Now, Can Mandela Win The Battle For Growth?Alan Fine
Historians may come to identify the evening of May 2 as the moment it happened. More than 340 years after Dutch explorers first landed, political power in South Africa passed from the white minority to an elected, black majority government. Outgoing President F.W. de Klerk conceded defeat, pledging to Nelson Mandela his full cooperation in a Government of National Unity. And Mandela invited de Klerk's National Party and all other losing parties "to join us in working together to tackle the problems we face as a nation."
The trick now will be translating the euphoria over democracy into economic progress for millions of black South Africans. And achieving growth and creating jobs depend in part on investment from and trade with the outside world. That's why executives and investors around the globe will be watching for the new government's early economic moves.
Superstructure. Some money is already beginning to flow in. The U.S. pledged to double its aid to South Africa, to $600 million over three years. Britain, too, will kick in $150 million over the same period. International Finance Corp., the private investment arm of the World Bank, announced it would include South Africa in its emerging-markets index by summer, which could spur a new wave of portfolio investment. Says Robert Weinberg, analyst at S.G. Warburg Securities Ltd. in London: "A trickle of money could become a river eventually."
To help that become a reality, the African National Congress seems to be bending over backward to boost investor confidence. The key post of Reserve Bank governor, for example, seems guaranteed to go to current Governor Chris Stals, who has run a tight monetary policy and won the plaudits of business.
There's also talk that Mandela wants to establish a three-member "super Cabinet," with each superminister taking ultimate responsibility in their area: law and order and foreign affairs, social welfare, and finance and economics. The leading contender for the economics post is ANC economics chief Trevor Manuel.
Involved in the economic department for only three years, Manuel is relatively inexperienced. But he has made a point of courting business, hoping to assure executives that the ANC is market-oriented. And an ANC superminister of economic affairs would make it politically acceptable for incumbent Finance Minister Derek Keys, a favorite in the business community, to be reappointed. Manuel's No.2, Tito Mboweni, looks a likely bet for the Trade & Industry post.
Even with the careful casting of top positions, the pressures on the new coalition government will be strong. Mandela is warning that the new government's centerpiece will be the ANC's Reconstruction & Development Program (RDP), its blueprint for a major public-works and infrastructure overhaul. Attempts by other parties to undermine the reconstruction effort would cause serious ruptures, he said.
Credibility. Strains are already being felt. The RDP, though designed to be fiscally conservative, has the potential to cost plenty. The ANC policy says it can be financed without an overall increase in taxes or a major rise in the budget deficit. Much of the funding would come from a redirecting of spending from defense and duplicative apartheid bureaucracies. Revenues generated by a strong economy, now expected to grow 4% this year, would also help, say ANC planners.
But opposition parties are openly skeptical. "The RDP is going to hit citizens' wallets," warns Dawie J. de Villiers, a member of de Klerk's outgoing cabinet. National Party Cabinet members and opposition members of Parliament are expected to push the ANC to lengthen the five-year deadline it has set for building 1 million new houses, electrifying 2.5 million homes, and creating millions of new jobs. And they could lobby hard for a slower reallocation of resources from whites to blacks.
Right now, though, relief is the feeling shared across the country, despite some remaining technical glitches in the election. A government with credibility is in power. And South Africans are finally daring to hope that the violence may be over. Hospitals that had made elaborate plans to deal with expected violence during the election week reported their quietest period in recent memory. If it can last, such stability may end up being the biggest boost to business confidence.
WHAT BUSINESS SHOULD WATCH FOR
-- Appointment of key government officials, especially current Reserve Bank Governor Chris Stals and Finance Minister Derek Keys
-- Launching of new public-works programs without major tax hikes or more deficit spending
-- How well the ruling ANC and opposition parties cooperate