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 It is the product of almost two decades of research and includes analyses, chronologies, historical documents, and interviews from the apartheid and post-apartheid eras.

26 Aug 1990: Mboweni, Tito

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POM. We're speaking with Tito Mboweni on the 26th of August. Tito, to start with, you said the African economy has been on the slide for much of the 1980s. In your analysis, what has been the cause of that slide and can these causes be dealt with when a new government takes over? [Tape off, then on] I'll rephrase the first question since we're running a bit short of time, what, in your view, are the major economic problems facing South Africa today?

TM. I think that they are problems of varying degrees but fundamentally my view is that they are problems which are tied up with the organic, as it were, decomposition of the entire socio-political and economic structure. A decomposition which is very repressive, a decomposition which then has a number of indicators. I feel that the previous structure on which the economy and the entire socio-system depended on in the past is beginning no longer to cope with the current situation. I will explain this just now. One, the socio-political and economic situation or framework was that, in our view, a colonialism of a special type. Meaning that a type of colonialism whereby, unlike the previous forms of colonialism in Africa and elsewhere, the colonising power, as it were, as we see in South Africa, and the colonised people are also within South Africa. So, in a sense, it was the colonised and the coloniser living side by side in one country. And in a sense, the white population, not as a whole, but the ruling class in the white population, can be said to be the colonial power. And, of course, the majority of the black people the colonised. What you had then was also an economic system which was reproducing those relations of colonialism of a special type. Starting off with cheap labour system, they tried to keep the migrant labour system, and with the process of urbanisation as well, very strict influx control measures, and so on. Oh, yes, and it started off the system with the process of the forcible removal of most black direct producers from the land, throwing them into the wage labour system, initially in the mining sector and agriculture. But over time, particularly you see this in the forties when there is beginning to be an over-concentration of the black population in the urban areas, you find a system again not beginning to cope. Imposing now strict influx control measures, now to keep away this population again. So you can see the system actually creates something but it is unable to cope with the actual results of that.

. Over the years what has happened is that actually, because of the growing impoverishment of the African rural economy and the growing urbanisation of the African population, you see the whole system of colonialism of a special type being challenged by those kinds of social forces. In other words, more and more urbanisation. Meaning that actually, in terms of your homeland policies, you see less and less people in the homelands because the Bantustans are economically not viable, people are forced to come into the urban areas. Then in the urban centres, massive organisation of labour in the trade union movement and so on, militancy of the working class. And therefore, you begin to get a the situation whereby the demands of the black working class, for example, are probably now beginning to be the same demands of a freed, as it were, labour force. But here it comes head on with the political structure, which is unwilling to cope with that kind of contradiction as well. An obviously growing demand for political independence out of colonialism of a special type, which, here I'm just describing the challenges to colonialism of the special type brought about in some sense by some of the developments arising out of colonialism of a special type. And that I'm just laying a generally framework for the crisis.

POM. Would you put population growth in there, too? Would you put the rate of growth of the population as a factor that's aggravating the economic crisis?

TMMost assuredly. For example now, if you take the Durban/Pinetown area, that's certainly one of the world's fastest growing urban centres in the world. But it is fast-growing because people are being moved from the Natal overland into the Durban, Pinetown area at a very high rate, I don't have the exact figures, but a very, very high rate of organisation, I think far exceeding in the rate of the economic growth. And therefore, the result is that you have got this huge concentration of people into a social structure which is not also prepared for that. So what you have is this massive squatting, coupled with what I will be coming to later on, the question of massive unemployment and also causing what I'm calling the decomposition of the system. The system is unable to cope with the dynamic forces that are coming in. But at the same time, the previous, in my view, the previous ideology of the Nationalist Party government is beginning, as well, to crumble in the face of all this. Whereas previously white people had been told that black people don't belong to the urban areas, they belong in the Bantustans, you've got, because of the dynamic nature of the development of society, more and more black people coming to the centres, more and more black people getting settled. And you have the break-up of the influx control system. And that needs to be explained to the white population. So the ideology of the Nationalist Party, as well, gets challenged. Then, obviously, there are other developments taking place within the, as it were, the white population and developments within the white ruling class, which also seek to undermine the ideology of the Nationalist Party. You know, the Nationalist Party was built on the ideology of "broeder", you know, "bondism". On developing a "volk", also a kind of "volk-ism". You know, the "volk" is the nation.

