REPORT ON THE SOUTH AFRICAN ECONOMY

Contents: Outline of the Problems • MINING • MANUFACTURING: In manufacturing there are two problems • 1. INWARD DEVELOPMENT and INTERNAL POLICIES • a. GOVERNMENT • b. INFLATION • C. SAVINGS • D. MANUFACTURING • 2. OUTWARD REDEVELOPMENT: MANUFACTURING • A. THE PROBLEM OF MARKET SIZE • B. MAKING BUSINESS COMPETITIVE • C. SEEKING LABOR INTENSIVE PRODUCT • HOUSING • The report says the South African economy has been distorted by the development of what looks like a first world economy in a country where 85% of the population is black and, of that group, half are illiterate. Since the Second World War, this economy was based on mining to produce most of its foreign exchange and on manufacturing of consumer goods for local use (i.e., import substitution). The foreign exchange is used to buy foreign capital goods (e.g. machinery) as well as components for manufacturing (e.g. auto engines) and goods not produced in the country (e.g. computers). Production of up-scale consumer goods for sale to the predominantly white market is too small to be efficient; this part of the manufacturing sector must either contract or become more efficient and seek foreign markets. Poor education for blacks and low pay have kept 60% of Africans illiterate and prepared for only for menial jobs as domestics or unskilled labor in industry and mining. The report says housing is an imperative need for black people in South Africa. Until recently, housing was provided in segregated townships by government authorities to whom residents paid rent. Essentially no new housing has been provided since 1985, while ending of the pass laws has permitted workers to bring their families from the homelands into where they work and has permitted the unemployed to migrate. Thus, informal settlements of shacks with poor or non-existent water and sewerage facilities have sprung up in back yards of the formal housing areas and on the edges of townships. The national government insists that African townships must be self-sufficient, but they are essentially bedroom communities with no commerce or industry to support their infrastructure. Therefore, while rents in townships are low, costs of services such as water, sewer, refuse removal and rain water drainage are high and some services are non-existent. The Urban Foundation and Planact urge that townships be consolidated into the larger regional governments, using the common overall tax base to support infrastructure and thereby equalize rates. The report discusses gold and coal mining, labor costs, black labor unions, capital-intensive and labor-intensive industries, the informal sector, Stephen Gelb, the Economic Trends Group of the Congress of South African Trade Unions (COSATU), income and VAT taxes, privatization of some parastatals (state-owned companies), less developed countries (LDCs), the Johannesburg stock market, newly industrialized countries (NICs), the ANC (African National Congress), electric utilities, transport, Azar Jammine, David Porteous, Pieter le Roux, South African Reserve Bank, Zach de Beer, the government-financed Independent Development Trust (IDT), the Association of Mortgage Lenders, the short-term insurance industry, the Perm, Etwatwa, Hilary Sapire, The Innes Labour Brief, The Soweto Rent Boycott, Dennis Creighton, Gil Wellbeloved, Ann Bernstein, Willy Thomas, exports, homelands, external financing, and National Investment Corp.