Select Committee on Foreign Affairs Fifth Report


Background: challenges facing South Africa

7. During our inquiry, and especially during our visit to South Africa, we have been repeatedly impressed by the tremendous progress that the country has made since its first democratic elections in 1994 in so many areas of life. As The Times columnist, Mr Matthew Parris recently observed:

Fitfully but unmistakably, the new South Africa is working. The country today is richer, happier, more powerful, fairer and more secure than it was a decade ago. And the direction is still up.[8]

This view has been echoed by much of the evidence we have received, stressing how the pessimists who, prior to the elections in 1994, predicted a dire future for South Africa have been confounded.[9] One submission stressed the triumph of democracy, in particular:

Since 1994, South Africa has been grappling with the daunting task of unravelling institutionalised racism in every sphere of society. The greatest single tribute to the success of that struggle is the fact that South Africa is one of the most democratic countries in the world. Democratic in the formal sense, with a free and fair electoral system, an independent judiciary, a free press and one of the most progressive constitutions in the world. But democratic also in the sense that millions of people, in their communities and workplaces, are actively engaged in grassroots political activity.[10]

During the course of our inquiry, South Africa successfully held its third fully democratic and multi-racial election.

8. Inevitably, however, since 1994 South Africa has had a number of tremendous challenges to overcome, not least the bitterly divisive legacy of an apartheid policy that affected every aspect of people's life. A number of these issues have been drawn to our attention during the inquiry and we comment on some of them below. Where appropriate, we also comment on how the United Kingdom is working in partnership with the South African Government to help it face them.

Economy

9. As can be seen from the graph below (figure 2), in comparison to its Southern African neighbours South Africa's economy is a 'giant.' It has a Gross Domestic Product (GDP) of around $120bn, relatively low inflation and a growth rate of around 4% per annum at present. After two serious crashes, in 1996 and 1998, the Rand appears to be stable and slowly gaining value. In general, the South African Government has followed strictly the guidelines of the International Monetary Fund (IMF) on economic policy, and has won praise from it and other international financial institutions.

Figure 2: total GDP of Southern African states 2002-04


Source: IMF World Economic Outlook database[11]

10. In a recent paper, two commentators highlighted South Africa's economic dominance of the southern half of the continent, generating 45% of Sub-Saharan Africa's GDP and 75% of the South African Development Community's (SADC). They also stated that the economy:

stands out in Africa not only in terms of its size, but also in terms of depth of expertise, technology and management. Macroeconomic fundamentals and their management remain sound. Fiscal policy is robust ... Monetary policy is healthy.[12]

11. However, it should be noted that, while South Africa's economy is much larger than its African neighbours, when it is compared to other middle-income nations, it is not so outstanding. The graph below (figure 3) gives a few comparisons—Argentina and Columbia are probably the closest to South Africa in terms of population.[13]

Figure 3: GDP of South Africa compared to other middle-income nations


Source: IMF World Economic Outlook database

12. Commentators also highlighted a number of significant challenges faced by the economy. For example, Mr Jesmond Blumenfeld, of Brunel University, stated in his memorandum to the Committee that:

inherited serious structural deficiencies and developmental backlogs have continued to inhibit growth and undermine confidence. The requisite restructuring will take more time to achieve, and will continue to present the government with difficult political choices. ... The key economic policy challenges remain the low levels of fixed investment, the 'jobless' nature of economic growth, the shortage of skills, privatisation, and South Africa's failure to become a major exporter of manufactured goods.[14]

These views were echoed in Mr Blumenfeld's oral evidence, where he described the process of tackling some of the structural deficiencies in the South African economy as, "like turning a super tanker around; it is a very slow process."[15] The problem of unemployment, which currently stands at around 35-40%, is a particularly pressing one and was a dominant issue in the recent election campaign. Geographically, South Africa is at the tip of an under-performing continent away from the dynamic growth markets of the world. The legacy of apartheid on the education of the black majority remains a major barrier to growth.

13. Those to whom we spoke all agreed that the South African Government had made some very difficult decisions in order to achieve stable, long-term economic growth. They also all believed that one of the keys needed to unlock the country's potential was increased foreign investment, something which has not always been forthcoming since 1994.[16]

14. Britain is already one of the largest investors in South Africa, and there is considerable two-way trade between the countries (see para 38 below for more details). We heard from the UK Trade and Investment section of the High Commission in Johannesburg how they were encouraging even more British businesses to invest in the country, bringing much-needed foreign capital, skills transfers and employment opportunities. It is in this area that the United Kingdom can probably be of greatest assistance in supporting South Africa's economic growth and development.

