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This is
one of three briefing papers prepared for delegation organized Shared Interest
visiting South Africa from April 22 through May 2, 2004. Shared Interest is a U.S. not-for-profit social investment
fund guaranteeing loans to community development financial institutions
engaged in South Africa’s reconstruction process including affordable credit
for small businesses and social housing in South Africa’s lowest income
communities. To see other paper click links below. |
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Shared Interest South Africa Delegation Briefing Paper April 22 – May 2, 2004 A Decade of Democracy: Economic Policy and
Development in South Africa By Richard Knight, March
19, 2004 South
Africa is the most developed and modern country in Africa with extensive
natural resources, a developed agricultural sector and significant
manufacturing. Gross Domestic Product (GDP) in 2002 was $104.2 billion - larger
than any other country in Africa. Real
GDP growth has averaged 2.7% since 1995. Gross National Income (GNI) per
capita is $2,520, more than 5 times the average for all of Sub-Saharan
Africa. But South Africa has one of the highest income disparities in the
world. The country suffers from chronic unemployment and one the highest
rates of HIV/AIDS in the world. Some
50% of South Africa’s people live in poverty; at least seven million people
live in shacks in informal settlements. Legacy of Apartheid Under
apartheid, the economy was dependent on foreign investment and technology.
The government imposed inward-looking economic polices including
protectionist policies aimed at limiting the impact of sanctions and
promoting white business. Blacks were denied basic economic rights – they
could not own land, accumulate wealth or conduct business in “white” areas.
The apartheid economy was one of white wealth and black poverty.
The
apartheid economy in the 1980s was negatively impacted by political
isolation, sanctions and disinvestment, including the outflow of foreign
capital as companies withdrew and the cut off of international bank loans.
The economic and political crisis of the 1980s resulted in stagnant GDP
growth, falling formal sector employment and a decline total investment as a
percent of GDP from nearly 26% in 1980 to about 15% in 1994, a rate that has
remained fairly constant. Since
the early days of colonial rule, poverty and unemployment have been much
higher for South Africans of color.
Today, according to the South Africa government’s National
Report on Social Development, 1995-2000, 61% of Africans are
classified as poor compared to just 1% of whites. The unemployment rate for Africans is 42.5%
compared to 4.6% for whites. The Congress of South African Trade
Unions (COSATU) noted in 1992: “While Africans make up 76% of the population,
their share of income amounts to only 29% of the total. Whites, who make up
less than 13% of the population, take away 58.5% of total income.” Overview
In
1994 the government of national unity, led by the African National Congress,
inherited a country of gross racial inequities with high chronic
unemployment. The economy has grown
every year since 1994, an improvement over the 1980s. The budget deficit has
been reduced and inflation has declined. Significant progress has been made
in education, health care, housing and providing basic services. But poverty
continues to be widespread, income disparities remain, unemployment has
increased and many people lack necessities. As government notes in its review
the successes and challenges in Towards
a Ten Year Review published in October 2003, “two economies” persist in
the country. “The first is an advanced, sophisticated economy, based on
skilled labour, which is becoming more globally competitive. The second is a
mainly informal, marginalised, unskilled economy,
populated by the unemployed and those unemployable in the formal sector.”[1] The Economy
Today South
Africa’s economy has had positive economic growth every year since 1994. Real
GDP grew an average of 2.7% between 1996 and 2003. With population growth of
about 2% per annum, real per capita growth has been positive, meaning
the average South African grew wealthier, although this benefit has not been
evenly distributed. Income disparity remains - in 2000, the poorest 20% of
households received 1.6% of total income, a smaller percentage than in 1995.
When
the democratic government came to power in 1994 it abandoned the inward
looking policies of the past. Tariffs were cut substantially and local
business faced increasing exposure to foreign competition and the forces of
globalization. The result was that local businesses either closed or had to
modernize (improve business processes and introduce new technologies) and
become more competitive – produce more goods with fewer workers. Jobs and Unemployment The
government notes that the economy has created some 2 million jobs since 1995.
The number of those employed increased from 9,287,000 in 1996 to 11,565,000
in 2003, a 24.5% increase.[*]
But as South African companies were forced to become more productive to
survive and the number of jobs in the formal sector declined.
