South Africa—a New Dawn
There is nowhere better than Johannesburg to address a business audience in Africa.
For Johannesburg is, of course, the economic hub of the whole of Southern Africa. Just over a century ago, with the discovery of one of the world's richest gold fields, Johannesburg swiftly grew into one of South Africa's main urban centres, [end p1935] attracting into the Transvaal large numbers of foreigners.
I too am glad to speak in Johannesburg: for my theme today embraces not just the future of South Africa but the future of Africa as a whole. [end p1936]
Problems of Africa
With just a few exceptions, the history of post-colonial Africa is one of lost opportunities and unfulfilled hopes. Independent African countries had high expectations of the post-colonial period. They had imagined that it was the yoke of empire rather than indigenous difficulties which held their people back. [end p1937] They believed that rapid progress could be made to raise incomes and improve welfare.
But after an initial period of growth, most African economies faltered and then went into decline. Not all, it is true. Kenya, Botswana and Malawi stand out as success stories—and significantly stand out too by the more or less free enterprise economic policies their governments are pursuing. [end p1938] But Sub-Saharan Africa as a whole has now witnessed almost a decade of falling incomes, increasing hunger and ecological degradation. There is understandable bitterness bordering on despair that most Africans are as poor today as they were forty years ago. Africa accounted for three per cent of world trade in 1960. It accounts for only one and a half per cent today. And some twenty-seven million people are facing starvation. [end p1939] Moreover, many Africans are aware that this has occurred while some other parts of the Third World—in particular, Latin America and Asia—are making economic progress.
Daily we see on television the tragedy of flood, famine and disease.
The response to these disasters will always be generous. And rightly so. [end p1940] But no-one can doubt that it is bad for both donor and recipient countries if aid ever comes to be seen as a substitute for tackling real and evident causes of continued under-development.
This is not a matter for Western nations alone but for the Governments of those countries as well. [end p1941]
As a recent report of the World Bank has stressed, many of Africa's difficulties stem from the failure to give sufficient attention to and devise sensible policies for agriculture. Often for political reasons the priority has been given to the short-term needs of those who dwell in and near the cities. [end p1942] And often exploitation of mineral wealth has seemed more immediately attractive than the regeneration of agriculture. Price controls and other restrictions have prevented African farmers gaining a sufficient return or having confidence in next year's markets. And some farming methods themselves have been ecologically destructive.
For the majority of Africans, only flourishing agriculture can assure their future. [end p1943] The population of Africa has continued to grow at a phenomenal rate—much faster than elsewhere. Indeed, it has doubled over the past twenty years. This too is a problem which has to be faced if the expectations of a rising standard of living are to be fulfilled.
Agricultural output has grown by less than one and a half per cent a year on average since 1970. [end p1944] And food production has consistently risen more slowly than population. If African countries are to avert hunger and provide their growing population with productive jobs and rising incomes, their economies need to grow by at least four to five per cent a year: and the primary source of this growth can only be agricultural production. [end p1945]
But, of course, agricultural failure in Africa has only mirrored more general economic failure: failure to raise productivity, to satisfy domestic or overseas markets, or to provide the investment for a satisfactory economic infrastructure. Many African countries are caught in a vicious circle. [end p1946] Furthermore, Africa as a whole does not have the numbers of qualified people and particularly economically qualified people—engineers, commercial farmers, accountants, electricians, computer scientists—that are now to be found in other developing countries in Asia and Latin America. [end p1947] Far too many of the governing elite are taken up with non-productive tasks.
African economies have also experienced another aspect of the same vicious circle—and one which is well known to western countries which have embraced socialism. Planning and controls multiply in order to counteract the distortions which previous planning and controls generated. And so on. [end p1948]
With notable exceptions, Africa today is a picture of economic failure, with enormous social consequences. [end p1949]
South Africa's Economy: A Contrast
The contrast between the economic performance of South Africa and that of Africa as a whole since independence is stark indeed. Until the problems of recent years, South Africa's economic growth has been able to provide for investment in the country's infrastructure and industries unmatched elsewhere in Africa. [end p1950] It provided jobs for hundreds of thousands of workers from surrounding countries too.
Policies favourable to free-enterprise, combined with the country's natural mineral wealth, have led to economic progress that other African countries can only envy.
Of course, there was another darker side. [end p1951] The benefits of those policies were far too narrowly spread.
But let us never forget that it was industry that led the way in breaking down apartheid, for which we are very grateful. Industry which trained people for jobs regardless of background. [end p1952] Indeed, it was the free market itself which finally helped to make apartheid unworkable.
Apartheid itself is a kind of collectivism. It stopped free movement of labour, it curtailed property rights and spawned a host of regulations. Quite apart from the moral aspect, apartheid proved incompatible with the imperatives of economic progress. [end p1953] It will be by free-enterprise capitalism within a framework of law that South Africa's divisions can be healed and her difficulties overcome. [end p1954]
Misgovernment in Africa
Throughout Africa and elsewhere, misgovernment and misguided economic policies have had the same historical roots—a socialist view of the State.
