By the mid-1970s the period of continued high economic growth since the early 1930s had come to an end. The average annual rate of growth fell from an average of 4.5% in the first 30 years of apartheid to an average of only 1.65% between 1976 and 1994 – well below the 3% annual population increase. In these final eighteen years real per capita income slumped by about 25%, with the poorest people the hardest hit.
The reasons for the economic crisis were complex. By the early 1970s the costs of apartheid were manifesting themselves. They included curbs on the training of black and coloured workers, the lack of proper funding for black and coloured education, the poor productivity of workers, and the long distances the poorest of the workforce had to travel because of the group areas. Inflation had become a serious economic problem.
But much of the economic crisis of the final two decades of apartheid was independent of apartheid. It included factors such as the sharp rise in energy prices after 1973, weaker prices for South African gold and other commodity exports, and the slowdown of the growth of South Africa’s main trading partners. The 1980s saw a slump that affected middle-income countries worldwide. South Africa did not fare particularly badly. The World Bank rated South Africa’s performance, measured in GDP growth between 1980 and 1985, as twelfth out of twenty comparable developing countries.
A serious problem confronted policy makers. The economy needed a flexible labour market and wage restraints to enable the formal sector to employ as many people as possible. But for political reasons it was important to increase black wages and narrow the huge gap between whites and blacks. Effective trade union organisation forced employers to push up wages. By the end of the 1970s South Africa’s labour costs were outstripping those of its competitors and its competitive advantage in most sectors began to dwindle.
The National Party government was also weakened by its inability to attract any significant support from the emerging middle and lower-middle class of blacks in the urban areas. At the heart of the government’s policy lay a form of political schizophrenia. On the one hand it wished to create a stable and contented black middle class; on the other hand it wanted policies in place that controlled all blacks. The pass laws that were the symbol of black subordination affected migrant workers and black professionals alike.
To facilitate the former objective, in 1977 the government allowed blacks to take out a 99-year leasehold on their houses, implying recognition of their permanence in the common area. The Riekert Commission of 1979 proposed a two-tier approach towards blacks, dividing them between outsiders (mainly migrant labourers from the homelands) and insiders (mainly professional people and skilled labourers). The insiders were supposed to enjoy more rights and privileges, but they too lacked political rights, freedom of movement and a sense of full citizenship.
South Africa’s diplomatic position also weakened. During the 1960s sports boycotts began to bite. South Africa did not receive an invitation to the 1964 Olympics; in 1968 international cricket ties were ended when an English team cancelled its visit after Vorster objected to the inclusion in the team of a South African-born coloured person, Basil D’Oliviera; and at the end of 1969 a tour by the South African rugby team to Britain was severely disrupted.