15. We conclude that, while there remains a number of difficult challenges to be faced, the prospects for the South African economy are generally very positive. If it is to deliver the employment and increased national prosperity the country needs, however, a significant increase in direct foreign investment will be needed. We recommend that the Her Majesty's Government continue to strive to stimulate and encourage private investment in South Africa.

Inequality

16. Linked closely to the issue of economic growth is that of the unequal benefit which different sections of the population have derived from the country's success. The total GDP figures given above hide dramatic differences in the incomes of the very rich and very poor in the country. For example, although per capita income in South Africa was around $2,300 in 2002, 2% of the population were still living on less than a dollar a day.[17] South Africa also ranked 111th out of 175 countries in the UN's Human Development Index (HDI), between Syria and Indonesia.[18] ACTSA's submission described South Africa as: "the world's second most unequal country."[19]

17. Given South Africa's past, it is unsurprising that it is the black population who suffer worst from poverty, joblessness and social deprivation. In 1998, when the first properly-researched figures for inequality and poverty in South Africa were published, the sharp contrasts between the living standards of the different ethic groups was revealed.[20] For example, 61% of black South Africans were 'poor', compared with only 1% of whites, and the infant mortality rate for whites was 7.3 per 1,000 births, while that for blacks was 54.[21]

18. To tackle this problem in 1995, the South African Government introduced a range of initiatives and programmes under the heading, 'Black Economic Empowerment' (BEE), which aimed to encourage the redistribution of wealth and opportunities to black and other previously disadvantaged communities. This policy has steadily developed since that time and, following a 2001 report by the Black Economic Empowerment Commission (BEEC), the Government agreed a target strategy for ensuring that companies become more representative of the population as a whole. For example, the Commission called for 25% of the top-listed companies to be black-owned by 2010.

19. BEE faces a number of very difficult obstacles before it is to succeed. Possibly the greatest is the lack of an educated and skilled black workforce, after years of official Government neglect before 1994. The policy has also been criticised for being seen, at least in its initial stages, to be merely creating a new black elite.[22] A recent article in The Financial Times on this subject, made clear the imperative for the policy to achieve tangible results:

South Africa needs to get black empowerment right, for the sake of both the economy and its nine-year-old non-racial democracy. In a country with some of the world's starkest social contrasts, broader economic participation by black people could cement faster economic growth and enhanced political stability.[23]

20. However, progress is slowly being made: black ownership of public companies, for example, was 9.4% in 2002 compared with 3.9% in 1997 (and virtually non-existent before 1994).[24] The British and South African companies we spoke to during our inquiry were also very positive about the way in which the Government was handling this matter, calming fears of BEE being imposed from 'on high'; indeed most of them saw it as more of an opportunity than a threat. The FCO, through UK Trade and Investment (UKTI), has assisted in the process of promoting understanding of how BEE works in practice, by organising seminars on the subject for concerned businesses.

21. We commend the South African Government for its work in tackling so boldly the lack of economic opportunities experienced by many black people in the country. We recommend that the British Government continue to work with its South African counterpart to promote a better understanding of 'Black Economic Empowerment' among British investors, and potential investors, and to assist them in seizing the opportunity that it represents.

HIV/AIDS

22. South Africa has a bigger HIV-positive population than any other country in the world at present.[25] Approximately five million South Africans, 11 per cent of the population, are HIV-infected; it is estimated that 600 people die every day from the disease in South Africa.[26] In its memorandum to the Committee, Save the Children estimated that the pandemic has created around 700,000 orphans, with 34.5% of pregnant women aged 25 to 29 being infected in 2002.[27]

23. While in South Africa, we also heard of the significant impact that the disease was having on businesses, particularly on the extractive industries. The high infection rate was inevitably leading to a greatly increased turnover of staff. One interlocutor suggested that in five years time some firms could face the prospect of having to replace one third of their workforce every year.

24. The response of President Mbeki's Government to HIV/AIDS has been controversial, particularly with regard to the provision of anti-retroviral drugs (ARDs) to sufferers. There was a concerted public campaign last year, led by a well-organised group of AIDS activists, known as the Treatment Action Campaign (TAC), protesting against the Government's policy at that time. On 17 November, the Government agreed to provide ARDs in state hospitals. It estimates that more than 50,000 people will receive the drugs in the first year, and up to a million by 2007.[28]

25. During our visit to South Africa, we were privileged to visit the 'Hospice in Soweto', one of a very few such institutions in South Africa. Around 75% of its patients suffered from HIV/AIDS, and the majority of the much-needed palliative care was carried out in the community by trained carers. We were told that there was still a great stigma attached to HIV/AIDS, and many families would deny that the patient had the disease. Poverty also forced some families literally to 'dump' patients in the street or at a local clinic because they simply did not have the resources to pay for their care.

