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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 It is the product of almost two decades of research and includes analyses, chronologies, historical documents, and interviews from the apartheid and post-apartheid eras.

14 Aug 1990: Bethlehem, Ronnie

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POM. We're talking with Dr. Ronnie Bethlehem on the 14th of August. I think a good starting point might be to tell us what your understanding of what the ANC's policies are on nationalisation.

RB. Well, I must confess that I am, in a measure, unable to give you a clear view as to what the ANC's policies on nationalisation are, because there is still quite a lot of noise and confusion regarding their policies on nationalisation. I have right in front of me here two very detailed statements, one by Nelson Mandela and the other by Mike Roussos, delivered to a conference on nationalisation on behalf of the ANC, which are fairly explicit. They are balanced and logically argued and not, and in many ways, encouraging, that the ANC's position on nationalisation has been considerably modified, that they, their attitude towards nationalisation is less dogmatic than it was before, and more pragmatic. But, then, you will have somebody like Thabo Mbeki make a public statement as he did recently in the Transkei which recommits the ANC to nationalisation, and seems to throw the whole argument back to square one. So one is, in a measure, confused by public utterances of ANC spokespeople on this question.

. However, I think one has to try and sift substance from rhetoric and posturing and my own feeling is that the ANC is no longer as dogmatically committed to nationalisation as it was before. It's more concerned about achieving real objectives of policy. And if these objectives of policy can be achieved by some other means then nationalisation will not be insisted upon by them. But what is worrying to us is, the extent to which the ANC may be trapped by the encouragement it has given to people in its own constituency, or the encouragement of expectations and other things which in a sense trap it because it now has satisfy either expectations or needs in its constituency and which could not be achieved easily and which drive it in the direction of nationalisation because nationalisation would seem to be a way of demonstrating that it's doing something.

POM. They also use the argument that, or members that we've talked to have used the argument, that they'll be doing no different than what the National Party did in 1948 when it came to power that it created a number of state industries, gave jobs to Afrikaners, used it as a vehicle to enlist Afrikaners. Is that a fair analogy?

RB. Well, that's a popular argument. I've heard that many times myself. I think in a measure, of course, it is misleading. The National Party did threaten to nationalise industries that were owned by English-speaking capitalists when it came to power in 1948 but once it achieved power it dropped that policy of nationalisation. What one cannot deny, of course, is that the state in South Africa has established, has been responsible for establishing, key industries moved by its understanding of the strategic needs of the country. I mean industries like ISCOR and SASOL were established on the initiative of the state. And a large part of the South African economy has remained under state control as a consequence. And the state has not pursued an aggressive nationalisation policy in the form of taking over privately owned enterprises but rather has brought into the state enterprises which didn't exist before and which the private sector didn't seem to have the motive to sponsor.

POM. Let's take the economy as a whole for a moment. South Africa's economy has spent most of the 1980s in the doldrums.

RB. Yes.

POM. To what specific factors would you attribute its poor performance during the 1980s?

RB. Yes. I think one needs first to say that the poor performance of the South African economy in the 1980s has been 80% due to the state of the world economy and only 20% due to internal factors. If one looks at the South African economy's performance against the performance of other mineral-based economies, for example Australia, one finds that the pattern of experience is very similar. Most of these economies had reasonably good growth in the 1950s, a very high rate of growth in the 1960s, during the stagflation period of the 1970s lower growth, and in the 1980s very low growth. And this is true of them all. So, South Africa's performance has been true to pattern as far as other economies that are similar to it are concerned. However, that having been said, one needs to say also that there were other factors which account for the poor performance of the South African economy. Some in the 1980s, some indigenous and some exogenous. The exogenous factors are factors like drought which affected Australia and South Africa and I think South American countries similarly. We had a period of extraordinary dry, extended drought which was very damaging, of course, to the agricultural sector and which necessitated special action on the part of the state in order to deal with it. Then there were other factors more peculiar to South Africa. For example, like the imposition of sanctions, like internal unrest, which also contributed to poor economic performance in 1980s.

POM. Do you think trade sanctions had an effect?

