South Africa’s Politics Bode Ill for Economy
The hotly debated question of whether U.S. companies should pull out of South Africa is being decided by the South African economy. It is in its fourth year of recession, and U.S. firms are getting restless.
General Electric recently sold its money-losing local operation to its own South African managers. Ford Motor, facing a declining car market, last year merged its local subsidiary into a venture owned by Anglo-American Corp., South Africa’s largest company. And International Business Machines President John F. Akers is complaining publicly that the South African government is moving too slowly on reforms that could get the economy moving.
The reforms that Akers--and world bankers and the heads of South Africa’s largest companies--are urging are political before they are economic. South Africa, the business community is saying, must allow its 18 million black people--69% of the population--fuller political participation in the society in order to broaden their economic participation. Business is pushing for the same reforms as South Africa’s black consumers--who are boycotting merchants to make their point--and black workers, who staged a general strike Thursday.
Badly Underdeveloped
South Africa’s current troubles stem from a long history of trying to be a two-tier society. At first, in policies originating in the 1920s, the white people--who now number 4.7 million, or 18% of the population--appear to have thought that they could have a developed industrial economy, with all of the consumer goods that such economies produce, while others remained drawers of water and hewers of wood. That policy changed in the last decade to one of trying to broaden the economy by giving the black people more economic rights--but without political rights.
The result is that South Africa is a badly underdeveloped economy. Its gross domestic product per head of population--$3,115--is less than that of tiny Ireland--$5,350.
How can a country of South Africa’s size and natural resources be poorer than Ireland? Simple: It chose to separate rather than unify its people.
Its approach was criticized on economic grounds long before the current furor. In “A History of South Africa, Social and Economic,” Professor C. W. De Kiewit of Cornell University put it this way in 1941: “It is one of the simplest axioms of economic thought that the whole of society suffers when any important group within it suffers from inadequate use of its intelligence, or wasteful organization of its labor. Whatever restricted the power of the native population to earn or to increase its capacity to produce also restricted its power to consume.”
GM Marking Time
Chickens come home to roost. There are fewer than 3 million cars on the road in South Africa, a country of 26 million people that is almost twice the size of Texas. If its economy had not been restricted, there would be customers to buy more cars. General Motors, which broke even in South Africa last year, is marking time, waiting and hoping for a broader economy.
The question for U.S. firms is: Are they part of the solution or part of the problem?
They are part of the solution. A modern business, encouraging and teaching its employees, is the real hope of South Africa’s ambitious black people--already the most industrially skilled work force south of Egypt on the continent of Africa.
And things are improving. Black trade unions, which have existed since 1924, gained formal recognition for collective bargaining in 1979. Black wage levels, formerly less by law than white levels for the same job, are now growing faster. There could indeed be hope for the long-term future.
But, unless the South African government take steps to improve the chronically stalled economy by broadening its society politically, what reason would U.S. firms have to stay there? They are commercial organizations, not the Peace Corps.
As it happens, they are selling out. To whom? To South Africans and Europeans and Japanese who are able to buy the businesses of departing U.S. firms for a song. The U.S. firms will lose a little money; South Africa’s government will lose a critic. But South Africa’s rising black people will lose the chance of having at least some industry in the hands of employers pledged to follow the fairness precepts of America’s Rev. Leon Sullivan.
South Africa is a tragedy. And Americans inclined to feel smug should look around our own country, at pockets of black teen-age unemployment amounting sometimes to 50%, and recall De Kiewit’s words about the whole society suffering when any group within it suffers from inadequate use of its intelligence, or wasteful organization of its labor.
“Never send to know for whom the bell tolls,” wrote John Donne in 1625, “it tolls for thee.”