The revolt against colonialism often led to the embrace of various kinds of left-wing ideology—whether openly Marxist, or masquerading as [end p1955] something home-grown and romantically African. Most newly independent African countries were all too willing to believe that large scale government intervention could provide the effective answers to poverty and deprivation. The command economy, in which an all-powerful government controlled prices, nationalised industry and directed investment was adopted. [end p1956] Unskilled bureaucracies were expected to make detailed decisions of great complexity. Corruption followed the excessive concentration of power.
And as economic freedom was diminished, political freedom was imperilled.
Of course, where the new Government was Marxist, that was always the intention. Many other Governments, disliking opposition, moved to the One Party State. [end p1957] Some of these One-Party systems are, of course, less oppressive than others. But, by definition, they are all more repressive than any genuine Multi-Party system can be.
The essence of democracy is free criticism and opposition which can form an alternative Government that the electors can freely choose. [end p1958] In too many parts of Africa there is little respect for the rule of law by government or governed, no real accountability, no free press. And in the absence of an alternative government, because of the One-Party State, violence in the form of civil war or a military coup has become all too frequent. Apart from the recent and remarkable case of elections in Benin, hardly any government in Africa has been changed by the electorate. [end p1959]
A New Beginning
Without a real determination to alter their political and economic systems most Africans will remain poor and indeed grow poorer.
Two developments offer us cause for optimism that such a change may soon occur.
First, the Soviet Union has ceased to export Marxist revolution to Africa. [end p1960] And second, there are increasing signs that Africans themselves recognise that free enterprise within a framework of law and a multi-party democracy are the way ahead. The number of governments which have so far moved in that direction is still too small. But as African self-confidence grows and post-colonial prejudices fade, I am sure that the number will increase. [end p1961]
Lessons for South Africa
South Africa will benefit, like other African countries, from the great international changes we have seen—in particular the reduction of external threats to her security. But South Africa faces a particular challenge. This is to achieve a full and free democratic political system while keeping the benefits which flow from a free economic system and sound finance. [end p1962] South Africans themselves must work out their own constitutional future by negotiation.
But there is no reason why building a fully democratic nation need imperil your country's economy. Rather, it would be strengthened by bringing domestic stability and international acceptance. [end p1963] From my own experience and that of increasing numbers of nations around the world, may I suggest five economic principles to be borne in mind in the new South Africa.
First, free enterprise must clearly prevail. No amount of talk of a mixed economy or a positive role for government must be allowed to obscure this fundamental distinction. [end p1964] Second, avoid more nationalisation and privatise any industries and businesses that you can. [end p1965] Third, remember that bureaucrats, vested interests and some companies will ask for controls and argue for subsidies. If they succeed, it is customers who lose out and tax payers who foot the bill.
Fourth, resist the temptation to protectionism, whether through tariff barriers or otherwise. Protectionism leads to inefficient industries which will damage the consumer and lose exports. [end p1966] Fifth, there will be strident calls to redistribute wealth as a means of eradicating poverty. By all means rectify wrongs which cry out for immediate action. [end p1967] But remember that it is only countries which create wealth and economies which grow that can support higher living standards for both rich and poor.
(Sixth. Keep firm control of public expenditure and sound monetary policy.) [end p1968]
South Africa in Transition
I believe that South Africa's economy can be an increasingly powerful engine of African recovery.
It is now essential that investment should flow into South Africa. Since 1985, lack of foreign investment and loans has held back South Africa's economy.
It is a tribute to the strength of that economy that it is in as good a shape as it is today. [end p1969] But the expectations which so many people have of tackling hunger, ignorance and poverty can only be satisfied if the South African economy increases its rate of growth. This it will not do unless international business and finance provide the resources. We must show all South Africans that free enterprise works to the benefit of all. [end p1970] Every time there is talk of anti-enterprise economic policies, harm is done. [end p1971] Above all, the violence which has claimed so many lives in South Africa over the past year imperils the whole future of this country.
We may argue about the responsibilities of the government for keeping order. [end p1972] But they cannot do so without the whole hearted cooperation of all the leaders of the black population in helping to bring this violence to an end. Yet, Ladies and Gentlemen, for all the risks and challenges which face you, I believe that South Africa is now seeing a new dawn. I have met more dedicated, impressive and great-hearted people working to change things for the better here than almost anywhere else in the world. (They are the hope, going to ensure; good over bad.) South Africa is coming out into the sunlight to rejoin the world. And the international community must warmly welcome her. [end p1973] For this is a cause of rejoicing not just to South Africa's friends, but to all the friends of Africa. Our hopes and prayers go with you.