POM. Volk?

TM. Yes, volk. Where, for example, in the initial period, Afrikaner, the Broederbond, formed a number of organisations, like the Uniewinkels, United Volks..., something like that. It formed things like Volkskas, the bank of the volk.

POM. Volk, volk.

TM. Yes, Volkskas. Formed things like the, you know, other cultural organisations, for example, in the initial period, in the twenties and thirties, taking more of the a sharper focus in the forties. If you are an Afrikaner, you buy from Uniewinkels, you bank with Volkskas, you get your insurance from Sanlam. By so doing, more belies Afrikaner savings and capital for the development of an Afrikaner bourgeoisie. But what has happened towards the late seventies was this Afrikaner capital, as it were, begins to grow beyond the Afrikaner base, begins to inter-penetrate with what was previously English capital. You begin to see a very interesting trend. Where actually Sanlam, the banks, and so on, are no longer interested in savings and servicing the Afrikaner community. They have a broad base, the market demand increases. The demand for their policies, and so on, and so on. OK, now they begin to employ more and more black people in some slightly technical fields which goes against the original conception. They begin to make co-loans from African business which brings about, as I said, the crisis part of the decomposition of the system. So you begin to see more and more poor Afrikaners, farmers, and so on, moving away from the Nationalist Party seeing that it is no longer the party of the volk but the party of the rich. And that contributes to the crisis as well. But I'm saying the totality of all this brings about the situation whereby I think the structure begins to no longer to cope with what was originally intended.

POM. OK, if you could put that there, on the one hand, and on the other hand, this is the first question I asked you, the South African economy itself has been on the slide for most of the 1980s. Two things, one, what do you think that has been due to? And secondly, is there any reasonable hope that in the foreseeable future, that is, the next four or five or six years, that the economy will do any better than it has been doing?

TM. Again, what I was trying to refer to as the decomposition of the entire system clearly shows that we need to change the framework within which economic activity takes place and also stick to, construct new international economic relations. I would say in the structure, I mean, amongst other things, you see, because of what I explained earlier on, in the post war period, but beginning with the war, because the war disrupted part of the trade centres and increasingly there was an inward industrialisation process taking place, production of consumer goods, which will obviously service the white population but increasingly as well servicing the black urban population of KwaZulu. On the whole, you could say also servicing the entire economy. But you know, there is a lot of protectionism that was brought in to protect these industries, infant industries, as they were, and produce consumer goods. But the contradiction is here: because of colonialism of a special type which imposes, starts with wage restraints on the part of black workers so the production of consumer goods, really, is mainly aimed at the white population and in terms of the problem of the effective demand, the black population in the main had low wages, could not be in a position, really, to satisfy their demands because of ...

POM. Lack of money.

TM. Yes. On the other hand, the white market was far too small because of the simple demographics and the market was that small. In addition to that, South African consumer goods are far more expensive, actually, if you compare them.

POM. Why is that, given that they should have a comparative advantage in wages. Why are they more expensive? Why are South African goods more expensive?

TM. Yes, that's what I'm coming to. One, there is a huge import content into the manufacturing goods.

POM. There is a huge import content?

TM. Yes. For example, the import of intermediate manufactured goods which then go into the production process. The capital good centres are very, very weak. And therefore, you import, actually, I think we import about 84% in intermediate terms, in the field of the capital goods factor. In other words, our intermediate goods contain that percentage. It means, therefore, also, importing the cost into the economy. So by the time the actual consumer good is produced it is a far more expensive effort if you compare it to other countries. But expensive as it is, with the bulk of the population experiencing a low wage situation, so, I mean, this is why I think Alec (Erwin) has been, he summarises a high cost, low wage economy. We begin to, so it's all contradictions, because for an economy that wants to grow, servicing this increasingly urbanising population, more sophisticated, an economy which wants to compete internationally, relative to seriously looking to the structure of production, as well.

POM. Now, I have got two figures and you can either check them or validate them. One is that wages now, for members of black trade unions, are about at 85% of the comparable wages among whites, that's one. [Tape off, then on] And two, that one feature of the economy here is that overall, the rate in growth in wages exceeds the rate in growth in productivity. How do you rate those two aspects to having high cost, low wage economy?