Despite this increase in
the number of jobs, South Africa suffers from chronic unemployment which has
increased from 20.3% in 1996 to 30.5% in 2002. Using the expanded definition,
which includes discouraged job seekers, unemployment in this period has
increased from 33% to 41.8%. The chronic structural nature of unemployment is
demonstrated by the fact that 70% of the unemployed have been jobless for
over a year and almost 60% have never been employed. People under 30 face an
unemployment rate of 61%. The jobless rate is far higher than in other
lower-middle income countries. There are a number of
reasons for growing unemployment including population growth of about 2% per
year, urbanization and increasing labor market participation by women. The
economically active population using the expanded definition of unemployment
has increased from 13,853,000 to 19,986,000,
a 44% increase. The labour
force participation rate – the percentage of the population aged
15 to 65 years which was economically active – is 56.9%. The
labour absorption rate – the percentage of the working age population
which is employed – is 39%.
Of
those employed, 63.6% work in the formal sector excluding commercial
agriculture. The formal sector includes all businesses that are registered.
Some 16% of those employed work in the informal sector excluding
subsistence and small scale agriculture. The informal sector consists of
those businesses which are unregistered. They are generally small in nature,
and are seldom run from business premises, using instead homes, street
pavements or other informal arrangements. About 8.7% of those employed work
as domestics. There is considerable difference by race - 93.6% of whites work
in the formal sector compared to 62.3% of Africans. More then 25% of employed Africans work in
the informal sector and a further 11.4% as domestic workers where wages are
far lower than the formal sector.
Jobs
are a major issue in South Africa. In its election manifesto the ANC promises
by 2014 to reduce unemployment by half. Partly this will be achieved through
an expanded public works program. The manifesto notes the government can
create some employment in the public service, public works programs and encouragement
of labor-intensive methods in parts of the economy but that “long-term
employment depends largely on higher rates of private investment; it depends
on strategies for growth in key sectors of the economy; it depends on joint
skills development and learnerships in both the
public and private sectors to provide work experience.”[2]
About
40% of those employed earn less than R 1,000 ($143) per month. Wages in the
informal sector are significantly lower than in the formal sector. Nearly 54%
of those employed in the informal sector make less than R500 ($70) per month.
Workers in the informal sector often remain poor since they tend to work in
survivalist activities such as street sellers. Many of those in the informal
sector are small or micro-business owners, 89% of whom are African. Economic Policy and Debates In
its 2004 election manifesto the ANC outlines Vision 2014 – Forward to the Second Decade of Freedom, that
includes a series of targets and objectives including: a) reduce
unemployment by half through new jobs, skills development, assistance to
small businesses, opportunities for self-employment and sustainable community
livelihoods b) reduce poverty by half through economic development,
comprehensive social security, land reform and improved household and
community assets and c) provide the skills required by the economy,
build capacity and provide resources across society to encourage
self-employment with an education system that is geared for productive work,
good citizenship and a caring society. Given
the level of poverty and unemployment, government policy has sometimes been
controversial. Often the strongest critics of government policy have been the
allies and members of the ANC, including the Congress of South African Trade
Unions (COSATU). One expression of that has been the People’s Budget, produced annually for four years by COSATU,
South African Churches Council (SACC) and South African NGO Coalition
(SANGOCO).[3] Reconstruction
and Development Programme In
the early 1990s unions, the civic movement and social organizations began to
develop a plan for social transformation needed for post-apartheid South
Africa. A process developed which
involved extensive consultations within the ANC, its allies and a wide range
of experts that resulted in 1994 in the Reconstruction and Development Programme (RDP).
The RDP aimed at addressing the many social and economic problems
facing the country. A key aspect of
the RDP was that it linked reconstruction and development. The RDP recognized that all the problems
(lack of housing, a shortage of jobs, inadequate education and health care, a
failing economy) are connected. It
proposed job creation through public works — the building of houses and
provision of services would be done in a way that created employment. The five key programs were: meeting basic
needs, developing human resources, democratizing the state and society,
building the economy and implementing the RDP.
Macroeconomic Policy When
the government came to power it saw the need to stabilize the economic
situation. In 1996 the government adopted a five year macroeconomic policy
called the Growth, Employment and
Redistribution (GEAR). GEAR aimed at strengthening economic development,
broadening employment, and redistributing income and socioeconomic
opportunities in favor of the poor. The key goals of the policy as originally
outlined were economic growth of 6% in the year 2000, inflation less than
10%, employment growth above the increase in economically active population,
deficit on the current account and the balance of payments between 2% and 3%,
reduction of the budget deficit to below 4% of GDP. The
government has significantly lowered the budget deficit and inflation. But South Africa’s growth rate remains at
about 3%, far short of the 6% goal which is seen as necessary to reduce
unemployment.
One of the most outspoken critics of GEAR is
COSATU. COSATU says that GEAR has failed to deliver the promised economic and
job growth or significant redistribution of income and socio-economic
opportunities in favor of the poor.