RB. Well, trade sanctions only came later. Trade sanctions came with the imposition of the CAAA in 1986. The deterioration, the poor performance of the South African economy goes back much further than that, into the early 1980s. The first half of the 1980s was characterised by drought. Then, of course, came the financial sanctions in 1985. But before the sanctions were imposed unrest had already become a factor. Now, why had unrest become a factor? Unrest had become a factor because of the large economic deterioration. Now, in South Africa's case, there is something rather special to the exogenous shocks that have affected the South African economy and caused it to under-perform. And one needs, in the first instance here, to draw attention to fluctuations in the gold price which affects South Africa far more than countries like Australia, for example. It's very interesting to note the connection between the - and this is what I was talking to this young lady, young journalist about - it's very interesting to note the connection between the cycle of unrest and the business cycle. Unrest has usually been preceded by economic deterioration in South Africa. The unrest that is associated with the Sharpeville period in the early 1960s was preceded by economic deterioration. If one measures economic performance in terms of per capita private consumption expenditure in real terms, there was evident deterioration before Sharpeville happened. In the 1970s, again, there was evident deterioration in terms of these criteria before Soweto blew in June 1976. And in the 1980s, before the unrest of 1983-84 really surged, there was evident deterioration. And in the 1970s and 1980s, the deterioration is linked, in both cases, to a very dramatic decline in the gold price. In the 1970s, for example, the gold price rises after the first oil crisis to a peak of nearly 200 dollars an ounce, and then collapses by 50%, so that by September 1975, the rand is devalued by 17.9%, all evidencing serious deterioration in the performance of the economy. It was only nine months later that the Soweto crisis exploded upon us.

POM. What's going to happen in the 1990s that will be different? What's going to happen that one can expect a better performance from the economy?

RB. Can I, before answering that question, just say something along the lines of what I was saying to get up to an answer to that question? In the 1980s, the same thing happened, the gold price peaked at 850 dollars an ounce, and then declined over the whole period of the decade. But it is in the decline of the gold price that you have economic deterioration occurring. In the 1990s, what occupies our mind right now is that there is, again, economic deterioration occurring, particularly pressure on the lower income groups in South Africa. Our projections indicate, for example, that private, real private consumption expenditure is going to decline in 1990. And if it continues to decline into 1991, the circumstances that in the past have been promoting of social and political unrest are in place. And it could well be, for example, that some of the unrest that we see, like the unrest in Port Elizabeth and in Natal, is directly linked to economic deterioration. Imposed upon it are all sorts of political and other justifications for the unrest. But basically, the social and political instability is rooted in economic underperformance.

POM. But economic underperformance seems to be dependent to a considerable degree on exogenous variables like crises that raise or lower the price of gold. What can one specifically point to that is encouraging, that one can say not only will the economy grow but it will grow at a rate of more than 5%, so the per capita income starts, in fact, rising. I mean, it's not since the 1970s, I think, that the economy last grew at 5%.

RB. Well, you see, really, I think we have a realisation having emerged both on the side of the government and on the side of the ANC that South Africa cannot afford another decade of economic stagnation. Unlike Australia growth for South Africa is an imperative because of our high rate of population growth and because of demographic change. And both the ANC and the government, I think, are determined to liberate the economy so that it can perform properly. And political settlement has become a precondition for that liberation, the liberation of the economy.

POM. But, it doesn't necessarily follow that if you have a political liberation that you would have economic growth.

RB. Yes, I think a lot of things will follow. You see, for example, since 1985, when financial sanctions were first imposed upon South Africa, South Africa had exported over 20 billion rands of capital via its balance of payments. It has become an exporter of capital when South Africa as a developing country should logically be an importer of capital. While the removal of sanctions will not necessarily result in a return flow of investment funds to South Africa, that will depend very largely on the state of the world economy on the level of metals and minerals prices and all the rest of it.

POM. There's also the competition for capital.

