The South African Economy: Coping with the Legacy of Apartheid
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Case Code: ECON018 Case Length: 19 Pages Period: 1994-2007 Pub Date: 2007 Teaching Note: Not Available |
Price: Rs.300 Organization : - Industry : - Countries : South Africa Themes: Corporate Social Responsibility |
Abstract Case Intro 1 Case Intro 2 Excerpts
"It is going to take decades to correct many of the wrongs"
- Rev. Motlalepula Chabaku, a legislator in Free State Province.
"The general consensus is that there has not been an improvement in equality"
- Matthew Stern, former economist, South Africa Country Office, World Bank, in 2004.
Introduction
In February 2007, Statistics South Africa announced that the real GDP of South Africa increased by 5.6% (annualized) in the fourth quarter of 2006, well above market expectations. The South African economy had been growing continuously since 1998, making it the longest economic upswing in the country's history. Business too was booming, with consumer demand growing at a fast pace. The country was seeing a rapid increase in the number of inbound tourists as well. "Having tripled the number of overseas visitors since 1994, it (the tourism industry) is regarded as being ready for 'a second phase of growth,'" said a report in the Financial Times (Refer Exhibit I for more information on South Africa).
However, the impressive numbers hid some harsh realities. Around 50% of South Africa's population continued to live below the poverty line and the country had an unemployment rate of more than 25%. The economic disparity between population groups in South Africa was wide and usually manifested itself along racial lines. Analysts attributed this disparity to the apartheid system, a race-based discrimination policy practiced by the government between 1948 and 1994. South Africa held its first multi-racial election only in 1994. The elections brought the African National Congress (ANC) to power. The ANC government took several policy initiatives to achieve its goal of bridging the economic gap between white and non-white sections of the population. It initially focused on social issues, with the launch of the Reconstruction and Development Programme (RDP). However, in 1996, with the Growth, Employment And Redistribution (GEAR) policy, the government decided to concentrate more on wooing foreign investment and on encouraging trade and industry.
Despite some success in poverty alleviation, the fact that the economic disparity between the population groups was expected to persist for many years to come, led many analysts to blame the government's shift in policy as the reason behind the slow change. Meanwhile, the government had been unable to contend with the growing menace of HIV/AIDS, with an estimated 5.5 million5 South Africans infected with the deadly virus. The high crime rate was another issue that required immediate attention.
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