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South Africa: A Big Bounce from the World Cup


The nation's economy has grown since the end of apartheid. On the eve of the World Cup, it measures how far it has come and how far it has to go

A couple of miles beyond the 900-foot-high bungee-jumping tower, past the $100 million, 235-shop Maponya Mall, and a short cab ride from the 94,700-seat World Cup soccer stadium, Sakhumzi Maqubela stands before his restaurant contemplating a question on the economy.

It's a pristine day in Soweto, the late part of the midweek lunch rush, the place about half cleared out. Tourists, hiding from the sun under red Coca-Cola umbrellas, pick at plates of tripe or chicken curry as the voices of costumed tribal singers drift across a patio. "It is nice sometimes when you don't understand that you are supposed to be worried," says Maqubela, a cheerful man with close-cropped hair, crisp chinos, and a pressed yellow shirt. "We kept asking, 'What is this "reception" they are talking about?' "

This is Maqubela's way of saying that while the recession that spread across the world in 2008 did reach South Africa last year, it was more of a ripple than a wave. Sakhumzi Restaurant, the tiny eatery he started eight years ago, is now a thriving 450-seat diner with 48 workers. The mild downturn didn't much clip the wings of his corporate clients or cause many of his package tour customers to cancel their visits. "We basically never felt the recession here," he says.

In 1992, on my first reporting trip to South Africa, Soweto was a raw slum of open sewers and shacks jammed with 1 million people—the seething epicenter of black revolt against the white apartheid government. Raids by the white regime were as common as they were unpredictable; murderous tribal and ethnic political conflicts made it a dangerous place to visit. A race war didn't seem far-fetched. Now, that palpable sense of violence has been replaced by bungee-jumping tourists and a generation of opportunistic small business owners.

"Growing up in Soweto," says Maqubela, "I didn't think this would ever be possible." His restaurant is one of 25 catering to tourists in this enclave five miles west of downtown Johannesburg. About 30 bed-and-breakfasts have also sprung up in recent years, and an estimated 1 million visitors pour in annually to see, among other things, the family home where Nelson Mandela plotted his antiapartheid strategies.

The transformation of Soweto is part of the larger, mostly hopeful story of how South Africa's economic and political prospects are intertwined. This is—or should be—South Africa's year to shine. Starting on June 11, the FIFA World Cup of Soccer kicks off here, the first time the global sporting event, with a television audience estimated to be half the world, has been held on the African continent. Hundreds of thousands of tourists will fly in for the monthlong festivities, potentially providing a boost not just to South Africa's economy but to its reputation.

What visitors will find is a nation of First World amenities and infrastructure, and a place where optimism is perennially tested by unresolved Third World issues of poverty, crime, inflation, and racial tension. Already the undisputed economic engine of Africa—it accounts for 39 percent of sub-Saharan Africa's gross domestic product—South Africa still labors with plenty of fiscal shortcomings. One of them is that the recession did bite at least a little. Unemployment, which had been trending downward since 2006, rose in 2009 to 24 percent from 22 percent in 2008, throwing tens of thousands of mostly poor and middle-class black South Africans out of work.

On the positive side, South Africa (pop. 49 million) has proven resilient. While it saw a negative GDP of 1.8 percent last year, the economy began growing again at the end of 2009, aided by the vital, $27 billion-a-year tourism industry that saw a slight uptick in visitors in an otherwise down year. Moreover, South Africa has weathered a recent bout of tension sparked by incendiary remarks made by an upstart African National Congress (ANC) politician and the murder of a notorious white supremacist. Predictions by pundits here and abroad of race riots didn't pan out.

"All things considered, I think we've done well," says JP Landman, head of a Johannesburg consulting firm who parses South Africa trends for government and corporate clients. Landman points to an unbroken string of gross domestic product and per capita income growth—aside from last year—since multiracial democracy came to South Africa in 1994. "We've had a transition, we are generating more and more cash flow," he says. "The issue now is whether we can generate the social capital needed for progress, for modernity."

