South Africa

South Africa Falters as Unrest Spreads

WSJ,

11 October, 2012

Eighteen years ago, the African National Congress took control from a white-minority government that kept black South Africans down.

Now, ANC President Jacob Zuma leads a black-majority government that has left many black South Africans behind. Black households earn less compared with their white neighbors than they did when apartheid ended in 1994. The gap between rich and poor is wider than when Mr. Zuma took office three years ago. And Mr. Zuma faces mounting opposition as he maneuvers for another term.

Disenchantment with the government has fanned protests across the country. Unrest erupted in August in Marikana, northwest of Johannesburg, where police opened fire on striking workers at a platinum mine owned by Lonmin LMI.LN +1.93% PLC, killing 34 people. It was the most violent clash between police and workers since the end of apartheid.

Two more people died on Thursday after a skirmish outside a platinum mine northwest of Johannesburg, where Anglo American Platinum Ltd. AMS.JO -1.34% fired 12,000 striking workers last week. One worker was set on fire on his way to work early on Thursday morning and burned to death, a police spokesman said. Forty-eight people were arrested after the incident on charges of public violence, and the police opened a murder investigation, he said.

Some of the 12,000 workers laid off by Anglo American Platinum protest their dismissal and the death of a colleague last week.

Also Thursday, talks broke down between unions and South Africa's three top gold producers, leaving production hobbled and some 70,000 workers in limbo. Mr. Zuma told a group of black business leaders that strikes posed serious threats to the country's economy and its ability to attract outside investment.

"We must get the economy back to full steam and create the jobs that our people so desperately need," he said Thursday.

The unrest is exposing a stark reality—South Africa is falling behind, even in Africa. When the ANC took control of South Africa in 1994, its advanced economy and relatively smooth transfer of power stood out. That same year, in Rwanda, some 800,000 people were killed, most of them members of the ethnic Tutsi minority shot or hacked to death by their neighbors, pastors or policemen.

President Paul Kagame, leader of the rebel force that ended the genocide in Rwanda, has presided over a robust economic recovery, though critics accuse him of harassing political opponents. (Mr. Kagame has dismissed those allegations.) The East African country has posted annual economic growth near 8% since 2004, more than double South Africa's 3.7% growth rate during the same period.

Mr. Kagame's government has lowered barriers for investors and aggressively courted international banks, telecoms and hotel chains to set up in the country. South Africa, meanwhile, has tried to block some investments, including Wal-Mart Stores Inc.'s WMT +1.07% ultimately successful bid to enter the country last year.

"Investors from the West…have grown a little bit arrogant," explained Gwede Mantashe, the ANC's secretary-general. "They will come here if they think they can make money. I have no illusions about companies coming here because they love us."

Meanwhile, in Zambia, democratic elections in 1991 led the government to scrap a policy of mine nationalization. Heavyweights including China Nonferrous Metal Mining (Group) Co. Ltd. and Glencore International AG GLEN.LN -0.41% have invested some $8.8 billion in the decade through 2011. By contrast, South Africa is debating nationalization and other ways to intervene in the mining sector, while major mining companies like BHP Billiton Ltd. BHP.AU +0.87% are scaling back investment and selling operations.

It isn't just slower growth rates causing political pain for Mr. Zuma. Brazil's economy has grown around the same pace as South Africa's, but President Luiz Inácio Lula da Silva left office in 2010 with an 80% approval rate because income equality had diminished and 35 million Brazilians had ascended from poverty into a nascent middle class. His successor, Dilma Rousseff, has pledged to pull 16 million more impoverished Brazilians into a better life by the end of her first term.

In South Africa, income inequality has worsened since Mr. Zuma took office in 2009. His approval rating is around 40%.

Some big things have improved in South Africa under the ANC. Nearly all citizens have access to electricity and clean drinking water today, compared with less than two-thirds in 1994. Welfare grants to 15 million poor parents and seniors have cut the proportion of South Africans living on less than $2 a day to 5% from 12% in 1994.

"We have achieved a lot already in only 18 years, which is an indication of further progress to be made," Mr. Zuma said at a local governance conference in September. "This fact gets lost unfortunately in the hurly-burly of competitive politics."

South Africa wasn't fated to struggle. After winning the first-ever free vote in 1994, the ANC took the reins of an economy that boasted Africa's biggest stock market and most advanced infrastructure. President Nelson Mandela instilled a spirit of reconciliation and left the white minority in control of the economy. He used steady economic growth to fund social spending to black villages and townships.

His successor, Thabo Mbeki, cut spending and privatized state enterprises. He also prioritized black ownership and hiring. But he was slow to tackle the HIV-AIDS epidemic that exploded in the 1990s and eventually killed hundreds of thousands of South Africans.

Mr. Zuma has drawn flak for refusing to fire officials for poor performance. An education minister has kept her post despite a failure to deliver textbooks for six months to more than a million students in Limpopo province. Mr. Zuma said he was enlisting a "presidential task team" to explain the mix-up. The minister, Angie Motshekga, said in June that the government's critics were sensationalizing an isolated failure.

"It is not that the Zuma administration is passing bad laws or doing evil things," said Allister Sparks, a South African author and political analyst. "It is that it is doing nothing at all while serious problems compound themselves."

