With its comparatively large and modern economy, stable political system, global voice on political and economic issues, and strong defence forces, South Africa is arguably Africa’s most influential country. Its status as Africa’s most celebrated and stable democracy was reinforced in April’s free elections, when the African National Congress (ANC) maintained its political dominance, despite an internal leadership battle which led to the ouster of President Thabo Mbeki before the end of his term. The smooth transfer of power to Jacob Zuma against the backdrop of ANC party politics will either lead to a new dispensation with potential for positive change, or will reverse some of the democratic gains and stability achieved since the end of apartheid in 1994.

The potential for conflict is strongly rooted in the vast inequality in its domestic economy. The minority white population still largely controls the economy, and despite solid growth since 1994, the majority black population still faces large unemployment; inadequate standards of health, education and housing; and marginalization from the formal economy. The global recession is expected to bring recession and negative growth in 2009, thus presenting the new government with a difficult challenge of promoting greater equality and opportunity in a declining economy. There is a growing threat of labour unrest, with multiple sectors now threatening crippling strikes. While tourism and the service industry are expected to weather the storm well, declines are expected in the mining, agriculture and manufacturing sectors.

Violent community conflicts driven by economic desperation and political/ethnic identities continue to be a source of conflict in South Africa. The presence of large numbers of foreign migrants from southern Africa, and in particular millions of Zimbabweans fleeing economic and political unrest, have increased competition for unskilled jobs, strained social services and led to xenophobic attacks. Poverty and desperation have fed violent crime, as has the proliferation of small arms. Particularly worrying is the widespread occurrence of rape. A hard crackdown on crime, especially in anticipation of the 2010 World Cup, could provoke an explosive reaction, particularly in urban slums.

Other risks stem from the political and ethnic domain. Conflict between the opposition Inkhata Freedom Party and the ANC has started to re-emerge in the Kwazulu Natal province in the form of alleged political assassinations. There is a growing ethnic dimension to this violence as well, as animosity flares among Zulu, Xhosa and other groups. The Western Cape has seen significant increases in clashes between municipal authorities and squatters.

Another potential source of conflict is the uneven distribution of land, which is still largely in the hands of white farmers with large-scale holdings. South Africa has kept the emotional issue of land reform under check through a land redistribution program, but fewer than 6 million hectares – less than one-fourth the target – has been transferred to landless blacks since 1994. The Zuma administration is expected to accelerate this rate, and with the failed model of Zimbabwe so readily apparent, will seek to do so in a consensual manner. Still, there is the potential for clashes over evictions and invasions. The restitution process, which allows victims of apartheid forced removals to reclaim their ancestral land, may also spark local conflict.

Notwithstanding these concerns, South Africa’s general outlook remains quite positive. It enjoys a democratic tradition since 1994, a very strong judicial and legislative framework, vibrant civil society, organised labour, solid infrastructure and a record of firm macro-economic policy, all key to political stability and strong economic growth.