Since Mandela's ANC party swept to power 16 years ago, ending 46 years of white rule, the government has steered an often tricky course between growth-oriented, free-market, open-trade policies and heavy spending on services—housing, electricity, running water, health clinics—that were often unavailable to the black majority. By its own accounting, it has built 1.2 million houses and provided water to 7 million people who didn't have it. Today it spends more than $22 billion on education, up from about $6 billion in 1994. Still, 24 percent of South Africans live without running water, 20 percent have no electricity, and 35 percent of students never finish high school despite the increase in spending.

The World Cup events will provide a pop, adding an estimated $13 billion-plus to the economy on top of the $2.6 billion the government is spending on stadiums, transport infrastructure, promotion, and closing ceremonies—although expectations have been tempered. In April, consulting firm Grant Thornton projected that foreign visitors to the event will fall about 23 percent short of the pre-Cup estimates of 483,000. Match Services, the official ticketing agent for world soccer's governing body, FIFA, said it had relinquished 450,000 nights of hotel room bookings because of slack demand.

Maqubela is still optimistic that his Soweto restaurant will get a decent World Cup pickup, given its proximity to the giant Soccer City stadium, where nine matches will be played, including the final on July 11. Not everyone shares his certainty.

"We miss the Americans," says Abdul Ngifenou, who counts 2009 as the slowest of the eight years he has operated an African crafts stall in the upscale Johannesburg suburb of Rosebank. The number of foreign tourists seems to have picked up since February, "but they aren't buying," Ngifenou says.

Dave Luman of Cape Town Framed, a gift shop just off the bricked pathways of the leafy St. Georges Mall, is optimistic, but also clear-eyed about the potential threats to South Africa's economic momentum. He has ordered an additional 70,000 rand (about $10,000) of inventory because about a third of his sales are already soccer-related items, and he hopes that business will be brisk. "That is," he says, "if the Malema debacle doesn't scare people away."

The actions of 29-year-old Julius Malema set off a month of soul-searching over whether South Africa can ever be a post-racial society. Malema is leader of the ANC's Youth League, a position that previously has been held by Mandela himself; in theory Malema could become South Africa's President one day, given that the ANC regularly polls about 90 percent of the votes of the nation's 80 percent black majority. A onetime staunch ally of current South African President Jacob Zuma, his fiery, anti-Establishment speeches play well in the townships, particularly among South Africa's large number of unemployed black men.

Malema (rhymes with dilemma) first made waves last year with his repeated calls for the ANC to nationalize the country's mines—a suggestion that was rebuffed by the ANC and even drew derision from the South African Communist Party. Then, earlier this year, he rattled many of South Africa's 4.3 million whites by traveling to Zimbabwe and endorsing the political party of President Robert Mugabe.

Zimbabwe is a vastly poorer neighbor separated by an unsealed border. More than 569,000 Zimbabweans have fled political and economic upheaval since 2007, according to CIA figures, many settling illegally in South Africa, which is already feeling the strain of more than 1 million illegal migrants from all across Africa. Meanwhile, scores of white farmers have been murdered there.

Malema whipped up Zimbabwean crowds by singing an anti-apartheid song with the refrain "kill the Boers," a reference not just to white farmers but to all whites who trace their ancestry to the Dutch farmers who began settling the Cape area of South Africa in 1652. In a tantrum broadcast on nationwide TV, he later tossed a white BBC journalist out of a press conference, ridiculing him as a "bastard" and "small boy" for daring to question Malema's Zimbabwe statements.

It didn't help that the Malema affair was still unfolding on Apr. 3 when Eugène Terre'Blanche, a 69-year-old white-supremacist, was bludgeoned to death in his bed by two black farm workers near the town of Ventersdorp, 60 miles west of Johannesburg. Terre'Blanche's supporters promptly cited Malema's singing of the "kill the Boer" lyrics as a provocation. Police, looking into motives, say they don't think the murder was political. They are investigating the possibility that the slaying was part of a wage dispute or involved Terre'Blanche soliciting sex from the accused killers, both of whom are male and one of whom is a minor.

