This resource is hosted by the Nelson Mandela Foundation, but was compiled and authored by Padraig O’Malley. It is the product of almost two decades of research and includes analyses, chronologies, historical documents, and interviews from the apartheid and post-apartheid eras.
Jan 1989: Alant, Theo
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POM. We are talking with Dr. Alant.
A. Dr. Alant, Deputy Administer of Economics Affairs and Technology.
POM. Dr. Alant we've heard two contradictory stories since we got here and one point of view is that the economy is doing well, that it has weathered the worst since 1985 – 1986, that the stock market is booming and a counter view to that is that the economy is a basket case. Is either of these the truth or does the truth lie someplace in between?
A. I think the economy is doing comparatively well within the constraints imposed to different matters. I want to refer to the sanctions issue, to the disinvestment campaign, to the payback burden that we have to bear. We have lost our international bankers in a sense. We have to pay instalments in June and December of every year. Yes, and therefore we have to maintain a positive balance in the trade account, external trade account. So we don't have enough or we are exporting capital at the moment to repay loans and that is strange for a developing country. We are not a developed country, we need investments. So there are several constraints.
. Also you referred to the situation since 1985 but you could go back to 1973 starting with the first oil boycott and we had to build up reserves of crude oil. In the 70s we became involved in this low intensity war, cost us a lot. We had to invest tremendously in weapons development and our Armscor. In the 80s the worst drought in the known history of this country prevailed for a few years; thereafter we experienced the floods, the tremendous floods, unknown in this millennium. Then came the civil unrest, heavy spending on community development, measures to - contra measures, measures to prevent revolution. We spent heavily on development in the infrastructure of the country. And then the issues that you started with.
. So under these constraint years in a sense we are doing well in a sense. Growth is not what it should be. Last year the economic growth was 3.2%. I'm mainly involved as Deputy Administer of Economic Affairs, in the manufacturing industry, that is the responsibility for the sectoral development in the industries was delegated to me. I can tell you that last year we had a growth of some 6.1%, say 6% in the manufacturing output. We think that the manufacturing industry will maintain a positive growth from now on for the first time in the 80s, for the first time in about a decade. A lot of investment I think lies in manufacturing capacity to build new factories and to expand the capacity in existing factories. That is contra to the economic cycle.
. Now we are very dependent on imports. There is a tremendous import propensity in this country. As soon as you get an economic upswing, you get more imports for more investment and then we have problems with the balance of payments. We have to maintain a positive balance of payments. But even under these circumstances we are now investing heavily in new capacity and I see that as a very positive sign. Although there is a slowdown in the economy, we have to cool down the economy in a sense, in order to maintain this positive balance as far as our external account is concerned. We see this gulf now this year also in the manufacturing output. If you go back to the 1980s and you put our fiscal volume of factory output in this country equal to a hundred then, when we took over towards the end of 1986, this ministry, the fiscal volume was 96. It, in fact, declined from 1980 to the end of 1986 by 4%. Since then the index has started to arise, picked up its head and it's above - on an 8 now on a seasonal basis and it is rising steadily. So we have signs of the first real economic growth I think of the 1980s.
POM. Three kinds of questions in regard to what you said. A couple of people have said that with regard to the sanctions that the trade sanctions haven't really been a burden to the economy but that the capital sanctions have been. That's one. Two, my understanding is that there is about 3.1 billion dollars due in short term loans to be renegotiated and or paid by next March. Could you comment first on the sanctions issue and disinvestments?
A. Yes, as far as the trade issue is concerned, yes we lost markets. I think we lost in excess of one thousand million rand export market in the U.S.A., virtually overnight. We lost export markets of gold to the Nordic countries. I think we, you can check on that, but we lost an export market of more than 600 million rand in gold to Denmark virtually overnight. So we lost a lot of markets, but we have regained those markets. We have started on a programme and we have the closest cooperation between the private sector and the government to develop new markets. I think it was a weak point in our armament in the past that we relied, too many eggs were in too few baskets. We relied too much on our traditional markets, export markets, say the USA and the EC. Yes they are important, we want to regain those markets. We are against sanctions. That means that we are against sanctions relating to any specific product or commodity. We are not withholding chromium or any commodity. We are not going to do that and we are for the development of a broader base (straight base) and we have succeeded and regained those markets in other parts of the world.
