South Africa's Current Political System - Research Paper Example

?Introduction International business is inspired by the existence of opportunities in other parts of the world. This is because most businesses expand to nations and economies that hold more potential and better chances for profitability and growth. The growth in globalisation and international expansion of businesses from the developed world to some attractive markets has led to the identification of what has become known as “Rapid Developing Economies” or “Emerging Economies”. Mahadevan describes Rapidly Developing Economies as nations with widespread industrialisation, stable currency, rule of law, capital controls, steady GDP growth (4% - 9% per annum on a consistent basis) and adequate technological infrastructure (2007). This paper will undertake the critique of one Emerging Economy, South Africa. In doing this, the writer will explore the political, economic and technological factors that make South Africa an emerging economic giant. The paper will go further to make recommendations on future strategic directions that can be taken by South Africa to sustain economic growth. Political Factors South Africa's current political system indicates that it is a multi-cultural and multi-racial society that accommodates people of all diverse backgrounds (Deverish, 1998). In order to understand the relationship between South Africa's diversity and its contribution to the nation's position as an emerging economy, it is worthy to look into the political history of the country and how it links up to South Africa's current position in the past 15 or so years. South Africa has had five different constitutions since 1910 (Klug, 2010). This can be traced to the 1902 Boer War between the British settlers and other European settlers of Dutch origins [Afrikaners] (Klug, 2010). Although Black South Africans fought in the Boer War, they were excluded from the negotiations that came up afterwards and this led to the creation of a constitution that guaranteed rights to the British and Afrikaners. Later on, laws that segregated the White minority [of about 10%] and the Black African majority known as Apartheid led to a system where Blacks were kept as a servant caste in the nation (Segal and Cortm 2011). Apartheid led to a situation where the Whites with links to European nations and the United States, used laws to promote a capitalist idea of industrial growth, mining booms and agricultural productivity (Lowenberg and Kaempfer, 1998). This caused South Africa's economy to boom in the period between 1948 and 1994 when Apartheid was entrenched in the society. The link between the White minority and the developed world led to the investment of Western capital into the economy. This also allowed South Africa to export and make a lot of money and build strong world-class infrastructure (Feinstein, 2005). However, the downside of this situation was that it led to a huge disparity between the rich White minority and the extremely poor and deprived Black minority. Due to this, South Africa's political system went through a lot of sanctions in the 1970s and 1980s which led to the further isolation of the country. However, the legacy that Apartheid left, in terms of advanced political and economic systems as well as advanced infrastructure set South Africa apart from the rest of the African continent. The 1994 constitution which effectively ended Apartheid guaranteed equal rights to all and now, in the political arena, South Africa has a stable and a reliable government that was inherited from the world-class Apartheid regime. This makes South Africa a relatively more reliable place to conduct business in the Southern continents. In South Africa today, the country is ran by a constitution that respects equality as well as freedom of business, rule of law and other factors that make it easy to establish businesses (Brand and Heyns, 2008). South Africa is a member of the World Trade Organisation and other international bodies that makes it easy for businesses to use their legal position in their home country to accomplish a lot in South Africa without having to do too much paperwork (Inozemtsev, 2009). However, it must be conceded that South Africa's poor, who are mainly descendants of the Black Africans who were denied rights under Apartheid are still struggling and this is evidenced by the high rate of illiteracy and the informal sector (Skinner and Valodia, 2003). Due to this, the government has come up with several laws which require the mandatory employment and empowerment of Black people in order to bridge the equality gaps that exists in the country's history. This is known as the Broadbased Black Economic Empowerment (BBEE). This could lead to a situation where a business might have to contend with employees who might not meet the quality level that an international business expanding to South Africa might not really want to keep on their payroll. Also, South Africa's national policies are more nationalistic in outlook. Firms try to do things that protect the interest of the nation and this has led to many rules and regulations that are allegedly targeting foreign owned businesses and subsidiaries in the country. There is also a growing sentiment amongst Black nationalist groups like the youth group that seek to threaten foreign business interests (Brand and Heyns, 2008) South Africa's socio-cultural system and political structures are created to support diversity and different systems and methods. Due to this, South Africa has the right atmosphere that enables the country to accommodate a large variety of businesses in its territory. On the international level, South Africa has various political agreements with several groups in the Southern hemisphere. This include the African Union, which allows businesses to use South Africa as a launchpad for other African countries. South Africa is also a member of BRICS which provides business and economic partnerships with Brazil, China, India and Russia. South Africa also has a trilateral relations with India and Brazil and together, these three countries are contending for a permanent seat on the UN Security Council. This makes them giants that promotes the possibility that South Africa could soon become a joint regional power in military terms and in international politics. In spite of