TM. I think one of the major problems there, and you have put your finger on what I was trying to explain initially. And that explanation being, that you have a structure, a total political economic structure, social structure, which is now acting as a fat, it is blocking the further development, I'll explain to you. One of the reasons labour costs are so high compared to productivity, is to very low skill levels. And you tie that to a Bantu education system, you tie that to, for example, costs related to labour strikes and unrest and so on. All these are costs which are related to the previous social structure I was talking about. And labour productivity, it is true in South Africa, is very low. Because of this particular type of, that's why I'm saying in our problem of restructuring the economy, we have to deal with these questions. Stabilise the environment and develop, for example, infrastructures which will service industry properly. In some sense, when, I think, we industrialise in the future we also need to really put emphasis on skills development and acquisition.

POM. Skill development is something that you can't do overnight. So this is a long-term process.

TM. That would be for quite sometime. It's not something that we're going to be resolving in the first year of a post-apartheid government.

POM. That's what I was going to ask you. I know it is kind of an unfair question but it concentrates some issues, that if tomorrow morning you had a majority government, what difference would it make in the life of the average person who lives in a township or in a squatters' camp, now, or even five years from now? Are they going to notice any material difference in their standards of living? Or, what can be done to at least start making a dent?

TM. Yes, I understand, we'll come to that, just keep your question in mind. I wanted to say that in our - indicating that part of the decomposition of the old system is shown by, for example, the apparent clash between, for example, the production of manufactured goods into a market which is unable to absorb them. Which is a very serious contradiction. Which means that we, in future, have to think about how do we resolve that question in terms of making our economy productive, competitive internationally, servicing the needs of the people. And the other thing is that with our very high unemployment rate, there is a big debate now as to what the exact level is, but I think it is somewhere in the range of five to six million or more, actually.

POM. What percentage is that?

TM. For workers above 18. I think about 30%.

POM. About thirty percent?

TM. Thirty percent. It's very, very high. Now, if you have that kind of percentage unemployed, it impacts on your demand for ...

POM. For wages.

TM. One, for wages, but two, for manufactured goods. Your demand situation is very bad which impacts on your manufacturing, which is the biggest problem we have to deal with. The other thing is that, as a result of that kind of decomposition, I mean, you see a kind of situation in which you have got a massive squatting problem. You have got - in other words, homelessness becomes a result of this. If I say "hunger", it would make sense, I think, because unemployed, no wages. And as a result we have a social decomposition, actually - crime, violence. This kind of social-cultural decomposition is a result of this objective problem. OK, now we are saying that in a future perspective we need to look into how can we, one, industrialise South Africa further, particularly developing this manufacturing sector and, two, meet some of the basic needs of the black population. For example, they need houses to live in. So, we are proposing that we need to therefore develop a growth path which will begin to get us to sort out our manufacturing sector and because most of us aren't convinced that we should over-concentrate on mining we should move into manufacturing and, of course, agriculture. Now, is the growth path which should attempt to meet the basic needs of the people one massive housing project so that there are a number of multiplied benefits? One, creates jobs, two, it creates benefits for the private sector, production of bricks, cement, and so on, for construction. Thirdly, it creates opportunities in the provision of electricity by the state but then those companies which produce bulbs and trucks, electric stoves, heaters, and fridges, all those kind of things. There will be, as it were, a multiplier benefit for the private sector but also it'll multiply employment generation.

POM. But a number of these trades require skills so you have blockages.

TM. I know, I know. But I think that massive housing, it's labour intensive. I know when it comes to the production of bulbs, you need a lot of skill. So these, as well, we need to work out, that's how I said, a skills development and acquisition programme which is targeted as well. We may need massive programmes of skills upgrading for people who have never had any skills at all in conjunction with the private sector, in conjunction with various ministries. But I'm addressing a general gross past issue. That by so doing, I think you are developing South Africa on a new growth path that serves the interest of the people but increasingly, as well, as we improve those skills which then are an input into manufacturing. Increasingly we want to reduce our dependence on imported manufactured goods.

POM. Now, the development of an industrial capacity would, it seems to me, require a fair amount of foreign investment. So whatever economic policies you develop must be able to attract capital at a time when more opportunities rather than less opportunities are going after capital. Now, does that put certain constraints on other things you can do? What I mean by that is the obvious one: nationalisation, what level is the debate about nationalisation at?

