I never thought I would descend to being the kind of person who read budget speeches for pleasure. I was therefore alarmed when, en route from Washington to Johannesburg, via Dakar last month, I found myself reaching out to Finance Minister Pravin Gordhan's Budget Speech that he had just delivered to the South African parliament. Worse, I soon found myself reading it with pleasure. The pleasure came from two sources: the eminent sensibility of the speech, and comfort from the realization that the problems we contend with, wherever we are, are fundamentally similar. South Africa is wrestling with keeping its fiscal deficit under control, its flagging growth rate up and yawning inequities in check. Musing about these problems I dozed off. When I woke up the cabin was dark. Curious about who was going to Dakar I looked around. Of the passengers in my cabin, around 30 percent were Black, 70 percent were White, and 80 percent were watching The Best Exotic Marigold Hotel.
When I alight in Johannesburg, the air is bracing, the sky clear, as only the African sky can be, and the warmth and smiles of the people switch on in my head the opening lines of Rabindranath Tagore’s famous poem in Bengali, called Africa. Tagore wrote it in 1936, one year after Mussolini’s invasion of Ethiopia, a poet’s protest against the savagery of the powerful.
There are officials from the World Bank’s Pretoria office to receive us. There is Asad, who is the Country Director for the World Bank. A charming woman comes and shakes hands with me; I am told she is Anneline, the Bank’s security officer, who will be with me during my stay here. Jacob will be driving me around for the next two days. He is the font of wisdom. Every time we are stuck on a question, be it one pertaining to street directions, South African politics or history, we would just have to lean over and ask Jacob.
As we drive to my hotel in Pretoria, cruising down well-maintained boulevards, past magnificent homes, at a street crossing, two luxury cars have come to a halt and two well-dressed men, presumably occupants of the cars, are wrestling on the road. It is a disturbing scene. I ask Jacob what is happening. “They are having a fight,” says Jacob matter-of-factly, making it impossible for me to pursue the investigation any further.
There are few countries in the world that carry as big a burden of history as does South Africa. The brutality of apartheid weighs down not only the pages of the nation’s history books but contemporary policy debates, and statistics. Unemployment among Whites is at a manageable level; unemployment among Blacks would make the worst performing in the Eurozone crisis look good. The story is similar for health indicators, poverty head counts, and per capita income. South Africa today has impressive people at the helm of policy; but the challenges are equally impressive. History can be a difficult adversary. Colored and black people do not have to leave the precincts of the main cities before dusk as they once had to under apartheid law, but thanks to poverty and housing costs many of them still do. They return to their townships, where land is cheap and housing affordable. In fact, the percentage of Blacks living in townships has gone up in the last ten years from 30 to 37.
The next morning, Celestin, who had traveled with me from Washington, Asad and Sandeep from the local World Bank office, my security officer and a special security person (again a woman) for going into the township, two visitors from Brazil, Anaclaudia and Eduarda, who are experts on the problems of the favelas, Xiabo who is an expert on China’s village enterprise, some local people and I head out to Diepsloot, a township half way between Pretoria and Jo’burg and home to around 200,000.
One enters Diepsloot via a modern shopping mall, and there, the mall’s affable manager, Mzo, takes us around proudly showing how well the mall is run. But as soon as one enters this sprawling township, the scene changes sharply.
Diepsloot was created ex nihilo, in 1994, as a residency for displaced people and low-skilled workers. Over time, through lack of work, the low skill has, for many, sloped off into no skill. The terrain is rugged—iron and asbestos, roads that are potholed and undrained. Even the poor homes are protected with barbed wires and the artless cubism of grills.
We walk into a couple of homes, talk to street vendors and local business persons. I am assured that there would be no way to do this after dark when people bolt their doors and the streets wear a deserted look and crime is rampant. As often happens in crime infested areas, there is something lovely about the people at an individual level and the disarming honesty of the residents take me by surprise. A cheerful young man from Mpulanga runs a modest local eatery—an open stove and some ramshackle chairs. He explains that he has no right—ownership or tenancy—to the land where he runs his “restaurant.”
A vegetable vendor says that at all times she is ready to run with her wares when the police come, because she has no rights to the shop and the space on which the shop stands. An impressive woman hardware shop-owner, when queried if she can be asked to leave the land since she has no titles to it, tells me without a moment’s hesitation: “That can happen tomorrow.”
With such an acute property rights problem, it is easy to see that only those with an extra-ordinary appetite for risk would set up business here. Not surprisingly, entrepreneurship is spare and sparse. Few people from Diepsloot go to nearby cities, like Jo’burg and Pretoria, to work because transport is meager and costly. Those who do, end up spending on average 20% of their income on transport.
Late in the afternoon we have lunch with some local business people at a restaurant called Mome’s. We discuss the economics of townships. The pressing policy needs are not difficult to fathom. The property on which people live and run business operations has to come with tradeable rights that allow people the freedom to sell those rights and move on when they need to. I cannot help recalling a paper I wrote with Patrick Emerson (published in 2000 in Economic Journal) where we demonstrated the power of well-specified property and tenancy laws. Secondly, the state needs to step in to provide minimal public infrastructure, include the soft infrastructure of law and order.
At the township conference the next day, I hear about the World Bank’s impressive work collecting data on Diepsloot and analyzing the challenges the township faces. We engage not only with researchers but local administrators, mayors of different towns and several senior politicians, including the Finance Minister. Talking to policymakers and the media at the conference and in other fora, the Eurozone crisis keeps coming up. Above all, they want to hear and believe that the worst is behind us. This is always a difficult conversation. It is easy to see why there is so much distrust of public statements. Responsible policymakers are supposed to calm markets by assuring people that the crisis that just occurred—in Greece, Cyprus or wherever—is an isolated event and will not spill over to larger economies. That being so when leaders tell people that the crisis that just occurred is an isolated event and will not spill over to larger economies, no one believes them. The net casualty is that when that is indeed the case, there is no language to convey it. This is the reason one must try to speak the truth even on touchy and difficult topics.
Two days after the township conference, after speaking at Witwatersrand University and the University of Cape Town and after meeting many more officials, including the officers of South African Social Security Agency (SASSA), doing impressive work on biometric identification of individuals for disbursing social welfare, Celestin and I depart for Dakar, which is another story, for another day.