Without Economic Growth, South African Democracy Will Wither : Sanctions: Mandala’s new mission will be to urge investors and companies to return to his country. Unfortunately, their business may not arrive in time.

In less than two weeks, Nelson Mandela will return to the United States with a new mission: The president of the African National Congress will call for lifting the remaining economic sanc tions against his country and invite U.S. investors and companies to again do business in South Africa. Nothing less than the future of democracy in South Africa will be at stake. Unfortunately, it is unclear whether the spigot of foreign capital can be opened either quickly enough or widely enough.

Mandela’s mission was made possible by two recent agreements. In June, the ANC, the National Party and 20 other South African parties agreed to hold the country’s first non- racial elections, on April 27, 1994, to choose delegates to a constituent assembly that will be responsible for drawing up a new constitution. Then, 12 days ago, the last barrier to the lifting of sanctions was removed when the parties agreed to establish an interim government that will oversee the final transition from white rule to a non-racial democracy.

Mandela and his erstwhile political bedfellow, President Frederick W. de Klerk, are counting on the removal of sanctions to provide an urgently needed boost to the depressed South African economy. If the economy quickly recovers from its apartheid-induced coma, it will make future political hurdles easier to overcome.

In the short run, renewed economic growth would help to undercut those political parties, most notably the white Conservative Party and Chief Mangosuthu Gatsha Buthelezi’s Inkatha Freedom Party, that have refused to accept the recent agreements. It would also address the underlying economic sources of the violence that continues to ravage South Africa’s townships. In the long run, economic growth will be necessary to transcend the bitter socioeconomic legacy of apartheid and to satisfy the greatly heightened expectations of South Africa’s black majority. Without it, the end of white rule could prove to be a Pyrrhic victory.


In the heady days following Mandela’s release from prison, some countries and investors ignored the ANC’s timetable for the gradual lifting of sanctions. The Bush Administration lifted most U.S. sanctions in 1991 and 1992. Other countries followed suit, including a few of the ANC’s staunchest supporters. But most countries and--more important--most state and local governments in the United States held off until Mandela sent a clear signal to act. The one significant remaining U.S. sanction is the “Gramm Amendment,” which requires the United States to vote against all International Monetary Fund and World Bank assistance to South Africa. Sens. Nancy Landon Kassebaum (R-Kan.) and Paul Simon (D-Ill.) are sponsoring a bill that would repeal this amendment once a transitional government has been established. Still, though the IMF and the World Bank have sent teams to analyze South Africa’s economic needs and discuss possible lending, it is doubtful that any money will reach South Africa until next year.

More than 150 laws and ordinances barring investment and trade with South Africa remain in effect at the state and local levels. They represent the most significant barrier to the large-scale resumption of U.S. business activities in South Africa. A number of initiatives to repeal these measures have been launched. Many universities are preparing to reverse actions barring them from including companies doing business in South Africa in their investment portfolios. In New York, state Comptroller H. Carl McCall has declared his readiness to withdraw any shareholder resolutions that call for restrictions on investment in South Africa. In anticipation of Mandela’s message, Calpers, the giant California-based public-employee pension fund, is reportedly delaying a decision to sell its holdings in companies that have resumed operations in South Africa.

Already, there are some signs of a rush by business to reinvest in South Africa, especially by companies that see the country as the economic gateway to the rest of Africa. Many of these companies are beginning to lobby the South African government and the ANC for greater economic access. In Johannesburg last week, nearly 200 U.S. companies participated in the first “Made in the U.S.A.” trade fair, billed as the largest of its kind in Africa.

Also, some large corporations have already taken the plunge, with the apparent blessing of the ANC. Digital Equipment, a giant computer firm, opened its South African subsidiary this summer, and Lotus Development opened its South African office last year.


But the trickle of foreign investment into South Africa is unlikely to become a flood until the political situation stabilizes and investors are reassured about the economic policies of the future government. This could take a long time.

In these circumstances, it is not enough for politicians to hail the political agreements without providing real economic assistance. Even under the most optimistic scenario, the flow of private capital to South Africa will not meet immediate needs.

Mandela has already called for a new “Marshall Plan” to help rebuild South Africa’s economy and facilitate efforts to alleviate the gross economic inequities created by apartheid.

To date, however, Western proposals to provide aid have paled in comparison with the sums--$540 million by the Clinton Administration alone--now being discussed for the Middle East in the wake of the historic Israeli-Palestinian peace accord. South Africa currently receives about $80 million in aid from various sources.


During the presidential campaign, Bill Clinton declared that the United States should put the “same kind of energy into helping South Africans overcome the legacy of apartheid as we do into helping the peoples of the former Soviet Union overcome the legacy of communism.” A Clinton Administration, he continued, “would begin to develop a program of aid and investment incentives to be used to help a democratically elected government” in South Africa.

The bill is now coming due on this promise. Whether or not Clinton is willing to pay up, his actions will tell us a lot about his commitment, not just to South Africa, but to Africa as a whole.*