Today’s visits capped our business visits in Cape Town, and added to our knowledge of the Republic of South Africa. It’s a port, and has been a port since the beginning in the 17th century, so it was fitting that we visited the Port authority. Actually, South Africa has six or seven ports, the biggest being Durban on the east coast. The port authority is a state-owned enterprise that runs the intermodal features that brings containers to and from South Africa; it’s an important industry because logistics is the second largest industry in Western Cape—behind tourism. It’s a major cog in job development (one of the real challenges in South Africa, where unemployment is probably 40% or more), because each container creates six jobs. The major customers are Chinese (wine is increasingly important in the China trade as the Chinese become more middle class) and the rest of Africa, with food processing accounting for 39% of the exports; the leading importers are from China, Europe, and the United States. Interestingly, one of the big suppliers is Caterpillar, which is not surprising given the importance of mining (important in the northeast more than here in Cape Town). One of the bad jokes that circulated was that anyone who complained about the ports committed a port whine.
Cape Town is economically and racially different from the rest of South Africa. While the average income is $11,000, that figure is skewed; as I mentioned unemployment is high, probably higher than the official 25%; youth under 24 are estimated to run 65% unemployment. Racially, the country is roughly 80% black, 10% white ( 70% Afrikaan, 30% English), 9% coloured, and 2% Asian, but in Western Cape it is roughly 15% black, 33% white, 41% coloured, and 3.5% Asian). You can see from these statistics that the country ranks as one of the world’s worst in terms of income inequality. Before the democratic elections in 1994 (remember this is a 21 year old country; it’s the US in 1797, suggested one of our speakers), only 2% of the wealth was controlled by blacks. The government has made it a point to raise that to 26%, and has in place a system of rewards (and punishments) to push black enterprise, similar to what happened as I mentioned in Malaysia.
In addition to job creation and income redistribution, the major challenge economically facing the government has been an energy crisis. Capacity is still where it was in 1998; through bad planning, mismanagement, lack of maintenance, there are rolling blackouts. I’ve experienced a few, but the hotels I’ve stayed at have had backup generators, happily; otherwise, we’d be in darkness for 2 ½ hours.
I stated that we had two visits that were primarily about China—at both our universities—and there is no doubt that China has been making its presence known in Asia, to the point where 50% of Africa’s trade is with China (though only 5% of China’s). The reasons are pretty clear: China wants political allies (there were strong Maoist influences in the African National Congress’ struggle against apartheid); China has the pricing power to supply poor countries with cheap goods; China’s infrastructure companies have slowed work at home and are available to sell elsewhere; and China’s enormous growth has consumed enormous quantities of commodities which Africa has in abundance. The Chinese have come into a number of countries and built dams, universities, roads, power stations, etc., and the geopolitical/business issues have prompted a lot of articles in the business press.
We discussed the issue with the US Consulate General here in Cape Town (his last posting was as ambassador to Papua New Guinea, so he had some Asian exposure to the Chinese trade diplomacy), and his point was that the Chinese can build roads, but don’t create jobs, while American initiatives like the AGOA (an act fostering African-US trade), the funding ($4.8 billion over the decade) to combat AIDS, and the Yali program (young African leadership initiative),which brings 500 African leaders (25-35) to the United States for 5-6 weeks of interchange with each other and government officials has been more productive of having longer-term effects than, as one faculty member put it, building a road with road stands where farmers can sell oranges.
One of the Yali graduates founded a business I went to today, RLabs, which may provide answers to some of the serious problems I outlined—60% youth unemployment, high crime rates, essentially a response to government has failed, schooling has failed, and the family has failed (South Africa has the highest HIV rate in the world, though the US aid has brought it down quite a bit). RLabs reminded me of Hull House in Chicago, which at the turn of the last century, brought immigrants in and educated them and gave them hope. This is what RLabs has done with and for local young people; we saw a change behavior modification class, a youth café, and efforts to work with—partner is the word– business and governments (US AID, the Finnish Government are two of the sponsors); they run a leadership academy, and a social enterprise incubator. And I thought, “Here may be the way out,” and as I’ve told students for years, “Without business, there’s no solutions.” It was a great look at a “missionary organization” whose graduates we met and expect to see in positions to make a difference in their world—and ours.