The character of the great leader Nelson Mandela is significant today on a global context is mainly due to his political activities in South Africa. However his personal ha spread more than that of a South African leader, but in to an internationally recognized key leader who not only helped South Africa, but humanity as well.
The leadership qualities of Nelson Mandela can be observed and understood in line with the oppression of all races other than white faced in South Africa. He not only had to deal with the political stability of the country, but also to establish goodwill and trust of the international community. South Africa was in turmoil with regards to economic sanctions, sports bans and violation of United Nations Human rights acts during the previous regimes. The greatness of the man and his management of the country has many positive effects on the world economy. Nelson Mandela through his management practices of governance and administration has provided many leanings to the global business community by emerging victorious in the face of adversity. Nelson Mandela's Management style is unique and is designed to create harmony and build partnerships to work together to achieve one common objective. A management and a governance style such as his was required to overcome the situation in South Africa with the international Community imposing restrictions on the country which resulted in losses to the South African Economy.
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The report aims at seeking the management style of Nelson Mandela and the challenges faced by him with regards to guiding South Africa through troubled waters, and bring prosperity to the country. The process of reforming the mindset of the international community to assist the struggle of all South Africans by bring many reforms to an ailing political system.
The South African economy needs to be analyzed from different perspectives. The country is rich with resource including human capital. Over the years the growth of the economy has been under severe turmoil due to the political instabilities and human right violations that has occurred in the country.
An in-depth analysis is required to ascertain the situation of the South African during the time of apartheid to the present. A comparison of the economy, politics, Trade and Globalization with regards to the past is needed to understand the impact of the growth of the country.
South Africa during the Apartheid
South Africa, a land with a vast amount of resources is located at the southern tip of Africa with a population of 43 Million out of which 79% are blacks and 10% are whites followed by other minorities (Appendix 7). With a large population comes a huge cultural diversity with South Africa having currently 11 National languages with the main percentage of the population speaking Zulu followed by Afrikaans and with English is 5th most used language amongst the 11. With a huge amount of blacks as compared to whites, the white's seeked control over major aspects of the Economy and Trade and left the blacks sorting after their work and livelihood. As the figure below shows that with the majority of the population the blacks actually lacked the land allocation and were falling behind in the income levels. With educational levels and especially health levels when compared to the whites saw the black infant mortality rate being a lot more than whites saw the sad state of affairs blacks had to deal with.
Mandela's Rise to Presidency
18TH July 1918 marked a historic day in South African history with the birth of their joyous leader Rolihlahla Mandela. He was always destined to be a great leader with inspiration from him father who was the principal councilor to the Acting Paramount Chief of Thembuland.
With his father's death, the young Rolihlahla became the Paramount Chief's ward to be groomed to assume higher office.
He seemed to be influenced by the amount of cases that came before the chief's court and this led him to have aspirations in becoming a lawyer.
He heard stories from the village elders about their ancestors' pain and valor during the war against resistance in defense of their land and made him feel like making his own contribution to the freedom struggle of his people.
Always on Time
Marked to Standard
After receiving a primary education at a mission school he was given the name Nelson which he is continued to be called today. He was enrolled into University College of Fort Hare for his Bachelor of Arts Degree where he was elected onto the Student's Representative Council.
He eventually was suspended from college for joining in a protest boycott but he managed to head off to Johannesburg where he completed his BA by correspondence, during this time he commenced to study for his LLB. He entered politics in earnest while studying in Johannesburg by joining the African National Congress in 1942.
During this time Nelson Mandela opened up a two man law firm along with Oliver R Tambo to become the first black law firm in South Africa serving to people who didn't have money to defend themselves.
Mandela soon impressed his peers by his disciplined work and consistent effort and was elected to the Secretary ship of the Youth League in 1947. By painstaking work, campaigning at the grassroots and through its mouthpiece Inyaniso' (Truth), he was taken into the ANC campaign against unjust laws in 1952. This measure was due to the victory of the National Party which won the 1948 all-White elections on the platform of Apartheid, at the 1949 annual conference. The country is divided between 9 Provinces which during apartheid rule the provinces were run by whites and forced blacks out of their homes and livelihood.
For his part in the Defiance Campaign, Mandela was convicted of contravening the Suppression of Communism Act and given a suspended prison sentence. Shortly after the campaign ended, he was also prohibited from attending gatherings and confined to Johannesburg for six months.
The span in the 1950 led to Nelson Mandela being a victim of various forms of repression. He was banned arrested and imprisoned. For much of the latter half of the decade, he was one of the accused in the mammoth Treason Trial at a great cost to his legal practice and political work and eventually after mass protest and violence the ANC was outlawed.
With the ANC at this time illegal, the leadership picked up the threads from its underground headquarters. Nelson Mandela emerged at this time as the leading figure in this new phase of struggle. He immediately went from underground to lead the campaign. The government saw the support Mandela gained throughout the country and responded with the largest military mobilization since the war, and the Republic was in an atmosphere of fear and apprehension.