Meanwhile, Zuma stood silent on Malema until Apr. 10, when he issued a statement denouncing him as "alien" to ANC values—a little late for many outraged whites. After a disciplinary hearing, Malema reached an agreement with the ANC on May 12, pleading guilty to "behaving in such a way as to provoke serious divisions or a breakdown of unity in the organization," the ANC said.

Newspapers bristled with predictions of a return to the upheavals that marked the tense years between the time Mandela was released from prison in 1990 and the 1994 elections that brought Mandela and the ANC to power. Then, political killings exploded across the landscape. In June 1992, 45 ANC members were gunned down by a rival political faction, and the assassination of ANC stalwart Chris Hani by a white extremist a year later nearly plunged the country into civil war.

The Malema-Terre'Blanche timing, with the World Cup looming, couldn't have been worse. "World Cup War: Machete Threat to England Fans," blared a headline in the Apr. 5 issue of London's Daily Star.

These things don't matter just to soccer fans. Africa and the world can't afford for South Africa to turn into the next Zimbabwe. The country already generates two-thirds of the continent's electricity. Once a nation of tariffs, South Africa has liberalized its trade policies with its African neighbors; in 2008 it did $104.7 billion in business with the 46 other nations of sub-Saharan Africa.

The mines Malema would nationalize sit on huge reserves: South Africa has 90 percent of the world's platinum, 80 percent of its manganese, 73 percent of its chrome, and 41 percent of its gold, according to government estimates. South African farmers account for 8 percent of the country's exports and help feed Africa and the world. Roughly twice the size of Texas, South Africa also can boast a first-world freeway system, world-class banking and telecommunications systems, and a stock market that has attracted $41 billion in investments from the U.S., according to government data.

For those with money, living standards are high. If you look past the razor wire decorating every gate and fence around every house or apartment, the better parts of Johannesburg might remind you of Santa Monica, Calif. Yet as the razor wire suggests, the Third World lurks around many corners. If your taxi ride from O.R. Tambo International Airport should take you through the township of Alexandria, you would see slums as squalid as any in Asia or Latin America.

This tension between prosperity and the underclass, with its racial overtones, is the subtext of the Malema affair, and it has prompted a fear that South Africa's disenfranchised will one day elect a Mugabe-like strongman out of spite or impatience. In Melville, a suburb of modest gated houses characerized by a tourist Web site as Johannesburg's "most cosmopolitan village," JP Landman, the consultant, reflects on this as he pulls up a slide of South African economic data on his laptop. Landman, 54, is in Malema's parlance a Boer, though he prefers Afrikaner, the name that South Africa's Dutch settlers gave themselves to show fealty to the African land they came to love.

Landman's politics couldn't be further from the white separatist views of Terre'Blanche. In the uncertain years before Mandela came to power, Landman and a majority of Afrikaners sided with the liberal wing of the National Party led by South Africa's last white President, F.W. DeKlerk. DeKlerk's job, in retrospect, was to negotiate the surrender of white power on as favorable and peaceable terms as possible. His negotiating partner was Mandela; both men won the Nobel Prize for peace in 1993.

My visit to Landman takes place two weeks after Terre'-Blanche's murder and a week after Zuma scolded Malema over his incendiary comments. "There was a time," Landman muses, "when an ambulance appeared before Parliament and the rand collapsed because people thought something had happened to Mr. Mandela." Now come Terre'Blanche's death and Malema's provocations, "and the chattering classes told us the country's going into an abyss, we're going to collapse, we are looking at a racial war," he says. "Well, nothing like that has happened—it's complete nonsense."

For Landman, the relative calm in the aftermath of the Malema affair reflects the reality of the new South Africa. The country has built up a reservoir of "social capital" that lets its citizenry absorb such shocks through spirited and even indignant discourse without violence. The explanation for the buildup of social capital is simple: "Cash flow" is the larger story of the South African economy's unblemished growth, says Landman. Even factoring in the 2009 recession, "per capita income still increased from 1994 to 2009 by about 27 percent," he says. "There is no question that the country is much richer than it was at the beginning of our democracy."