these situations and circumstances, South Africa has some setbacks which could affect it in terms of international competition. First of all, there is a major problem with unemployment (SA Info, 2012) and due to the fact that country has rigid employment laws which makes it tough to get full employment, more people seek jobs and many have turned to crime (Eweje, 2005). However, the South African police has been able to curb crime drastically and it is fairly safe to conduct business in South Africa today. Economic Factors “South Africa is the economic powerhouse of Africa and leading the continent in industrial output and mineral production and generates a large proportion of Africa's electricity” (SA Info, 2012). South Africa is clearly ahead of the rest of Africa in terms of financial matters. South Africa has a population of just under 50 million, however, the GDP of South Africa is much higher than most African countries (Perry, 2009). In comparison, Ghana with a population of 25 million has a GDP of just about 7% of South Africa's GDP whilst Nigeria, with a population three times that of South Africa [about 150 million] has a GDP of just about 70% of South Africa (Perry, 2009). This shows that South Africa is much ahead of the rest of the continent and the quality of life is meant to be much higher than the rest of the continent. South Africa runs a sophisticated financial system with banks and other institutions that keep the country in the ranks of the richest nations on earth. South Africa has a stock exchange that ranks number 20 in the world (SA Info, 2012). The legal system of South Africa is also amongst the best in the world. The GDP of South Africa continued to rise steadily each year since the year 2000. The rises are as follows: Year Percentage in GDP Growth 2001 2.70% 2002 3.10% 2003 4.90% 2004 5.00% 2005 5.40% 2006 5.10% 2007 3.10% Source: SA Info This shows that South Africa has an economy that keeps growing and expanding at a gradual pace and in a consistent manner. Standard and Poor's ratings of South Africa continued to increase between 1994 and 2005 and they stated that it has improved in terms of economic stability and there is prospect for growth as well as moderate debt burden and stable institutions (SA Info, 2012). This trend continues to increase. There was a major boom in the economy and currency after they hosted the 2010 Football World Cup (Van Niekerk, 2012). South Africa has also boosted its economic strength by linking up with different economies and nations around the world to promote their interests. South Africa has strong relations in the South-South cooperation with India and Brazil (Rampa et al, 2012). Through this, South Africa gets access to affordable offerings from India and Brazil. South Africa's membership of BRICS gives it access to a wide global market that consists of approximately half of the world's population. Trade within BRICS, which are also rapidly developing economies is worth $600 billion and the GDP of the countries is over $2 trillion (Subramaniam, 2009). The trilateral trade between South Africa, India and Brazil is worth over $10 billion (Subramaniam, 2009). South Africa was also affected by the global financial crises. However, the nation's Central Bank, the South African Reserve Bank has set aside funds to support some areas and aspects of the economy that need to be restructured (Kamp, 2010). Due to this, the conspicuous elements of the financial crises as seen elsewhere in places like the United States are not affecting South Africa so much. Technological Factors South Africa is a regional leader in infrastructure and technology. South Africa has the best infrastructure on the continent and most of them was inherited from the Apartheid regime in 1994. South Africa has branches and units of all the major technological brands. The growth in the Internet and wireless services in South Africa has made it a major attraction for most businesses to site their operations (Khosrowpour, 2010). South Africa has fast Internet services and started using 3rd Generation appliances and wireless communication as far back as 2006 (Khosrowpour, 2010). The current crop of communication systems are amongst the most modern and can compete with other systems in the richest countries in the world. This makes it easy for businesses to expand here because they can always communicate and stay in touch with others. South Africa has some of the best training systems and facilities in the world (World Bank 2011). This is because the government subsidizes the country's IT systems and has placed it under the list of special areas that must be developed (World Bank, 2011). Due to this, IT professionals from all over the world are given quota work permits to settle in South Africa and start working in the economy. This has allowed many bright and talented IT professionals to immigrate from India and other nations that have the expertise and know-how. Also, English is the lingua franca of South Africa. Due to this, South Africa can easily integrate into other parts of the world and most people speak English. Through this, the country has successfully trained a lot of the locals and most businesses have training systems that are friendly and supportive of technology (World Bank). In the energy sector, South Africa produces, coal, uranium and other energy products that are processed locally for the local market (Cassiolato et al, 2011). South Africa also has many infrastructure systems that allows it to refine its oil and continue to maintain a very healthy and reliable petroleum exporting system. South Africa's e-commerce system is strong and most banks have facilities that can integrate to other banks around the world electronically (World Bank, 2011). This allows real-time transactions that can support both large and small international businesses that seek to operate in the country. Recommendations for Growth Although there are many prospects for development and growth in South Africa, there are some apparent problems that exist in South Africa and if the country wants to continue to maintain its foothold as a leading emerging economy, it would have to address it. First of all, there is the growing trend in Black nationalism which seeks to endanger foreign and White-owned businesses and put South Africa on the level of Zimbabwe which seized