Berkeley Program in Law and Economics

South Africa’s transition from apartheid to democracy stands as one of the past century’s most important political events. The major hurdle to the transition was for the poor majority ANC to provide a credible promise not to exploit the full economic resources of the then ruling economic elite. The new constitution adopted a form of federal governance that has the potential to provide such protections by specifying an annual policy game where the new majority and the minority elite each control one policy instrument of importance to the other. Provided the majority is sufficiently patient and not “too demanding” in their preferences for redistribution the game has a stable equilibrium with less than maximal redistributive taxation. Our analysis makes these restrictions on preferences precise. The new, more radical ANC and the Zuma presidency challenge this equilibrium.