The Shackled Continent

by Robert Guest

  The only surprising thing about this is that everyone was so surprised. Businesses that insult their customers tend to go bust. South Africa’s former white rulers always assumed that capitalists would be slow to discriminate if it hurt profits, which is why they passed so many laws to force them. The Mines and Works Amendment Act of 1926, for instance, which barred blacks from most well-paid positions, was passed because white labor unions appealed to the government to stop firms hiring blacks. Entrepreneurs – even racist ones – objected to “job reservation” because it affected their bottom line. Racist laws forced them to overpay their white employees, to forgo the benefit of black skills, and to suffer volcanic labor relations.

  Apartheid, and the sanctions that it provoked, made the South African economy stagnate. As Themba Sono, professor of business studies at the University of Pretoria, put it:

  [V]ery few South Africans realise just how badly the [apartheid] government impoverished the entire nation. The per capita income of black Americans, for instance, is higher than that of white South Africans, and the descendants of the Dutch and French who settled in South Africa are much poorer on average than those who stayed behind in Europe. A measure of the damage [apartheid] did can be obtained from a comparison with Japan, which had approximately the same per capita GDP fifty years ago. Today, South Africa’s per capita GDP is only 20 per cent of Japan’s.31

  As apartheid rules became progressively harder to enforce, black incomes began to catch up with white ones. Between 1975 and 1990, average real black earnings in manufacturing rose by almost 50 percent. For whites, the figure was only 1 percent. On the one hand, the government and white labor unions were struggling to preserve the gap between black and white wages. On the other hand, black labor unions and market forces were working to narrow them. White unions insisted that white workers should be paid much more than blacks, irrespective of how much they produced. But employers objected. When a job could be done equally well by a black employee, it made no sense to pay extra to have it done by a white one.

  Winners and losers

  Whites will probably cope in the new South Africa. They may be politically powerless, but they have money and skills. Those who are unsatisfied can emigrate, as many have, to Europe or Australia. For those who stay behind, legally mandated discrimination will provide an incentive to acquire marketable skills.

  Under apartheid, many young whites studied politics or public administration at university and aspired to careers in government. In the new South Africa, they are more likely to study accounting or computing and to go into business or set themselves up as consultants. Unskilled whites will suffer. But most whites will succeed in making themselves commercially indispensable. In the long run, this will probably make them richer. Civil servants’ salaries are generally lower than those paid by software firms.

  Something similar happened in India, when the reservation of a large proportion of government jobs for the formerly “untouchable” caste prompted other castes to quit the civil service, go into business, and end up wealthier than before. In several countries commercially astute minorities have prospered despite laws that discriminated against them. Jews in medieval Europe were barred from many trades and often confined to ghettos but still ended up banking for kings. Countries such as Indonesia and Malaysia still maintain laws that discriminate against ethnic Chinese citizens, but the Chinese are richer than the locals. The future for white South Africans may be similar: politically impotent, often unpopular, but rich.

  Affirmative action is portrayed as a means of helping the poor. But the beneficiaries are mainly middle class, which is to say, those who have already largely overcome the legacy of past discrimination. It is the best-educated blacks who are accelerated into managerial jobs. The poor lose, in two ways. First, they receive worse public services than they otherwise would. Second, affirmative action retards economic growth and so makes it harder for the jobless to find work. This is hugely important: in 2001, South African unemployment stood at 31 percent or 43 percent, depending on whether you count those who have given up looking for non-existent jobs.32

  As in other countries where corrective discrimination is allowed, it is implemented much more aggressively in the civil service than in private companies. This is because government has no competitors, so political objectives often outweigh practical ones. If a private firm offers shoddier or more expensive goods than its rivals, customers will flee. The civil service, by contrast, is only indirectly accountable. The public can vote once every five years for a change of government, but that is about it. So bureaucrats find it easier to recruit by race than do firms that have to make a profit to survive.

  In the new South Africa, most poor people, who are mainly black, receive much better public services than they did under apartheid. Whereas the old regime spent little money in black areas, the ANC has tried hard to bring piped water, roads, and electricity to the poor.33 But the government could have provided more of these good things if it had been color-blind.

  All firms bidding for public works contracts are required to have black partners or managers. Firms deemed “blacker” than their rivals are allowed to charge up to about 10 percent more and still win the contract. This is wonderful for blacks who own construction companies. But since the government is paying more than it needs to, the poor receive fewer houses, water pumps, and village roads than they should. In effect, “affirmative procurement” is a transfer of wealth from the poor to the well-off.

  It can also provide a convenient cover for corruption. ANC officials can award contracts to their friends and justify it by pointing out that these friends are black. Many seem wholly unembarrassed at such apparent conflicts of interest. Several retired ANC politicians have made fortunes by exploiting their contacts. Because most of the poor are black, the government treats blackness as a proxy for poverty and argues that anyone black is in need of a leg-up. But the beneficiaries of this largesse are often millionaires.

