This month, South Africans will have every reason to celebrate the tenth anniversary of majority rule under the African National Congress. Not only have they witnessed one of the more remarkable political transitions of the past century, they have seen it occur within the spirit of reconciliation and democracy. However, as the ANC completes its first decade in power, one can only hope that it recognizes the magnitude of the daunting economic and social challenges now facing the country. For failure to come up with bold and imaginative solutions to these challenges runs the all too real risk of unraveling many of the country’s laudable economic achievements since apartheid’s demise.

The celebration of the ANC’s tenth anniversary in government might be the sweeter if the widespread fears at the time of transition are recalled. The conventional market view ten years ago was that the inexperienced ANC government would soon succumb to populist policies in order to garner immediate favor with its main labor union constituency. It was feared that this would lead the ANC down the all-too-well-trodden emerging market path of high inflation and economic dislocation.

To its great credit, the ANC in office could not have proved the naysayers more wrong as it became the very model of fiscal and monetary policy rectitude. Indeed, over the past ten years, the government’s budget deficit has seldom exceeded 2 percent of GDP despite pressing social problems. At the same time, within the framework of monetary policy independence, the Reserve Bank has succeeded in ratcheting down inflation from double-digit levels to its present level of around 4 percent. This was achieved in an environment of at times considerable exchange rate instability as mistakes were made in exchange rate management and as the economy was opened towards international trade.

Fiscal and monetary policy prudence has certainly delivered the desired price stability. However, such prudence has not been accompanied by the deep economic structural reforms that might have supported a pick up in economic activity that could generate meaningful job growth. In particular, the government’s efforts at labor market reform and at privatization policy have been halting at best and they have certainly not measured up to the task of adequately promoting either domestic or foreign investment. Moreover, while the government has identified labor skill shortages as a key constraint to faster economic growth, so far the government measures introduced to upgrade domestic labor skills have been wanting.

In the context of limited structural reform, economic growth in South Africa has averaged only 2 ¾ percent a year over the past decade, which has barely kept up with the country’s population growth. This is a very far cry from the 6 percent growth rate conventionally thought necessary simply to absorb new entrants to the labor force, as is all too sadly attested to by the rise in unemployment to around 30 percent of the labor force.

As the ANC starts its new mandate following this April’s general election, the imperative to deepen structural reform so as to accelerate domestic economic growth could hardly be greater. In part, this is due to the fact that South Africa is now embarked on a policy of Black Economic Empowerment, which could very well add regulatory disincentives to both domestic and foreign investment. It is also due to the long shadow that Zimbabwe’s economic debacle now casts over the South African economy.

However, very much more importantly, it is due to the fact that the economic brunt of South Africa’s Aids pandemic is still to take its toll on the economy and on the government’s budget. In that respect, it is well to recall that a staggering 5 million South Africans and almost one quarter of the economically active population now test HIV positive. Moreover, it is only very recently that the government has begun an anti-retroviral drugs program.

As the justified celebrations wind down, the ANC would do well to soberly reflect upon the fact that time is running out to deliver on the public’s aspirations for decent wages and employment. The ANC would also do well to reflect upon the many emerging market economy failures with which history is littered as a result of governments’ failing to take on the special interests that hinder meaningful economic change. In so doing, the ANC might lay the groundwork for addressing South Africa’s daunting economic problems. It might also provide a fitting sequel to the remarkable political transition that the country was so fortunate to have experienced.

Desmond Lachman is a resident fellow at AEI.