RB. If financial sanctions are removed from South Africa, South Africa no longer has a compulsion to export capital. Now, a new government, a government in which the ANC initially is a participator and may be ultimately the sole party in such a government and in a post-apartheid period with sanctions removed that pressure is no longer there. The South African economy is extraordinarily resilient. It's very interesting to see how it performed in the second half of the 1980s. In no other example that I know of in the Third World has an economy under such adverse pressure been able to generate the kinds of current account surpluses that South Africa has generated for six to seven years consistently. That is a measure of the ability of the South African economy to correct itself through processes of economic adjustment. So, we are dealing with an economy which has enormous resilience and that resilience is rooted in the fact that the economy is basically strong. And that it is based on mineral exports and on a relevance in a global market context which other countries perhaps do not have.

POM. Why do you believe that in a post-apartheid era, at least many of the people that we have talked to in the last month expect there to be a substantial inflow of foreign investment. What are the grounds for believing that that would happen?

RB. No, we don't believe that. That is something that is incorrect, in our view. Whether foreign investment moneys come to South Africa - I think we need to differentiate anyway between the kinds of capital inflows that come from private sector agencies and the kind of capital inflows that may be linked to institutions like the IMF and the World Bank and governments. For a spontaneous inflow of private sector capital to occur towards South Africa circumstances in the global economy must change to make South Africa interesting to overseas investors. Let me put it crudely, if for some reason, let's take the present crisis in the Middle East, for some reason the gold price is sent on a surge up back to 850 dollars an ounce as occurred in the early part of the 1980s and does again. What happened in 1980 averages over 600 dollars an ounce. Even if sanctions are increased against South Africa, I think it would be logical to argue that there would be a strong flow of money to South Africa under those circumstances. The opposite case will be the removal of sanctions, but a continued low level of the gold price, low level of other metal and minerals prices. There will be no flow of capital to South Africa even though sanctions are removed. My emphasis was not on the flow of funds to South Africa from private sector sources, but the removal from South Africa, with the removal of sanctions, the removal from South Africa of the need to export capital. Now, as I said, in the second half of the 1980s, South Africa exported 20 billion rands worth of capital in order to meet foreign debt and also partly that was explained by capital flight. But if you can stabilise South Africa politically then the pressures of capital flight diminish, or are reduced, and the need to meet foreign debt repayment is either reduced or eliminated in which case lots of things happen. South Africa can now address its own internal developmental needs unencumbered by such external obligations.

POM. If one looks at the economy now, I think it was the Sanlam report for June said that it was heading towards, if not in, a recession.

RB. Yes.

POM. You still have tight money supplies. Interest rates are still high, even though they may be relaxed a little. It's a high cost producing country in terms of the manufacturing industry. Its population is growing at what, 3% a year or something?

RB. Two and a half percent is the average population growth rate.

POM. Yes. Where will a new government get the wherewithal to start, in this context of very limited growth, tight monetary policy? Where will it get the resources to address the huge imbalances in expenditure, the backlog in housing, electricity? I mean, there's a laundry list of things.

RB. Yes. Interestingly, most of the resources will be internally generated. I think one needs to say that while the balance of payments and capital inflow are important, there's a lot of room for manoeuvre with things like this. We were able to generate an economic upswing in the period 1986-87-88 and 1989, a three and a half year upswing we had at the very time that we were exporting 20 billion rands worth of capital through the balance of payments. That upswing occurred from a low base, admittedly, but it also occurred, too, because we were now into a regime where monetary policy and fiscal policy were more focused and mutually supporting. And there was a much more careful management of available resources. When resources are abundantly available, there tends to be slack management of scarce resources, and a lot of wastage. And I think, partly, you can have an improvement in performance even though you're exporting capital because you're using what you have much more carefully.

. One needs to note, for example, the relationship between gross domestic savings and the gross domestic investment. When gross domestic savings exceed gross domestic investment, that indicates the extent to which you are generating a balance of payment surplus. And we have been generating balance of payment surpluses on current account specifically in order to meet debt repayment. But the magnitude of the capital outflows here, relative to the totality of gross domestic savings, is small. The great bulk of the funds required for gross internal investment are internally generated. However, as a developing country South Africa needs to be able to import savings from savings surplus countries. All developing countries logically they should be in deficit on their current account not in surplus on their current account. South Africa has had to contrive the position of being in surplus on its current account of the balance of payments.