Nelson Mandela was caught, convicted and sentenced to five years imprisonment. While serving his sentence he was charged, in the Rivonia Trial, with sabotage. Mandela was sentenced to life imprisonment and started his prison years in the notorious Robin Island prison.
During the apartheid, South Africa had a lot of problems with several countries restricting trade with most of Africa but these countries didn't have an adverse affect on South Africa's economy but it wasn't until 1980's where the United States and the EEC (European Economic Committee now the European Union), Economic Sanctions place even d on South Africa by the Western World, sports bans from cricket and football tarnishing their global image even further along with political instability lead to businesses closing up and the economy taking a downturn.
In 1983, saw a change in perspective with the First Executive State President Pieter William Botha's application of the apartheid system was less repressive than that of his predecessors: interracial marriage - which had been banned - was legalized, and the constitutional prohibition on multiracial political parties was lifted. He also relaxed the Group Areas Act, which barred non-whites from living in certain areas. In 1983, constitutional reforms granted limited political rights to Colored's (South Africans of mixed white and non-white ancestry) and Indians. Late in his term, he became the first South African government leader to authorize contacts with imprisoned ANC leader Nelson Mandela. However, on the central issue of ceding power to blacks, he would not budge. In the face of rising discontent and violence, he imposed greater security measures such as states of emergency and state-sponsored covert action against anti-apartheid activists. He also steadfastly refused to negotiate with the African National Congress
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After a total of 27 years in captivity he was released on 11 February 1990, Mandela plunged wholeheartedly into his life's work, striving to attain the goals he and others had set out almost four decades earlier. In 1991, at the first national conference of the ANC held inside South Africa after being banned for decades, Nelson Mandela was elected President of the ANC while his lifelong friend and colleague, Oliver Tambo, became the organization's National Chairperson.
Nelson Mandela has never wavered in his devotion to democracy, equality and learning. Despite terrible provocation, he has never answered racism with racism. His life has been an inspiration, in South Africa and throughout the world, to all who are oppressed and deprived, to all who are opposed to oppression and deprivation.
PESTEL Analysis of South Africa
PESTLE analysis is the acronym for "Political, Economic, Social, and Technological, Legal & Environmental analysis" the macro environment and the macro-environmental factors which are focused by managers to asses the risk, seek opportunities by minimizing uncertainty. This is a very useful strategic process which needs to be monitored both post and pre assessment of a particular country to make calculated management decisions. This model can be used as a gauge to measure the feasibility of conducting business as well as provide information to the management
The political situation of a country is a key factor that an international manager takes in to account when making decisions. The stability of the government; and its policies are a key indicator of the political landscape of the country. The political situation in a country effects the business decisions and managing a business and the attractiveness for operation and expansion depends on the policies, laws, tariffs, enforced. Therefore having a stale government and fair political governance is a key determinant for international Managers in decision making. The stability of the political situation of the country helps decision makers in organizations to operate by minimizing risks to achieve their objectives,
South African political landscape is quite unique as the establishment of democracy which lead in to government stability was possible only after 1994.with the election of Nelson Mandela the first Black president in a country which has a population of 44 million.
The apartheid is South Africa played a major role in destabilizing the economy as the thinking of the ruling party who was depriving most South Africans to the basic requirements of human rights. During this time the productivity of the country dropped and the eyes of the international community South Africa were imposed with sanctions for its unfair and bias governance. During the apartheid the majority of blacks, Asians and coloured individuals were not represented in parliament with just a minority rule.
Nelson Mandela through is life's work and dedication to unites south Africa and bridge the divide among the blacks and whites in the country preached of a brighter future with practical reforms to enhance the quality of life for the native South Africans and bring about prosperity to an ailing economy ht by sanctions placed by the United Nations and other developed countries.
Nelson Mandela was challenged to clean up the hurt, rivalry and bring about stability to the country and therefore his exemplary life which was to lead through his life's work on what he knew as just. This mentality of firmness, forgiveness symbolized him in the international community, as well as among South Africans, who sort after him for guidance to prosper the country with clear visions and stable and fair governance.
The management style he practiced during his presidency stabilized the political landscape, thus enabling the lifting of the trade bans for South Africa. The UN sanctions were uplifted. The government under Nelson Mandela addressed the oppression faced by the blacks, and other colored races and created policies to implement programs to maximize the labor force to develop the economy.
Nelson Mandela has addressed the following political situations through his governance.
- Minimizing political risk thus enabling stability of the government and the society
- Build better relations with international diplomatic missions to enhance the relationships with the Build a reliability and integrity of the legal system which assist the business infrastructure, and protects the rights of all persons
- Addressed the bureaucracy to enhance the effectiveness of the government's economic policies to enhance economic growth
"The informed and proactive management of political risk goes hand in hand with profitable, responsible and sustainable business. Managing risk well can not only improve profitability but enhance a company's social license to operate as well as its reputation and brand equity "(Warhurst, 2008)
The Political Risk is a chart that displays scores with respect to the following nine different aspects of political risk scored on a scale of 1-5 with 1 being the least amount of risk and 5 being the highest amount of risk (A.M. Best Company, Inc., 2009) International Transactions Policy - Effectiveness of the exchange rate regime and currency management.
