South Africa: Disturbing Signs Of Disarray After Mandela

South Africa's ugly brush with foreign-exchange markets raises some tough questions about its future. The rand, battered for weeks by a severe bout of Asian flu, hit a record low of 6.75 against the dollar on July 6--a loss of 28% since the start of 1998--just 48 hours after African National Congress stalwart Tito Mboweni was named to replace Christian L. Stals as governor of the Reserve Bank.

The currency steadied a bit later. But the incident may be just the first of many as the ANC's alliance with labor unions and the Communist Party frays in the runup to 1999 national elections. It also gave a foretaste of potential problems the ANC will have in ruling after revered President Nelson Mandela, 79, finally retires next year.

Ostensibly, Labor Minister Mboweni, who has no banking background, was named in order to quash speculation about Stals's future. The technocratic Afrikaner was set to retire from the central bank in mid-1999, though there have been rumors that he might be bounced out early. In reality, however, the move was as much designed to mollify the ANC's left wing, which has been growing increasingly restive over the government's inability to create jobs. "This is an example of what we can expect to see in the next year," says Nick Barnardt, an economist at Johannesburg-based AMB Securities. "[ANC leaders] need to further enhance the feeling within the black population that they are running the country."

But the worry is growing that Mandela's designated successor, Deputy President Thabo Mbeki, will be unable to handle a deepening economic and political crisis as deftly as Mandela has. The President manages to remain above political brawls, even as the economy sours and demands amplify for more jobs, decent housing, and improved education. "Mandela could pull it off. But not Mbeki. He does not have the stature," says Steve Friedman, director of the Center for Policy Studies, a Johannesburg research institute.

South Africa's economic crisis is deepening. Gold prices have crashed. The prime lending rate is 24%, the highest level since political turmoil forced a state of emergency in the mid-1980s. Unemployment is at 33%. And scaled-down projections now envision economic growth of just 1% this year.

But the government, which Mbeki runs day-to-day, is still pushing a policy it calls GEAR: growth, employment, and redistribution. GEAR's lack of results so far is increasing tensions between the ANC and its allies, the 1.7 million-member Congress of South African Trade Unions and the Communist Party. Both want to see big new spending on public-works programs to cut jobless rates. Mbeki and his Cabinet, leery of the reaction on global financial markets, are resisting that doggedly.

STANDING FIRM. Mandela has lately dropped his usual aloof public stance and come to Mbeki's aid. He gave the Communists a public dressing-down for sniping at government policies. "GEAR is the fundamental policy of the ANC," he told their early-July Party Congress in Johannesburg. "We are not going to change it because of your pressure."

Mbeki, too, scolded critics at an earlier COSATU conference. And he seemed to question the ANC's broad alliance, which has a 62% majority in Parliament: "When we speak of this strategic alliance, are we speaking of something that continues to exist, or are we dreaming dreams that reflect the past?"

Strained though it is, the alliance is likely to hold through next year's elections. But after that, it could fall apart, pushing South Africa into uncharted waters--without Mandela's calming influence.

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