South Africa - Politics, government, and taxation

The political system of South Africa was reshaped following the 1994 elections. The African National Congress (ANC), which won the elections, governed under an interim constitution with the Inkatha Freedom Party (IFP) in what was known as the Government of National Unity (GNU). The GNU created a new constitution, which was signed into law by President Nelson Mandela on 3 February 1997. Under the new constitution, the South African Parliament has 2 houses, a National Assembly and a National Council of Provinces. The National Assembly has 400 members who are elected under a system of "list proportional representation ." Voters cast their ballot for a party, which in turn selects the actual members. The National Council of Provinces has 90 members, 10 each from the 9 provinces. Of the 10 delegates from each province, 6 are permanent and 4 are rotating.

The executive president is selected by the ruling party in the National Assembly. The president then selects a cabinet of 28 ministers who must be approved by the National Assembly. The judicial system is topped by a constitutional court and a supreme court of appeals, which rule on constitutional and nonconstitutional matters, respectively. The 1997 constitution provides for a bill of rights which protects the basic human rights of all South African citizens. Because of the high crime rate the general feeling in South Africa is that the legal/court system is insufficient. This belief causes economic instability, which discourages foreign investors from investing in the country. Due to low long-term foreign investments, the growth of the South African economy has slowed.

South Africa has many political parties but is dominated by just a few. In the 1999 elections, the African National Congress gained the vast majority of the seats in parliament, with 266. The ANC formed a coalition with the Inkatha Freedom Party, which gained 34 votes. The Democratic Party (DP), with its 38 seats, and the New National Party, with its 28 seats, formed an opposition coalition called the Democratic Alliance. In 1999 the ANC's Thabo Mbeki was elected president.

As the ruling and most powerful party in South Africa, the ANC has had to balance a number of difficult challenges in managing the economy. On the one hand, the ANC wished to honor the alliance it made with the South African Communist Party (SACP) and labor federation COSATO for the purposes of the 1994 election. This alliance would imply that government policies will be characterized by Marxist tendencies, favoring the nationalization of industry, collective ownership of land, equalization of after-tax income, and direct intervention in the economy. However, the realities of trying to rule over a modern economy while at the same time addressing the problems of decades of racial inequity have pushed the ANC in other directions. The ANC has since dropped its commitment to nationalizing industries and has in fact privatized a number of state-owned firms. Reflecting its still growing commitment to a free market economy, the ANC has committed itself to maintaining fiscal discipline, an anti-inflationary monetary policy , and a stable exchange rate , and the relaxation of exchange controls. The ANC also hopes to lower import tariffs , to expand tax incentives, and to privatize some public sector assets. Perhaps the more pressing of the jobs before the government, however, are the dual tasks of providing for the nation's many impoverished or economically disadvantaged people and dealing with the growing problem of violence and corruption.

The ANC government supports an open economy and has attempted to enter into a variety of trade agreements to ease international trade. The openness of the economy makes the country highly dependent on events in the outside world. This fact was clearly illustrated by the Asian economic crisis and by the increased price of oil after 1999; both events affected the South African economy negatively.

The government levies a variety of taxes, which together amounted to 24.1 percent of the GDP in 2000-01. The largest share (43 percent) of tax revenues come from individuals, who pay a progressive income tax that ranges from 18 to 42 percent. Corporate taxes contributed 10 percent of the total. Indirect taxes , such as customs and excise duties , a value-added tax , a fuel levy, and stamp duties and fees, account for 40 percent of revenues. The government has committed itself to lowering the tax burden on individuals in the coming years.