Nelson Mandela’s death reminds us of his heroic struggle to end apartheid in South Africa and promote racial equality throughout the world.

Yet, it is also a reminder of the missed opportunities the anti-apartheid movement of the 1980s had in forging alliances with businesses. In fact, had Mandela and his anti-apartheid movement chosen to work in conjunction with free enterprise, rather than use it as a cudgel to destabilize the South African government, one wonders whether apartheid would have disappeared sooner and whether the current South Africa would be such an economic mess. Rather than the enemy, the American companies in South Africa could have been Mandela’s best ally in the war for equality.

You don’t hear about “divestment” much nowadays, but it was the buzzword of the early 1980s. Institutional investors, namely state pension funds, were pushing American corporations to pull out of South Africa as a protest against the country’s white-first apartheid policy. Indeed, it was a reprehensible policy, as Afrikaners, who were the minority, enforced racial segregation in public life. Mandela, who died last week, was the international face of the anti-apartheid movement, despite spending 27 years as a prisoner of the Afrikaner government.

To put pressure on the government to end apartheid and hold multi-race elections, some groups decided to push corporations to pull out of South Africa altogether. The argument was that businesses leaving in protest would destabilize the country economically, forcing whites to the table. Indeed, it led to fireworks at many corporate annual meetings, as activists placed divestment measures on shareholder ballots.

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But American free enterprise saw it differently. CEOs at the time (and, incidentally, many in the Reagan administration) thought promotion of capitalism was the best way to end apartheid. Indeed, business owners know that racism, in addition to being morally reprehensible, is also bad economic policy. If you promote whites over better-qualified – and more efficient – minorities, you are doing your business a disservice and potentially letting your competitors provide a better alternative for attracting workers. Many American corporations promoted freedom and equality within the walls of their organizations on South African land, giving workers opportunities they couldn’t have in the public sector. There were promotions, raises, better working conditions and job training. In short, American corporations were giving South Africans their one true taste of freedom – and that helped whet the appetite for more.

What’s more, companies rightly thought that divestment would disproportionately hurt the black African worker. Close a factory and the immediate impact is felt not by the white government in Pretoria but rather on the poorer black communities that relied on these companies for jobs and commerce.

Sadly, the free-market argument fell on deaf ears. In retrospect, that was not surprising, since many members of Mandela’s African National Congress were socialists and communists, believing that the goal should be a takeover of government, then mandatory state-sanctioned equality forced on the public and private sectors alike. There remains debate today as to what extent Mandela himself was a communist – a term that carried far darker connotations in the Cold War 80s – but it was clear he was no advocate for a free-market approach to ending apartheid. The current South African president, Jacob Zuma, was a member of the South African Communist Party in the 1960s.

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Some would argue Mandela’s approach worked, that sanctions crippled the government, forcing F.W. de Klerk to hold open elections and leading to Mandela’s ascendancy to the South African presidency in 1994. But, while it may have won the war for equality, it didn’t win the peace. The ANC has talked a good game about promotion of free markets, but it is crony capitalism at best, with rampant corruption and a shocking income inequality for a nation that is supposed to be part of the free world.

In fact, South Africa has given birth to a new term: “tenderpreneur.” The government hands out contracts – “tenders” – that should be available through public bidding, but really are gained through bribes and nepotism. The way to rise in South Africa economically is to exploit this racket. Economic history tells us this approach to business can only lead to ruin.

Already, there are signs that the average black South African is no better in economic terms than he was under apartheid. Think that’s an exaggeration? Trade unionists today now refer to “economic apartheid,” or the gap that exists between the wealthy and the poor. While divestment by industries may have ended apartheid, it also crippled the South African economy in ways that are being felt still today.

None of this should take away from the heroism of Mandela’s struggle. But the economic legacy that followed his release from prison and ascendancy to power for his ANC is a stain on the country’s freedom, in economic terms.
So, amid the justified praise of Mandela, it is proper time to question whether a pro-business approach could have created a greater South Africa. Had Mandela used free enterprise as a tool for his worthy goals, the people he was trying to free may have been better served. Hopefully, an entrepreneurial spirit, rather than a tenderpreneurial one, can still win out in a post-Mandela South Africa.

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