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Business Leadership in South Africa's 1994 Reforms

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The democratic, multi-racial election of 1994 ended the apartheid era in South Africa. Leading up to that historic change, a group of white business leaders saw that their country might follow one of two paths. It might experience an overthrow of minority rule, ending up something like Cuba, with a revolution and nationalization of major industries and isolation from much of the world. Alternatively, it could follow a path something more like Brazil, which ended military leadership and redemocratized to tolerate social change and political crises while encouraging a dramatic business growth.

From 1948 to 1991, the South African government had enforced apartheid, a policy of racial “separatism” that favored the less than ten percent of the population defined as white. Non-white people could not own property or run businesses outside “reserved” areas, and the government forcibly resettled more than three million people to black "homelands," areas that were described as creating separate nation-states for ethnic groups. Non-whites had to have a work pass to enter areas designated white. Public gatherings were forbidden outside of church meetings, and black voting was allowed only in homelands, far from population centers.

Conflict within the country turned violent. Violence spread on all sides: 4,000 people were killed and 50,000 were detained without trial during the revolts in the 1960s. Black leaders were exiled or imprisoned, and speaking up against government policy led to threatened with arrest or worse. In 1962, the United Nations proclaimed sanctions, and many countries enacted their own trade restrictions. In the 1980s, a divestment movement pressured investors not to buy shares in companies doing business in South Africa, leading many international companies to withdraw from the country.

In spite of the country's history of oppression and violence, when F. W. de Klerk became president in 1989, he broke with the earlier policies of the National Party and immediately called for a nonracist South Africa. The African National Congress (ANC) was "unbanned" and its leaders returned from exile. Other leaders were freed from prison - Nelson Mandela was released after 27 years of imprisonment. The government began rescinding apartheid laws. De Klerk then negotiated with Mandela and the ANC to move the country toward peaceful elections. Negotiations led to a new constitution, which guaranteed freedom of speech and religion and prohibited discrimination.

In 1994, South Africa held its first free elections, marking a peaceful transition from a government controlled by the country’s white minority. The African National Congress (ANC) won over 62% of the vote in the election, in which 16 million of the 21.7 million eligible voters had never voted before. The new government was led by the ANC's Nelson Mandela and Thabo Mbeki, with the National Party's de Klerk as First Deputy.

Examining the role of business in South Africa's historic transition leads to key questions - what factors led business leaders here act to push the country's future away from isolation and missed opportunities toward to a "high road" of participating in an increasingly globalized economy? How effective were they? And, if business leadership played an important role in the events in South Africa, could they take a similar role elsewhere?

Published Date: 03/04/2013

Suggested Citation: Jean Rosenthal, Ian Shapiro, and Itumeleng Makgetla, "Business Leadership in South Africa's 1994 Reforms," Yale SOM Case 13-010, April 3, 2013

Keywords: South Africa