POM. Where have you primarily regained them?
A. In our part of the world, to the east where in the past the east bloc countries were neglected, we have started opening markets there and we are achieving success. And also we have for the first time on a desk for trade with Africa and the Africa trade is booming although from a low base. It is growing very fast. That is the one thing, we must develop trade and we'll have better relations with Africa. We've been looking at Europe and America and we have not paid enough attention to Africa. Also in the far east
POM. Has Japan been a significant (market)?
A. Yes, Japan was number one some while ago but pressure from the U.S. was exerted upon Japan and they have slipped into, they are not number one. I don't know where they are now, but they are very sensitive. You know the Japanese economy is very dependent on the US as a market. We saw that in our election last year. Yes, and when I visit the Far East you have the same yearning as you find here. They want to diversify their trade base. Taiwan was dependent upon the US for more than 70% of the export market. It's down to some 40% and it is a national priority to decrease it to less than 30%. So the same sort of, there are many common dividers between us and other countries. Yes, but we have regained markets. And we have opened up new markets. We see especially trade delegations, although they come secretly, privately here on the top level, on the ministerial level, from countries that you wouldn't imagine. I think it is a normalization in a sense that we neglected those markets in the past. You know some years ago there was an outcry when Russian jam was found on the shelves of some supermarkets here, you can't imagine that. I've said it in parliament, we encourage trade with all countries in the world, irrespective of the internal policies, be they communistic, be they socialistic, be they capitalistic. The private sector conducts trade and if they could make a profit through trading with any specific country then they're free to and we'll encourage them. So in a sense we have gained through those sanctions, in a sense we lost initially. We would like to regain the markets that we lost in America. You know, if you look at our trade balance with America our exports to them have been diminished tremendously. But our imports from them are rising rapidly.
POM. Now wouldn't the restrictions on capital inflow and ...?
A. The restrictions on capital inflow are hurting but yes we are not crying, we are developing. We have a strategy to counter that. We are going through hard times at the moment, but we are seeing, as I have said, we're putting emphasis on the manufacturing industry and we have selected a few areas for development and we think that we are over the worst times now. They are past and the balance of trade is improving at the moment and that is the restriction. And I think we'll emerge from this situation stronger. But, yes, it has been hurting and at the moment it is hurting but we look forward to a future where we'll be stronger when those sanctions are lifted, then we'll really boom.
POM. As to my specific question. Where is the capital for a new capital formation coming from to finance the increase in the productive capacity of industry?
A. There's a lot of money being thrown around on the stock exchange nowadays. There's a lot of money in the hands of the insurers, for example, there's a lot of money available for investment.
POM. They are investing here rather than abroad?
A. No, South African companies, there's a lot of money locally available for investment. Not enough. I think we could maintain a growth rate in the old terms of somewhere between 5% and 10% if we have enough money available from the outside.
POM. Would that be overall or in the manufacturing sector?
A. No overall, within a number of years. In the manufacturing sector we're aiming at 8%. Last year we achieved 6%. You know you have the cycle in the economy and in the past when there was a downturn in the cycle then you had a downturn in the manufacturing cycle. We are aiming at a situation where you could develop the manufacturing sector, anti-cyclical in a sense, but you know the manufacturing sector was developed as the sector that replaced imports from 1922 up to two years ago and the manufacturing sector looked largely at the home market. For the first time in history we are establishing enterprises here where the market for the products being manufactured, or that will be manufactured, are abroad. And that is the main thing. You should enlarge your capacity with a view of exporting and not being a fair weather exporter that only exports surpluses. But, you must dedicate part of your capacity to the export market, that is the old solution.
POM. You talked about identifying a couple of key sectors or target areas for growth. What are those areas?
A. As I have said the manufacturing sector and then we have to ...
POM. Anything specific in the manufacturing industry?
