Now, South Africa Must Free Its Economy

`All I want is a three-bedroom house with indoor plumbing and some privacy," says Rebecca Matlakala, who lives in Alexandra, a crime-ridden black township outside Johannesburg. It's truly amazing how universal the desires of people are around the world, including South Africa. After a century of apartheid, Matlakala now has a chance of seeing her dream come true.

But only if the new government gets its economic policies right. And only if Pretoria can reestablish control over the townships, where criminal and political violence are approaching epidemic proportions.

Surprisingly, getting the right economic policies in place may solve both problems. After the Apr. 27 elections, Nelson Mandela will face two complex and contradictory demands: increase job opportunities for South Africans and provide immediate benefits to his impatient followers. One calls for long-term economic growth. The other calls for quick redistribution of resources.

This economic Gordian knot can be cut clean through if Mandela is willing to use the sharp sword of global competition. The closed South African economy today resembles that of Mexico or Argentina circa 1970. Walls of high tariffs protect inefficient local businesses, while the state owns or heavily subsidizes many industries. In addition, near control of the world gold and diamond markets provides the taxes that have kept it all going.

Until now. To achieve higher growth and more job opportunities, South Africa must become a more open, export-driven economy. With its rich resources, excellent infrastructure, top-rate services, and inexpensive, skillful labor force, the country stands a good chance of becoming Africa's first real economic "tiger."

But first must come political stability, and that leads back to economic redistribution. The African National Congress is counting on a "post-apartheid dividend" to generate over $11 billion for a huge public-works program. Funds would come from defense cuts plus massive foreign aid and investment.

It's a fanciful dream. Expenses for law and order are likely to rise, not fall, as the new government cracks down on crime and reestablishes control in the townships. And investors, both domestic and foreign, are bound to wait months, if not years, to see if South Africa becomes another Taiwan or degenerates into another Lebanon.

Privatizing the state's industrial assets could provide an answer to this dilemma. It could generate big bucks quickly for public works and help build a larger African middle class. Privatization could also provide carrots to entice foreign companies to invest in South Africa, alleviating the 45% unemployment.

South Africa seems to be on the verge of a major miracle in shifting to majority African rule through open democratic elections. Beyond that, it must cement this political change with an equally courageous economic miracle. One can only wish South Africa, and Rebecca Matlakala, "Godspeed."

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