In South Africa, inequality and economic ills persist

By the time Nelson Mandela was released from prison in 1990, the path to ending South Africa’s political crisis through the abolition of apartheid was known, even if it would not be easy or straight.

Solving the country’s economic crisis was another story. It still is.

When I first visited the country a few months after Mandela’s release, the white overclass was just beginning to come to grips with the scale of the challenge. A Johannesburg economic firm had released a paper warning that South Africa’s self-image as a big economy preparing to take its place on the world stage with Britain and Germany was a dangerous delusion — better to think of itself in terms of a second-tier economy like Belgium, they wrote.

The idea came as a shock, and the implications were stunning. A big, thriving economy might just be able to manage the transition to post-apartheid democracy rule by raising the living standards of the black population — about 80% of the country’s 37 million people — to that of the white minority, who then made up a bit more than 10% of the population but controlled roughly 70% of the economy. A small, struggling economy couldn’t accomplish the task without sharply reducing white living standards. There simply wasn’t enough money. And that meant white flight, with the onetime rulers taking their assets and skills elsewhere and leaving behind a nation even more impoverished.


The reason for the mental disconnect was obvious to anyone who traveled freely around the country. The white elite lived in a bubble: salubrious suburbs with well-appointed schools, elegant resorts, BMWs on the roads. It was easy to imagine this same environment simply being extended into a multiracial nirvana. The elites knew there was another South Africa but they could avoid thinking about it, if they wished, except in the abstract.

Even those who considered themselves to be liberal, pragmatic, forward-looking South Africans were locked inside a cell of delusions. I spent one evening with several couples in Cape Town, a community with a tolerant veneer derived from its British traditions, distinguished from the rock-ribbed conservatism of their Afrikaner neighbors. And they were liberals, by South African standards, yet their views of race relations and of the character and intellectual potential of their black citizens would have been denounced as hopelessly retrograde in any reasonably intelligent American household. Plainly the place had a long way to go.

South Africa was a nation in the process of fooling itself. The whites loved to describe themselves as members of Africa’s “white tribe,” prepared with the coming end of anti-apartheid sanctions to join their fellow Africans in lifting the entire continent by its bootstraps — in fact, leading the transformation. Some of their first encounters with the other Africa were eye-opening, to say the least.

“I’ve just had a near-death experience,” one Johannesburg businessman reported after innocently driving into a street riot in Lagos, Nigeria, being forced out of his car at gunpoint and huddling for hours in a Lagos shantytown as Nigerian troops put down the disorder with live ammunition. The memory still reduced him to a cold sweat, weeks later and safe at home.


Visitors to South Africa found it no easier to get a handle on the place. Western journalists and others for whom the country was their first experience on the continent were invariably aghast at the poverty and repression; those coming from other sub-Saharan places, however, could be surprised at how much better some of South Africa’s blacks lived than their neighbors in black-ruled countries.

The fabled black township of Soweto, that product of forced social and economic stratification, was itself stratified, with sections of middle class-style homes and degrading slums too; but it didn’t quite assault the senses or the sensibilities like, say, Nairobi’s Kibera, a vast slum of almost surrealistic poverty. One could almost think that South Africa’s blacks had it pretty good, considering. But that, too, was an illusion.

Apartheid formally ended with the free, universal-suffrage elections of 1994 that brought the African National Congress to power. In economic terms South Africa has changed since then, but not progressed. It is still the largest economy in Africa, with 2012 gross domestic product of $384 billion that ranks 28th in the world, according to the World Bank. But that puts it at the head of a slow train (and well behind Belgium) — the African runner-up is oil-producing Nigeria, No. 37, whose GDP is one-third smaller.

In per-capita GDP South Africa comes in sixth in Africa and 77th overall, at $11,440 per person. (The ranking is based on the World Bank’s purchasing power parity index, which factors in differences in living standards.) More than 26% of its people were living on less than $1.25 a day, according to a United Nations survey covering 2000-06. Official unemployment is about 25%; unofficially the figure could be as high as 40%.

The culprit is an economy still dependent on mining and agriculture. Mining (mostly gold and platinum) still accounts for 60% of the country’s exports, but the sector is vulnerable to price swings in the international markets and to persistent labor unrest. Layoffs of thousands at a swipe often follow price drops in gold.

Fears of a brain drain have proved to be justified. Emigrants typically cite a rise in crime, but a divergence in opportunity between South Africa and the rest of the world obviously is a major factor. A 2004 World Bank study found that 25% of South Africa’s graduates with advanced degrees ended up in the United States; of all its emigrants, more than 77% had post-secondary or professional degrees.

One example: South Africa-born Elon Musk, who immigrated to Canada at age 17 and subsequently moved to the U.S., where he became known as the founder or co-founder of PayPal, Tesla Motors and SpaceX.

Nearly half of all the medical graduates of the University of Witwatersrand — 2,000 physicians — had left the country by then. Government figures estimated that as many as 1.6 million skilled, professional and managerial workers had emigrated between 1994 and 2004, and for every one who left, 10 unskilled workers lost their jobs.


The most troubling trend in South Africa’s economy is an old one: inequality. The gap between rich and poor has actually increased since the end of apartheid — by some measures economic inequality in South Africa is now the worst in the world — but the old inequality between the races has been supplanted by inequality within the black community.

The reasons resemble those driving inequality all over the globe. These include more demand for educated workers and much less demand for the unskilled or poorly educated, as well as a steering of more of the share of worker productivity toward the favored few at the top of the pyramid. Educational opportunity was always unequal in South Africa, even within races; but the problem hasn’t been solved. South Africa’s economy has grown at a decent clip since 1994; but even larger swaths of the population are being left behind.

Nelson Mandela’s passing won’t have any direct effect on any of these trends, unless his memory inspires the nation to redouble its efforts to raise educational attainment, diversify the economy and distribute the fruits of labor more fairly. These are problems South Africa shares with many other countries, including the United States. Inspiration helps, but much more is needed.

Michael Hiltzik’s column appears Sundays and Wednesdays. Read his new blog, the Economy Hub, at, reach him at, check out and follow @hiltzikm on Twitter.