A. Yes, the multi-vehicle industry. We have embarked on a new local content scheme which includes exports. Up to three years ago the multi-industry was an importer only and I think next year we will be exporting more than a thousand million rand of products from that industry, manufactured products. It is the balance of payments, the net usage of foreign currency that counts there. The net usage of foreign currency as a percentage of the local turnover must be halved in seven years time. But how they go about it will be their own choice. And it is based on value. In the past our local accounting scheme was based on mass. The net import of that industry last year was some four thousand million rand and if you could decrease that, the net value, they can import much more, I don't mind, but then must export. If you could half that in 7 years time then it would mean a difference of two thousand million rand contributed by only one sector.
. And looking at the chemical industry, to develop our chemical industry in the sense that we want to produce more chemical feed stocks here, we have put up a committee between the government and the private sector to develop a South African strategy. We have looked at the textile and the clothing industries. We think they are sunrise industries. We have looked at the footwear industry, we introduced certain measures. We are not yet at the end of the road but that industry is growing fast. We're looking, for example, at the earth moving equipment industry. The import balance also, they import about two thousand million rand. We think we could halve that. We couldn't go too far, but the net import bulk could be halved and it could facilitate a lot of economic development.
. You know we want to improve our economy in the sense that we have to move to higher levels of technology. In the past many measures introduced by government worked against that. You can only improve your productivity and your competitiveness by going steadily to higher levels of technology in industry.
POM. It surprises me that you didn't mention the hi-tech industries.
A. Yes, the electronic industry. We have not yet finished our investigations there. We think that we can. And the electronic components and goods industry, the importation in that industry is growing rapidly. It is exploding. We must do something. In the past our electronic industry was supported by only two sectors here and that was the armaments sector and the post office. But we want to develop that industry too. And we have taken certain measures. I have asked the Board of Trade industry there to investigate the possibility of removing all import duties on electronic components. And I will ask people to get electronic components at world related, world market prices. That is a very healthy thing. We cannot manufacture electronic components here competitively. They have become commodities worldwide. To give the people the access to commodities at world market related prices, and then to promote the industries to investment on the research and development side. To develop niche stock products for the export market.
POM. To develop?
A. Niche stock, you know special products for ...
POM. Yes.
A. We cannot compete internationally on a volume basis. We cannot manufacture hair dryers, for example, it would be ridiculous.
POM. This is like flexible specialisation?
A. Yes, specialisation and we think there is much hope there. So, I could go on like this. We are achieving success, we can see the investments coming. We have a shortage of, for example, ties. The main reason is that during the 1980s no new investment was made in tie manufacturing here. I spoke to the gentleman involved, I visited the factories. I encouraged them and they are spending on capex now, capital expenditure, 300 million rand at the moment to enlarge capacity.
POM. You mentioned one thing that was interesting because to many Americans it would contain a paradox that they might not easily grasp. On the one hand you have say the US in general is a proponent of sanctions, on the other hand you talk about the increase in trade between South Africa and other countries in Africa. Could you talk a little about the nature of that trade? Who are the main trading partners of South Africa in Africa?
A. It is not our policy to make known under these circumstances. If they don't release the figures than we don't make known the trade figures. We make known the trade figures for Africa as a continent and for a few regions, say the EC or the Far East etc., America, but not for individual countries. The problem with Africa is that they don't have money available to pay so you have to revert to counter trade and unconventional trade methods. In many cases they have, say, wood or oil or other commodities to sell and I am of the conviction that we must encourage the private sector to rather buy from them even with government assistance then to buy from African countries. Of course some of them buy virtually all, say Zaire, they buy their chemicals here, they buy machinery for the mines, they buy food for the mines here. But we bought in the past so little from them. And we've encouraged the private sector to go there and to assist them to develop the infrastructure for example to deliver to sell wood to us and we could import wood. We could therefore shift trade, we import a lot of hard wood from South America and some islands in the Pacific. I'm of the opinion that we should put emphasis on buying the wood from Africa. It would help Africa, we're part of Africa. So we're investigating different aspects. We are together with the Africa Institute looking at the African map and we have identified priorities in Africa. I don't have the list here but we are rapidly developing trade with Africa and Africa is responding very positively.