  In the private sector, affirmative action is less enthusiastically pursued. But because firms have to be seen to comply with the law, it is still a hefty burden. Time and effort devoted to meeting racial quotas cannot be spent improving products. Hiring on grounds other than merit is unlikely to foster excellence. The rest of the world will not buy an inferior South African product simply to assist in “transformation.” Nor will many South Africans.

  Economic growth in South Africa has been further hindered by delays in privatization. The ANC is torn. On the one hand, selling the state-owned power, telephone, and transport companies would bring much-needed foreign investment and skills. If more competition were allowed in these markets, power and bandwidth prices would fall, benefiting everyone and making South Africa an easier place to do business. This is why, in 1997, the government sold a 30 percent stake in Telkom, the telephone firm, to an American-Malaysian consortium and has promised gradual deregulation.34

  But at the same time the ANC knows that if big companies remain publicly owned, they can more easily be used for political ends. State-owned firms take their orders from politicians and so work harder to promote blacks and to roll out services to poor and rural areas. The government hesitates to abandon such important levers of control.

  Similar reasoning causes the government to give away licenses to use limited public resources. The supply of fish in South African waters, for example, is finite, so fishing boats are not allowed to catch more than their quota. These quotas could be auctioned, which would be easy to administer and raise large sums of money. But the government fears that black firms, which tend to have shallow pockets, would be outbid. So it apportions quotas to the firms it considers the most deserving. The process is slow, raises no money, and is open to corruption. It is applied to mobile telephone licenses, too. In 2001, after a long delay, the government gave away the country’s third such license to a partly black-owned firm of questionable competence. The license could probably have been auctioned to a world-class firm for about $200 mi
llion: enough to build 100,000 houses for the poor.

  South Africa’s ethnic problems are nowhere near as grave as Rwanda’s, and affirmative action has not crippled or corrupted its civil service to anything like the same degree as it has Nigeria’s. The example of Malaysia shows that it is possible to combine laws that discriminate in favor of a racial majority (albeit less extreme laws than South Africa’s) with rapid economic growth. But South Africa’s neighbor, Zimbabwe, shows that such laws can become little more than a cloak for the award of contracts and licenses to cronies of the ruling party. And there is little evidence from anywhere that corrective discrimination improves the lives of more than a small minority. This improvement, moreover, usually comes at a heavy cost in lost growth and increased racial tension. It goes without saying that those who are discriminated against resent it.

  I once asked President Mbeki how long he expected affirmative action laws to remain on the books. He predicted that they would eventually “fall into disuse” when they were no longer needed. Asked to name another country where this had occurred, he could not. This is not surprising. Affirmative action has been pushed back a pace or two in the United States but only after determined legal action by its opponents. In other countries with similar laws, such as India and Sri Lanka, these laws have tended to multiply and expand in scope.

  Judge a man by the content of his character

  Tribal passions are not, in themselves, a bad thing. Most people love not only their country but the town they grew up in and the people and the food and the songs they grew up with. Tribal loyalty is not so very different from family loyalty, from the admirable urges that impel so many Africans to feed and shelter orphaned nieces and cousins.

  Governments, however, are supposed to represent the entire population of the country they rule. To favor one tribe over another instantly violates that ideal. Since governments are so powerful, groups seek their favors avidly and grow angry if rebuffed. Few people care that the owner of the Chinese restaurant on the corner employs only his cousins. (And nor should they: family businesses are often wonderfully efficient.) But members of virtually every African tribe seethe that their neighbors have grabbed a bigger plateful of the public pie. Tribal politics lead to ethnic tension, inefficient government, and slower wealth creation, as in South Africa, or worse, as in Rwanda.

  The only sensible solution is a separation of tribe and state, much as faith and state are formally separated in America. Governments should not discriminate on grounds of ethnicity, period. Civil servants should be recruited on merit alone. State contracts should be awarded to the bidders who offer the best value for money. Aid to the poor should go to the poor, not to rich members of ethnic groups that are, on average, poor. As for private companies, it is none of the state’s business whom they hire. Workers and employers enter into contracts if both parties think they will benefit. Such voluntary agreements tend to increase the sum of human happiness, and governments should not forbid them.

  This may seem hopelessly idealistic. Many of the world’s most powerful interest groups passionately oppose the idea of equality before the law. But all the alternatives are worse.

  In Africa, the country that has come closest to separating tribe and state is Tanzania, which is home to 120 ethnic groups, each with distinct and sometimes mutually incomprehensible cultures. Yet in the decades since independence the country has suffered almost no communal bloodshed. This achievement is marred somewhat by occasional spats in Zanzibar, a semi-autonomous island off the Tanzanian coast. But only somewhat. The reason so many people like Nestor Nebigira, the Burundian refugee I mentioned at the beginning of this chapter, find sanctuary in Tanzania is that the place is more peaceful than any of its neighbors.

