foundation is firmly in the Marxist camp. This means that most policies, when first announced, tend to be interventionist, centralizing control in the national government. Reactions from the media, opposition parties, and world bodies usually force them to compromise. But this often leads to a policy that is a mishmash of contradictory ideas. For instance, the government recently nationalized all water sources in the country. Once this was done it announced that a market in water was necessary for efficient allocation. And since a water market requires prices, the government announced it would impose a price system; the government, not the market, would set prices.
What makes South Africa unique is the kind of debate being conducted in political circles. As noted, the ruling coalition government is fundamentally Marxist. Yet the Official Opposition in parliament takes a relatively libertarian, or classical liberal, stand on most issues. The Democratic Party (DP), now under the leadership of Tony Leon, was once the only parliamentary voice in opposition to apartheid. Today it is vocal in its support for free markets, the rule of law, private property rights, and limited government. Libertarian-oriented Americans would find it a far more satisfactory choice than the Republican Party. For instance, the DP opposes affirmative action and censorship. It stands for free-market capitalism, yet it also is the party of choice of the gay community.
The DP is closely identified by many people with the ideas of the Free Market Foundation, the classical liberal Institute of Race Relations, and the Helen Suzman Foundation. Tony Leon has called his politics “muscular liberalism,” while the ANC has branded it “mutant liberalism” or “libertarianism.” But opposition voters have rallied to the DP. In the previous election the DP held only seven seats in parliament. In the 1999 election support increased, giving the DP a total of 38 seats. However, the ANC still holds two-thirds of the seats in parliament.
The National Party, which previously was the Official Opposition, saw support collapse as its voters joined the DP bandwagon. Now the NP has officially closed up shop, and its leadership has followed its members into the DP under the new name: Democratic Alliance (DA). The Federal Alliance, a minor party with two seats, also joined the DA, bringing the total number of parliamentary seats under Tony Leon’s leadership to 68.
In South Africa, politics is dividing into two camps. On one side is an alliance dominated by the ideas of Marx and Engels. On the other side is an opposition that has read, and to some degree understands, Hayek and Mises. Whatever the future may hold one thing is guaranteed: South African politics won’t be dull.