POM. If you had to rank the various regions of the world in terms of their priority as markets nine or ten years ago?
A. I think the value of Africa is from a geopolitical point of view. We are part of Africa. In that sense, but the most important focus for us at the moment is of course the EC and then the Far East, the newly industrialized countries in the Far East. Of course the American market is very important. We want to regain the lost markets there and the east bloc countries and Red China. Those are the markets I think in the next century - the hub of activity, the main economic activity will be centred around the Pacific.
POM. The Pacific Rim?
A. Yes.
POM. What if your creditors apply political strings to the renegotiation of the dept payment? For example, say if they said Nelson Mandela must be released before we would either extend credit or negotiate?
A. Well they are hypothetical, you know. I'm involved in trade and industry, I'm not involved in those issues. But then government would have to sort itself out. And see what the action should be. That's very hypothetical. But you know we have already paid a lot of our loans.
POM. Though my questions is if you have to repay them what options do you have?
A. I would not speculate. I'm not - I was not prepared for such a question really.
PAT. It's become a - just recently within the last month in the US, in the United States, now maybe other places in the world it's been there longer, but it's become the sort of debating issue, the public policy issue that sort of carries on from the sanctions. And it is coming among certain sectors of activists out of this country. It is not something that is being dreamed up out there. Its become the definition of legislation so to speak in the US in terms of applying the next piece of leverage which is to pass legislation which puts some strings on lending institutions. Now maybe there are not a lot of US lending institutions. We understand most of this gets extended through Swiss banks.
A. Yes. If so, you know the United States through the sanctions complaint against our trade have lost a lot of their influence here.
PAT. Yes, sure, that's right
A. Bear that in mind. So they are becoming less of a factor in a sense.
PAT. In terms of your candidacy, you and your colleagues, what sort of tax burden does the average family have in South Africa? And is that getting better or do you have a campaign platform for cutting individual income taxes?
A. Yes, indeed. As it is out of the economic realities of the past 20 years and the problems we had to cope with, the government's spending increased tremendously as a percentage of the size of the economy. I think in, you can check me on that, but some 20 years ago the government budget was about 14% of the net internal product of the economy and now it's some 27%. It nearly doubled. That is of course the reason for the high inflation rate. Government spending was too high for good reasons. But we think we're on the verge, or on the brink of a new dispensation year, a new era and we have promised - also I made the submission to government personally, that we'll have to cut government spending. We won't be able to halve government spending in a year's time, it won't ever be possible, but real government spending must be decreased by some percentage of one or two percent per annum. The real spending for a number of years to cut down the government budget. And that will facilitate or make possible the reduction in company tax, the company tax is 50% now which is very high. You know, many companies that have disinvested in the sense here, disinvested for economic reasons the growth in the economy was slow. When an international company looks at the possibility of investments say here and in Thailand or in any other country then they compare the cost of raw materials, of labour, of electricity if its an electricity intensive industry. They compare the political risks. But then they compare the quantum of money that they could take home in the form of dividends. And that relates also very strongly to the company tax rate now. If the company tax rate is 50% a year and 30% in another country that they are considering, then in the end they decide against South Africa. So the company tax rate was too high. And we're going to decrease the company tax rate, it is in our pamphlet and in our five year plan to not more than 40% in the next five years. And that's a very important aspect and then you must have parity between the company tax and the marginal tax rate maximum for the individual. It is currently 45% at a certain taxable earning but that will have to decrease to 40% also and we think we could do better than that. That is very important to decrease the taxes and it's very important, of prime importance, for economic development in the future to decrease the company tax.
. [P. And two related questions to the tax issue. A few people have told us that the government subsidizes the homelands to the ... on a regional basis we have the decentralization policy. Those people live there. We want to give our job ... cost of erecting one housing unit is much cheaper if you do it there. So it is just common sense but you have to look at the macro picture to see what the related costs amount up to.]
POM. Would you have the general figure of what portion of total government expenditure is directed specifically at the homelands?
