Role of the Government
South African economists in the 1980s described the national economy as a free-enterprise system in which the market, not the government, set most wages and prices. The reality was that the government played a major role in almost every facet of the economy, including production, consumption, and regulation. In fact, Soviet economists in the late 1980s notedthat the state-owned portion of South Africa's industrial sector was greater than that in any country outside the communist bloc. The South African government owned and managed almost 40 percent of all wealth-producing assets, including iron and steel works, weapons manufacturing facilities, and energy-producing resources. Government-owned corporations and parastatals were also vital to theservices sector. Marketing boards and tariff regulations intervened to influence consumer prices. Finally, a wide variety of laws governed economic activities at all levels based on race.
The government's main concern since the discovery of gold in 1886 had been balancing the growth of the mining industry against the need to diversify, in order to create sustained development and self-sufficiency.Successive governments had tried to encourage and to support local industries that could reduce imports, provide jobs, and create a multiplier effect by encouraging further industrial growth. Paul Kruger, who had led the Transvaal in the late nineteenth century, had granted monopoly concessions to industrialists; the 1920s governments of Jan C. Smuts and J.B.M. Hertzog had initiated statecorporations, and the post-1948 National Party government had tried industrial decentralization (see Industrialization and Imperialism, 1870-1910; Segregation, 1910-48; and Apartheid, 1948-76, ch. 1).
Even after decades of policy shifts designed to spur development and diversification, however, South Africa's export economy in the 1980s still relied primarily on the gold-mining industry, and the governmentstill protected import-substitution industries in order to keep them in operation. Furthermore, agriculture continued to be an uneven producer and therefore received substantial subsidies and other forms of government assistance. In the late 1980s, the government presented a blueprint for economic policy consistent with this history of economic struggle. Its central economic strategy advocated ashift toward strongly market-oriented policies, but left room for government intervention in response to social and political demands. The strategy increased the emphasis on local industrialization in order to cut imports and to create jobs. The only component of the central economic strategy that was really new was the effort to strengthen export industries, especially to increase value addedthrough local processing of raw materials for export.
In 1994 the new Government of National Unity continued the economic policies of its predecessors, emphasizing a market orientation overall, but allowing government intervention when necessary, and maintaining import-substitution industries while trying to spur industrial development toward exports. International markets increasingly opened toSouth Africa, and trade flourished, especially with the new industrial giants of Asia. Senior government officials tried to downplay the ANC's longstanding commitment to nationalization of key industries in order to gain much-needed foreign investment. It was nonetheless clear that the debate over privatization would continue at least through the rest of the decade.
Twolegislative pillars of apartheid--the Natives Land Act (No. 27) of 1913 (and its amendment in 1936) and the Group Areas Act (No. 41) of 1950--limited African economic and business activities in both rural and urban areas (see The Legislative Implementation of Apartheid, ch. 1). These acts were repealed in 1991, but few blacks could yet afford to move into formerly white areas without financial assistance....