South Africa: Diamond in the Rough

South Africa: A Diamond In the Rough South Africa has been connected to the world economy with its abundant natural resources, for which there have long been international markets and purchasers, since the first Dutch explorers landed there in the 17th century. Unfortunately, South Africa 's pervasive, severe and seemingly perpetual social problems have always been and remain today a substantial drag on South Africa 's ability to fully develop a world-class economy. This paper explores: the interaction of these two forces and how they have at different times hampered its ability to meaningfully trade around the world; the historical points of integration with the global economy; and how the country participated in the world economy and the energy sector post World War II until today. The Dutch became world traders long before coming to Africa in the mid-17th century. The Dutch colonized in the southern part of Africa in 1652. The goal was that South Africa would be no more than a trading post where ships could get supplies, but it soon became a full-blown colony known as Cape Town. Political and social troubles were not far behind. Great Britain took over the Cape of Good Hope in 1795, gave it back to the Dutch in 1803 and took it back in 1806. During this time, there was the famous upheaval with the Zulu people and other tribes that resulted in a major military defeat for Britain. Britain persevered in its policies, however, and steps toward global trading with South Africa made major strides in the 19th century. Significant mineral discoveries in the 19th century during British rule, increased international trading in South Africa, but it came with more social and political upheaval. South Africa “degenerated into conflicts such as the Anglo-Boer War,” when mines of diamonds were discovered near and around Kimberley and Cape Town in 1867 (Amoah 99). “From then on, mining, and the industry associated with it, would always be at the center of South African economic, social and political life” (Ross 59). Additionally, in 1886, “gold was discovered in the hills of the Southern Transvaal, in quantities sufficient for a century’s continual exploitation” (Ross 70). Britain took full control of the gold fields in 1902. At the beginning of the 20th century, South Africa began exporting its diamonds and gold to Europe and other countries as well as importing consumer goods from Europe. In 1910, the political powers in South Africa made significant strides toward stabilizing at least the political challenges. South Africa negotiated with Britain to become a unitary state, the Union of South Africa, a dominion of the British Empire. This period can be seen as South Africa’s first true integration into the global economy until at least World War I. South Africa took part in World War I by supporting Britain. World War I and the years that followed, including the Great Depression, governed the politics and economics of South Africa in the 1920s and 1930s. In the 1920s, the government “introduced measures to provide whites with greater job opportunities by instituting higher protective tariffs to encourage local manufacturing; by opening up new overseas trade relations, especially with Germany; and by establishing the state-owned South African Iron and Steel Corporation (Iscor)” (Byrnes Conflict in the 1920s). Squatter camps were created where many of the blacks were living and being charged high rents by the whites, which caused discord with the majority of the population. This was the type of discord, which in later years would consume South African politics that caused major setbacks in its ability to trade internationally. “By 1933, it was felt that the major economic decisions, particularly whether South Africa should stay on the gold standard or follow Great Britain off it, required a non-partisan government” (Amoah 117), which was formed in 1934. Moreover, South Africa suffered economic weakness during the period of the Great Depression, as did many countries. “Their economic problems had become especially evident during the depression, when the Carnegie Commission on Poor Whites had concluded in 1931 that nearly one-third of Afrikaners lived as paupers, whereas few English-speaking whites lived below the poverty line” (Byrnes The Great Depression). South Africa, like many countries, benefitted greatly economically from World War II in the period of 1939 to 1945. Gold and diamonds continued to be its most important industries as well as iron, coal and other minerals. Its manufacturing grew tremendously to support the war effort. South Africa saw a great increase in the number of people employed in manufacturing including women. As more and more white people moved to the cities and black people moved to the squatter communities right outside of the cities in support of these industrial advancements, social unrest followed. In 1948, the South African government ruled by the National Party introduced the policy of apartheid, which called for the total separation of the races – white, colored or native. The National Party controlled the South African government until 1994. Laws were passed to support the division of the races as well as give the government the ability to deal with opposition. Resistance to this legislation was felt throughout the 1950s. “In 1960, a majority of white voters, irritated by growing world condemnation of apartheid, supported the proposal to make South Africa a republic, whereupon it left the British Commonwealth” (Byrnes Implementation of Apartheid). South Africa’s economy flourished in the 1960s despite the serious undercurrent of social unrest. “Foreign investment in South Africa, attracted by rates of return on capital often running as high as 15 to 20 percent, more than doubled between 1963 and 1972, while high immigration levels helped the white population to increase by 50 percent during the same period” (Byrnes Consolidating Apartheid). This foreign investment and immigration helped grow South Africa’s economy substantially as it participated in the reconstruction of the global economy. It was clear by the 1970s, though, that apartheid was meeting a lot of resistance both locally and globally. South Africa fell into an economic recession, which included high inflation and tightening of the job market. Additionally, the world was increasing its criticism of the apartheid policies and foreign investment money was limited during this time. International pressure increased in the 1980s led by the United States. Apartheid policies limited South Africa’s ability to participate in the emergence of the second global economy. In October 1986, the United States Congress, passed legislation implementing mandatory sanctions against South Africa. These included the banning of all new investments and bank loans, the ending of air links between the United States and South Africa, and the banning of many South African imports (Byrnes Limited Reforms). Furthermore, over 90 US companies pulled out of South Africa. “This twin dynamic from the top-down global and a bottom-up democratic revolution” from inside South Africa forced the government to start making real political changes to prop up its economy (Allen 181). Nelson Mandela, “a leader and icon of the apartheid struggle had been imprisoned for 27 years,” was released in 1990 and “the ban on Mandela’s African National Congress (ANC) was lifted” (Amoah 99). The government began to slowly repeal the apartheid legislation. During this time, there was much violence. Finally, however, in the election of 1994, the ANC won the majority of the vote, and Mandela was elected president of South Africa. The changes from the social upheaval had a positive effect on South Africa’s international trade relations. Mandela’s government began to lower taxes and open up the financial system. South Africa began to integrate again into the global economy and saw its imports and exports begin to rise and foreign investment dollars flow back into the country. South Africa is also committed to lowering its global carbon footprint. Coal, a leading contributor of greenhouse gases in the atmosphere, is the primary source of energy for South Africa because it has an abundant supply of it. Besides fulfilling domestic needs, the country “exports 28 percent of its coal production” (Energy 2012). With the adoption of the Energy Act of 2008, South Africa is committed to preserving the environment and using renewable sources of energy to help reduce emission levels. In addition, South Africa continues to install solar units and wind energy farms. The South African “government set a target of 15% energy efficiency for the industry and 12% nationally to be achieved by 2015” (Energy 2012). Social issues continue to interact with South Africa’s economy. South Africa in recent years has faced massive TB and HIV/Aids epidemics. During my visit to South Africa in 2010, we visited the indigenous Himba people. They said that the members of the tribe have died or are sick because the men work outside of the tribe; they contract Aids or TB and bring it back to the tribe. “Out of the 49.99 million South Africans, 17 percent of adults ages 15 to 49 were HIV positive in 2010” (Amoah 104). It was clear to me when visiting that South Africa is still working through its history of apartheid. “The majority of wealth, business, industry, education, and land are still in the hands of the white minority” (Amoah 100). The squatter towns still exist. One white shop owner said that she hoped that the money that South Africa made from the World Cup would go to improving the living conditions of those in the squatter towns. Since the World Cup, there have been demonstrations and strikes because, in the people’s view, there has been no substantial change in the living conditions, land distribution or job opportunities for the black Africans. Our tour guide through the beautiful wine vineyards outside of Cape Town was of mixed race. I would not have known this except that she talked incessantly about the race issue in South Africa. Despite its serious political and social issues, however, South Africa is a big player globally. South Africa’s economy is growing but is it growing fast enough to combat its difficulties? The Economist states that “Economic growth in the region 's largest economy, South Africa, will be significantly below the regional average, at 3.1% in 2013” (1). The good news is that the black middle class is growing. Bottom line, South Africa will continue to need assistance from the Western world if it is going to be successful as it carries on its fight for true racial equality and a healthy population, free of Aids and TB, to become a world-class economy.