A. No. I don't have it available but you could get it from Finance I think it's better.
POM. Let me just in the couple of minutes we have left talk a little about the labour force. It would seem that if growth is to continue and the manufacturing and high technology sectors are to be more developed that you need a more highly skilled labour force and that the pool of this labour is black. How do you bring the level of black education and technological sophistication to a level that allows you to exploit your growth capacity?
A. It's a very difficult problem that we are faced with. Of course we already have to devote a lot of our income or the expenditure of government to the black education.
POM. Do you have a proportion of that again?
A. I don't have it. You'll find it from Finance but as much as we could afford we're spending there and we think that expenditure on education, in fact capital expenditure, it's investment. The best way to invest money is in people. But, yes, we have a shortage of human skills in this country. I talked to the textile industry the other day and I asked them "What are the three major problems that your industry is faced with?" And they said manpower, manpower and manpower. Skilled people, skilled people, skilled people. Yes we are still very dependent on imported skills in a sense but we have all the people available here locally and we have to train them.
POM. That's possible. Again this is a question that's like a circular one.
A. It's very difficult you know, It's a chicken and egg situation.
POM. Yes, like on the one hand, you are saying that you have to reduce government expenditure by one or two percent over like six or seven years, and on the other hand, even at the moment the per capita spending, say on black education, would be at least three times less than the per capita expenditure on white education. Yet if you are to increase your skilled labour pool that must come from the black community which means you have to increase expenditure on black education.
A. It's a question of priorities, we'll have to stop certain public services, stop planning those services. If I had the time I could have given you a list of services that the Department of Trade and Industry, the government in the past has been delivering to the private sector that will have to privatise. So, for example, we'll have the trade meteorology division
POM. Sorry, the which?
A. Trade Meteorology and we think in a modern society we should only make certain statutory provisions to ensure that scales are being tested annually, etc. But government should not have a few hundred inspectors going around to test the accuracy of petrol pumps, etc. This is one example in our own department. I think in a period of five years the staff contingent in our department will be decreased by some 30%. So we will have to cut in order to have money available for the priority of integration that you mentioned.
POM. One final question. Do you as a candidate for re-election in the National party believe that South Africa is in a post apartheid era?
A. Yes, we are already in the sense, as Mr Allan Hendrickse said the other day, that his party was also partly responsible for the scrapping of some seventy discriminating laws. Yes, we have done away with discrimination happily in the past decade and we are still burdened with some discrimination left and we have to fight it out. We can't just eradicate it overnight. There are some obstacles - mainly in the transport areas, say in our own city, of legal obstacles of existing contracts that you have to consider. But we are fighting out all discrimination.
PAT. When you campaign and deliver that message do you find that you are typically ahead of your political audience that you are having to use your platform to educate people?
A. In Pretoria East. Now you know, in Pretoria East my support in the previous election was such that I had the largest number of votes brought out for me in that election of any candidate and the largest number of votes ever in the history of this country. Pretoria East. And we have the largest majority. And our constituency in Pretoria is very supportive, I think, of what I am expressing. I'm expressing their views you know when I talk to you.
POM. Why do you think that the international community would still insist that South Africa is an apartheid state and yet the state itself believes that it has ...?
A. Because the black people are not yet involved in decision making up to the highest level. And that is the issue that remains. You know on the local level we established a local ordinance for all the different groups in this country. On the provincial level the management is integrated at the moment but on the top level in this country, the parliamentary level, black people are not yet involved in decision making per se. That is the thing that ...
POM. Blacks are involved at the provincial level?
A. Yes, we have the mixed or integrated executive committees in the provinces where the blacks, the Indians, the coloureds take part in decision making so that the decision making process is integrated there. We have two levels already that we have achieved a lot of success but on the top level, yes, we have to bring in blacks to take part in decision making processes. That is the hurdle that we'll have to jump on in the next year.
POM. Do you see that Mr. de Klerk as the, almost as certain the next State President?
A. Yes, I would believe so.
POM. Do you think that in the next five years we'll see a lot of changes in that direction?
A. Yes, I don't doubt it. Yes. It will be a very enlightened year I think.