- Monetary Policy
- Fiscal Policy
- Business environment and ease of doing business.
- Labor flexibility including the company's ability to hire and fire employees.
- Government stability.
- Social stability including human development and political rights.
- Regional Stability
- Legal System - Transparency and level of corruption in the legal system.
Countries rated from one of five in tiers, they are "CRT-1" (Country Risk Tier 1), denoting a stable environment with the least amount of risk, to "CRT-5" (Country Risk Tier 5) for countries with most amount of risk, Nelson Mandela was challenged in 1994 to gain financial investment, Help and commitment form the international community for the future development of South Africa and his management theories helped to achieve same.
Changes in Economic Trends
As stated before, South Africa had a torrid time during the apartheid system however the whites actually prospered during this period of time. With the support of foreign capital, the mines and the mining finance houses which were largely dominated by English speaking South Africans shunned out opposition and other races. Their workforce was basically black because they believed that black were desperate, in abundance and indispensable.
With further incentives provided to white land owners and company owners such as a varied labor practice law which kept wages low, outlaw trade unions and even tolerating job reservation for white employees with prevented blacks from developing skills. White trade unionism was allowed but there were no black trade unions until the 1970s when black workers began flexing their economic muscles through trade unions promoting political change.
During the apartheid system the post-colonial African countries had already imposed sanctions on South Africa in solidarity with the Defiance Campaign which was initiated by the United Nations; these measures had little effect because of the relatively small economies of those involved. The disinvestment campaign only impacted South Africa after the major Western nations, including the United States, got involved beginning in mid-1984.
The imposition of international sanctions on the country began economic pressure that saw the unraveling of apartheid but the most damaging isolation was the denial of investment funds and the boycott of South African investments particularly by influential universities and foundations in the United States. United States of America constitutes of 1/5th of the total foreign investments during the time and this created a huge dent in the economy with 250 companies pulling out followed by Europe which was their 2nd biggest investor.
Ironically during the 1980s gold reached its highest price as a result of international tensions reaping huge profits for the mining company conglomerates. However, because of currency restrictions they were unable to invest abroad. The result was that they used their surplus funds to buy up businesses in virtually every activity in the economy. However, the financial benefit for the mining companies of continuing to support the system eroded as international capital stopped flowing into the country.
From 1984 onwards because of the disinvestment campaign and the repayment of foreign loans, South Africa experienced considerable capital flight (Appendix 4). The net capital movement out of South Africa was (African National Congress, 2004):
R9.2 billion in 1985", R6.1 billion in 1986, R3.1 billion in 1987, R5.5 billion in 1988.
The capital flight triggered a dramatic decline in the international exchange rate of the South African currency, the rand. The currency decline made imports more expensive which in turn caused inflation in South Africa to rise at a very steep 12-15% per year.
The South African government did attempt to restrict the damaging outflow of capital. In September 1985 it imposed a system of exchange control and a debt repayments standstill, under exchange control South African residents are generally prohibited from removing capital from the country and foreign investors can only remove investments via the financial rand, which is traded at a 20% to 40% discount compared to the commercial rand. This means companies that disinvest get significantly fewer dollars for the capital they withdraw.
Nelson Mandela Influence on Economic Activity
According to the United Nations South Africa's economic growth is commendable with adequate guidance and political vision which enhances the opportunities for investment to the country and trade development to other markets on South African produce. The productions of Gold, Diamond are the main exports out of South Africa and are the key exports from the country. At present there is a drive to enhance other industries such as services, food and beverages specially wines and also the focus has shifted to tourism with the country offering many diverse attractions from wildlife both on land and in the ocean, with magnificent landscapes, rich culture, history and heritage.
The extensive modernization projects, particularly in health and education. Pure water for all is a theme that is common and has high investment by the government to provide water resources to all the deprived homes. This is a step to reduce the spared of deceases among the population and create a healthy workforce. South Africa faced many hard ships due to lack of education to the masses, discrimination to most of the population which is reflected in the following graph post 1994.
As depicted in the table during the apartheid most of the population was oppressed so their contribution to the economy was restricted. There are disparities between basic essentials provided to the majorities while the whites dominated most resources
During this time the surrounding African countries stopped all trade with South Africa but there was no impact as the amount traded was not significant, However this changed with America and Europe in the mid eighties stopped all FDI coming to South Africa and America aloe pulled out their investment which was an impact that the South African economy could not handle. Only due to this reason the rule of the Apartheid started to ease with the first multi party democratic election was held in 1994 and Nelson Mandela was appointed as president to a country in turmoil.
