Guiding South Africa’s Resurgence : Economy: Senior U.S. officials and business executives teamed up with their counterparts from the now-democratic nation over the weekend to begin wrestling with the needs facing a newly multiracial government.

The Clinton Administration is stepping for the first time into the uncertain but potentially lucrative business of trying to guide the economic resurgence of a newly democratic South Africa.

But the job of redrawing the nation’s economy in a way that ensures that the transition to democracy translates into fundamental improvements in living standards for all South Africans is easier said than done. Just listen to Trevor Manuel, once an African National Congress intelligence officer and now South Africa’s minister of trade and industry.

“We’ve inherited an economy that is fairly skewed,” said Manuel, a man who displays a penchant for flowery ties and down-to-earth rhetoric. The Johannesburg stock exchange is the 10th-largest in the world, he notes, yet “South Africa is one of the few countries in the world where there is no McDonald’s.”

With personal encouragement from Vice President Al Gore and South African Executive Deputy President Thabo Mbeki, senior U.S. and South African officials teamed up with business executives from both countries in Atlanta over the weekend to begin wrestling with the economic needs facing the new multiracial government.

“We want to build an economy,” said Harry L. Schwartz, South Africa’s ambassador to the United States. “We have tremendous resources to become a major economic power.”

True, say less biased observers, eyeing a potential $20-billion market. But what about the promises Nelson Mandela made to the black majority as he campaigned successfully to become the country’s first black president? What about building houses in black townships, supplying them with electricity and clean water, and revamping the educational system?

At its heart, the dilemma is this: Can South Africa attract the outside investment it needs for growth and wealth redistribution, while also meeting the political goal of reconciliation of the races and the economic goal of raising living standards of the black majority?

Vice President Gore is among those who answer affirmatively. The blueprint for change drafted by the African National Congress “doesn’t ask for utopia,” Gore said. “It asks for running water, flush toilets, schools, health clinics. But how can South Africa finance even these things in a country where the majority of the people have less than 10% of the wealth?”

Indeed, according to South African officials, the commitment to both democracy and the free market is unwavering.

“We have not come carrying a begging bowl, but a national commitment to invest in people by investing in democracy,” said Mbeki, who is calling for increased U.S. investment and two-way trade between the United States and South Africa.

How important is outside investment?

“It is vital,” he said.

The Clinton Administration has committed itself to providing $200 million a year for three years in grants, loans and loan guarantees to assist in the process. But the real investment must come from outside government. “The key to the future of our relationship will be the private sector,” Gore said. “That’s what will create the jobs. That’s what will create the income.”

Commerce Secretary Ronald H. Brown says there is a short-term need for “hundreds of millions of dollars” of U.S. investment.

The U.S.-South Africa Conference on Democracy and Economic Development was the first effort to bring the new South African elite together with those in the United States who are in a position to provide assistance--without a massive commitment of government funds.

“If you just throw money at South Africa, you won’t necessarily create a successful economy. The South Africans don’t have the skills in public administration . . . that are part of a market economy,” said one U.S. official involved in organizing the meeting.

From the South African perspective, the objective is much broader. “The battle in South Africa is to ensure we can give this hard-won democracy some content . . . and reposition South Africa in the global economy,” Manuel said last week in Washington.

On the positive side, said Witney Schneidman, senior vice president of Samuels International Associates, an international trade and investment consulting firm, “the prospects are quite good.”

South Africa, Schneidman said, “has a first-world infrastructure.” He cited its banking network, an established system of contract law, a relatively open, market-based economy and a geographical location that provides access to markets in other regions, such as the Indian Ocean rim. South Africa’s $112-billion economy is beginning to grow, after four years of recession, and it has major deposits of gold and platinum.

On the other hand, “there are a lot of misplaced expectations,” Schneidman said. “Most people don’t understand the gap between the white business establishment and black business.”

The unemployment rate in South Africa is approximately 46%, average income of blacks is one-tenth that of whites, and the black literacy rate is half that of whites.

In fact, the upbeat tenor of the current discussions may involve a considerable amount of “blue-sky” expectations, said Walter Kansteiner, an African affairs expert who served on the National Security Council staff during the George Bush Administration.

“You’re not going to achieve reconciliation with the white community if you’re going to slap huge taxes on the whites and go into a budget deficit,” Kansteiner said in an interview.

For now, potential investors are faced with seemingly unanswerable questions. Will the 75-year-old Mandela live out his term, which runs until 1999? Will he be replaced by a group less interested in reconciliation? Will Zulu nationalism increase in intensity and evolve into ethnic warfare?

Bertram Lee, a member of the board of directors of Reebok International Ltd., discounts the more pessimistic answers. “I’ve been an investor in Africa for 25 years,” Lee said. “Businesses that would look at their investments in a short term of three years or five years are missing the boat. . . . It’s certainly not the way Reebok is looking at it.”

Conferences such as the session in Atlanta, which was sponsored by the U.S. Information Agency, may turn out to be of limited value, according to some academics. Such gatherings are likely to do little in the short run to boost South Africa’s economic growth, which has averaged less than 1% a year for the past decade. By some estimates, growth must average at least 5% for each of the next five years for Mandela to be able to carry out his program.

In addition, South Africa is unlikely to really prosper until its wealthier citizens stop sending their investment money out of the country, reversing what has been a net capital loss since the 1980s. To accomplish this, Mandela must convince the business community in South Africa that his plans will not lead to onerous taxes or budget deficits, without alienating the black majority that brought him to power.