They say GEAR, with its focus on stringent monetary and fiscal
targets, conflicts with the goal of the RDP of growth based on job creation,
meeting people's needs, poverty reduction and a more equitable distribution
of wealth. COSATU notes that the
government is committed to higher spending on basic service and spending did
increase between 1994 and 1996. This, however, was followed by decreased
spending following the adoption of GEAR.
The
government acknowledges GEAR’s stringent limits on
expenditure impacts on the ability to meet social development goals of the
RDP. As the South African National
Housing code notes “The most
significant goals of GEAR in respect of our capacity to implement the housing
programme are those that have to do with
availability of funds for housing.
GEAR is clear about promising tighter fiscal policy measures, which
are being brought about by a cut in government expenditure and a more
cost-effective civil service.” The
debate over macroeconomic policy has quieted as government shifted its policy
to one of increased spending. The budget deficit is projected by the
government to be -3.2% in 2004 and -3.1% in 2005, up from -1.1% in 2003
In
2001 Thabo Mbeki announced the Micro Economic Reform Strategy which states
that, although necessary, macroeconomic stability is not sufficient to
achieve growth and equity in the South African economy. Consequently, it
identifies certain high-level microeconomic reforms that are necessary within
the economy. It focuses on such issues as technology, human resource development,
access to finance and infrastructure (including transport,
telecommunications, energy and water) and on equality issues such as Black
Economic Empowerment, women empowerment, small business development,
employment and geographic spread. Priority growth sectors are clothing and
textiles; mining, metals and minerals; automotives and transport; chemicals;
tourism, agriculture, information and communication technology; cultural
industries; services; and aerospace.
The
Micro Economic Reform Strategy serves as the basis for the Integrated Manufacturing
Strategy that argues that “an integrated and advanced manufacturing sector in
South Africa can be leveraged to generate higher levels of economic growth,
employment creation, and the reduction of economic inequalities throughout
the entire economy.”[4] Black Economic Empowerment The
RDP included a commitment to Black Economic Empowerment (BEE). The government
defines BEE “as an integrated and coherent socio-economic process that
directly contributes to the economic transformation of South Africa and brings
about significant increases in the numbers of black people that manage, own
and control the country’s economy, as well as significant decreases in income
inequalities.”[5] In
March 2003 the government augmented its BEE policy the publication of a strategy
document South Africa’s Economic
Transformation – A Strategy for Broad-Based Black Economic Empowerment.
In August 2003 the government introduced a bill in Parliament to create an
enabling framework for the promotion BEE. The bill enables the government to
“issue guidelines and codes of good practice on BEE, as well as establish a
BEE Advisory Council to advise the President on the implementation of BEE and
related matters.”[6] The
government uses various tools to promote BEE, such as procurement, regulation,
financing, and institutional support. The Department of Trade and Industries
provides a range of grants and incentives to enterprises. It is also
considering new schemes and amendments to existing schemes including supplier
development, micro-enterprise development, support for skills development,
and the acquisition and development of new technology.
The
government has created a number of lending facilities for small, micro and
medium enterprises (SMMEs). Khula
Enterprise Finance Limited was established in 1996 to facility access to
credit of SMMEs. Khula
makes loans or provides loan guarantees through intermediaries such as commercial
banks, retail financial intermediaries and micro credit outlets which provide
loans to SMMEs. Khula is expanding
its outreach programs with the emphasis turning to the formal micro, very
small and small enterprises. More than 1.5 million people have benefited
directly or indirectly from Khula's assistance.[7]
However, Khula is confronting major cost recovery
and delivery issues and is being redesigned. The Industrial Development
Corporation is also involved in funding the transfer of ownership, management
and control to black people. Equity stakes in a number of listed companies
were sold to black investors. Growth & Development
Summit In
June 2003 a Growth and Development Summit (GDS) was held at which government,
business, labor, and community representatives agreed to work together to promote
higher rates of investment, expand employment and promote people-centered
development. An expanded public works program was agreed to that will provide
750,000 short term job opportunities over the next five years. Such jobs can provide poverty and income
relief through temporary work for the unemployed to carry out socially useful
activities. GDS endorsed an expansion in public investment initiatives to
develop and maintain economic and social infrastructure by government,
state-owned enterprises and developmental institutions, in order to
facilitate growth, improve productivity, create jobs and promote urban and
rural development. The Summit also agreed that small enterprise promotion,
and especially the development of black-owned small enterprises, is a crucial
component of job creation in the economy.
