The political transformation of South Africa, a long and continuing process marked by its turning point, the democratic elections of April 1994, has been accompanied by expectations of economic transformation. Under the political regime of apartheid, minority control had generated an economic system that was unsustainable: the extreme inequality of income and wealth, principally along ethnic lines, could not be compatible with social stability; economic growth had been negative for a decade, reflecting the structural weakness of the existing economy; and South Africa's relationship to world markets was fragmented by both protection and sanctions, especially since access to world financial markets was interrupted in 1985. With political transformation, structural economic change was an imperative in all three respects. “Nation building” requires old inequalities to be addressed and a reversal of declining average gross domestic product, while the restoration of normal international relations meant South Africa had to achieve a new role in the world economy, a global system that is itself rapidly changing.

Irrespective of policy initiatives, South Africa's economy would change to a greater or lesser degree in response to shocks, but the question is whether South Africa's new government could construct an economic strategy that delivers structural change appropriate to the new political environment at home and abroad. Since 1994 the government has maintained a policy regime similar to the old one. It has implemented neither a radically “liberal” strategy, comprising rapid deregulation and privatization of the large state sector it inherited and complete liberalization of foreign exchange markets, nor a radically “populist” policy of expanded public expenditure to address housing shortages, education inequalities, and unemployment.