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| World Marketplace |
Goal-Oriented
James Thompson and Ian MacMillan
10/01/2004
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Indeed, foreigners who own property in
South Africa are wary of growing resentment due to rising property prices caused
by their purchase of vacation homes in the country’s most scenic areas. They
fear that, in the event the land restitution program is unsuccessful, they might
become scapegoats and bear the brunt of any retaliation.
Many in industry and
government have realized the issue is crucial. Clem Sunter, a senior director of
the U.K. and South African mining giant Anglo American, says, “South Africa will
have little alternative but to develop a land ownership model…more in
keeping with the industry model.” He suggests, “One way to do this would be to
turn farms into companies, with shares being spread variously among employees,
new black shareholding consortiums and the original farm owners.” Regardless of
what model the government chooses to follow, it is imperative that the process
is just, and that it does not unduly jeopardize the fragile agricultural
economy.
Growing Pains
The government is acutely aware that it needs to promote
growth. Trevor Manual, the minister of finance, wants to raise the rate of
investment and halve the unemployment rate. The ministry has not fully addressed
how it intends to accomplish this. It could spend more and tax less. It could
also change the tax policies to encourage growth. For example, a more
expansionary fiscal policy with less dependence on income tax, especially
corporate income tax, would help.
| Foreigners who own property in South Africa are wary of growing resentment due to rising property prices caused by their purchase of vacation
homes in the country’s most scenic areas. |
As in many first-world countries, there
will have to be an effort to create more jobs, the majority of which need to be
in the micro-, small- and medium-sized enterprise sectors. The government will
also need to support sustained growth of established small and midsized
enterprises, which have already survived for some time in the market, rather
than squandering resources on funding untested start-ups.
The dire
unemployment situation raises the risk that, in an effort to appease the masses,
Mbeki may be tempted to put a brake on privatizations, because they often lead
to the loss of jobs. Indeed, a number of ministers, along with Mbeki himself,
have indulged in antimarket and antiforeigner rhetoric. While their frustration
with the complexities of governance, tepid economic growth and lack of FDI may
be understandable, these sentiments will repel foreign investors.
South
Africa will be seeking to boost its transportation and power infrastructure. As
a consequence of a poorly managed rail system, South African roads have been
overstressed, and there is a significant need to rebuild and expand them.
Meanwhile, South Africa will reach its power generation capacity in 2007, and
will no longer be able to maintain low power prices. At that point, there will
be a need for substantial investment in generating capacity. It is likely that
the government will look toward private-sector partnerships to finance these
investments.
Housing is another trial for the government. The rapidly
emerging middle class is creating demand for new housing and low-rise office
development. Construction corporations are likely to benefit from a steady
increase in demand through the medium term and into the preparation phase for
the World Cup.
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