26. The UK, along with other international donors, provides some support to the hospice. It has received limited funds for the past five years from the Small Grants Scheme, which is DfID funded but administered by FCO. We were concerned to be told by the Foreign Office, therefore, that, "the future of the Small Grants Scheme beyond March 2005 is uncertain."[29] The Office promised, however, to work with DfID to look for alternative sources of funding. We shall monitor progress on providing funds for this project.

27. On the whole, however, the United Kingdom can be extremely proud of the assistance it has provided to combat HIV/AIDS. The Minister informed us that the Government had provided around £30 million towards combating the disease in South Africa alone.[30] Globally, Britain is now the second largest bilateral donor on HIV/AIDS after the USA, providing more than £270 million in 2002-03.[31] As the Minister recognised, though: "It is not enough of course, and it is never going to be enough."[32] Our colleagues in the International Development Committee have examined this subject in detail in their recent report.[33]

28. We conclude that the British Government is playing a key role in the fight against the scourge of HIV/AIDS in South Africa, and throughout the world. As always, though, more could be done and we recommend that the Government maintain an active dialogue with the South African Government on this subject in order to assess what further assistance could be given.

Crime

29. The high prevalence of crime, particularly violent crime in the inner-cities, is one of the most significant and well-publicised problems facing South Africa at this time. This is not only an extremely serious issue in respect of individual citizens' everyday life, but also has a very detrimental economic impact through its deterrence of much-needed tourism and trade. Mr Blumenfeld observed in his oral evidence:

The crime problem is serious, it creates difficulties for any firm wanting to send skilled personnel there because they have a responsibility for their welfare, and there is both a perception but also a reality that crime levels are high particularly in certain areas. There is no question that it does have an impact on investment.[34]

We believe it is important to note, however, that the prevalence of crime in South Africa, as in the United Kingdom and elsewhere, varies greatly from area to area and it is misleading to view the entire country as being especially dangerous or crime-ridden. Much of the most violent crime is, sadly, confined to the township areas, mainly affecting the urban black population.

30. While in South Africa we visited a local police station in Alexandra and met some of the officers who work there. We also met a secondee from the Metropolitan Police who was working there at the time, supporting their work. We heard and saw at first hand some of the difficulties they face everyday. We were also very pleased to have the opportunity to discuss some of these issues with Mr Charles Nqakula, Minister of Safety and Security, who was able to give us a broader insight into how the Government is tackling the problems.

31. In his oral evidence to us, Mr Chris Mullin MP, Parliamentary Under-Secretary of State, Foreign and Commonwealth Office, recognised the scale of the problem, but was unable to offer any significant strengthening of this bilateral assistance:

The maintenance of the rule of law is a prerequisite for stability and economic success, particularly if you wish to attract foreign investment. The South Africans are as well aware of that as we are. Do I see any possibility of expanding the assistance we already give? Modestly, I think. We are talking about capacity building here, things like training. Sir John Stevens, the Metropolitan Police Commissioner, I know has personally taken an interest in the Met's operation there and I think he is in South Africa at the moment. At the end of the day it comes down to providing them with effective training and resources, and perhaps bringing some of them over here to see how we do things. I can see scope for modest expansion but, at the end of the day it is the South Africans who are going to have deal with this problem; it is a very serious problem. We can just do our best to help and advise in all capacities.[35]

32. We conclude that the fight against crime, especially violent crime, is one of the most serious, and difficult, challenges facing South Africa at this time. We recommend that the British Government continue to offer significant assistance to South Africa in this field, and that co-operation projects currently in place are strengthened and improved, particularly those relating to improving the professional training of police officers.

Land reform

33. Since 1994, the South African Government has been struggling with the issue of land reform. The Land Affairs Department announced recently that some 700,000 people had received almost three million hectares of land through the Government's restitution and redistribution programme since the end of apartheid.[36] The Department recently reported a "remarkable increase" over the past year in the number of land claims settled, but said it would be a major challenge to complete all claims by its deadline of 2005. Only land that was unfairly expropriated under apartheid is eligible for redistribution.

