Trouble in the Rainbow Nation

The scenes of recent anti-immigrant violence in South Africa have shaken to the core the perceptions of post-apartheid bliss. South Africa, which remains the continent’s economic hub and in 1994 became a paradigm of peaceful political transition, is now forced to re-examine the progress made over the last decade or so. There is democracy, but does it really deliver? There is economic growth, but does it reach everyone?

After South Africa’s widely condemned apartheid regime ended in 1994, the country became a “rainbow nation” of truth and reconciliation, an African miracle of economic success, and a beacon of hope in a continent that had seen too much wanton destruction. But the violence against African foreigners that began in a poor Johannesburg township and spread to other parts of the country this month exposed the bleaker picture beneath the air-brushed images.

Despite impressive economic growth rate of 4.5 percent, the motto of the African National Congress (South Africa’s ruling party) “A Better Life for All” remains largely unfulfilled. Inequality has grown, the government has failed to deliver housing and basic utilities to many, desperately poor shantytowns keep on expanding around the booming urban centers, and unemployment rate is at least 28 percent. The eruption of violence against poor immigrants, whom the locals blame for perceived exacerbation of their own dire situation, is a warning sign that urgent reforms are needed.

With such formidable challenges – and anti-foreigner violence threatening to spread further – South Africa’s government is losing the confidence of those who embraced it with high hopes over a decade ago.

But there is still hope and it’s not too late to act upon it. The key to success it to involve the poor into democratic decision-making and help the country’s many small entrepreneurs realize their full potential. In the past, promoting entrepreneurship was a prerogative of specialized government programs – with little success. In 2004, CIPE partner the Centre for Development and Enterprise (CDE) concluded a major research project with the verdict that “after ten years of good intentions, the results of the state-driven delivery approach to entrepreneurial support have not been impressive.” Young entrepreneurs in poor areas such as the country’s largest township, Soweto, are particularly affected by crime, weak infrastructure, and labor issues.

Promoting entrepreneurship means above all reducing the costs of doing business, providing basic infrastructure, and reforming the broader institutional environment. Entrepreneurs know best what is required to create a better business environment. That is why the government should heed the voice of small entrepreneurs and allow them to play a more active role in bringing about change through democratic participation. By taking the initiative to organize and advocate for that change, young entrepreneurs can lead the way to a better business environment for everyone.