South Africa was home to many multinational firms who did not move out even during the apartheid; with the access to cheap labor initially pre 1994 the MNC exploited same. However Post 1994 under the rule of Nelson Mandela and his style of management and governance MNC were forced to adjust to accommodate equal pay, reduce discrimination and to assist a fair growth to all persons. The government actively encouraged foreign investment to South Africa by stabilizing the political environment, providing concessions and attracting FDIs to the countries. Building the human capital with education on trade and soft skills, to cater to the demands of the globalised world: thus enabling the people access to jobs and also to create 400,000 new jobs in immerging industries of agricultural exports and tourism.
Highly developed communication and transport facilities, has created a strong economic growth in recent years. Attracting major events such as sporting events and other world renowned conferences South Africa has been successful in promoting the nation as a tourism destination to the world.
In resent years many sporting events were held in South Africa after being banned from participation in international sporting events such as Cricket, Rugby, football etc. this was a strategic move made By nelson Mandela to create a common medium to compete and to build trust among nations to change the ideas about the country. The effects of these can be seen today with the present government investing heavily on Visit South Africa campaign which will be a major contributor to the economy of South Africa
South Africa is a multi lingual country with 11 official languages they are listed as follows
The 11 languages
Many nationalities are present in the country through migration and boarder crossings which has now contributed to a diverse multi national population. The population statics can be broadly summarized as XX % blacks, XX% whites XX & mixed races while XX % are of Asian origin. The main religion can be stated as Christianity. Access to education is difficult due to the past apartheid regime where the access to education was restricted to only the whites with only a very selected few blacks gaining access to education. The number of Women in educational institutions during the regime was near to zero.
The apartheid regime has accounted for the deterioration of the colored people living in South Africa as they were not given access to basic requirements such as health, education and political representation. These individual that is more than 80% of the population has been oppressed, and denied growth prospects pre elections in 1994.
After 1994 and the election of Nelson Mandela large scale reforms were put in to place to minimize the risk of loosing man power in terns of skilled labor both in trades as well as professionals. The reforms are set to create a nation of knowledgeable persons who can cater to the increasing demand of the labour force which will assist the growth of the country in to the next millennium.
The social skills and etiquettes of South Africa is diverse. Added to that most of the population has had no access to a structured system of education that is inline with the changes taking place in the global environment. The challenge faced by Nelson Mandela is to overcome these barriers to create a sense of pride as a South African. Bringing many dialects in to a few national languages, providing adequate support to the cause of One South Africa: and taking a united nation forward in harmony, brotherhood and a greater sense of community; to prosper the country.
Listed are some key operations and projects that were undertaken to build the societies with a sense of ownership and so that the nation can proceed further with the changes in the world and the globalised environment.
- Education and reforms to education
- Access to health care and medicine and trained staff
- Access to clean water and sanitation
- Equality in pay and promotions
- Taxation policies
- Rights to democracy with the power to vote, and express one self
Post apartheid South Africa is a tolerant country with its western influence they lifestyle is very social by nature. However there are some disputes within the races and these needs to be negotiated with caution. Some of the wounds are still fresh and time will be a grate healer. This is amply displayed by nelson Mandela through out his life it can be said that his management theory is created taking in to consideration the cultural diversities and tolerances that was displayed.
The challenge of post apartheid was to create a society of harmony and togetherness, combining the various methods of thinking to accommodate a rapid growth of the country. The theories displayed in the management and governance style of nelson Mandela can be highlighted a philosophical and these traits displayed have created a nation that is moving forward.
The society through its western way of thinking and influences, and with the cultural traits has a unique balance which is an advantage in communicating with international organizations. With the boom in the service industry these traits can be used to enhance the opportunities for the foreign multi national companies to explore.
Access to technology was limited to certain areas: with the most parts of the country not having the man power or intellectual ability to use, design or develop the technological front due to lack of infrastructure and education.
The distribution of income is the next barrier that is evident the last 20% of the households in South Africa accounts to only 3% of the national income. The ton 20% of the households accounts of 65% of the countries GDP with the remaining 60% accounts for 32% of the GDP.
It is also note worthy to take in to consideration that the population now stands close to 50 million but the internet penetration is low as highlighted in Appendix 8
As the world in moving to a fast paces internet society with a high globalization drive. South Africa needs to catch up fast. The industries become efficient with more access to the internet. The lack of educational infrastructure, as its still being developed post apartheid, and the disparity of income levels the internet penetration is low.
In the management of the government a high focus is provided to the development of infrastructure of Information Technology, tele communications, education and access to other new technologies to improve the efficiencies of all forms of industries in South Africa.
Improving the technological infrastructure in the country will attract more FDI to the country as this is a booming industry. It is safe to note that many in South Africa will have their first Interne experience on a mobile and adjusting to these new technologies are challenges which can be overcome and used as opportunities by the government to bring more revenue to the country as this vastly remains an untapped market.
