The economic and political scene
NICHOLAS DAVENPORT
In the beginning of his reign. although he had always hated the apartheid policy of the Nationalist Afrikaner government at the Cape. Mr Harold Wilson rightly decided that we must continue to trade with South Africa just as we trade with coun- tries behind the Iron Curtain whose authoritarian governments we dislike equally or more. Mr Heath's Government takes the same view. So the SPECTATOR asked me to fly out to South Africa to look at our mutual trade, consider the scope for its development and report on the current prospect for investment.
Scenically the Cape Province must be the most beautiful country in the world. It enjoys a Mediterranean climate but with fewer thunderstorms to upset it. Around Cape Town the country is like a perpetual park planted with rare and beautiful trees. Blue-grey mountains seem to rise out of gardens of proteas, lilies and hydrangeas. Outside the Cape the country stretches into vast areas of red-coloured earth sweeping up to mountain ranges whose curvilinear ridges are reminiscent of a Picasso draw- ing. The hugeness and emptiness of it all are the first impressions of the traveller from this crowded little island.
Politically it will always be a difficult country to govern with such a racial hotch- potch. There are 3i million whites, 2 mil- lion Cape Coloured (centred chiefly in the Cape Province), over half a million Asians (mainly in Natal) and 13 million Africans divided into about ten main Bantu tribes with nine different languages. A total of about 191 million. By the year 2000 it will have a population of about 42 million, of which 7 million will be white, nearly 6 mil- lion Cape Coloured, over 1 million Asians and 28 million Africans. The racial com- position will then be approximately 17 per cent white, 14 per cent Cape Coloured, 3 per cent Asians and 66 per cent Africans.
It must be understood that in this, the one hundred and fiftieth year after the land- ing of the 1820 settlers, the British South Africans no longer run South Africa. The Boers have won the Boer War. This was recognised when South Africa left the Commonweath in May 1961. The Afri- kaners have taken over and some of them say quite frankly that the English are too liberal and too permissive to administer a difficult multi-racial complex. Nevertheless the English South Africans are the biggest English-speaking minority in the world— nearly the size of New Zealand's popula- tion—and South Africa is the only place on earth where a large British-descended population lives without wielding political power.
My mission was economic but to see through the economics I had first to under- stand the politics. The differences between the three political parties are simply ex- plained. The Nationalist party, which won 54 per cent of the votes in the April election, sees the four population groups—whites, Africans, Coloureds and Asians—as separ- ate nations and South Africa in the process, as it were, of being fragmented into separ- ate white and black states or at any rate into white and black areas of regional autonomy. The United party—the Op- position—believes that the South African omelette cannot be so unscrambled. It regards the four population groups as distinct cultural communities within a single South African nation-state : it believes that they should be represented as groups within the same parliament— the non-white representation being some- what thin as a start. The Progressive party, adopting an even more non-racial view, contends that the people of South Africa, whatever their race or colour. who measure up to specific standards of education or wealth, should share as indi- vidual citizens the same political privileges.
To get the best informed criticism of apartheid one must go to South Africa and read the English-language papers. Un- like some of the police states of Europe open criticism of the government is allowed, although there is a strict censor- ship on what is regarded as subversive in press or literature. Whether the apartheid (separate development) policy of the Nationalist government is economically viable time alone will show but the defeat of the extremists in the recent general elec- tion suggested that Nationalist party policies are not as rigid as one had sup- posed and that a liberal movement is slowly getting under way. I heard it suggested that some sort of federalism, perhaps on the Swiss pattern, might eventually provide a common ground for a political compromise in South Africa. A form of federalism was, in fact, put forward by a leading South African liberal, and former president of the Institute of Race Relations. in a Johannes- burg address last year. What seems to be most needed is a common meeting-ground for the intelligent educated people of all races.
I came away with the feeling that the administration of apartheid is becoming an increasing headache for the Nationalists and an increasing heartache for the English liberals. It was interesting to find both English and Afrikaner businessmen `fall- ing over black-wards' to help the non- privileged classes and their wives, devoting their spare time to welfare and educa- tional work among the Africans. I was told that when the government slashed the income tax a year ago and replaced it with a sales tax all the businessmen voluntarily and immediately put up the wages of their Cape Coloured and African employees so that their standard of living should not be hurt. How right it was, I felt, to maintain cul- tural contacts with these fair-minded and decent businessmen with whom our own Government is so anxious to develop trade. South Africa has a mixed economy—the public sector claiming about 25 per cent of the gross national product and 48 per cent of the fixed investment --and a very curious economy it is. Like our own it runs a surplus of imports over exports but the deficit is met not, as here, by 'invisible' services but by the sale of newly mined gold. The gold sales around R.800 million p.a. arc usually more than enough to meet the deficit : any surplus gold goes to build up the reserves.
It is a dynamic fast-growing economy. Over the twenty years 1948 to 1968 the average rate of growth in real terms was 5.3 per cent a year. In money terms it was 8.1 per cent, so that the average rate of inflation was 2.8 per cent. (The inflation was very largely 'imported'.) The specta- cular discoveries of diamonds and gold in the late nineteenth century were followed by the usual industrial developments of a maturing economy in agriculture, trans- port. building and manufacturing, helped surprisingly, by a state-owned Iron and Steel Industrial Corporation set up in 1928. Diamonds and gold brought the first sub- stantial inflow of capital: and the country has never been short of capital since.
South Africans are said to be blessed with luck. Who would deny it seeing that they found themselves sitting on top of a rich auriferous deposit deep down among the most ancient rocks in the world? It was a lucky jump in the price of gold which has more than once come to their rescue. It pulled them out of the great depression of the 'thirties when their government follow- the British in letting the £ float. This was the occasion when the sterling price of gold was marked up from 84s 10d per ounce to 126s 10d by the end of 1931. Next the devaluation of the South African pound in line with the British in 1949—remember that Sir Stafford Cripps devalued by as much as 30 per cent—gave another un- expected boost to the South African gold mining industry.
The sterling price of gold rose from 122s 3d to 248s per ounce. This. happily coinciding with the opening of twelve new gold mines in the Orange Free State, ushered in the greatest boom which the Rand has ever seen. And on top of the gold some of these new mines became important producers of uranium.
The output of the gold mines is now reaching its peak and in another two years it will start on its long, slow decline. It was surprising, therefore. that the Nationalist Afrikaner government did not follow sterling in November 1967 and devalue by 14.3 per cent. Perhaps they were too proud but a devaluation of the Rand would have helped to extend the life of some of the older gold mines.
The coming decline in gold production will be offset to some extent by the rise in the output of other metals. New diamond fields have been discovered—an important one in Botswana—and other metals are being mined—uranium. platinum, anti- mony. copper. not to mention vanadium. asbestos and chrome. The country is rich in coal and first-class iron ore. But it will. be long time before gold can be replaced. Gold will remain the key to the stability of the South African economy for many years to come.
It was therefore amazing to find that Dr. Diederichs. the Finance Minister very nearly threw away the key in the great gold drama of 1968-69. I asked a gold ex- pert to give me his views about this crisis in the gold-mining industry. It follows.
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