Ever since he took office two years ago, President Nelson Mandela has juggled competing demands between business, labor, white, and black interests in South Africa with remarkable success. But this spring is proving a testing time for the 77-year-old President. On Apr. 30, hundreds of thousands of workers launched a one-day strike to protest provisions in the country's new constitution. And the markets have voted thumbs down on the government's new Finance Minister, Trevor A. Manuel, who lacks banking experience. Since the start of the year, the rand has plunged 18% against the dollar.
The turmoil threatens to deal a serious blow to the economy for the first time since growth began picking up in 1993. Reserve Bank Governor Christian Stals has warned that the plunging rand will push inflation up more than three points to 10%--even though banks recently raised interest rates. While the government still says the economy will grow 3.5% this year, others disagree. Nick Barnardt, chief economist at BOE NatWest Securities Ltd., for one, has scaled back his gross domestic product growth forecast from 3.5% to 2.8%.
BOXED IN. Consumers are starting to get nervous. Anticipating rising prices, shoppers have been rushing to snap up such imported electronic equipment as satellite dishes, videocassette recorders, and personal computers. Gas prices jumped 7%, to 47.5 cents a liter, on May 1. "It's going to kill us," worries Richard Sibanda, a 30-year-old taxi driver in Johannesburg.
In a sense, Mandela and his new Finance Minister have boxed themselves into a corner. The business community wants the government to move more quickly to lift exchange controls to allow companies to channel some investments outside of South Africa. But the plunge in the rand's value forced the government to spend $1.15 billion to support the currency, which cut deeply into hard-currency reserves. Without a reserve cushion, plans to begin lifting exchange controls this spring are likely to be delayed. The moves may not come until yearend or early in 1997.
LOCKOUT LAW. There could be plenty more instability in the meantime. The Congress of South African Trade Unions (COSATU) plans to call for more strikes or a referendum if provisions giving employers the right to lock out striking workers are not removed from the draft constitution. The document is expected to be completed and ratified by the Constitutional Assembly on May 8. Mandela is in a difficult position because the African National Congress has also called for scrapping the lockout clause. Mandela hasn't voiced an opinion on the issue.
So far, the South African President's response to the turmoil has been to continue calling for reconciliation. But the markets seem to want more. Says BOE NatWest Securities economist Barnardt: "The markets are saying, `Mr. Mandela, that game [of appeasement] is up. Now it's time to take firm stands, even if it means alienating some groups."' If the rand keeps falling, Mandela may have to choose more decisively between business and labor interests--or watch his hard-won economic gains slip away.