Will South Africa Survive? Jacob Zuma's Mrs. Thatcher Moment
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The Johannesburg Mail & Guardian reports that two weeks of vandalism and violence in the townships show few signs of abating and that President Jacob Zuma appears unable to do much to stop it.   Zuma was selected as ANC Party Chairman in late 2007 and won April's Presidential Election on promises to do more to help the poor in one of the most unequal countries on Earth.  Black South Africans still reflexively support the ruling ANC, the  party that liberated them, but less enthusiastically than before, after 15 years of crime, and growing inequality. In the current protests people have held up signs saying that life was better under white rule.

In the Mail & Guardian's words, "In the past week, scenes reminiscent of the apartheid era have returned to the townships -- clouds of acrid black smoke rising from burning tyres, police turning on residents with rubber bullets, sirens wailing and -- most symbolic -- official buildings and vehicles being set on fire."

This week 150,000 municipal workers are set to go on strike, and chemical industry workers may also walk out, which would dry up the gasoline supply. These developments follow a week-long construction industry strike over demands for a 13% wage increase, which ended less than two weeks ago when the employers gave the union pretty much everything it had asked for. South Africa is to host next year's soccer World Cup, and has staked much of its prestige on its coming off smoothly, which it hopes will set the stage for Cape Town's bid to host the Olympics. All of this will collapse if the five new stadiums and the showpiece $1.8 billion light rail line linking Johannesburg and Pretoria are not finished on time. Though the construction workers agreed to a moratorium on further strikes before the World Cup, a general strike remains a distinct possibility.

Britain has gone down the same path twice before. The 1926 general strike lasted 10 days until a judge ruled it illegal, making the unions liable to massive fines and allowing the government to seize all union funds. The Trades Union Congress called off the strike without getting any meaningful concessions from government or the employers, but union power grew over the next 60 years until the 1984-1985 showdown between Arthur Scargill, head of the National Union of Mineworkers, and Margaret Thatcher, Prime Minister. Mrs. Thatcher faced down the union, refusing to give in to their demands and calling out the police to prevent them from blocking access to coal mines and power plants. After a year of grim hardship for the miners and their families, the NUM called off the strike. The trade union movement never regained the power it had lost.

General strike or no, President Zuma may soon have to make a similar choice: stand up to the unions or let them destroy the economy. But the stakes and the complexity of the issue may be much greater than in 1980s Britain. Hate Mrs. Thatcher though many did, few questioned the basic integrity of the government itself. This is not true in South Africa, where endless parades of post-apartheid politicians - including President Zuma himself - have been accused of or caught out in shameless corruption. Even as riots spread through the townships and squatter camps, the new communications and education ministers went out last week and spent over half a million dollars of public funds to buy themselves three BMWs and a Range Rover in what their spokesperson said was a case of "obeying the rules." People can see the black elite feeding at the public trough while they live in constant fear of violent crime in squatter camps that lack running water, electricity, and jobs.

It may not be enough, then, for President Zuma to face down the unions and his other adversaries on the left, and it may not even be possible, since the umbrella Congress of South African Trade Unions is a part of the ANC's ruling coalition, as is the South African Communist Party. Unless the government can achieve visible progress in stamping out corruption, curbing criminal violence, and creating jobs (the official unemployment rate is 23.5%), the unrest can only continue. South Africa's business sector has so far exhibited a remarkable resilience and an ability to adapt to changing political and economic circumstances, but we can't assume it will do so forever.

Mr. Zuma may yet have his Mrs. Thatcher moment and if and when he does, I hope he responds with the Iron Lady's courage and sense of purpose. And I hope if he does it will be enough to put the country back on track.

Disclosure: Long T. Rowe Price Africa and Middle East Fund (NYSE: TRAMX) long. Long Market Vectors Africa ETF (NYSE: AFK)

Posted 07-27-2009 2:41 PM by Anonymous