  The first president, Julius Nyerere, despite his woeful economic policies, showed unusual wisdom in tribal matters. He recognized that ethnic politics could tear the country apart. While other African leaders stirred tribal rivalries to keep themselves in power, Nyerere sought to soothe them instead. He imposed a single official language, kiSwahili, and urged every Tanzanian to learn it so that they could talk to each other. He banned ethnically divisive talk from politics.

  It was a great success, with one caveat. Nyerere had the power to ban tribalism at least partly because his regime was thoroughly undemocratic. With only one party allowed, there was no incentive for politicians to try to win votes by appealing to voters’ tribal prejudices. Some argue that multiparty politics in Africa inevitably leads to ethnic politics. Yoweri Museveni, president of Uganda since 1986, has effectively banned political parties for precisely this reason, although he started to talk about lifting that ban in 2003.

  Many African politicians find it hard to imagine a political contest based on class interests or ideas rather than tribal horse-trading. This is not always their fault. Often they behave this way because that is what their supporters demand.

  Writing about Zambia, Patrick Chabal and Jean-Pascal Daloz, two European academics, argue that patron–client links, usually ethnically based, are the “fundamental” determinant of how people vote. “The populace expects to exchange political support for concrete help: that is the only way in which politics makes sense to them.… The understanding of the concept of citizenship and of the purpose of the individual vote remains indelibly linked to the anticipation of the direct communal (or even personal) benefit which elections offer.… This is also the view at the top. A Zambian minister was quoted as saying: ‘If I don’t appoint people from my own region, who else will?’ ”35

  Such expectations can create a vicious circle. When voters assume that politics is a struggle between ethnic groups for the spoils of government, they tend to vote along ethnic lines and especially for candidates perceived to be good at grabbing and distributing those spoils. The more such candidates win power, the more tribal politics becomes, and the greater the incentive voters have to keep voting tribally. Breaking free of this cycle will be extremely hard.

  That said, as African democracies mature it may grow easier for tribal disputes to be solved, if not amicably, at least according to laws that everyone respects. A recent worldwide study found that ethnic diversity reduced annual economic growth by a shocking 3 percent in undemocratic states but made no difference in democracies. One reason may be that people have fewer grievances in liberal democratic states than in tyrannous ones. If they do not feel oppressed, they are unlikely to blame the tribe next door for their oppression.36 Power should also be decentralized rather than concentrated in the hands of an overweening presidency, as is the case in most African countries today. If regions are self-governing and self-financing, they will have only themselves to blame if things do not go well.

  There are no multi-ethnic African states where multiparty politics are wholly unsullied by tribalism. But there are reasons for hoping that ethnic hatred need not hold the continent back forever. Tanzania became a multiparty democracy in 1995, and inter-tribal relations remain largely cordial. So it can be done.

  At his trial in 1964, Nelson Mandela gave a rousing speech from the dock. He declared: “During my lifetime, I have dedicated myself to [the] struggle of the African people. I have fought against white domination, and I have fought against black domination. I have cherished the ideal of a democratic and free society in which all persons live together in harmony and with equal opportunities. It is an ideal which I hope to live for and to achieve. But if needs be, it is an ideal for which I am prepared to die.”37

  Wise words, little heeded.

  6. FAIR AID, FREE TRADE

  Why aid fails, and how it could work

  Somalia has no government, unless you count a “transitional” one that controls a few streets in the capital, Mogadishu, and a short stretch of coastline. The rest of the country is divided into warring fiefdoms. Warlords extract protection money from anyone who has money to extract. Clans, sub-clans, and sub-sub-clans pursue bloody vendettas against each other, often fighting over grudges that pre-date the colonia
l period. Few children learn to read, but practically all self-respecting young men carry submachine-guns.

  I was at one of the country’s countless road blocks, on a sandy road outside Baidoa, a southern town of shell-blasted stone walls and sandy streets. The local warlord’s men were waving their Kalashnikovs at approaching trucks, forcing them to stop. Many of the trucks carried passengers perched atop the cargoes of logs or oil drums. The men with guns then ordered all the children under five to dismount and herded them into the shade of a nearby tree. There, they handed them over to strangers with clipboards, who squeezed open their mouths and fed each one a single drop of polio vaccine.

  This was foreign aid at its most heroic. The World Health Organization (WHO) is trying to eradicate polio. It’s a foul disease that paralyzes small children and sometimes kills them by causing their lungs to seize up, but it’s vaccine-preventable. As recently as 1988, it afflicted an estimated 350,000 people, but since then, under the WHO’s auspices, over 2 billion children have been vaccinated. In 2001, there were only 537 reported cases of polio, and the true total was thought to be no more than twice that.

  Polio could be completely eliminated, like smallpox was in 1979. The wild polio virus cannot survive long outside its human host, so if enough people are vaccinated, it has nowhere left to hide. But it is holding out in places like Somalia: poor, often violent countries, where local health services are too dysfunctional to organize proper vaccination campaigns. This is where foreign aid workers come in.