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.
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.”
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.”
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.”
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).
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.
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.”
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.”
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.”
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. 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.” 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.
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. 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.
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.
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. Families and government will have to redirect resources toward health care and care for orphans.
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.
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. 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.
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. 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.
Formal Sector Overviews
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.
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. 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.
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.
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 contributes some 18.5% of GDP and has grown faster than the overall economy - some 4% per year between 1994 and 2002. 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.
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.
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.
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 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%). 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.
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. 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.
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.
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.
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.
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.
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.
[*] 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.
 Towards a Ten Year Review, Government Communication and Information System (GCIS) on behalf of The Presidency, October 2003
 Medium Term Strategy Framework 2003-2006, Department of Trade & Industry.
 South African Yearbook 2003/04, GCIS, Pretoria
 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.
 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.
 Stepping Back From The Edge: The Pursuit Of Antiretroviral Therapy In Botswana, South Africa And Uganda, UNAIDS, November 2003
 Business Day, February 4, 2004
 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.
 Operational Plan For Comprehensive HIV And AIDS Care, Management And Treatment For South Africa, November 19, 2003
 Toward a Ten Year Review, op. cit. and Budget Speech by Minister of Finance Trevor Manuel, February 18, 2004
 TAC misread Mbeki over AIDS deaths', Business Day, February 13, 2004.
 South African Yearbook 2002, GCIS
 Report on the Survey of Large and Small Scale Agriculture, Statistics South Africa, 2002.
 Recent Employment Data from the Labour Force Survey, Department of Trade and Industry, October 1, 2002.
 Employment Trends in Agriculture in South Africa, Statistics South Africa and National Department of Agriculture, 2002
 South African Yearbook 2003/2004
 “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.
 New York Times, July 9, 2003
 South African Yearbook 2002/2003
 South Africa’s Mineral Industry 2002/2003, Department of Minerals and Energy; Chamber of Mines of South Africa.
 “Rising Rand Takes a Toll on Gold Earnings” by Nicole Itano, New York Times, January 27, 2004.
 Chamber of Mines
 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.
 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.
 Department of Minerals and Energy
 Department of Minerals and Energy; Mbeni.