Hundreds of years of racial abuse and neglect aren’t rectified in a few years or even a few decades. Patterns of material distribution within a society stay fixed until they are consciously displaced by new social structures. South Africa has 31 percent poverty in its population of 48.6 million people. Drug use is a problem. Illicit drug trafficking and money laundering are also problems. Above all, the developed part of the economy was designed to exclude the poverty part of the economy. The top ten percent of the population control over 50 percent of the country’s GDP.
Opportunity In A Changing Society
South Africa is a resource wealthy country with gold, platinum, diamonds, chemicals and minerals, but the territory doesn’t support the population in a balanced or workable way. One of the enduring legacies of apartheid is territorial divisions. Trade treaties and treaties for military protection are still affected by South Africa’s previous pariah state status –1948 through 1993. During those long decades South Africa was targeted for boycott and isolation. Since the end of apartheid all that has changed, but it takes time to rearrange trading partners and trading status and even longer to change diplomatic treaties. Treaties are a means of compensating a territory for things that are missing. A territory that has little food will seek trade treaties with territories that can supply food.
In South Africa’s case, food isn’t the biggest problem, unemployment is that biggest problem and it’s based on the legacy of inequality and especially racial inequality. After apartheid was replaced with democracy, countries around the world quickly responded by dropping trade and political sanctions, but that did little to change the internal social structure that has for so long excluded blacks, coloreds and other non-white races. Simply put, there was no reset of social realities in South Africa. The reset was legal and a big victory for positive change, but now comes the arduous work of building a new culture and for that those who are prospering are not eagerly seeking means of redressing social structure. The mineral and metal trading structure of South Africa is still busy extracting resources rather than distributing opportunity.
In the United States, when slavery was abolished the social structure was not easily reorganized. In fact, there was a substantial reactionary response in many parts of the South and West that dug in their heals against reorganization. Jim Crow practices were the result. South Africa has a different history, but the fact that legal change produces rapid economic and diplomatic restructuring conceals underlying social realities. It can take several generations to produce substantive social change. So, what does this mean for South African territorial developments?
A Few Winners Hold Back Real Growth
South Africa’s economy is the largest African economy and it accounts for about a quarter of Africa’s total GDP. The World Bank describes South Africa as an upper-middle income economy. Yet that upper-middle income is experienced in the cities. South Africa is structured around the industrial paradim where rural, agricultural people move to the city to improve their circumstances. The distribution of opportunity is limited elsewhere. In 2002, according to one estimate, 62% of Black Africans, 29% of Coloreds, 11% of Asians, and 4% of Whites lived in poverty. After apartheid sanctions were lifted the economy grew dramatically as did foreign exchange, all of which has supported a substantial middle class with growth happening in cities. But de facto social growth won’t happen until economic opportunity is far more widely distributed in South African society. In the mean time the de jure trade treaties and practices continue to greatly favor well-established business and industry channels that were set in place during the previous apartheid social order. The non-middle class parts of South African society experience severe unemployment. In the black community unemployment approaches 65 percent. The average unemployment rate is 24 percent.
These high levels of unemployment and the crime that accompanies them, discourage foreign investment. Thirty percent of South African businesses consider crime to be a major constraint on investment and thereby on economic growth. The struggle for investment then feeds back and depresses employment. It’s a cycle that might be changed by direct micro-finance investment in secotrs other than the mining and manufacturing sectors that have long been the center of South African economic activity.
Another feature of the South African economy is its dependence on international metals, minerals and chemical prices and the up and down price cycles that accompany them. When metal and mineral prices fluctuate South Africa’s economy is negatively impacted and sometimes severely. Reconstructing a volatile economy is much more difficult than building on a dependable economic base.
Since the great recession of 2008 South Africa’s economy has struggled more than other emerging market countries. Export volumes and private investment have not recovered fully. The long-range potential growth pattern of South Africa under the current trade policy environment is estimated at 3.5 percent. Per capita GDP growth is mediocre, though improving, growing by 1.6% a year from 1994 to 2009, and by 2.2% over the 2000–09 decade, compared to world growth of 3.1% over the same period.
An extensively restructured middle class consumer economy will counteract those price fluctuations but racial stability and opportunity for a much broader participation are required. South Africa is a bellwether of sorts about the progress and effectiveness of international finance and trade transparency. Human Rights Watch has criticized South Africa for deporting hundreds of thousands of Zimbabwean refugees, treating victims of political violence as economic migrants. A sort of ethnic cleansing. The more racially inclusive South Africa’s middle class becomes, the more we know effective new financial arrangements and systems have been established. Until that inclusiveness is well underway, we can use crime as a bellwether of what is missing. Investing in South Africa is profitable in cyclical patterns tied to metals.