A November 2008 study by the Bureau of Market Research at the University of South Africa reported that the nation's black middle class, which had numbered in the low thousands in 1994, had swelled to 9.3 million by 2007, up more than a third over 2001 levels. The study defined middle-class as those 16 years and older with incomes ranging from about $10,000 to $18,000 a year—far above the South African average per capita income of $5,787 a year, meaning that millions of people have yet to cash in on democracy's economic promise. "Have we done enough to curtail the expectations that people have? No, I don't think so," says Landman. "That people are for now disillusioned is absolutely true. But is this an indication of South African failure? Absolutely not."

He adds: "A million South Africans will tell you that our roads have deteriorated—and yes, they have. But we've built schools and clinics where we never had them before. Slowly, we're doing what we have to do."

Venture into South Africa's heartland and you'll get an earful on Julius Malema—and reminders that the nation's racial progress depends more on a pragmatic black-white compact of mutual civility than on lofty ideals. Two hours by car southeast of Johannesburg, where the California-quality N3 Motorway meets a two-lane blacktop highway called R34, a stretch of spectacularly deteriorated road begins to show itself. This is the Highveld country of the South African province called the Free State: rolling rangelands, checkerboard cornfields, table-topped granite outcrops that look like the backdrop for a Clint Eastwood western. At one hilltop rise in the road, a herd of imposing white-faced, red Herefords graze under what is now a fall sun. Geologically, this big-sky land seems an odd cross between Kansas and West Texas hill country. Politically, it's the Deep South, a former bastion of the hard right of the Afrikaner political spectrum. About 30 miles east, dodging potholes that sometimes consume an entire lane, you come to the village of Vrede, a town that mirrors South Africa's larger story in many ways.

Pronounced FREAR-duh, the town of about 2,500 takes its name from the Afrikaans word for "peace." When I was last here 18 years ago, Vrede was segregated, its merchant class entirely white. About 18,000 blacks lived blocks away in the ramshackle township of Thembalihle, which, like most black townships then, existed without electricity, plumbing, or running water. With change in the air, Thembalihle's blacks, led by a young ANC agitator named Bheki Radebe, had launched a series of crippling boycotts against Vrede merchants—who had come to depend on black trade—as they fought for services, the right to swim in the town pool, and an end to housing segregation.

The mood was at turns tense and ugly, and grudgingly optimistic. Carel van den Heever, an Afrikaner merchant and entrepreneur who had invested much of his savings in a tourist lodge on a nearby lake, had bluntly put the aspirations of change-minded whites in perspective. The alternative was "a race war," he said at the time. "Blacks and whites can coexist here. We must—or else."

No race war came to Vrede. Instead, by key measurements—growth of a black middle class and a boom in the area farm economy—Vrede has prospered. The town's business district rises up along 10 blocks of Church Street, anchored at one end by a 19th century Dutch Reform sandstone church and a handsome white-and-green-roofed commercial building, constructed in the historic Cape Dutch style, that holds a sweets shop, a diner, and a grocery store. Many shop signs are still in Afrikaans, the antique Dutch spoken by those of Afrikaner descent.

On the open-air patio of a coffee shop, Pamela Rinke, an Afrikaner widow who owns an 850-acre cattle farm a few miles from town, says she vividly remembers the boycott years and is thankful they are long past. "Everything is all right in this area—we are all safe here," she says. "Well, watch the potholes. The roads are full of them."

The town, in her opinion, has borne its change with dignity. Most of the stores that were around in 1992 are still in business. The complexion has changed, however. Blacks, Indians, and Pakistanis own some of the stores and work in others. In Vrede's most popular bar, I saw three black workers from a nearby pipeline project flirting with an Afrikaner waitress—a scene unimaginable in 1992. For Rinke, who grew up in Zimbabwe but has lived here since 1981, the lessons of the past are that race relations need not be a


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