The legal framework was one sided through the apartheid with no relevance to other civilizations living in the country. The legal framework was unjust, bias and did not respect the rights of individuals. The minority white skinned persons that were in power practically got away with everything from acts of violating human rights to acts of violence.
During this regime some NMC worked well with the lax labour law restrictions and they were able achieve better profits through same. However after the boycotting of South African produce, stopping of FDI and sanctions imposed by the United Nations prompted and pressured the then president De Kirk to move in to reforms, this enabling a change in the judiciary.
After the apartheid regime and the election of Nelson Mandela in 1994 the legislature changed it was created in a conducive manner taking in to account the UN guidelines for the protection of human rights the Roman Dutch Law and the English law to suit its territorial integrity and create equality and improve foreign trade. Legislature, judiciary and its policies were created to attract Foreign Direct investments so that this will assist the further development of the country.
Depicted in the picture the legal requirements of the country needed large scale reforms and these reforms were needed to enhance the economy of the country. Nelson Mandela and his government made the changes to accommodate the investors to invest in South Africa, while remaining firm on exploitation of labour. These enabled the country to become stable in its policies, politics, economy, economic reforms, and legal frame work to develop industries such as tourism, invest in sport activities with a fair opportunity for all to participate and provide equality with access to healthcare, education, shelter, freedom of movement, freedom of speech, etc.
The management of a government through a time of change is challenging and the required legal frame work is required. These legal frame works was set up so that the South African economy can develop, and create opportunities for all South Africans
There are other factors that managers could be taken into consideration such as the trade history, the incentives the government is willing to give out to companies willing to invest in the country and the globalization factor which put out whether South Africa is a viable country for a multi national to invest in.
As managers it is imperative to come up with historical date in order to gain a certain insight as to whether the country or location is worth investing in.
History of South Africa has been marked with travesty and degradation due to the brutal apartheid system which constituted a system of racial segregation which lasted from 1948 to 1993, during this time the countries as a whole went through several downward trends amongst the international community, with restrictions on trade by the UN and economic sanctions amongst their major trading partners Europe and United States of America. During the post apartheid system there has been a transition to democracy as well as the remarkable transition to democracy under the leadership of former imprisoned anti-apartheid activist and future president, Nelson Mandela (Porter, 2010).
South Africa with his vast resources and industries has South Africa firmly amongst the top countries to do business with. Forty-five percent (45%) of its homeland relies on imported food. Fishing is regarded as a major industry while cattle and sheep-raising are also vital in the economy. Minerals account for 70% of the country's earnings in foreign trade. In fact, South Africa leads the world in the production of gold, vanadium and chrome. It is also standing along the lines of leaders in international business when it comes to gem production of diamonds, uranium, asbestos, antimony, platinum and manganese. The only industrial resources which did not contribute largely to the mining industry are petroleum and bauxite since they could not supplement commercial consumption. Domestic mining of coal makes up 80% of the country's primary energy needs. It is also considered as the world's largest producer of synthetic fuels. More than half of the African continent, at a rate of 70%, generates electricity from South Africa. The United States is actually the single trading partner of South Africa. As evidence to this, statistical data gathered depicted the reliability of trade between the two nations. Since 1999, increases in import and export relations between the two were seen. To these days they have lived with the legacy of supporting each other in world trade (Foreign Tradex, 2010).
Foreign Investments during & after apartheid
Investments have taken a hit during the time of the apartheid with US investment which was mainly in mining and manufacturing and wholesale and retail trade with approximately 250 American companies accounted for about one-fifth of total foreign investments in South Africa as of 1982. Furthermore during the period between 1984 and 1987 the number of US companies with direct investments in South Africa dropped from 325 to 259. In 1986, the United States and the EEC banned new investment in South Africa. This hit the economy pretty badly with their major trading partners being the US and Europe. As Appendix 1 and Appendix 2 shows just how important the two countries are to South Africa's economy.
After the establishment of a multiracial government in 1994 and the lifting of bans led to an increase in foreign investment in South Africa due to certain trade agreements that have been made in cognition in order to better both trade as well as relations with both parties. South Africa has negotiated a host of general trade agreements since 1994 as part of the process of normalizing trade relations with international trading partners.
General trade agreements do not make provision for market access in specific sectors, but essentially allow for Most Favored Nation tariff treatment, which the global minimum standard is for international trade relations as established under the World Trade Organization (WTO).
The numbers of multinationals with direct investments or employees in South Africa have increased by over 20%. By 1997, total foreign direct investment (FDI) exceeded $18 billion. Inward FDI flows increased to $1.5 billion. Even now different to worldwide trends in the economic downturn, FDI inflow in South Africa reached a record $6.65 billion.
The UK has been the largest investor with almost half of the total, followed by the US, Germany, the Netherlands, Malaysia, and Switzerland. Manufacturing and business services gained the main share of FDI, led by telecommunications; major investors included PETRONAS, SDC Communications, Dow Chemicals, Telecom Malaysia, and Coca-Cola
Nelson Mandela's impact on Trade
Nelson Mandela is an international icon and a symbol of hope for the oppressed and marginalized people across the globe and this worked well with how the western world and the world in general saw him and in turn saw in a vibrant South Africa.
