- The Washington Times - Thursday, August 16, 2001

SOWETO, South Africa — The fruit sellers, shop operators and kindergarten owners of this black township are still waiting for the financial rewards of a democratic South Africa.

Their dreams of working for big companies, of getting bank loans for their own businesses, of breaking out of economic apartheid remain unfulfilled.

Part of the problem, analysts say, is the unrealistic hopes that blacks had about how long it would take to broaden an economy straitjacketed during the racist apartheid era that only ended with the country's first all-race elections in 1994.

France Mohlomi, 30, thinks there's nothing unrealistic about his hopes.

With a university degree and a two-year internship under his belt, he thought a big advertising firm would hire him. When that did not happen, he went to a bank, seeking a loan to start a silk-screening company.

"They checked my business plan. They said, 'Ahhh.' They turned me down," he said of his attempt a few years ago. "If you don't have a house, they don't give you a loan. They call it a risky thing."

Mr. Mohlomi works as an assistant at a fruit stand on a dusty street in Soweto. For 10 hours of work seven days a week, he takes home about 1,000 rand a month, or about $125.

This isn't what was promised.

Heading toward victory in the 1994 election, the African National Congress promised "a better life for all," and politicians eagerly fueled the hopes of the poor that financial security and equality lay ahead.

Seven years later, President Thabo Mbeki describes the country as two lands — one rich and white, the other black and poor. The average annual income for whites is $6,300; for blacks, it's $950.

Unemployment among blacks is growing — four of every 10 blacks don't have jobs, six times the rate for whites. More than a half-million jobs have been lost since 1994, most of them in mining and agriculture, which employ many unskilled blacks. Sixty-five percent of nonwhites live in poverty.

Blacks make up 78 percent of the population but earned 43 percent of the national income last year. Whites, 11 percent of the population, took in 44 percent, a University of South Africa study showed.

"If we don't empower [blacks] economically, even the democracy we are talking about is very threatened," said Peter Karungu, an economic consultant.

There are some successes, however.

The small black middle class is growing, and almost a quarter of the money earned by South Africa's highest-income group — people with yearly salaries above $30,700 — goes to blacks, according to a study.

Some blacks, including Cyril Ramaphosa and Tokyo Sexwale, director of ABSA Bank Ltd. and non-executive director of Gold Fields Ltd., are among South Africa's most influential businessmen.

But change is coming much slower than many people expected.

The government has tried to boost blacks' share of the economy by giving black-owned firms an edge in bidding for state contracts. All medium and large firms are required to adopt plans to make their staffs more reflective of the population. Land redistribution and sales of state monopolies are structured to favor blacks.

However, the strategies have not worked well enough, even the government concedes.

The programs were uncoordinated and unfocused, and the country expected too much help from white business and international investors, said Andy Brown, a researcher for a commission created to redress economic inequities.

In a report being studied by the government, the Black Economic Empowerment Commission recommended legislation that makes it imperative for the financial sector, pension funds and unions to invest at least 10 percent of their assets in "areas of national priority."

The government-appointed commission, headed by Mr. Ramaphosa, also called for rural development and faster land redistribution, a transformation of the banking sector to make it more accessible, more preference for black firms in government purchases and better education for blacks.

The proposal sets out ambitious goals: At least 30 percent of productive land should be in black hands. Blacks should form 40 percent of professionals. Blacks should own at least 25 percent of each economic sector. Deadlines are to be set later.

With more than half the population excluded from the economy, South Africa cannot prosper, Mrs. Brown said.

"They're not formally employed. They don't have bank accounts. They live in underdeveloped rural areas. They are uneducated. They don't have access to training programs," she said.

David Mashapalo, chairman of the Black Business Council, said past efforts relied too much on businesses to voluntarily do the right thing.

Black empowerment "is not a question of people doing things out of the goodness of their hearts. It's something that has to be done, and it has do be done consciously and properly," he said.

Supporters of the commission's proposal argue it will work better than past efforts because it calls for a law that would define black economic empowerment, set specific targets, coordinate the effort and measure it.

"For the first time, black business has set out quantitatively what they expect in terms of black empowerment," said Ajay Lalu, senior executive for corporate finance at Ernst and Young. "There is one coherent understanding of what empowerment is and where it is heading."

Others are skeptical.

The problem is not a lack of will for change, said Tom Lodge, chairman of the University of Witwatersrand's political science department.

"These are not revolutionary prescriptions," he said. "The difficulty is to actually make them happen. A shopping list of targets is simply not enough."

Mr. Lalu counters that stricter requirements will make white businesses change. "It forces them to make a choice: Either they transform, or they won't be in business in five to 10 years," he said.

The key will be how successful South Africa is in creating jobs, said Mr. Karungu, the economic consultant.

"Jobs are not only a way of life, but they are the only way to create a harmonious, very peace-loving nation, lower crime and to make blacks and white become one," he said.

"If there are no jobs, you create idleness, helplessness, and in the worst-case scenario, you end up creating criminals."

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