The analogy that has become very common to draw in recent years between Israel and apartheid South Africa has always been imprecise. Arab people living in Israel's 1948 borders have rights of citizenship. They vote in Israel's elections and send representatives to the Knesset.
Indeed, if Israel were still limited to its 1948 borders today, it would be a straightforward democracy. A flawed and unequal democracy in many ways, to be sure—but then, what democracy isn't? (Our own democracy here in the States, one may have noticed, is not doing so hot.)