Something South Africa Could Bank On : A New Idea for an African Development Bank to Underwrite a Non-Racial Economy

When change comes to South Africa, the new government will face a daunting economic task.

The cost of bridging the gap between the comfortable standard of living enjoyed by most of the white minority and the harsh poverty endured by the black majority is estimated at upward of $20 billion. This is essentially the price of equality in the bitterly divided nation.

Although South Africa is a nation rich in resources, the new government will need help from foreign investors to bring equity to its economic system with haste. A conduit--a South African development bank--could funnel international investment from private investors and foreign governments to a new, non-racial government.

The idea of such a bank, proposed by Rockefeller Foundation President Peter Goldmark, emerged in a recent meeting between American corporate leaders and Nelson Mandela, the deputy president of the African National Congress. Mandela has responded with considerable interest.

The development bank would kick in, according to Goldmark’s plan, only after a peaceful agreement establishes a democratic and non-racial government in South Africa. That timing is designed to make the bank a carrot for both sides--a symbol that international investors are ready to help but only after a peaceful deal for a new government has gone down.

In theory, the development bank could make several types of loans. Like the World Bank, it could finance physical infrastructure--basic projects such as roads or an irrigation system. The new bank could also make long-term loans to underwrite hospitals, schools and other social institutions. The bank might also establish a special category of loans to help to restructure the economy by allowing new economic power for ordinary South Africans--to own their own homes and perhaps even a piece of their companies.

To have any meaningful impact, the new bank must raise billions of dollars. Even at that level, however, the development bank alone cannot rebuild the troubled nation. U.S. philanthropy must also help. To encourage the transition to a more equitable society, several foundations--most notably Kellogg, Ford, Carnegie, Rockefeller, Mellon and Mott--are making grants to human-rights organizations, legal aid groups, arts projects and community-based organizations. The foundations are also funding leadership programs to prepare blacks for their new roles in a new South Africa.

Prodded by internal and external forces, South Africa is on the road to irreversible change. The new development bank is another step in that direction. It deserves broad encouragement from all nations that want to see a new South Africa succeed.