. It's very interesting, if you look at the balance of payment figures in South Africa's case, over an extended period of time, the current account has been in surplus. Since 1984, South Africa has generated consistent and substantial surpluses and it has done so as a deliberate act of policy in order to meet its contractual obligations to foreign banking creditors. That has put an enormous constraint - let me put it this way, that has imposed a severe constraint on its ability to grow. The recession that we're presently going into is a self-imposed recession. The upswing, in a normal circumstance, should have logically continued much longer. It shouldn't have been aborted by South Africa now, by the balance of payments surplus now being threatened. But as the economy goes into an upswing it becomes the demand for imports increase relative to the demand for exports and threatens the balance of payments surplus. And this upswing has had to be aborted in order to ensure that a current account surplus continues to be generated on the balance of payments. If you remove that constraint from South Africa then South Africa can run its upswings longer. And we shouldn't have to abort an upswing at a 3% increase in real GDP. We should allow our real GDP to continue at a higher rate and not be compelled to pull the economy in earlier. We're doing that at the moment because the South African government is committed to honour its obligations to its foreign banking creditors.

POM. So, you believe that when the country can run a deficit in its balance of payments, when there's no need for the outflow of capital to meet contractual debt obligations, that this'll provide a take-off point for a rate of growth that could be four to five percent or whatever?

RB. Yes. I think what we would hope for is a normalisation of the relationship between the South African business cycle and the overseas business cycle. We can't control the overseas business cycle. If in the 1990s the global economy is going into an extended period of recession, South Africa inevitably will be affected by that. And South Africa's growth rate will be low even though its population growth continues to be high. And that may have severe consequences for our internal social and political stability. I just must add to that, that the converse would also be true. That if the global economy performs well in the 1990s, in other words if all things beyond our control are satisfactory and you remove now the need to export capital South Africa should be able to realise a potential of a sustained growth rate up to five or even six percent and that would make an enormous difference to its internal position socially and politically.

POM. Do you find that the ANC has an appreciation of the finer nuances of economic policy making?

RB. Yes, I think one needs to answer that question more complexly. I can't give you a simple answer to that. There is no question about it that the economic experts in the ANC and its advisors - they're well-tutored and well-graduated economists, they certainly do understand that. The extent to which their understanding has to be compromised in order to bridge the gap between what the ANC understands are the needs of the economy and what the ANC is trying to answer in terms of what is demanded from its constituency is something else. And the ANC itself is partly culpable of spoiling the situation as far as the constituency is concerned by creating expectations in the pre-post-apartheid period. Creating expectations in its constituency which could embarrass it later. There is the danger that people will expect an ANC government to do things, to deliver what it could not deliver. And it therefore may be driven, and this brings us back to your opening question, it therefore may be driven to do things which logically it knows will not necessarily provide it with greater power to address imbalances but which will appease its constituency, because the constituency now sees the ANC doing things and taking from the rich and giving to the poor through a process of nationalisation.

POM. The trade unions. The black trade union movement is one of the success stories in South Africa as far its ability to organise and bargain on behalf of its members. Yet a trade union movement that wants to participate in the immediate after effects of the ending of apartheid, which wants to establish full parity with white workers in all sectors, could threaten the whole economic process, could they not?

RB. Yes, it could do. I think COSATU is aware that it has a different role to play from the ANC. It is aware of potential differences between itself and the ANC. Were the ANC to become the government, COSATU, well, Alec Erwin said to us today that COSATU is bound to address the needs of its members first and in its own sort of way. And you could have the same kind of difference between COSATU and an ANC government as have emerged between, say, the Trade Union Congress in the United Kingdom and a Labour government. They are aware of that. At the moment, however, their identity of interest in getting rid of the apartheid order is overriding and any differences between them are marginal. But there is potential conflict, I suppose, between the trade union movement in South Africa, and the black trade union movement in particular, and a future South African government. I should say that that could be most tricky in the intermediate phase, because the prospect is not, I don't believe, for an early takeover of the South African government by the ANC. I think more likely is that we will be moving fairly soon into a situation where the ANC and the National Party will be the two main participants in a government of national unity which will oversee the discussions to a new kind of, the negotiations to a new constitution.