The
GDS noted that “[i]t is increasingly difficult for
young people to find work - partly because there are not enough jobs, and
partly because the young do not have the skills that are in demand in the
labour market.”[8] Business and the
government have agreed to register at least 72 000 unemployed learners in learnerships by May 2004, an increase from 26,000. The
GDS also committed those attending to support the government’s Broad-based
Black Economic Empowerment Strategy. Social
Grants An important and successful tool for the
government in reducing poverty is social grants. In 1994, racially based social
grants inherited from the apartheid regime that totaled R10 billion were
distributed to 2.6 million recipients. Of these over 1.6 million were older
people and only 60 000 were children predominately from the white, Coloured, and Indian communities.
Today government
equitably distributes R34.8 billion (nearly $5 billion) in social grants to
more than 7.7 million beneficiaries: the aged, young children in poor
households, people with disabilities and others. Some 4.4 million children
receive social grants, including 4.2 million who receive the child support
grant in some 2.9 million poor households. The real value of these grants
has increased above the rate of inflation. Recently the government decided to
extend child support grants to the age of 14 by 2006 which will add an
additional 2.2 million children.[9] In
1993 there were 13 disability grants per 1,000 compared with 29 per 1,000
today. The government, working with NGOs, is embarked on a campaign to ensure
that all people eligible for social grants, especially children, are
registered and thus receive the grants to which they are entitled. The
Department of Social Development is also working to expand Home-Based/Community-Based
care and support to children and families affected by HIV/AIDS and the
consolidation of the Poverty Relief Programme to
focus on sustainable development. About 4.5 million children benefit from the
Primary School Nutrition Programme. The government
is in the process of consolidating grants delivery into a new Social Security
Agency and expenditure is expected to grow significantly over the next few
years.
In
July 2001 a group of 12 organizations announced the formation of a Basic
Income Grant (BIG) Coalition. They proposed a grant of R100 per month (about
$14.30) for all South Africans, indexed to inflation. In a declaration they noted “At least 22
million people in South Africa — well over half the population — live in abject
poverty. On average they survive on
R144 [$20] per person per month.” They
estimated a R100 monthly grant would double the amount available for
consumption by people in the poorest 29% of the population and close the
poverty gap by more than 80%. They proposed the grant be financed by a progressive
taxation system and estimated net costs after tax offsets would be R20 to R25
billion annually. Endorsers of the
platform, now 26 organizations, include Black Sash, COSATU, the South African
Council of Churches, the South African National NGO Coalition (SANGOCO), the
Southern African Catholic Bishops’ Conference and the Treatment Action
Campaign. The
idea of a Basic Income Grant received important support in the Consolidated
Report of the Committee of Inquiry into a Comprehensive Social Security
System for South Africa (also known as the Taylor Committee), which was
released by the Minister of Social Development in May 2002. The report found
that the economy was unlikely to create enough jobs (formal and informal) and
as a result a system based on “tiding people over” until they found
employment was not sufficient to reduce poverty. The report notes that there
is no income support program for older children, adults between 18-59 years
and no general assistance for households where no one is employed. “The existing social security programmes do not adequately address the problem of
poverty,” notes the report. “Half of the poor live in households that receive
no social security benefits at all, and the rest remain poor in spite of the
benefits they receive.” Existing social security programs reduce the average
poverty gap by 23 per cent. The ‘poverty gap’ gives an estimate of the extent
of poverty, by adding, for each household, the amount by which income falls
below the subsistence line. By contrast BIG would reduce the poverty gap by
74% and free an additional 6.3 million people from poverty. The report found
that BIG was affordable and administratively possible and suggested a phased
introduction to address these concerns.[10]
Despite
the findings of the Taylor Committee the government has not been won over.
Minister of Finance Trevor Manuel, in his February 2004 Budget Speech, said
he had sympathy for the underlying intent of BIG but that “Government’s approach, however, is to extend social
security and income support through targeted measures, and to contribute also
to creating work opportunities and investing further in education, training
and health services. This is the more balanced strategy for social progress
and sustainable development.”
