South Africa: Diamond in the Rough

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South Africa: A Diamond In the Rough
South Africa has been connected to the world economy with its abundant natural resources, for which there have long been international markets and purchasers, since the first Dutch explorers landed there in the 17th century.  Unfortunately, South Africa's pervasive, severe and seemingly perpetual social problems have always been and remain today a substantial drag on South Africa's ability to fully develop a world-class economy.  This paper explores: the interaction of these two forces and how they have at different times hampered its ability to meaningfully trade around the world; the historical points of integration with the global economy; and how the country participated in the world economy and the energy sector post World War II until today.

The Dutch became world traders long before coming to Africa in the mid-17th century. The Dutch colonized in the southern part of Africa in 1652. The goal was that South Africa would be no more than a trading post where ships could get supplies, but it soon became a full-blown colony known as Cape Town.

Political and social troubles were not far behind. Great Britain took over the Cape of Good Hope in 1795, gave it back to the Dutch in 1803 and took it back in 1806. During this time, there was the famous upheaval with the Zulu people and other tribes that resulted in a major military defeat for Britain. Britain persevered in its policies, however, and steps toward global trading with South Africa made major strides in the 19th century.

Significant mineral discoveries in the 19th century during British rule, increased international trading in South Africa, but it came with more social and political upheaval. South Africa “degenerated into conflicts such as the Anglo-Boer War,” when mines of diamonds were discovered near and around Kimberley and Cape Town in 1867 (Amoah 99). “From then on, mining, and the industry associated with it, would always be at the center of South African economic, social and political life” (Ross 59). Additionally, in 1886, “gold was discovered in the hills of the Southern Transvaal, in quantities sufficient for a century’s continual exploitation” (Ross 70). Britain took full control of the gold fields in 1902.

At the beginning of the 20th century, South Africa began exporting its diamonds and gold to Europe and other countries as well as importing consumer goods from Europe. In 1910, the political powers in South Africa made significant strides toward stabilizing at least the political challenges. South Africa negotiated with Britain to become a unitary state, the Union of South Africa, a dominion of the British Empire. This period can be seen as South Africa’s first true integration into the global economy until at least World War I. South Africa took part in World War I by supporting Britain.

World War I and the years that followed, including the Great Depression, governed the politics and economics of South Africa in the 1920s and 1930s. In the 1920s, the government “introduced measures to provide whites with greater job opportunities by instituting higher protective tariffs to encourage local manufacturing; by opening up new overseas trade relations, especially with Germany; and by establishing the state-owned South African Iron and Steel Corporation (Iscor)” (Byrnes Conflict in the 1920s). Squatter camps were created where many of the blacks were living and being charged high rents by the whites, which caused discord with the majority of the population. This was the type of discord, which in later years would consume South African politics that caused major setbacks in its ability to trade internationally.

“By 1933, it was felt that the major economic decisions, particularly whether South Africa should stay on the gold standard or follow Great Britain off it, required a...
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