34. Many South Africans have been frustrated at the slow pace of reform, however, and the apparent "foot dragging" by some of those involved in the process. In 1994, the ANC promised to redistribute 30% of farmland in 10 years. So far only around 3% has changed hands, and 90% of commercial farmland remains in the hands of approximately 50,000 white farmers.[37] Earlier this year, President Mbeki, therefore, announced amendments to the land restitution law, which would, in the Government's opinion, "expedite land reform and reverse the legacy of apartheid." [38]

35. There has been strong criticism of this move from some groups, with critics claiming that they will allow the Minister of Land Affairs to expropriate land without a court order and without the landowner's agreement.[39] Unsurprisingly, references to what happened in neighbouring Zimbabwe, and recent developments in Namibia, are frequent.[40]

36. We were reassured, therefore, to hear from a number of sources within and without South Africa that what was happening there was a genuine, well-managed programme of land reform. Both Mr Richard Dowden, of the Royal African Society, and Dr Steve Kibble, of the Catholic Institute of International Relations (CIIR), told us that, while there was a land movement in South Africa, it was nothing like the "state-sponsored ... violent" force seen in Zimbabwe. Indeed, Mr Dowden observed:

I would have thought there was far more threat from modernisation and mechanisation to the livelihoods of rural South Africa and the general process of globalisation than there would be from taking over farms in the way it has been done in Zimbabwe.[41]

37. We conclude that, at this time, the South African Government appears to be pursuing a sensible and considered policy of land reform, that seeks to address the historically unequal distribution of land in the country. However, we consider it is critical to South Africa's future prosperity that any moves towards land expropriations similar to those seen in Zimbabwe are firmly resisted.


8   "A pessimist recants: the new South Africa is working", The Times, 25 October 2003 Back

9   See, for example: Q 170 [Mullin] Back

10   Ev 18, para 2.3 [ACTSA] Back

11   www.imf.org/external/pubs/ft/weo/2004/01/index.htm Back

12   Jeffrey Herbst and Greg Mills, "The Future of Africa: A New Order in Sight?", Adelphi Papers 361 (November 2003), p 42 Back

13   Latest population figures: South Africa - 42,768,678; Argentina - 38,740,807; and Colombia - 41,662,073 (Central Intelligence Agency, CIA World Factbook 2003, January 2003, www.cia.gov/cia/publications/factbook). Back

14   Ev 33 Back

15   Q 54 Back

16   See, for example: Q 59 [Blumenfeld]. Back

17   UN Statistics Division www.unstats.un.org/unsd/mi/mi_series_results.asp?rowID=580 Back

18   The Human Development Index (HDI) measures a country's achievements in three aspects of human development: longevity, knowledge, and standard of living. Longevity is measured by life expectancy at birth; knowledge is measured by a combination of the adult literacy rate and the combined gross primary, secondary, and tertiary enrolment ratio; and standard of living, as measured by GDP per capita. For more details, see: http://hdr.undp.org/reports/global/2003/faq.html#21. Back

19   Ev 19, para 2.10. Also see QQ 185-6 [Mullin]. Back

20   "Poverty and Inequality in South Africa: Report prepared for the Office of the Executive Deputy President and the Inter-Ministerial Committee for Poverty and Inequality", May 1998 www.gov.za/reports/1998/poverty Back

21   Ibid., pp 20 and 29 Back

22   See, for example: Q 61 [Blumenfeld]. Back

23   "The emergence of a black business class", Financial Times, 5 November 2003 Back

24   South African Government, Towards ten years of freedom: progress in the first decade, challenges of the second decade, October 2003, www.gov.za Back

25   UNAIDS, Report on the Global HIV/AIDS Epidemic 2002, July 2002 http://www.unaids.org/en/default.asp Back

26   Q 43 [Fraser] Back

27   Ev 114 Back

28   "Pretoria Aids drug decision wins wide approval", Financial Times, 21 November 2003 Back

29   Ev 81 Back

30   Q 230 Back

31   HC Deb, 9 December 2003, col 914 Back

32   Q 230 Back

33   International Development Committee, Third Report of Session 2002-03, The Humanitarian Crisis in Southern Africa, HC 116 Back

34   Q 67 Back

35   Q 228 Back

36   News24.com, 25 November 2003 Back

37   "Mbeki to join land grab club", Sunday Times, 4 January 2004 Back

38   See, for example: "Mbeki can seize white farms", The Times, 31 January 2003. Back

39   See, for example: Ev 135 Back

40   "Namibian Workers To Seize Land From White Farmers", Independent, 6 November 2003  Back

41   Q 109 Back


 
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