Impact of HIV/AIDS An
estimated 4.7 million people in South Africa are HIV-positive. Every day in
2002 some 600 people died of AIDS, or more than 200,000 in the year. Between 400,000
and 500,000 people have reached the stage where they should be on anti-retroviral
treatment to save their lives. An estimated 30,000 people were on anti-retroviral
treatment by the end of 2002.[11]
It
is extremely difficult to assess what the near and long term economic impact
of HIV/AIDS will be on the South African economy. A study by ING Barings Bank
predicts that the economic growth rate over the next decade is likely to be
0.3 to 0.4 percentage points lower every year resulting in a real GDP being
17% lower in 2010 than it would have been in the absence of AIDS. Many of
those infected are of working age. AIDS is likely increase the shortage of
skilled workers and produce bottlenecks in the economy. “More than 40% of
manufacturing companies say HIV/AIDS is biting into profits, according to a
survey by the Bureau for Economic Research and the South African Business
Coalition on HIV/AIDS,” reported Business
Day.[12]
Families and government will have to redirect resources toward health care
and care for orphans.[13]
In
November the government adopted a Comprehensive HIV and AIDS Care and Treatment Programme, including the provision of anti-retroviral
treatment, which could reduce the impact of HIV/AIDS. The goal of the program is to provide all South
Africans and permanent residents who require comprehensive care and treatment
for HIV and AIDS equitable access to this program within their local
municipal area within a period of five years. Western Cape has 13 sites
providing treatment. Gauteng will start implementing the program on April 1 and the Free
State on May 1. But the government is behind on its initial goal of treating
53,000 people by the end of March 2004.[14]
The government plans to establish
at least one accredited service point in every health district (in each
District or Metropolitan Municipality) by the end of the of 2004 and within a
period of five years to provide all South Africans who requires comprehensive
care and treatment for HIV and AIDS equitable access to the program within
their local municipal area. Government expenditure on drugs, staff and
infrastructure and expected to rise sharply. The government’s goal is to be
treating 53,000 people with anti-retroviral drugs in 2003/4,
rising to nearly 1.5 million in 2008/9.[15]
According to
the projected budget in the operational plan, about one third goes to the
purchase of anti-retroviral drugs and the rest goes to new staff, laboratory
testing, nutrition, health system upgrades, program management, capital
investment and research. Prevention
remains at the core of government policy. Studies show that education results
in higher condom use. Condoms are available free at all health clinics and
the government is expanding supply through non-traditional outlets – like
clubs, shebeens and spaza
shops. The government distributed some 400 million male condoms on 2003/04, a
14% increase over the previous year. A program to prevent mother to child
transmission of HIV through the provision of Nevirapine is also expanding.
Government
expenditure by national departments on HIV/AIDS programs has increased from
about R30 million ($4.3 million) in 1994 to R342 million ($49 million) in
2001/02. In February 2004 the government announced a further R2.1 billion ($300
million) is to be allocated for the comprehensive response to HIV and AIDS,
including provision for anti-retroviral treatment programs, in 2004/5. Expenditure
is further set to increase to at least R3.6 billion ($500 million) in 2005/06.[16] Critics
such as the Treatment Action Campaign (TAC), which campaigned for years for
the government to provide free anti-retroviral drugs, complain that the
government has been slow in responding to the AIDS pandemic. The government
responds that it was only recently that drug companies lowered the price
sufficiently and that much other work needs to be done producing training
manuals, treatment protocols and expand laboratory services.[17]
The government claims it is behind in it schedule to provide anti-retroviral
drugs because of the legally mandated tender process to purchase the drugs.
TAC responds that the law allows the purchase of an emergency supply. “Many hospitals have the capacity, they just don't have the
medicines,” commented TAC treasurer Mark Heywood in February.[18] Formal Sector
Overviews Agriculture South
Africa’s agriculture accounts for about 3% of GDP. It represents about 11% of
employment, 7.5% in the commercial sector and 3.6% in subsistence and small
scale farming. Much of the country is dry and agricultural production is
vulnerable to drought. There was a significant fall in crop production in
2003, especially in maize, due to adverse weather conditions. South Africa is
largely self-sufficient in agricultural products but because of drought
sometimes has to import grains. Agriculture products account for between 7%
and 8% of exports. Some 1.3 million hectares is irrigated and almost 50% of
the country’s water is used for agriculture.[19] There
are some 60,900 commercial farming units in South Africa. These are almost
exclusively white-owned and include most of the land which is most suitable
for commercial crop production.[20]
In 1996 the average size of commercial farms was 1,349 hectares. Commercial
farms employ 734,000 people, about 9% of those employed in the formal sector.[21]