During his term as president, Nelson Mandela headed out to Berlin to talk with the EU; the summit has taken a small step to improve relations with South Africa. EU leaders agreed to ratify a long-stalled trade pact that will open up European markets to South African produce. The deal creates a free trade zone for 90% of their two-way trade, which is worth $20bn a year. Economists say the deal could add 1% a year to South Africa's growth rate. The EU is South Africa's largest trading partner, foreign investor and aid donor (BBC News, 1999).
This trade agreement removes all doubt about the trade relations between South Africa and the EU which South Africa is heavily dependent on. The agreement is a further step to consolidate and strengthen the firm partnership between the European Union and South Africa in the area of politics, business, and commerce.
The deal will help boost South Africa's ailing economy, which has been slowing since the Central Bank raised interest rates last year to defend the currency, the rand. Traditional exports of diamonds and gold have suffered from falling prices.
There were some immediate benefits in terms of people making investment decisions having more certainty. The agreement has a much broader significance as it will also apply to other southern African states who are members of a regional free trade pact with South Africa (BBC News, 1999).
The twelve-member European Union (EU) was South Africa's leading trading partner in the early 1990s, purchasing almost 40 percent of its exports in most years. European (including British) direct investment in South Africa had reached US$17 billion, or 52 percent of all foreign investment in South Africa, by 1995. By the mid-1990s, the EU could promise South Africa one of the world's largest markets for South African exports. The EU also proposed a variety of loans and grants on preferential terms for South Africa in the 1990s, as well as a US$122 million aid program for priority needs such as education, health, job creation, and human rights (M.Byrnes, 1996).
Trade and investment with United States has been steadily growing since 1994 with the abolishment of the apartheid system.
United States being South Africa's single biggest trading partner it was imperative that Nelson Mandela see to repair the damage that was there during the apartheid system. He as well as the government of United States of America that was headed by George Bush Senior sort to support each other's economy. They did this through several agreements such as the:-
Trade and Investment Framework Agreements (TIFA's):- Although the United States have actually developed various TIFAs with most nations around the world. The nature of this treaty focused on trade, friendship, cooperation and other ties that bond the two nations. The primary objectives were set on the expansion of trade of goods and services between them considering all the terms of the agreement and founded on its framework. Furthermore, the agreement was taken for appropriate measures that will encourage exchange of goods and services while securing a long-term development and diversification of trade. Lastly, it encourages both countries' private sectors to enhance the growth through job creation and economic development which will create an open environment for investment.
A free trade agreement would mean expanded market access for local brands into the US and have a significant impact on the country's exporters. The US market is valued at more than $9-trillion. A wide range of South African industries stand to benefit from the agreement, in particular the textile, clothing, vehicle manufacturing and agricultural sectors.
Nelson Mandela changing the views of the International Community
Former president Nelson Mandela highlighted the importance of creating capacity to re-attract foreign investment as tool to support the national development strategy in South Africa (SA), in the perspective of foreign investors rejecting South Africa during the apartheid eras.
Nelson Mandela's policy and trade agreements with the international community saw a prosperous time for South Africa in general amidst the devastation both politically as well as culturally. With this new found unity both in South Africa as well as the world towards South Africa, the country moved to a new level.
Business when analyzing whether to invest in South Africa would have to take into consideration the infrastructure as well as the situation both economically as well as politically with in the country. After 1994 when Nelson Mandela won the election it bought a sense of unity and graciousness. The blacks found him as a god sent freedom fighter, fighting for unity and equal rights for the masses while the whites believed that Nelson Mandela was a forgiving man who at the time campaigning for presidency and during his term has never once talked about taking away the rights of the white people.
Businesses knew this would be huge opportunity to miss, with the amount of resources and the abundance of skilled labor able to speak several different languages to actually communicate not only to South Africa but all of Africa.
There are many reasons why SA would appeal to foreign investors, as the country is the economic powerhouse of the African continent with a comparatively open economy. In addition, the country's first world transport and telecommunication infrastructure, its abundance of mineral deposits, its diverse natural resource base and it's well-developed. Manufacturing industry all contribute to the country's favorable investment prospects.
The Government of South Africa knew they had to come up with certain incentives in order to induce foreign investments. They have started to educate and train the apartheid generation during his reign as president and he believed that people from every generation can make a difference. The second challenge that came up to him was the critical challenge in addressing poverty, income inequality and job creation and to now the U.N Report states that the number of South Africans living in absolute poverty has been on the decline.
FDI inflows have been steadily going in an upward trend since 1994 as shown in Appendix 3 Nelson Mandela came up with an emphasis more on agriculture this was one of the strategies because he discovered that there was a huge dependence amongst the Gold mining and diamonds, this has opened up a whole sector for the domestic players as well as foreign players. Businesses have been booming due the prosperity amongst cultures which has lead to more inflow in investment has lead to more employment and a gradually level par income rates when compared to whites.