lands from White farmers. Secondly, South Africa has major problems with its workforce and people. Employment laws are generally weak and the country has a high rate of unemployment as well as AIDS (Eweje, 2005). Thirdly, South Africa has major problems with a huge income gap due to two main things: Apartheid and Immigration. Being an economic powerhouse in Africa, more and more African migrants from Zimbabwe, Congo, Nigeria and other parts of Africa continue to pour into the South African economy and they come with problems with poverty and other issues. These people add up to the native Black population who were denied education and the dependency and poverty rates increase in the economy. Also, urban planning is under pressure, particularly from the poor Blacks who move into the city in search of better conditions (Richardson, 2012). This leads to major health and environmental risks that put the country in a terrible condition for international investing. In order to do this, it is commendable that the government of South Africa comes up with some policies that would prevent major problems and issues. This is the only way that the country can maintain its position as a leading economy. Economic Controls The government needs to preside over the economic affairs of the nation in a much more stringent fashion. The Central Bank and the Economic Ministry must ensure that incentives are given appropriately to various entities and organisations that need them and this will be done in a way that the rightful areas of the economy would be preserved and productivity would move on. South Africa's economy is based on mining and if the right incentives are given to mining, there would be enough revenue to keep the economy running. The government needs to play a proactive role to protect and promote aspects of the economy that are productive as it pursues its social development agenda. The government must go great lengths to retain its White population who benefited immensely from the country's wealth under Apartheid to develop themselves. This way, they will be able to give back to the economy and support it to become a more balanced nation. The talks of nationalising mines and other things should be discouraged. Control Immigration South Africa needs to control immigration. Immigration must be as selective as possible. This is because the country has a major burden with a human resource base that has problems becoming productive. Due to this, it is not right for the country to take in more people who cannot contribute constructively to the economy. However, the immigration from other African countries seem to be turning in people who are not so well educated and they come in to consume what is meant for the locals. On the other hand, immigration should be selective. Only people who can contribute meaningfully must be let in. Such persons must prove that they are going to be an asset, rather than a liability to the economy before they are let in. Education Since there is potential for expansion of the South African economy, the nation would have to develop its human resource base. This can be done by providing more education to its nationals. The nation must invest in providing high quality basic education and also promote learning amongst South Africans in foreign nations in order to tap into new ideas. South Africa must educate its masses, particularly those who were denied education under Apartheid. This will help bridge the gaps between the various classes of the economy and promote better results in the country. International Cooperation South Africa must continue to pursue international cooperation. This is because there are still some barriers to trade in the country. These barriers can be brought down further and there could be more cooperation between international businesses through the reduction of barriers and the further liberalisation of the economy. Also, discriminatory taxes must be eliminated from South Africa and more people should be allowed to get the benefit of doing business in the economy without feeling tensed up. Labour Law Review There is the need for the labour laws and the collective bargaining agreement systems of South Africa to be reviewed. This is because these rules make it difficult for businesses to become productive. Rather, the welfare state mentality and the labour disputes are causing the country to lose a lot of money. The recent Marikana mine saga caused the killing of several striking miners. Due to this incident, there was a sharp decline in the value of the Rand. If the country could move from the welfare state model where collective bargaining is the way forward, these disputes could be resolved in a non-adversarial manner and more international businesses would be comfortable to do business in the economy without feeling tensed up. Promote Security South Africa has been cited as one of the most dangerous nations in the world. However, the police and the security services have done well to reduce the level of crime in the nation. In spite of this, many people have some degree of fear when they are in the country. The government can reassure people by coming up with more robust systems and structures that would safeguard assets and people and also make it clear to the international community that South Africa is making achievements in this quest. Promotion of FDI South Africa has a lot of potential for investors. However, the country is making minimal effort to promote its investment potentials. Nations like Malaysia [truly Asia], Turkey, Angola, Nigeria and other places around the world make a conscious effort to promote their nations as investment destinations. This is seen on world-class media like CNN and BBC. However, South Africa seldom goes out to attain this end. In order to become an attractive destination and increase the numbers of foreign investors, South Africa can consider advertising and promoting its services in a proactive manner on the international media. This will increase the number of international investors and encourage more investors to come into the country to invest. References African Economic Outlook (2012) South African Economy [Online] Available at: http://www.africaneconomicoutlook.org/en/countries/southern-africa/south-africa/ Accessed: 18th November, 2012. 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