Subsistence
farming, by contrast, is largely African farmers on mostly on communal land
in the former homelands. It employs some 792,000 people, 30% of those
employed in the informal sector of the economy.[†]
It was estimated in 2000 that 52% of those employed in the rural areas of the
former homelands work on farms. Most of these were on plots of less than one
hectare.[22] The government has set the
goal of redistributing 30% of commercial agricultural land to blacks by 2015. The Land Redistribution for Agricultural
Development program adopted by the government in 2001 provides grants to
blacks to purchase land or to acquire a lease option for commercial agricultural
purposes and to obtain fixed assets, equipment that improves the value of the
land and production inputs for the development of the land that is acquired. Manufacturing Manufacturing
contributes some 18.5% of GDP and has grown faster than the overall economy -
some 4% per year between 1994 and 2002.[23]
Manufactured goods make up 38% of exports, up from 25% in 1994. Yet despite
this growth, employment has decline from 1,427,045 in 1994 to 1,270,647 in
1992. The
automobile industry is an example of this trend - growth in output but a
decline in employment. The automobile industry has been transformed into one
of South Africa’s major exporters, much of which is sent to the U.S. Exports include both vehicles and
components. Catalytic converters account for 40% of component exports, where
South Africa has the advantage of local production of platinum group metals.[24]
In
2001, the industry's exports to the United States rose by 387%, to $359
million. In 2002 they grew again, to $572.9 million. These exports to the
U.S. are considered “AGOA exports,” which means they enter the U.S. duty
free. General
Motors will likely add to this growth in automotive exports. GM withdrew from
South Africa in 1987 and its former subsidiary was renamed Delta Motor
Corporation. In 1997 GM reacquired a 49% in Delta. In January 2004 it
announced it was acquiring the other 51% of Delta, which will be renamed GM
South Africa. Delta’s production remains largely for domestic consumption –
the company’s vehicle exports account for only about 1% of the South Africa’s
total vehicle exports. Delta also exports parts. GM will continue a planned
R1.5 billion ($213 million) capital investment program which includes a focus
on product and export development programs.[25] This
growth, however, has not led to more employment. According to the National
Union of Metalworkers of South Africa, which represents most auto workers, the
number of jobs in automobile and auto-component manufacturing fell by 16,200
between 1995 and 2001.[26] In
the longer term, South Africa’s success in vehicles and parts exports is
challenged by the growing exports from China and India. Also, AGOA expires in
2008 and if it is not renewed South African exports will lose a cost
advantage.
Mining Mining remains an important part of the South
African economy. South Africa has significant deposits of base and precious
metals, coal and diamonds. This includes a large percent of the world’s
reserves of many key commodities including manganese (80%), chrome (76%),
platinum-group metals (56%), gold (52%), and vanadium (44%).[27] South Africa is a
significant producer of uranium, mostly as a by-product of gold production at
Vaal Reefs. There has been strong demand for many minerals
including from a rapidly growing China. Mining contributed 8.1% of GDP in
2002, up from 7.5% of in 2001. Primary mineral exports accounted for 32.9% of
South Africa’s total export revenue in 2002, including gold which accounted
for 12.6%. However, mineral exports have been declined from 49.9% of exports
in 1993 as a result of the decline of the gold-mining industry. Gold in South Africa is produced by deep, hard
rock mining and is very expensive to produce by world standards. As a result
a number of mines have closed. South Africa’s gold production has declined
from 619.5 metric tons in 1993 (27% of world production) to 395.2 metric tons
(15.3% of world) in 2002.[28] The problems have been increased in the past year
by appreciation of the price of the rand, which reduces the amount companies
receive for exports. The average dollar price of gold increased from $310 an
ounce in 2002 to $364 in 2003, a 17% increase. But the rand appreciated 28%,
reducing the rand price of gold from R 3,248 per ounce to R 2,735.[29] While this has hit all
commodity exports it has taken a greater toll on gold mines because of the
high cost of production. This is a reversal of the situation in 2002 which
saw an increase 20.3% in foreign income in rand terms as a result of a 22.2%
depreciation in rand/dollar exchange rate.[30] Total production of platinum group metals has
increased from 200 metric tons in 1998 to 239.6 metric tons in 2002.
Employment in that period has increased from 90,000 to 111,460. Output is
projected to increase100% over the next five years.[31]
South Africa produced 220,212,491 metric tons of
coal in 2002 of which 31% was exported. Coal output is also projected to
increase both for domestic consumption for power generation and export. An
expansion of the Richard’s Bay Coal Terminal will raise its coal handling
capacity by 10 million tones to 82 million tones allowing increased exports
especially to China.[32] The mining industry represents 4% of employment.
Gold accounts for 43% of mining industry’s work force, platinum group metals
22.6%, coal 17% and diamonds 5.4%.