Works Cited Allen, Michael H. Globalization, Negotiation, and the Failure of Transformation in South Africa: Revolution at a Bargain. New York, NY: Palgrave Macmillan. 2006. UH Library Research Guide. Print. Amoah, Michael. Nationalism, Globalization, and Africa. New York, NY: Palgrave Macmillan. 2011. UH Library Research Guide. Print. Byrnes, Rita M. South Africa: A Country Study. Washington, DC: Federal Research Division, Library of Congress. 1997. UH Library Research Guide. Web. 27 Oct 2012. Energy (2012). South African Government Information. South Africa Government Online. <www.info.gov.za> Web. 27 Oct 2012. Growth in South Africa Will Lag Behind the Regional Average. The Economist. Global Forecasting Service. Electronic Journal List. UH Library Research Guide. Web. 2 Nov 2012. Ross, Robert. A Concise History of South Africa. Cambridge, UK: Cambridge University Press. 1999. UH Library Research Guide. Print.

Cited: Allen, Michael H. Globalization, Negotiation, and the Failure of Transformation in South Africa: Revolution at a Bargain. New York, NY: Palgrave Macmillan. 2006. UH Library Research Guide. Print. Amoah, Michael. Nationalism, Globalization, and Africa. New York, NY: Palgrave Macmillan. 2011. UH Library Research Guide. Print. Byrnes, Rita M. South Africa: A Country Study. Washington, DC: Federal Research Division, Library of Congress. 1997. UH Library Research Guide. Web. 27 Oct 2012. Energy (2012). South African Government Information. South Africa Government Online. &lt;www.info.gov.za&gt; Web. 27 Oct 2012. Growth in South Africa Will Lag Behind the Regional Average. The Economist. Global Forecasting Service. Electronic Journal List. UH Library Research Guide. Web. 2 Nov 2012. Ross, Robert. A Concise History of South Africa. Cambridge, UK: Cambridge University Press. 1999. UH Library Research Guide. Print.