The falling value of gold
South Africa has still not escaped the torments of volatility. It periodically hits economic growth, business confidence, the gold price - even the weather. But since the first democratic elections of April 1994, the troughs have been neither as deep nor as sustained. When the economy loses pace, as it did earlier this year, it no longer drops into negative growth. And periods of slower growth seem to be far shorter than they were in the dying days of apartheid. But there is still a rapid ebb and flow of confidence. Regularly, as confidence seems to be picking up, there's another blow to the economy. The most recent and the most serious was a drop of almost 30% in the gold price, putting the jobs of thousands of miners at risk and savaging export earnings.
There are a number of reasons for the waves of good news-bad news. These include the wide economic and political differences that still dominate daily life; the continued failure to develop a broadly based economy, with mining, particularly gold, and agriculture maintaining their dominance; and the fact that the government is struggling with comparatively limited resources to get rid of structural problems inherited from the apartheid regime.
South Africans have little control over some of the factors that impinge on this distorted economic and political structure - for example, the gold price or the market attack on the currency last year when it lost 25% of its value against those of major trading partners. The latter, though, at least reflected perceptions of government shortcomings - foreign investors simply did not believe that the administration dominated by the African National Congress (ANC), devoid of any detailed economic plan, would meet its commitments to reduce the budget deficit and the national debt. In other areas where South Africans ostensibly do have total control they have often been found lacking in commitment to deal with problems. The most significant of these has been the wave of violent crime since the 1994 elections.
Crime has become a dominant feature of daily life, with criminals respecting no-one - even the homes of politicians are not inviolate. Stephen Koseff, chief executive of Investec Bank, considers crime to be the top problem that must be resolved if the economy is to move ahead. He is particularly concerned about the way crime is pushing up emigration levels, with some of the best brains and many recent graduates leaving the country.
The problem has been exacerbated by the difficulty of adapting an undertrained, underpaid, under-resourced police force, which under apartheid rode roughshod over civil liberties, to a democratic South Africa; high levels of unemployment; and masses of unlicensed weaponry easily and cheaply available as a result of the armed struggle at home and civil strife in neighbouring countries.
Public anger at the crime wave and a recognition of the harm it is doing to the economy have forced the government to focus attention on the problem. Although there are some signs that the wave has peaked and that the police may be starting to win the war, crime features prominently in many company annual reports, particularly those of retail banks that have been the victims of recurrent violent robberies. Dave Brink, chairman of business umbrella grouping Business South Africa and of the country's largest bank group, Absa, said in the bank's recently published annual report: "We remain unconvinced that enough is being done to bring to book and incarcerate those criminals who endanger the lives of our staff, customers and general public ... mere statements of intentions and one-off crackdowns announced from time to time will not suffice."
The other major problem cited by business as a significant stumbling block to economic development is differences between business and organized labour, with the government in an uneasy position in between. The fact that the ANC is politically allied with the largest trade union federation, Cosatu, has by no means guaranteed that government and unions will ally against business.
Government has, however, made job creation an economic priority and it is included in its Growth, Employment and Redistribution (Gear) macroeconomic strategy unveiled last year. Business endorsed much of the plan but Cosatu's response has fluctuated between lukewarm support and an openly critical view that the strategy is failing ordinary South Africans.
Business pressure groups say organized labour's demands for higher wages and shorter working hours are unreasonable and make it impossible for the formal business sector, especially small businesses, to create jobs.
The governor of the Reserve Bank of South Africa, Chris Stals, has recently entered the debate, warning of the serious consequences of high wage demands for the economy. Investec's Koseff says lack of labour flexibility is retarding the development of small and medium enterprises - "the real place where we will create employment". A consequence of the lack of flexibility, argues Koseff, is that small businesses cannot afford to create jobs as they are being forced to meet onerous levels of good employment practice and minimum-wage structures. "There is a need for a fundamental change in the thinking of unions and policymakers if we are to create jobs," he says.
Nico Czypionka, chief economist of Standard Bank Group, argues that South Africa has to go for the east Asian option if jobs are to be created. This requires low-wage employment for the unskilled together with high-wage employment for the skilled. This, Czypionka reckons, is the only way to attract foreign capital while simultaneously creating additional jobs. Unless this is done, foreign investors will prefer areas where labour is cheaper and more skilled.
Czypionka says Gear implies a smaller job market in the short term but an increase in employment in the longer term because structural adjustments will foster growth. However, this view does not seem to be accepted by either the trade unions or government. Czypionka, along with many other researchers, does not accept estimated unemployment figures. He says the figures are overstated both at the top and the bottom end of the market. At both ends, he argues, many are self-employed. Moreover, many employers avoid taking on full-time staff because of the restrictions of labour legislation and what is perceived to be the negative attitude of organized labour.