Remembering Nelson Mandela's Unsung Economic Legacy

Nelson Mandela, who died Thursday at age 95, was the most important leader in South Africa’s history and one of the global giants of his time. What people often overlook, however, is the role Mandela played in building up Africa’s largest economy. Nearly as consequential as Mandela’s moral example was his skill in managing the transition from apartheid without widespread violence, repression, or economic collapse.

Mandela believed strongly in the link between economic and political progress. Soon after his release from prison, Mandela argued that there must be “a fundamental restructuring of our political and economic systems to ensure that the inequalities of apartheid are addressed.” At the core of white minority rule had been the “homelands”: a system that kept almost half of South Africa’s population confined to semi-independent or supposedly sovereign states without the freedom to move or look for jobs in the rest of the country. The collapse of apartheid meant the end of those restrictions. The myriad legal restraints that prevented blacks and “coloreds” from gaining promotions—or access to jobs at all—were removed as well. From a state made up of 11 “countries” and three legally distinct racial groups—all with markedly different rights to move, work, and invest—South Africa became one economy. Think of it as opening borders to mass migration under the worst possible circumstances.

The dismantling of the homeland system, however, was by no means a certainty in the early days of Mandela’s presidency. The supposedly “sovereign” homeland of Bophuthatswana, home to 2.5 million, and semi-autonomous Kwazulu both threatened civil war over the dismantling of the homelands. Relations between the African National Congress and the Zulu Inkatha Freedom party have remained tense—and sporadically violent—since the end of apartheid. But national unity and economic stability were both preserved largely through negotiation and compromise.

South Africa’s gross domestic product growth rate, meanwhile, picked up considerably under Mandela. Economic growth rose from less than 1.5 percent from 1980 to 1994 to slightly under 3 percent from 1995 to 2003. Despite the sudden influx of internal migrants with the legal right to compete equally for jobs, average personal incomes for white South Africans increased by 62 percent from 1993 to 2008, according to University of Cape Town economist Murray Leibbrandt. Average incomes for Africans themselves increased even faster—by 93 percent over that period.

As educational opportunities expanded, secondary enrollment rates increased from 50 percent to 70 percent from 1994 to 2005. The government also rolled out a range of infrastructure services: The proportion of the country that cooked using electricity from the mains climbed from 45 percent in 1993 to 73 percent by 2011, for example.

South Africa has become an increasingly important source of economic opportunity for its neighbors. South African investment accounts for around 70 percent of intra-regional investment flows. Imports from the Southern Africa Development Community—the regional trade block which South Africa joined upon its independence—climbed from $16.3 billion in 1993 to $68.7 billion in 2006. The number of migrants in South Africa—nearly all from other countries in the region—increased from 3.3 percent to 3.7 percent of the population between 1990 and 2010. There are now approximately 3.3 million SADC nationals living in South Africa; remittances from those migrants back to their home countries amount to close on $1 billion a year, according to South Africa’s FinMark Trust. The trust reports a 2005 survey of Zimbabwean remittance recipients in which more than half of respondents “agreed that they would have grown sick with hunger” in the absence of remittance payments.

Some tragic mistakes were made by President Mandela and his successors. The HIV/AIDS crisis and the government’s late and sporadic response to it shaved years off life expectancy. In 1993 4 percent of pregnant women in the country were HIV-positive. That climbed to 28 percent 10 years later, before finally leveling out. Today, a little more than one in 10 of the population is HIV-positive. Unemployment has remained stubbornly high—around 25 percent—and the gap between rich and poor is still wide. In 1993, the average white had an income more than nine times the average African. By 2008 that had dropped—but only to a little less than an eightfold income gap according to analysis by Leibbrandt.

Progress against poverty was even slower than these figures might suggest. That’s because inequality within the African population grew rapidly for the first decade of independence—a trend arrested only by the rapid expansion of social safety net programs in the last few years. (About 30 percent of South Africans benefited from social grants in 2010—up from 13 percent in 2002). Poverty in South Africa remains almost uniquely an African phenomenon. All but six percent of whites have piped water in their homes, for example, while two-thirds of Africans lacked access to it.

It’s worth considering the alternatives. At independence, South Africans looked north to Zimbabwe as a reasonably successful model of how things could work out after a difficult transition to majority rule. They’re extremely lucky that South Africa, under Mandela’s guidance, took a different path. Starting in the 1990s, Zimbabwe President Robert Mugabe ordered land “reforms” that took property from white farmers and awarded it to his cronies and henchmen, slashing output as a result. By the turn of the century, Zimbabwe’s inflation rate was heading over 100 percent; by 2006 it would top 1,000 percent. Zimbabwe’s economy remains in a state of punch-drunk torpor.

Some may be disappointed that Mandela failed to create an African lion to challenge the East Asian tigers in terms of growth and poverty reduction. But the nonviolent absorption of a considerable majority of the population into an economy from which they had previously been excluded, all while incomes and access to services improved and civil rights were respected, was an incredible accomplishment—one that owes much to Mandela’s leadership. Let’s hope his successors preserve that legacy.