TM. Are we shifting? I think it is shifting, actually. I think we are shifting into addressing the issues. In South Africa, nationalisation is a code word for all kinds of things, taking people's coffee machines, microwaves, etc. It's a very bad word in South Africa. And in a situation whereby open debate has been illegal for a long time this causes problems, this word "nationalisation". And what we are doing? We are shifting the debate into saying that clearly, whatever the case is anywhere in the world, there is a role for the state in the economy. And there is a role for the private sector, domestic private sector and foreign private sector. There is room for joint ventures between the state and the private sector on certain economic ventures. We think in that way it would address the issues.

POM. Just the one you have given in housing, for example, the state would have to be a major agency providing financial help, right? And then making available mortgages to people to buy the houses, right?

TM. Yes. I think various forms of housing provisions still have to be looked at, the state provision, but also private provisions.

POM. Let me ask you a question, I'm sorry.

TM. Can I develop this a little further? To say that in the papers, what I've said, that we are clearly envisaging a situation whereby the existing public corporation, we see them as continuing as public corporations. Particularly those key and important ones, Eskom, this one was privatised but we see it being made a public corporation again, Iscor, South African Transport Services is called now Transnet, you know. The Development Bank of Southern Africa, the Land Bank. Now, this, we think, should continue being in-state, as public corporations. But we need change, the way they are oriented at the moment, oriented more towards this kind of basic needs situation I was talking you about. For example, Eskom has a lot of work to do in terms of the provision of electricity. Not necessarily profitable rates but at rates which are affordable but make the company able to break even, and so on and so on. What I was saying that, for example, for a massive electrification programme in South Africa, you will probably be in a position to create about 1.5 million new jobs by the programme of electrification. OK, you provide jobs, but also the multiplier effect, and I'm envisaging the calculations at the moment, that if you build these new homes, how many bulbs and planks and so on will be produced, and what will be the exact benefit in terms of private sector benefit? But also, on the other hand, you are creating employment and then a wage and then a tax benefit, in a sense, for the state. So it's a kind of, not co-existence, co-existence is not a very good word, but a kind of working together with the private sector, the public corporations, and whatever other forms, joint ventures.

POM. You're saying sometimes the state is better equipped to do something, sometimes the private sector is, and sometimes the best way is for both of them to work together.

TM. Work together.

POM. To work together. Sorry, Pat?

PK. My question goes back to your foreign investment issue. What is it that South Africa offers foreign investors as it looks to compete on all these new open markets in the world?

TM. That is a difficult question, actually. I would say that no doubt there are opportunities for further industrialisation in South Africa which perhaps no longer exist, I don't know, in Britain and other places. So, there are opportunities for those firms which want to come in on an industrialisation drive.

POM. Most countries, including Britain, have an industrial development authority where they travel the world, roaming, offering tax incentives, act in all kinds ways. I mean, Ireland has one that almost lets any company operate for about fifteen years without having to pay a cent in taxes, and fifty percent of their capital costs are provided, but it's a rip-off.

TM. I know. I think that is one of the issues. I think once we are in government, which I hope isn't too soon, but I won't be in the ministry, but I think once the ANC is in government, then we are in a position to use, for example, this kind of industrial development ministry, whatever, which will act as the first port of call, as it were, for foreign investors. But, you know, I think we need to be a bit careful about the extent to which tax holidays are used to attract foreign investments. I've studied a bit the African experience. In Lesotho, for example, which is not very far from here, they used to offer six-year tax holidays, so these companies will come, most of them Taiwanese, six years. After six years, close shop, go to Swaziland, close shop, go into Botswana.

POM. Ireland has had the very same experience. They take advantage of all these things, and when these advantages are up, would close shop and move on to the next port of call.

TM. Yes, yes. But I think the serious question is a package, we only have concept package now but we'll have to produce, not now, it is difficult now to do this as a liberation movement, a package but in terms of a perspective. We have to think about these things. Let me say that already we are having lots of discussions, actually, with many foreign firms who want to come and invest in South Africa, post-apartheid.

POM. To go back to the question. What could I, if I were a dweller in a township, what could I reasonably expect to happen within five or six years that would improve my standard of living? If I was a squatter, what could I be looking forward to within five or six years?

