Thursday, November 27, 2008

Today in the World: South Africa

South Africa will continue to manage its economy with restraint after next year's elections, despite pressure from leftist allies seeking to adopt more expansionary policies, ruling ANC leader Jacob Zuma said.

Zuma, who is likely to become president after the elections, told the American Chamber of Business late on Wednesday that the government would maintain the policies that had spurred a decade of strong growth and prepared the country well for the choppy economic waters ahead.

"We are proud of the fiscal discipline, sound macro-economic management and general manner in which the economy has been managed. That calls for continuity," he said in a copy of his speech. -Reuters

Why should you care about that? There are important divisions in the ANC, which is normal considering it was an umbrella organisation whose sole purpose had been to end the Apartheid and full equality for blacks. Divisions on other subjects did not matter when they were out of power, but ever since 1994 they have been the ruling party they have taken a growing importance. Mandela and his successor Mbeki decided to run South Africa in a pragmatic and business friendly way which did not please the leftists and the communists inside the party. They have managed to achieve good economic growth, but poverty remains rampant. The left wing and the communist in the party did not leave it to form another party, they stuck around and complained bitterly.

Zuma associated himself with this wing of the party, who successfully forced Mbeki to resign recently. There will be elections in 2009 and Zuma is widely expected to win. But after Mbeki resigned there was a split in the ANC with pro-Mbeki ministers defecting to form a new party. There was fear that the whole Mbeki faction and all the business interests that supports it would follow the split group, who is supposed to meet in a Congress in December. In this case it could have forced the first real electoral battle in South Africa since the end of Apartheid. But Zuma just said clearly that he will not change the way the economy is managed. Everything will stay the same. The odds are, the business community will stick with the ANC and support Zuma after what he has said.

The ones who seems to be the losers here are the leftist groups and the communists inside the ANC; they fought tooths and nails internally for years to have their voice heard and they managed to force Mbeki to resign through some internal infighting. The goal was supposed to put a lefties-friendly Zuma in power and instead they got a business-friendly Zuma. They will not be happy.

But it has to be said, the economy under Mbeki and Mandela has been doing quite good with solid growth, and it seems strong enough to withstand the current international crisis without too much problems. And the economic growth has not benefited only the very wealthy, it has created a brand new black middle class. But of course, wealth does not appears overnight and there is still widespread poverty left. Growth takes times, just look at China: even with 10% growth for decades it is still mostly poor even though it appears to be on the way to go the Taiwan/South Korea/Malaysia route in 2-3 decades.

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