. In other words what I'm expecting is that we're going to have ANC in a governmental role before we have a new constitution in South Africa. Now, once the ANC is in a governmental role, albeit as a partner with others in a power-sharing government, it may have to make compromises to satisfy its national unity partner which COSATU might not like. COSATU then may have the difficult choice of deciding, do we do things which are clearly more in the interest of our members, our sectional interests, the sectional interests of our members, or do we adopt a more patriotic approach to the whole thing and make certain compromises of our position in order to make possible the success of a national unity government? My own feeling is that COSATU actually would fall on the latter side of the line, they would make those compromises because it's of such importance in terms of its relationship with the ANC that it should do that. In other words it would not compromise the ANC even in such a government. But you don't know what the issues might be.

POM. Will white people as a group experience a fall in their standard of living in the short-term, 10-12 years or whatever?

RB. I think it's necessary to say in answer to that question, firstly, that whites have suffered a relative decline in their standard of living already. There's an enormous gap that still divides white and black, that white incomes are substantially greater than black incomes in this country. But it is interesting to note that white wages have increased at a rate below the inflation rate over an extended period of time whereas black wages have increased at a rate above the inflation rate. This has been partly the consequence of a deliberate policy to narrow wage gaps. It needs to be added, the comment needs to be added to that, that that doesn't measure the totality of black welfare. Because part of the consequence of a rise in black wages has also been a rise in black unemployment as the economy has attempted to adjust to this higher cost of labour relative to the cost of capital. And therefore, there has been a continuing, over an extended period of time, a continuing capital intensification of South African industry. But in the future that process will probably continue. The wage gaps will have to continue to narrow. It's a difficult question to answer, how much people will suffer in the way of well-being as a consequence of policies designed to uplift the poor. I think it invites a mercantilist response. The mercantilist response is, What you gain, I lose.

POM. Zero sum.

RB. Zero sum. Whereas, the economic processes are very much, very synergistic. What you gain can be my gain, too. And if we can broaden the domestic market and make a severe impact on poverty it might be surprising that whites will experience an improvement of their economic position, not the deterioration in their economic position. Of course, whites will be resistant to having to make sacrifices to meet historical injustices. Blacks will be, particularly through the ANC and company will be insistent that, like Joe Slovo says, there's no way in which we can address black, this huge difference between white and black without in some way diminishing the position of whites. I have a different response to that as an economist, I don't think it works like that, necessarily. And it could just be that the removal of sanctions from South Africa, the emergence of a non-racial democratic government in South Africa, the return to South Africa of a normal relationship with the rest of the world and hopefully, given an optimistic global environment for the South African economy, that the position might be surprise! surprise! that whites will not have to suffer too much in the way of sacrifice. On the contrary, they may actually improve, find that on the whole the quality of life improves. And if I may just add, the quality of life has very much to do with living in a society which is very unstable and where there is violence and danger and so on. If you can eliminate that I think a lot of white people would be happier to have less in the way of swimming pools and also less in the way of threats to their physical security.

POM. Given everything we've said, what difference would a majority government make to the life of the average person who lives in a township or a squatter camp? In four to five years?

RB. Yes. I want to answer that by coming back to your question earlier when you said what resources will be available to address this? We're not short of resources to make very substantial differences here. And let me give you an example, South Africa presently spends ten and a half billion rands a year on defence. It spends probably an equal amount on Bantustan bureaucracy. It's spending something like six billion rands in developing the Mossgas project which will create 2,000 jobs directly. I have estimated, in a very crude way, that through a simple process of restructuring state expenditure, in other words redirecting state expenditure away from projects which are manifestly inflationary in their nature, because you're not creating goods and services to balance the income that has been generated in the process, away from such things to such matters as house building, for example, could make an enormous difference. I believe, through a process of public works, linking unemployment and homelessness, we could build a million houses in three years in South Africa without having to raise taxes, without having to strong-arm the financial institutions into holding debt securities which they would not want to hold and without having to resort to the international community for extra funds. However, that would require 20 billion rand over a three year period. If we wanted to generate 40 billion rand for such a project or for such projects, house building, education, health, and so on, we could generate that quite simply. And with the aid of the international community, with South Africa's relationship with that normalised and now having achieved ANC participating in government, if not an ANC government itself, the funds would be there. We can do that. It requires national focus, though.