TM. I think if you were a squatter, you should look, one, towards having a job, in the first instance. For example, through this massive housing project, you should look towards having a job there, and the various spin-off benefits that come along with such a programme where you get jobs, and then a wage. Secondly, I'll say that if you are low-income person, you should look forward to a state housing authority which would engage in provision of housing. And you should look for an electricity supply commission, Eskom, which would be providing electricity in Natal. I would say expect that and put pressure ...

PK. Water?

TM. Water, proper, clean water, and so on. And I say, put pressure as well on those in government, so people don't suddenly say, 'Oh, there are a lot of problems.' They must put pressure continuously on people and say these are our expectations and so on, and so on.

POM. On housing, there is such an overwhelming backlog of housing, would the attention be on producing better forms of shelter or actually, which could be made perhaps cheaply and mass-produced in a certain way, or producing houses with two or three rooms, toilet facilities, you know, where a family of six or seven could live comfortably? Or will there, but which would cost more, serve fewer families in the longer run. Do you know what I'm saying?

TM. Yes, I know, I know. I think if you look into various forms and types of housing, flats, for example, are one quick way of providing houses. But you know, I don't know how many black people will be prepared to live on the twentieth floor.

PK. It's not just an issue with black people, people don't like it. It is a non-racial issue.

TM. So, I know in the post-war period in Britain there used to be competition in how many high-rises the government will build, and so on, and so on.

PK. And now they are disasters.

TM. I know they are. But I think some, you have to have some sort of flats. They may not go that high. Personally, I'm prepared to live on the fourth floor, but not beyond. But some young people, probably a bit adventurous, want to live a little higher. So, I think there are various forms. Even the kind of low-cost house which ordinary folk which never had a home can have for starters. But also what we are thinking about is providing site and service whilst they will have a wage and then if they have got a site, the state, in the first instance, it is their responsibility to put in the basic structure, and from there a mortgage for people to begin to build their own. So I think there will be a combination. State housing, state, as it were, individual, and also private. There are those who can afford to build homes.

POM. Resources. You have to restructure the economy, one that will create new sectors, re-deploy resources. Where, and you have a limited tax base, the tax base is already fairly narrow, and to redress the huge imbalances in expenditures between whites and blacks will require still more resources. Where will all these resources come from?

TM. That is a big question. But there are other areas where we can save. I don't have the figures with me, because you caught us in the process of moving, but we can phone you up with some of the details but we have, for example, calculated something that we call the "post-apartheid dividend". In other words, if you cut expenditures on the duplicate civil services, for example, you have about ten or so Ministries of Education, ten or so duplicate permanent set-ups, and because of the Bantustan system, so on, and so on.

POM. It's like the peace dividend.

TM. Yes, that dividend.

PK. And then, all of a sudden, you'll have an Iraq.

TM. Oh, no, I hope not. So, there is a post-apartheid dividend which we are expecting.

POM. Has anyone tried to estimate this and what it might mean in dollar amounts?

TM. Yes, I'm saying, I don't have the figure with me because you caught us when we just moved offices, but I will phone you up and give you some figure, which is not the final figure. Because if you stop defence, you cut defence spending because we are no longer fighting a war in Southern Africa, you cut the bureaucracies, you restructure the taxation system with more people coming into the job market, that is a tax base increase. And also, we will have access to international sources. So, I think we will have a resource base but it must be a resource base which is in a package of a growth path.

POM. So, you envisage, really, am I right in thinking that a system where, even if the state isn't actively involved, the state is going to be involved in 'preparing this growth path by saying, This is what we would proceed', a general plan rather than a specific one with the government saying, 'We want to build 1.5 million houses a year, want to have so much infrastructure done, want so much water delivered.' You could establish targets in which certain sectors ...

TM. Yes, because we can work out targeted indices, like indicative plan, you work out, this is what we want to achieve in terms of housing. But you know, as a state, what you do is that in order to encourage the private sector to go into that housing, what do you do in terms of certain concessionary rates, interest, interest payments and so on, credit, facilities, how the state can bond in to make money off that. So in an indicative plan where you can actually identify the targets, influence the direction which the economy should grow, without necessarily acting as commander to anybody. So people are not compelled to do it, but if the concessions are higher, they will go in that direction.

POM. I'm sorry we have to go. Is there any chance of getting half an hour of you on Monday morning? Or over the weekend?

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