South Africa Sees Fresh Start for Economy, With the Same Challenges

South Africa Sees Fresh Start for Economy, With the Same Challenges

With the end of Mr. Zuma’s tenure, international investors upgraded South Africa’s prospects, sending the nation’s currency, the rand, to a three-year high, while bidding up shares of South African companies.

Longer term, the challenges confronting the incoming administration are enormous.

For decades, a succession of governments led by the A.N.C. have sought to bridge inequality with programs targeted at improving the lives of black South Africans. Townships have gotten electricity and more modern housing. Government contracts have been set aside for black would-be entrepreneurs.

These programs have had an impact, improving material conditions and generating jobs.

They have also been riddled with corruption.


Customers in a Johannesburg bar watching Mr. Zuma’s resignation address on Wednesday.

Wikus De Wet/Agence France-Presse — Getty Images

At local governments across South Africa, bureaucrats have abused their authority to steer contracts to companies that put cash in their pockets. At every level of society, people have grown accustomed to kickbacks and political connections determining who prospers, and who goes without.

Mr. Zuma’s demise resonates as a sign of a potential new order taking shape. He will forever be linked to his association with the Guptas, three Indian-born brothers who effectively bought key levers of governmental power, amassing influence so comprehensive that it became known as “state capture.”

His resignation has raised hopes that South Africa is finally contending with its epidemic of corruption. That view gained momentum when an elite police unit raided a home belonging to the Guptas nearly at the same moment that Mr. Ramaphosa was assuming office.

The new president is a hero of the anti-apartheid struggle, a former deputy president and chairman of the National Planning Commission, a focal point for thinking about how to engineer economic growth. As a former trade union leader and protégé of Mr. Mandela, he enjoys credibility among a range of interest groups, while carrying a reputation as a savvy and strategic operator.

He has had his brushes with controversy, most notably after a 2012 police massacre of striking platinum miners that killed 34 people. At the time, Mr. Ramaphosa occupied a seat on the board of Lonmin, the company that owned the mine. Emails soon surfaced showing that, a day before the police opened fire, Mr. Ramaphosa had been urging senior government officials to take strong action to end the strike.


South African newspapers in Johannesburg carrying headlines about Mr. Zuma’s resignation.

Marius Bosch/Reuters

Still, no corruption charges have stuck to the new president, who now claims a mandate to clean up the toxic mess left behind by Mr. Zuma.

Some doubt whether the A.N.C. can be salvaged as an effective vehicle for egalitarian policymaking. The party’s executive ranks include many figures implicated in corruption. Mr. Ramaphosa, 65, may champion new initiatives aimed at generating economic growth, yet he finds himself relying on his party brethren to execute his visions, with no certainty that the money will land where intended.

“I don’t necessarily think that taking the president out does much to dismantle the patronage network,” said Ayabonga Cawe, a development economist at Xesibe Holdings, a research and advisory firm in Johannesburg. “You’re going to need a lot more than taking out the guy at the top.”

Above all, Mr. Ramaphosa must contend with the structural defects that have long constrained South Africa’s economy, a legacy of apartheid.

Beyond its systemic discrimination against black people, apartheid severed the country from much of the global economy. It ensured that huge numbers of uneducated black South Africans were available at poverty-level wages within major sectors of the economy like mining, agriculture and textiles. That cushioned domestic companies from the pressure to modernize.


Mr. Zuma in 2008 after a judge dismissed a corruption case against him on procedural grounds. Mr. Zuma was elected leader of the African National Congress party in 2007 and became president in 2009.

Agence France-Presse — Getty Images

International sanctions isolated South Africa, shielding its firms from competition against multinational rivals. Sanctions also denied South African companies the ability to operate abroad, giving them an incentive to focus on the domestic market. The apartheid-era government obliged with subsidies for favored firms while allowing companies to pursue oligopoly, free of nuisances like antitrust law.

The result was a system in which large industries, from retail to furniture-making to chemicals, were dominated by huge enterprises whose core strength was the ability to protect themselves against competition. That system has largely prevailed, with smaller companies and start-ups facing often-impossible odds.

“Apartheid was a system that lends itself to large conglomerates and concentrations of wealth in the hands of a few,” Mr. Cawe said. “It’s not just about the corruption. It’s about all of these parallel networks in big business that you need to dismantle. Most of those are white.”

Here is a world that Mr. Ramaphosa knows keenly, having achieved extraordinary affluence by running South African companies with interests in mining, banking, real estate and telecommunications. His fortune has been estimated at $450 million.

If he is serious about reinvigorating the economy and creating a space for black-owned small businesses, he will need to take on the prevailing structure that made him so wealthy.

His success on that front may be even more decisive than whether he can tame corruption.

“This is certainly the most optimistic moment for South Africa in a very long time,” said Mr. Goldin, the former adviser to Mr. Mandela. “In a way, it does feel like a new beginning. But the jury is out.”

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