Employment in the mining industry has declined
from 610,794 in 1994 to 417,045 in 2002. The 2002 figure is actually an
improvement of about 10,000 over 2001. As a result the number of people
employed in mining as a percent of the economically active population has
declined from 4.5% to 2.6%. This is largely the result of the decline in the
gold industry. The number of people employed gold mines has declining since
the 1980s, going from 392,327 in 1994 to 199,259 in 2002. A Gold Crisis
Committee consisting of the government, the National Union of Mineworkers and
the Chamber of Mines, is working to restructure the industry and save jobs.
Employment in the coal mines has declined in this period from 60,187 to
47,904. Employment in the platinum group metals has increased from 97,643 to
111,460.[33]
The mining industry is still largely controlled
by whites. In line with it’s policy to promote black economic empowerment, in
October 2002 government set the goal that historically disadvantaged South
Africans should control 15% of mines in five years and 26% in ten years. A
number of black owned companies have acquired mines or significant stakes in
mining companies. In March 2002, De Beers sold its Kamfersdam
Mine to the New Diamond Corporation, a BEE company. Mvelaphanda
Holdings through various subsidiaries has acquires a 19.4% of Trans Hex,
South Africa’s only listed diamond company, and a 22.5% interested in Northam Platinum Ltd.[34] Conclusion Economic
growth, poverty reduction and job creation remain key goals of economic
policy. The South African government has made significant progress in meeting
the goals of the RDP: providing housing, basic services, health care and land
reform. The lives of millions of people
have been improved. South
Africa has had continued economic growth every year since 1994. But due population growth, urbanization and
increased labor force participation the current growth rate is insufficient
to reduce unemployment. Though jobs have been created in the informal sector
they have been lost in the formal sector. A large number of jobs have been
lost in the mining sector. Despite increased output there has been a loss of
formal sector jobs in manufacturing.
Government
programs have had a real impact on reducing poverty. Through its housing
subsidy program at least seven million people have been housed. The
government’s programs to provide free basic water and free basic electricity
have also had a tremendous impact. Social grants, especially to the elderly
and children, have benefit nearly 8 million people and, if fully implemented
by getting all eligible people registered, could almost cut the poverty rate
in half. The government’s HIV/AIDS program is beginning to have a real impact
and the provision of anti-retroviral drugs will prolong lives.
South
Africa remains a divided economy vast majority of the poor are black
and most of the wealthy are white.
South Africa’s income disparity is the highest in the world. Blacks
suffer higher rates of unemployment and poverty than whites. The government’s
Black Economic Empowerment policy has the potential to promote economic
growth and address historical inequalities that were created by 300 years of
colonialism and apartheid. Reducing
the high rate of unemployment is crucial to reducing poverty. There is no easy
answer to South Africa’s structural unemployment. But government policies,
including increased public and private investment, expanding education and
skills training, job creation through infrastructure development and support
for small, micro and medium size business are an important start. -------- Richard Knight is a New York City based
consultant on Africa, human rights and economic justice. He previously worked
at the American Committee on Africa/The Africa Fund. His web site is www.richardknight.com. Population and use of
racial classifications: Africans make up 79% of the population, whites 9.5%, Coloureds 8.9% and Indians/Asians 2.3%. The term black in
this paper is used to describe all those not classified as white. In terms of
the use of racial classifications the following from Statistics South Africa should be born in mind: “Population group
describes the racial classification of a particular group of South African
citizens. The previous government used legislation to impose this type of
classification, to divide the South African population into distinct
groupings on which to base apartheid policies. For quite a different reason
it remains important for Stats SA to continue to use this classification
wherever possible. It clearly indicates the effects of discrimination of the
past, and permits monitoring of policies to alleviate discrimination. Note
that, in the past, population group was based on a legal definition, but it
is now based on self-perceptions and self-classification. An African/black
person is someone who classifies him/herself as such. The same applies to a coloured, Indian/Asian or white person.” Exchange rate: Rand to dollar exchange rate used is the average monthly average August
through December 2003 average. $1 = R0.143164. Conversions of large numbers
are approximate.
Sources: Much of the
information here comes from national and provincial government web sites
including those of the Statistics South Africa (Statistics SA), the
Government Communication and Information System (GCIS) and various national
departments available at www.gov.za. I have
also used information from the South Africa Reserve Bank available www.reservebank.co.za. Other web sites include the ANC (www.anc.org.za), the Basic Income Grant
Coalition (www.big.org.za), COSATU (www.cosatu.org.za), the National Labour
and Economic Development Institute (www.naledi.org.za),
the Treatment Action Campaign (www.tac.org.za)
and UNAIDS (www.unaids.org). I have occasionally used sentences or
phases without footing each or placing them in quotes, especially in
descriptions based on government web sites. Spelling: There are
minor differences between South African English and U.S. spelling of
words. In quotes of text and titles
from South Africa the original spelling has been used. |
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[*] The employment statistics from different periods are not strictly comparable. Up though 1999 they were based on the October Household Survey. From 2000 forward they are based on the Labour Force Survey.
