The Economy at the Time of Transition

The Population Registration Act of 1950 divided the South African population into four main racial groups: whites, Natives (Africans or Blacks), colored people (people of mixed race), and Indians. And during the final two decades of apartheid under the leadership of the National Party, the economic climate was difficult for many South Africans, particularly for blacks, coloreds, and Indians who were living in poverty and underdeveloped communities. The apartheid system institutionalized throughout the country racial discrimination, oppression, and the repression of civil rights, as well as, to a lesser extent, economic rights. The economy was built on exploitation through segregation and a controlled migrant labor system, whereby Africans were required to work in urban areas yet prohibited to live there.

That affected both men and women, although they experienced such difficulties differently. For example, the government restricted rural women from entering urban areas and, as such, confined them to agricultural work and informal earnings—leaving many vulnerable to attack and theft while the men were off working in the cities. Unprotected by inheritance or property rights, they were especially vulnerable to poverty and violence, as the death of a husband or another income-generating member of the family often meant a total loss of their property.

Most of South Africa’s national income went to whites, who had per capital personal incomes of more than nine times those of blacks, almost five times those of Coloreds, and three times those of Asians. Because black South Africans, who represented the majority of the population, were not the beneficiaries of economic development programs and policies, the country had one of the most unequal distributions of income in the world. The disparity between rich and poor was staggering, with 65 percent of all income held by just 20 percent of the richest South Africans. Moreover, by 1994, the country’s health status relative to income was one of the worst in the world.21

By the time the National Party government announced the dismantling of apartheid, the economic system was no longer viable and was instead hampering the country’s ability to compete globally. Economic growth was stagnant, with an average growth rate of 1.7 percent. Per capita income had declined to an average of -0.7 percent annually and unemployment had increased. The national debt had gone from less than 3 percent of GDP in 1989 to more than 9 percent in 1994. And by 1993, one year before the end of apartheid, 60 percent of the population lived in absolute poverty.

Economic Foundations and the Future

The combination of economic sanctions, the lack of growth, and the increased cost to maintain the apartheid system left the post-apartheid government with a struggling and broken economy. Yet some strong economic foundations remained. The country had a solid infrastructure that, although racially skewed, included roads, electricity, railways, harbors, bridges, and a water system; a relatively robust financial system, by international standards; human resources; technological capabilities; a vibrant business community; and an annual per capita income that put the South Africa in the upper-middle-income bracket for developing countries.22 The new government’s challenge was to leverage those assets, minimize the liabilities, and steer a new economic direction that would benefit all South Africans.

 
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