New-style legislature may be costly for South Africa when it can least afford it
The political aims of the South African government appear set to run head on into economic reality. Next month Pretoria launches a new-style government that most analysts expect to be very expensive. Economic conditions could probably not be less favorable.Skip to next paragraph
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The South African rand has fallen to record lows against the United States dollar. The price of gold is in the doldrums. Inflation is stuck at about 11 percent annually.
And the economy in general looks set for a serious recession and rising unemployment, particularly among blacks, following two years of economic decline.
''The magnitude of the problem is so great that politics must be put aside,'' says Arthur Hammond-Tooke, economist for the South African Federated Chamber of Industries.
But putting politics aside would prove difficult for the white regime because next month it is scheduled to bring Coloreds (persons of mixed-race descent) and Indians into central government as junior partners.
The white rulers have designed a tricameral Parliament for whites, Coloreds, and Indians that will be bureaucratically costly.
And since the new Parliament excludes the black majority, the Colored and Indian members will seek tangible benefits so they can show that cooperating with the white rulers was worthwhile, analysts say. The government will probably be inclined to want to meet the material demands of Indians and Coloreds to ensure the new Parliament does not break down.
Working at cross purposes, though, is government spending, which many economists feel is already excessive and should be better controlled if the economy is to get on a sounder footing.
Mr. Hammond-Tooke says there has been a ''run-away'' of government expenditure that the country simply cannot afford. He says government spending this year has been running at a rate 17 percent above last year's.
A major feature of South African government spending is in defense, which includes the cost of fighting guerrillas seeking to end South African occupation of Namibia (South-West Africa).
South Africa has been hard hit by two developments beyond its control. A prolonged drought in all of southern Africa has forced South Africa to import corn at considerable expense.
Under normal circumstances, South Africa is an exporter of corn.
The other development is the steady decline of the price of gold, which now stands at its level of mid-1982 - about $340 an ounce. Gold is South Africa's single most valuable export and accounts for nearly half of the country's foreign revenues.
Despite these unfavorable developments, the government and the South African consumer - at least the more affluent whites - have continued to spend and borrow.
Last week the government announced severe measures that will push interest rates substantially higher. The prime lending rate rises to 25 percent and consumers could pay more than 30 percent for small loans and outstanding credit card balances.
The aim is to shut off spending, cool inflation, and get the economy back in balance. Pretoria also says it will review all government spending programs.