South Africa’s two-tier economy

By | March 17, 2012

The World Economic Forum’s Global Competitiveness Report 2011-2012 identifies twelve “pillars” of sustainable national competitiveness: institutions; infrastructure; macroeconomic environment; health and primary education; higher education and training; goods market efficiency; labour market efficiency; financial market development; technological readiness; market size; business sophistication; and innovation. 142 countries are then ranked according to relevant variables in a Global Competitiveness Index. South Africa comes number 50 overall in this table, but then the BRICs are not much different: China 26, Brazil 53, India 56 and Russia 66. The top ten is dominated by European countries, with Switzerland (the source of the report) number 1.

Inequality is endemic to this world economy, but South Africa’s detailed profile, as revealed by the following selected indicators, is remarkable:

Security exchange regulation 1

Soundness of banks 2

Efficacy of corporate boards 2

Financial services availability 3

Financial market development 4

Management schools 13

Air transport infrastructure 17

Professional management 18

Home market index 24

Scientific research 30

Firm technology 30

Buyer sophistication 31

Marketing 31

* * * * * * * * * * *

Electricity supply 97

Internet use per capita 105

Supply of scientists & engineers 112

Pay and productivity 130

Life expectancy 130

Education system 133

Crime and violence 136

Hiring and firing practices 139

HIV prevalence 139

TB prevalence 141

Businessmen listed the most problematic factors as inefficient government bureaucracy (20%), poorly educated workforce (17%), restrictive labour regulations (16%), corruption (12%),  crime and theft (10%) and poor infrastructure (8%).

What we have here is a world-class business environment surrounded by some of the lowest human development conditions in the world. It would have been easy to explain such dualism not long ago, when South Africa was notorious as a mining enclave run for the benefit of whites only; and perhaps two decades of ANC rule (with the black union federation COSATU as its principal supporter) are too short to undo the legacy of neglect and harrassment endured by the poor black majority for over a century. But South Africa’s first world corporate capitalism and the third world conditions most citizens live in are both to a significant extent a product of post-apartheid government. Moreover, public discourse in South Africa could hardly be said to reflect these stark contrasts. The arrival of “democracy” in the form of black majority rule in 1994 is still celebrated without any apparent irony.

The social glue for this paradoxical situation is the ANC’s ability to count on the votes of the poor black majority whose interests it systematically neglects. No wonder the South African left is hamstrung by its ideological legacy on race and class. South Africa’s growth rate of an average 3% a year is less than half that of the seven African countries who (with China, India and Vietnam) currently make up the top ten fastest-growing economies in the world. Surely this relative stagnation is an effect of the country’s business-friendly (some would call it “neoliberal”) economic model. The prospect for major social explosions still seems to be low, not least because South Africans have been told they are superior to the rest of the continent and are easily diverted by resentment of other Africans who come there for jobs.

Category: APE

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