POM. The State Minister for Education I think yesterday said that if the expenditure on blacks and whites in education was to be equalised at the present moment it would be tantamount to economic suicide.

RB. Yes, of course. If one does the simple calculations of what it would mean in the way of extra state expenditure, to bring blacks up to the level of whites in terms of education, housing, and health, the strain - it would be physically impossible. That is so. A million houses doesn't equalise the position between blacks and whites. But a million houses in three years makes an enormous difference to people living in shacks. And it provides tangible evidence that the situation is beginning to change. It also begins to generate, through multiplier effects, enormous inward industrialisation processes. A million homes means a lot in the way of requirements for stoves and furniture and all sorts of things like that. It also has feedbacks that are positive into education. You can't expect, for example, young people to be successful at school when they have to go home and share a room with ten other people. And you can't expect people to keep themselves healthy if they have to live in the unsanitary conditions of Mshenguville.  If you can start improving sanitary conditions by improving the housing stock you start having circular beneficial effects which need to be taken account of.

POM. I'm nearly finished. Thank you for the time. I do appreciate it.

RB. It's all right.

POM. Do you think that economic structures will occupy a pivotal place in the negotiations?

RB. I don't understand the question. What do you mean by 'economic structures'?

POM. Well, the kind of economy that the country will have in a post-apartheid era, whether it's a free enterprise, market oriented economy, whether it's one where there will be large-scale ... In other words, where the mix of public and private will be set in some defined way.

RB. I'm not certain that there will be any need for the new constitution to accommodate too much here. The ANC has already made it clear that its vision is of a mixed economy. If it has disagreements with the National Party, or with the business community, its disagreements are on, 1) the degree of concentration in the South African economy. And the ANC has already publicly said that that concentration can be dealt with through antitrust legislation and you don't need to provide for antitrust legislation in the constitution. The real differences between the ANC on the one side and the National Party and perhaps the business community on the other, have to do rather with policy approaches as to how the economy should be managed. The government after 20 years has come around to the old business view, the Democratic Party view, that policy needs to have regard to market forces. And that interventionism, there's a lot of disillusionment with interventionism, with the ability of the state to intervene in the economy and actually improve society.

. The approach of the ANC is very much more interventionist. It believes that intervention is necessary. My own feeling is that the ANC is correct in this. There is no way, in a South African context, and I say this, actually, being somebody who after a long period has personally come around to the view that minimal government is desirable if you want to preserve freedom, if you want an efficient economy. I would change that view if I was back in the depression, I'd be a strong Keynesian and advocating state intervention if there had been a collapse of the private sector. But if you haven't got a collapse of the private sector, if you've got a buoyant or a private sector which wants to take initiatives then the state must not block those initiatives. And the state must not crowd out the private sector, because the private sector actually is a better and more efficient manager of scarce resources than the bureaucratic public sector.

. However, in a South African context, there is no way in which you can simply abolish apartheid, to remove apartheid from the mix of apartheid and capitalism, and say, well, let capitalism get on with the matter of development in a market context and deregulate the economy and expect all these imbalances to disappear. You could concede that the imbalances will begin to disappear in such a situation. But there's no question of their disappearing sufficiently quickly. Certainly the political players, the ANC and others, are much too impatient, having regard to the deprivations of their constituency, to allow the imbalances to be corrected over generations.

