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South Africa

 
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South Africa

Postapartheid Reconstruction

As the African National Congress (ANC) shifted away from its liberation agenda toward a leadership role in government in the early 1990s, ANC economists, together with government and private-sector consultants, developed a blueprint for development in the late 1990s. This Reconstruction and Development Programme (RDP) analyzed nationwide living standards and proposed ways to improve government services and basic living conditions for the poor. The RDP detailed the extreme poverty of at least 17 millio n citizens who were living below internationally accepted minimum standards. The report estimated that 4.3 million families were without adequate housing, and some 12 million people lacked access to clean drinking water. Most homes, and many schools and h ospitals, lacked electricity. An estimated 4.6 million adults were illiterate.

In May 1994, the new government adopted the RDP as the centerpiece of its economic policy, although President Nelson (Rolihlahla) Mandela was quick to reassure potential investors and donors that his government's social programs would be financed larg ely through cuts in existing government spending. He pledged that his government would avoid both dramatic increases in taxes and large-scale deficit spending to implement the much-needed welfare improvements.

The RDP envisioned sweeping government programs to raise living standards--to build houses and roads, to provide services, to upgrade education, and to create jobs to narrow the gap between rich and poor. By late 1994, the government had begun to impl ement its highest RDP priorities: a US$135 million school lunch program; a US$14 million program of free medical care for children and pregnant women; providing water and electricity to rural communities; and phasing in free, compulsory primary education for children of all races.

Government officials and ANC economists in the National Institute for Economic Policy estimated that RDP expenditures in fiscal year (FY--see Glossary) 1994-95 would amount to 2.5 billion rands (R; for value of the rand--see Glossary), or about 7 perc ent of government spending. They also estimated that RDP expenditures would double in FY 1995-96 and would increase by about R2.5 billion each year after that, to R12.5 billion--probably more than 25 percent of government spending--in FY 1998-99. The Deve lopment Bank of Southern Africa estimated costs approaching US$30 billion--US$19 billion in capital expenditures and US$11 billion in recurrent expenditures--by 1999. Government officials insisted that they would rely on increased trade and overall econom ic growth, as well as on international assistance and private-sector donations, for most of the additional revenue, and that reconstruction would be aided by a one-time, 5 percent levy on individuals and companies with taxable incomes of more than R50,000 . They also predicted that the government would save money by increasing efficiency (in particular by eliminating the redundancy that had been necessary to provide services to separate racial groups under apartheid) and by reducing military expenditures.< /p>

To help finance the RDP, the government also undertook negotiations to sell some national assets to private citizens, despite the ANC's earlier opposition to privatization. Senior government officials, including the president, accepted salary cuts of between 10 percent and 20 percent to contribute to social reconstruction. President Mandela also asked for concrete proposals and contributions from the business community--such as on-the-job training and employer subsidies of housing, transportation, and education--to meet the urgent needs defined in the RDP.

The new government launched worldwide appeals for new trade and investment packages for South Africa, as it tried to overcome more than a decade of international isolation. South Africa began reentering world financial markets, establishing new tradin g partners, and expanding formerly clandestine trade ties that had long existed with many countries. International donors and investors responded cautiously at first, in part because of the continuing high levels of urban and township violence.

After mid-1994 immigrants from other African countries arrived in large numbers--a total of perhaps a million in that year alone, according to some estimates--seeking jobs in postapartheid South Africa. Poorer neighboring states also intensified their requests for assistance from Pretoria, hoping South Africa's economic revival would increase output and trade throughout the region and that South Africa would become the region's new "engine of development."

Structure of the Economy

Data as of May 1996

South Africa - TABLE OF CONTENTS

  • The Economy

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