Reflections on South Africa

This past week, around 25 of us from the MBA were in South Africa - Johannesburg and Cape Town - to look at South Africa and see how it is evolving. I am still in Cape Town - part holidaying and part finishing up my dissertation - but thought I'd make this blog post while my thoughts are still fresh :-)

South Africa is now routinely mentioned in the same breath as the emerging economies of Brazil, Russia, India and China. So much so that in fact the BRIC acronym has been modified to now be BRICS – indicating the confidence economists have in South Africa’s potential for growth.

The week in South Africa included visits to a number of organizations. A number of them seemed to be hard-nosed profit-focused corporations that presented a picture of how they in fact assist sustainability and Black Economic Empowerment (BEE). This meeting of ironies – financially driven but appearing to be society friendly – somehow sums up my experience in South Africa.

It is perhaps not surprising then, that the rest of the country or the little one can see of it in 10 days, symbolizes this dual principled mindset. Unsurprisingly, the evidence of earlier apartheid is omnipresent. It is present in every establishment we visited, with blacks and ethnic minorities (Indians, Coloureds) doing the blue-collar jobs while the whites appeared to be doing more responsible roles.

South Africa is presented as the ‘Rainbow Nation’ to its people and the rest of the world. Such a description of a country is best accepted with a healthy dose of cynicism. While there is no denying the diversity that South Africa represents, its contours have not yet adapted to symbolize the romantic notion of a rainbow.

With millions still living in poverty, blacks living in townships, Indians living in Durban and whites still owning and starting the majority of businesses in the country, the economic, social and geographical segregation does not offer an image that brings solace or even hope to the ambitious mind. Yes, progress has been made, the colonial policies have been reversed, the apartheid era and the age of open discrimination is over. And yet, a candid conversation with a cab driver suddenly appears to take the fuzziness out of the unease I had felt all week. One of the big stories this past week had been the overthrow of Thabo Mbeki and the crisis in Parliament. And yet, the country seemed like one behind the African National Congress, making it not a one-party state but a one-party dominated state.

The unhappiness of the previously disadvantaged people is apparent, but their nationalism has not yet developed significantly enough for them to also be critical of a party that was the significant force in bringing forth the political changes that brought them forward from obscurity.

In some ways the strength of the African National Congress is also its biggest weakness. South Africa is proud of its open media, its culture and its institutions. Yet, unless dissent is actively present in the African community the culture will remain dominantly un-African (or should I say un-Black?).

Perhaps the change I have witnessed in South Africa has brought my own prejudices forward and exposed me to a reality where the colonists and the colonized appear to be living in harmony. I have struggled to accept this fact and am convinced that what I see must not be true. It cannot be that white corporations that were only 12 years ago active participants in the discrimination culture are now suddenly promoting policies that are completely opposite to what was earlier.

It also seems strange, perhaps, that South Africa as a nation is following a policy of BEE that imposes conditions on its private industry. I am a firm believer in the free market and while reservation-oriented socialist policies had their supporters (and some would argue, even their place) in the 20th century, countries like India that adopted these are now suffering from increased segregation (rather than less) and the continued effects of polarized economic and social classes.

Private enterprise in an emerging economy like South Africa should not be chained down by rules that actively manage employment in the industry. Incentives are the key to economic change and social behavior and in my opinion, BEE is an inadequate policy providing misplaced incentives. Rather than guaranteeing 25% of jobs in a company to previously disadvantaged people, a social incentive scheme incorporating scholarships, entrepreneurship schemes and providing easy access to funding to established SME’s would have been better positioned.

The inadequacy and misjudgment of the BEE policy makers is evident when one examines South Africa’s economy and notices that despite a relatively high growth rate, the economy supports massive unemployment, mostly among the black community.

How can this be? Is South Africa a country that has undergone superficial change but is yet to percolate it down to the masses?