Globalization has made the world smaller, increase in trade and investments, internet, cheap phone calls, instant cash transfers have made the world interdependent than ever. South Africa this couldn't be more evident, a country that has been shun away from the global world in many areas of trade, economy and sports.
With the arrival of South Africa's first black president in 1994 it open doors amongst the Western World and brought unity amongst the people of South Africa.
With the vast resources to capitalize and the abundance of labor, global companies not only have a stable political environment with a sound economy, they also have incentives provided by the government in order to help the company but also the country by providing jobs and skills and infrastructure to take South Africa to the next step.
The effects of Globalization can sometimes have an adverse affect on the country and the resources there mainly the labor. Globalization without internal policies protecting respective industries it could lead to exploitation of labor, safety standards are ignored to produce cheap goods and other malpractices. Nelson Mandela knew that if South Africa would turn a new chapter, it would have to embrace the new but also be cautious of the negative effects of it.
Nelson Mandela came up with certain stipulations that multinational companies had to adhere in order step into the prospects of opening up an industry within the country. The government believed that everyone was equal and that was more evident with the income levels of blacks gradually being in par with whites.
The Government of South Africa demonstrated its commitment to open markets, privatization and a favorable investment climate with its introduction of the Growth, Employment and Redistribution (GEAR) strategy - the neoliberal economic strategy to cover 1996-2000. The policy set government the goals of achieving sustained annual real GDP growth of 6% or more while creating 400,000 new jobs each year. The policy was meant to increase investment, especially Foreign Direct Investment, in the country to help achieve these goals.
Creating Awareness of Change
South Africa had a huge public image problem during apartheid and the time after, it was up to the incumbent president at the time Nelson Mandela to come up with a way to show off to the world with the change in situation in South Africa comes a change in fortunes.
Just after a month of office he invited the South African rugby captain François Pienaar for tea and discussed the prospects of the team in the up and coming World Cup. Pienaar who is white was in awe on how Mandela carried himself and the personality of the man that has gone through such hardship in his time. Mandela's challenges did not only lie on the white side of the apartheid fence, he had some tough political persuasion among his own black supporters too. They had been brought up to detest rugby. Next to the old anthem and the old flag, there existed no more repellent symbol of apartheid than the green Springbok shirt. That was why the blacks-only pens at rugby stadiums were always full on international match days, cheering the Springboks' opponents (Carlin, 2007).
Mandela set himself the mission of converting black South Africans to the perplexing notion that the South African team belongs to all of South Africa. With several people disliking that notion and even gone as far as showing their disgust during a speech Mandela gave to gather support for the team but eventually, Mandela being a natural-born persuader and black South Africans an amazingly forgiving lot, he achieved his goal. Come the morning of the final, on June 24, 1995, black South Africans were as excited as their white compatriots.
It was the picture of black Nelson Mandela wearing a South Africa "Spring Bok" jersey handing over the trophy to white skipper François Pienaar was probably one of the most iconic pictures in the history of he South Africa and bought a new ages of co-operation and unity amongst all races of South Africa.
Soon after other sporting bodies gave way and allowed South Africa to participate. The public had gained a reputation in being athletic and the government saw this as an opportunity to help the country explore their capabilities by improving the infrastructure in different aspects. This has led to South Africa hosting several different events such as the World Cup in Cricket, The T20 World Cup, Champions Trophy, Rugby World Cup and now the up in coming FIFA World Cup. These have all been huge investments in South Africa that has paid loads of dividends with several companies both foreign and domestic putting in funds to make sure the event goes on smoothly. This in turn helps the economy with a gain in tourism for example with the 2010 FIFA World Cup just a few days away most of South Africa's luxury hotels are already experiencing unprecedented occupancy levels, driven mainly by holidaymakers in Cape Town and business travelers in Johannesburg. With the years following the sports events, South Africa expects many return visitors who came here initially as sports supporters thus making it an increasingly popular destination to the world travel market.
This would also have a huge impact on jobs, the figures are very encouraging. The number of annual jobs sustained in total is 695,000. Of these, 280,000 annual jobs will be sustained in 2010 and 174,000 by the net additional economic activity in this year. This is an economic measure of equivalent annual jobs sustained by this amount of economic activity, and not new jobs created. Businesses see that as a great opportunity to invest in South Africa with the inflow of tourism and better infrastructure and several incentives given by the government and the commercial interest in South Africa.
Since democracy returned to South Africa in 1994 and bought South Africa to the attention of the world. Global companies have been heading to South Africa to take advantage of the country's vast investment potential. The Government then decided to take it up on themselves to induce foreign investments; the strived to achieve a sophisticated business environment of South Africa provides a powerful strategic export and manufacturing platform for achieving global competitive advantage, cost reductions and new market access (South Africa: Alive with possibility, 2010).