The ANC governs in an awkward coalition with the South African Communist Party and the Congress of South African Trade Unions—even as top ANC leaders have become some of the country's most visible business tycoons.

Moody's Investors Service last month downgraded South Africa's debt one notch to Baa1 from A3, saying the government appeared increasingly unable or unwilling to address labor strife and inequality.

"I don't know how they win back investors' faith in South Africa," Peter Davey, a metals and mining analyst at Standard Bank PLC. "They've almost crushed it."

Mineral Resources Minister Susan Shabangu said in August that her department would undertake a "process of collaboration" with mining companies and South Africans to regain the trust of both investors and workers.

South Africa's union-driven wage hikes have deterred many foreign companies from tapping the vast pool of unskilled labor. At the turn of the century, some of South Africa's best-known companies, such as Anglo American PLC and SABMiller SAB.LN -0.04% PLC, moved their primary exchange listings to London, where it was easier to raise funding. As a result, the country lost tax revenue.

The Marikana miners' strike started as a power struggle between two unions seeking to represent disgruntled workers living in cramped hostels or in shacks without running water or electricity. When the strike started in August, the National Union of mine workers, a political ally of the ANC's, blamed an attempt by its young rival, the Association of Mineworkers and Construction Union, to recruit new members. When it ended the union said mine owners "exploiting" workers were to blame.

"Marikana is just an example of monumental leadership failure," said Mamphela Ramphele, a veteran of the antiapartheid struggle and a former World Bank managing director. Speaking in August in Cape Town, Ms. Ramphele said "the unions, Lonmin, police…and of course the president were all missing in action."

Through his office, Mr. Zuma declined requests to be interviewed. His spokesman, Mac Maharaj, defended the president's actions in the wake of the shooting, including his appointment of a judicial commission to investigate it. "From the time that violence arose the president has been deeply proactive," Mr. Maharaj said.

Born in the rural Zulu heartland to a domestic worker mother and a policeman father who died when he was young, Mr. Zuma melds an easygoing image with the instincts of a veteran politician.

But his populist appeal has been dented by scandals. Corruption charges against him linked to a government arms deal were dropped in 2009, a month before he took office. Mr. Zuma said at the time that the charges were politically motivated. Last October, he fired two ministers amid allegations that they violated ethics codes and misspent public funds.

In December, 3,000 ANC delegates will vote on whether to keep him as their party leader. He needs that mandate to seek a second presidential term in 2014, and support isn't assured. "If we mess up in the ANC, we have messed up for the nation," said Mathews Phosa, the ANC's treasurer general. He said someone was likely to challenge Mr. Zuma, though no candidates have stepped forward.

The ANC-led government hasn't gone far enough in addressing unemployment and income inequality, Mr. Maharaj, the president's spokesman, acknowledged. But he defended what he described as Mr. Zuma's collaborative approach to policy-making.

"It may appear to some as too slow, it may be described as indecisive," Mr. Maharaj said. "But the fact is, carving a path forward by talking between labor, business, communities and government is one of the most delicate political acts."

Meanwhile, Mr. Zuma's allies in the ANC have sought to whip up support for the embattled president. In May, thousands of protesters filled the streets of Johannesburg to demand a local art gallery remove a painting that depicted the president with his genitals exposed.

"This government appears to be mostly using its forces to stay in power rather than to create a vision for South Africa," said Greg Mills, director of the Brenthurst Foundation, a Johannesburg think tank.

Mr. Maharaj said it was inevitable that the government be "bedeviled with accusations that the incumbent government is neglecting urgent tasks" as the ANC leadership conference approaches. He said, "I think there is no evidence that President Zuma has at all slowed from attending to all those tasks at the community level, in the country, as well as in Africa and the world global economy."

Mr. Zuma's travails deepened after the police opened fire on miners at Marikana. That day, Mr. Zuma announced he would rush home from a political summit in neighboring Mozambique to deal with the crisis, but didn't arrive for another 24 hours, when it was too dark to visit the site of the shooting. He didn't speak to the protesters for another five days.

"President Zuma didn't come to hear us and what we want soon enough," said Siyamcela Male, a 26-year-old Lonmin miner. "The ANC doesn't want to help us. They want our vote and then they disappear."

Mr. Maharaj said criticism about the timing of the president's visit was misplaced, and "doesn't help to find a way forward, it only looks back over one shoulder."

Still, Mr. Zuma's critics made the most of his response. Among Mr. Zuma's fiercest critics is Julius Malema, a youth leader who was expelled from the ANC earlier this year for sowing divisions in South Africa's ruling party. Prosecutors recently charged Mr. Malema with money laundering. He was also hit with a nearly $2 million bill in unpaid taxes by the revenue service. Mr. Malema appeared in court recently but didn't enter a plea for the money-laundering charge. Outside of court, he said that he has done nothing wrong and that the accusations were politically motivated.

Mr. Malema was the first top politician to visit the striking miners after the shooting. "Many are afraid to come close to you, especially those you elected," said Mr. Malema.

Mr. Zuma arrived at the scene four days later. Shielded from the sun by aides holding broad umbrellas, he apologized for coming late. He said he needed to meet with mine executives and police before hearing the workers' side of the story.