. There will have to be a role for the state in the South African economy. There's no question about that. Now it's a matter of really achieving agreement on the role of the state. The ANC says there has to be a role of the state. Business, some people more reluctantly than others, are prepared to acknowledge that there has to be a role for the state. Indeed, if one's going to be realistic about it, one would expect that in certain critical areas, particularly the areas of housing, education, health, and so on, that the role of the state is going to increase, not diminish. There is a danger in such circumstances that, if nothing is done to restructure the state and the state's expenditures, that where the state today accounts for 33% of GDP, it would quickly account for 40%, then 50%, and maybe even 60%, particularly in a post-apartheid era where the pressures on the state to do things is greatly intensified. That is why restructuring of the state is important. From my point of view, we need a withdrawal from the state from areas where the private sector can handle the management more effectively, to provide for the increase in the role of the state elsewhere.

POM. Could you give some examples?

RB. Well, I'm thinking, for example, of the ISCOR privatisation. I see no reason why ISCOR should reside in the state sector. I personally don't see any reason why ESCOM should reside in the state sector, or why SASOL should reside in the state sector. Or why any other business which can be properly subjected to the disciplines of modern management should reside in the state sector. The ANC may have a slightly different view of this. They want the state to be powerful and to be able to influence the direction of the economy. I believe that they can exercise that influence anyway through what the state will be able to do in the directing of its expenditures. But as I say, I think appropriately, there could be withdrawal from the state, withdrawal of the state in areas like that to make for an expanded role for the state in other more critical areas. Certainly, privatisation is a way of providing funds to the state rather than the other way around. Nationalisation would require, particularly nationalisation with compensation, the opposite. A flow of funds from the state to the private sector or to the shareholders who are being expropriated. It doesn't actually make sense, you see. And I think that the ANC will come to terms with that kind of logic. I don't think once the ANC is in a position of authority, whether it be as a partner in government or whether it be on its own, that it would not come to an acceptance of this. Because I think in the end, what the ANC is driven by is actually to achieve the best possible growth for the South African economy in the future.

. We also recognise that there has been something wrong with, in terms of job creation, something wrong with the growth that we had experienced in the past. We have had an economy which has tended to be going more capital-intensive rather than labour-intensive. Partly that has to do with the nature of the South African economy and its relationship with the global economy. In order to hold your market shares in export markets, you've got to be efficient, and being efficient often means capital intensity rather than labour intensity. But we do need to have a better balance between rates of GDP growth and rates of employment growth. And where we've had very high rates of GDP growth we haven't had sufficiently high rates of employment growth. That has been our problem and that is where we need to talk about the kind of growth path that the economy requires.

POM. Thank you. That's a lot!

RB. Sorry.

PK. Don't be sorry. It's fascinating.

POM. That's terrific.

PK. I think it's the first economic -

RB. Two weeks ago I was at a seminar in Port Alfred, at which Simon Brand was present, we were sitting and Brand was a participant. Simon Brand is the Chairman of the Development Bank of Southern Africa. Into this discussion I put the suggestion that what we should do is have a national public works programme, if you like. A kind of South African New Deal. I don't want the state to build houses but I want the state to actually develop the programme. Let the private sector do the house building but build a million houses in three years, restructure state expenditure, and make available 20 billion rand over a three year period for this. Simon Brandt's immediate response to that was, be careful, we mustn't talk like that because we will be creating expectations which the economy cannot deliver. Now, Mr. du Plessis is also very aware of what the economy can't deliver. The people who talk about what the economy can't deliver are sometimes constrained by a rear-view mirror of what the economy is.

. I want to think of the economy driven by a sense of national urgency. There were people in 1940 in the United Kingdom who said that there's no way, Britain having neglected its defences as it had done during the 1930s, that it could deliver in terms of the production of Spitfires and Hurricanes in order to meet the threat that it now faced by Nazi Germany. It was amazing how it did deliver once there was a sufficient national motivation to do that. If we had a sufficient feeling of national urgency, if we felt that our society was as threatened, and we are, was as threatened as Britain was in 1940, then we would deliver what needed to be delivered. The South African economy can deliver a million houses in three years if government, the private sector, and the trade unions all get together and agree that that is necessary for national salvation. It will deliver that. And it will deliver it without destabilising the currency and without sinking the balance of payments.

POM. I'll be back in three years to shake your hand.

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