Almost half the members of the American Chamber of Commerce in South Africa are Fortune 500 companies, and over 90% operate beyond South Africa's borders into southern Africa and across the continent (South Africa.info, 2010).
Nearly 20 years after abandoning apartheid-era South Africa, multinational banking giant Barclays returned in 2005 with a massive R30-million purchase of a majority stake in Absa, one of the country's big-four banks. The historic deal was the biggest single foreign direct investment in South Africa, ever. German motor manufacturer BMW opened its Rosslyn assembly plant near Pretoria in 1994. The company recently announced a further investment of R2- billion in the facility, allowing it to produce 60 000 units a year - and increasing its South African export capacity to R50-billion over the lifecycle of future models. The world's largest communications company, Vodafone, announced in November 2005 that it is to increase its stake in South African cell-phone company Vodacom to the tune of R16-billion. Other major multinationals with major operations here include Volkswagen, General Electric, Acer, Cisco Systems, Microsoft, EDS Corp, Hertz, Levi Strauss, Coca-Cola, Pepsi, and Indian giants Mittal and Tata (South Africa.info, 2010).
Investors are looking at Africa in a new light and increasingly seeing the need to have a foothold there, much as was the case with China 20 years ago. To be successful in Africa, business leaders must reject the image of a continent in constant crisis and that's what investors should remember and then they would see vast benefits (Reconnect Africa, 2010).
A Turn for the Better
In 1990 the white president Frederik Willem (F.W.) de Klerk recognized the economic unsustainability of the apartheid system and released Nelson Mandela the black nationalist leader and unbanned the African National Congress (ANC) that Mandela led. Despite some fears that the country could become unmanageable because of tribal conflict or even a military take over by the white-dominated armed forces de Klerk and Mandela guided the country to democratic elections in 1994 with Mandela as president.
Despite socialist rhetoric and support from socialist countries in its early years the ANC maintained the mixed economy and encouraged the market economy including relaxing foreign exchange controls.
The 1994 government inherited an economy wracked by long years of internal conflict and external sanctions. The government refrained from resorting to economic populism. Inflation was brought down, public finances were stabilized, and some foreign capital was attracted. However, growth was still subpar. At the start the President Nelson Mandela vowed to promote economic growth and foreign investment by relaxing restrictive labor laws, stepping up the pace of privatization, and cutting unneeded governmental spending. His policies face strong opposition from organized labor. Onward economic growth picked up significantly; both employment and capital formation increased with The affirmative action policies, called Black Economic Empowerment, have seen a rise in black economic wealth and an emerging black middle as well as work place relation with blacks and whites working in harmony.
The policies and the incentives provided by the government of Nelson Mandela have seen the country move and prosper and only the best is yet to come. With several sporting events including the up and coming FIFA World cup which a massive inflow of tourists coming into the country and also a massive inflow in investments prior to the World Cup. With approximately a billion people watching the world cup it would put South Africa in the focus of the world. At present every year South Africa attracts more than 6.5 million visitors, many drawn by the country's climate, cosmopolitan ambience and culture and the mysteries of the land. Local tourism currently is at about 8 million trips which is a contribution to the locale economies and is welcomed by investor who are seeking to invest in the country. This increase of travel within and to South Africa speaks volumes on the income of the locals, the growth of the industry, political stability and freedom of movement and the number of the population these can drive the economy forward by attracting FDIs. This is within the overall goals of diversifying South Africa's economy and ensuring sustainable GDP growth by capitalizing the emerging tourism market. South Africa can create a business and leisure hub for investment, creating an opportunities and the environment for international companies to reach out to all parts of African continent using the resources available in South Africa (South Africa Alive with Pissibility, 2010). This would bring even more prosperity to South Africa with even more employment and all these factors would lead to the economy taking an upward trend.
South Africa has gone through a lot of turmoil and heartbreak through the apartheid system which saw injustice among the blacks and a breakdown in trade and economic activity with the sanctions posed by the United Nations and the Western World which held and still holds a huge percentage on the foreign investments within South Africa.
After mass oppression came a joyous day among South Africa as a whole when they elected Nelson Mandela for president, he inherited an economy devastated with civil unrest and barriers in every walk of life; he knew that he would have to do something drastic in order to gain the trust among the globe.
He brought down sanctions that were imposed by the west and also provided incentives for companies willing to invest in South Africa. He developed the infrastructure and also improved the education of the public in order to gain a demand for skilled labor.
He also knew that the dependence in normal goods of export would have to cease and new sectors and industries would have to be introduced and promoted. As Appendix 5 shows sectors that didn't have much of an opportunity to grow during the apartheid grew substantially because of the policies and the incentives created by the Mandela government.
International Managers see South Africa as a diamond among the rough. Amidst it's horrific past; the country has grown leaps and bound to compete with any other super power as shown in Appendix 6. The country itself held host to so many events and with the biggest one coming up all thanks to the vision and mission of Nelson Mandela.
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