[†] These employment figures must be viewed with caution. They are based on the Labor Force Survey. The September 2001 survey showed 359,000 people employed in subsistence agriculture, the February 2002 survey 792,000 and the March 2003 survey 420,000. This wide variation is in part due to the nature of the survey. A survey in 2000 indicated that there were 943,000 farming operations in the former homelands.
[1] Towards a Ten Year Review, Government
Communication and Information System (GCIS) on behalf of The Presidency,
October 2003
[2] The ANC’s election manifesto is available at www.anc.org.za.
[3] The
People’s Budget is available at www.naledi.org.za
[4] Medium Term Strategy
Framework 2003-2006, Department of Trade & Industry.
[5] South Africa’s Economic Transformation – A
Strategy for Broad-Based Black Economic Empowerment, Department of Trade
and Industry, March 2003 available at www.dti.gov.za
[6] South African Yearbook 2003/04, GCIS,
Pretoria
[7] Khula web site www.khula.org.za
[8] Web page
of NEDLAC www.nedlac.org.za and Medium Term Budget Policy Statement 2003
[9] Speech By Dr Zola Skweyiya, Minister Of Social Development On The Occasion Of The Reading Of The Third Debate On The Social Assistance And The South African Social Security Agency Bills In The National Council Of Provinces, February 24, 2004 and Minister's Notes: Media Briefing on the National Social Security Agency and Social Assistance Bills to be tabled at the NCOP, February 25, 2004.
[10] Consolidated Report of the Committee of
Inquiry into a Comprehensive Social Security System for South Africa, May
2002 available at www.welfare.gov.za; Coalition
Endorses Evolutionary Report's Big Anti-Poverty Plan at http://www.sacc-ct.org.za/taylor.html
and The Basic Income Grant: Poverty, Politics and Policy-making by Ravi Naidoo, October 31, 2002 and other documents on the BIG web
site www.big.org.za.
[11] Stepping Back From The Edge: The Pursuit Of Antiretroviral Therapy In Botswana, South Africa And Uganda, UNAIDS, November 2003
[12] Business Day, February 4, 2004
[14] Roll-out or cop-out on Aids
drugs?, Mail and Guardian Online,
February 27, 2004; Update On The Roll Out Of ARVs In
The Free State, Free State Provincial Government, March 17, 2004; and The
Expanded Hiv And Aids Treatment Programme
In Gauteng, Gauteng Provincial Government, March 15, 2004.
[15] Operational
Plan For Comprehensive HIV And AIDS Care, Management And Treatment For South
Africa, November 19, 2003
[16] Toward a Ten Year Review, op. cit. and Budget Speech by Minister of Finance
Trevor Manuel, February 18, 2004
[17] See the web site of the Treatment Action Campaign at www.tac.org.za.
[18] TAC misread Mbeki over AIDS deaths', Business Day, February 13,
2004.
[19] South
African Yearbook 2002, GCIS
[20] Report on the Survey of Large and Small Scale Agriculture, Statistics South Africa, 2002.
[21] Recent Employment Data from the Labour
Force Survey, Department of Trade and Industry, October 1, 2002.
[22] Employment Trends in Agriculture in South
Africa, Statistics South Africa and National Department of Agriculture,
2002
[23] South
African Yearbook 2003/2004
[24] Automotive
Industry Export Council, http://www.aiec.co.za/.
[25] “G.M.
Returns 10 Years After End of Apartheid,” New York Times, January 30, 2004 and
various press releases on the Delta Motors Corporation web site.
[26] New York Times, July 9, 2003
[27] South
African Yearbook 2002/2003
[28] South Africa’s Mineral Industry 2002/2003, Department of Minerals and Energy; Chamber of Mines of South Africa.
[29] “Rising
Rand Takes a Toll on Gold Earnings” by Nicole Itano, New York Times, January 27, 2004.
[30] Chamber of Mines
[31] South African Mining Industry – Statistical Tables 2002, Chamber of Mines and Medium Term Budget Policy Statement, National Treasury, Republic of South Africa, November 12, 2004.
[32] South African Mining Industry – Statistical Tables 2002, Chamber of Mines and Medium Term Budget Policy Statement, National Treasury, Republic of South Africa, November 12, 2004.
[33] Department of Minerals and Energy
[34] Department of Minerals and Energy; Mbeni.