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 It is the product of almost two decades of research and includes analyses, chronologies, historical documents, and interviews from the apartheid and post-apartheid eras.

27 Aug 1992: Bethlehem, Ronnie

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POM. Let me start with a very simple and direct question. I'm seeing Derek Keys tomorrow morning and I've been thinking of some questions to frame for him that would link government economy policy to ANC economic policy and wonder what thoughts do you have on the critical areas that need attention if the economic part of the transition is to be managed smoothly. I'm saying that in the context of maybe the Nedperm Report of last year which talked about there needing to be three miracles, an economic miracle, a political miracle and a social miracle, for something to work.

RB. Can I just come right across laterally. South Africa needs at this point in time, it needs one miracle. It needs a miracle of a world economic recovery because without that, I mean it was always the case that a global recession would do more damage to the SA economy than all the sanctions that could be cooked up against SA, and in a global recession there is no way in which SA can be an island of high growth in an ocean of low growth. Some people would like to argue that SA could be an island of high growth in an ocean of low growth. Yes, if SA were to do the kind of restructuring that is necessary to improve its own internal efficiency and get on in a very deliberate way with the social imbalance restructuring that is necessary here. The fact is that we don't have the political cohesion to do that and we really do need help from the outside world in providing the wherewithal for this transition to take place properly. That's a big worry to us. If the world does continue to drift downwards rather than bottom out with this recession and go into an upswing in the 1990s we could be in serious trouble in the 1990s. I think I've said this to you before, I'm not sure, on these tapes, but that is so. I wouldn't say it's impossible for SA to actually perform quite well given a more or less OK world economy. If the world economy goes into some sort of a protracted recessionary decline we're in trouble.

POM. What would make you think that if there were an interim government or a newly elected government that it would be any more successful with the economy than the present government is?

RB. I'm not saying that it would be, I think that an interim government would have huge problems. I mean we can see at the present time very serious problems for SA,  not so much the government and its constituency, although there are lots of problems with the government and we can come back to those, but problems of the ANC and its constituency. I can just cite a few that raise all sorts of anxieties in my mind. Nelson Mandela came out and made a statement recently on television, I saw this interview with him on television, it was given wide currency, I'm not quite sure how wide it was spread in the black community, but he certainly came out and he said we cannot afford a bond boycott. And Moses Mayekiso has said, "Stuff you. We're having a bond boycott."

. In the area of black education the PAC is certainly against it. I believe that the ANC don't like to see what's happening because if the teachers' union has its strike a lot of kids who might have passed will fail their matric exams this year and will have another wasted year in black education. It's just a matter of degree really because we know we're going to have a wastage in black education. But the interesting thing is that the teachers' union is defying the ANC. They're not going along with the ANC, they're going ahead with the strike irrespective of what the ANC thinks.

. There is all sorts of evidence to show that the ANC leadership has problems with its constituency. Now it may have had those problems even had CODESA 2 been successful, as some Nats would like us to believe, but that's speculative, we'll never know that. Certainly, however, when CODESA 2 broke down the ANC leadership found itself out on a limb and having to repair a huge gulf between itself and its constituency which had gone the other way in terms of radicalism. One's not sure, I think the reasons why we haven't seen the government and the ANC get together is because the ANC hasn't yet solved the problem of leadership/constituency relationship. It's got a very, very big problem there. And the ANC leadership has to solve that problem before they can go back into negotiations. That's my own feeling.

POM. In what respect are the economic problems structurally different than they were two years ago, has everything gotten worse? There's more unemployment, high inflation, one feels there's a greater sense of depression about the depression itself, lack of business confidence. I think what someone quoted, saying a third of the companies listed on the Johannesburg stock exchange were on the borderline of bankruptcy. Is that right?

RB. Well I don't think so, you get these kinds of statements. One doesn't know, I can't give you any factual response to that. I can tell you, however, that there is a problem and again it comes back to the problems we've been talking about. We had in August, August 3rd and for a whole week after that, we had this week of mass action and we have a threat published in the ANC magazine referred to in Business Day this morning, but it comes out in other statements made by ANC leaders, not top leaders but middle ranking leaders, Ronnie Kasrils in particular who has responsibility for organising mass action, that we're going to have another week of mass action in October.

. Now I can tell you that if we have that a lot of things will collapse. Not only will companies collapse, because many of them are over a barrel anyway, and if we don't have any economic recovery by then which we probably won't, further action of this kind could be very damaging to them, might force many of them to the wall.

POM. Is this an effective tactic for the ANC since it puts pressure on the government to be more accommodating?

RB. Well, personally I think that business has been as pressurising as it can be. I'm involved in business. My impression is that business is trying to be even-handed. It has met with the ANC, it has met with the IFP, it has met with government, and I have been in meetings where business has made it very clear to the government that business wants to see the negotiations resumed. Now business can talk and government, which is political, might have different insights as to what the urgency of getting back to the negotiating table is, so one has to be a little bit sceptical about that. But I can tell you that business is concerned.

. The interesting thing is that we've had a turnaround in SA where I think a great number of people who formerly would never have had these kind of thoughts in their heads, today want an interim government because they feel an interim government is the only way to getting on with the problem. But the ANC has a problem. If it joins an interim government can it deliver?

. We were in negotiations, I was part of those negotiations, over the Economic Forum which was laid aside and business confronted our labour colleagues about mass action. It became clear from the labour people that they wanted constructive discussion on the question of the Economic Forum and so they allowed us to say our piece, they gave us a bit of a response and then we got on with the constructive negotiations on the Economic Forum and we made very good progress until government came in at two o'clock and confronted them again in exactly the same kind of way. It took a lot of very patient talking on the part of the labour people to get the government people around. At the end of the day we'd made progress but the one thing that the labour people who were in the Economic Forum made clear, they said, "Look, let's get on with these discussions that we're having. We're here. Accept that we're here in good faith."

. Now if there's going to be another week of mass action I think, and if over this court ruling, Bernie Fanaroff, and he's going to be able to succeed in mobilising the radicals in COSATU into using this as a pretext, we may find that the Economic Forum collapses. Now the problem with COSATU is that for them mass action, they say, is made necessary by the intransigence of the government and they've got to use mass action to pressurise the government. But they do so by turning the economy into a battlefield and business can't stand aside and just accept that because all that business can do to pressurise the government into negotiations, they're making it very clear what they want.

POM. One of the things one hears quite frequently is that COSATU and SACCOLA were very close to an agreement that would have resulted in a one-day shut-down, and another one a two-day, maybe more restricted

RB. Are you stating that as a fact?

POM. No, I'm saying that this what we've heard, we heard that these meetings said that they were very close to agreement, but that the government stepped in and pressurised business.

RB. I think that's not a correct way of seeing that.

PAT. They had come to some agreement but they had to go back to their respective constituencies and consult. The point being that in that particular time of consultation the government stepped in before they went back on Tuesday.

RB. The government, some government people, or even FW might have had a word with them. But you can't get away we don't know, that's only speculation, you heard that on the grapevine. The one factual thing that we do have is that when again I was involved in the background of these things, I wasn't directly involved in it. They had worked out the so-called charter and business had gone a long way to accept the whole thing. The collapse came when COSATU insisted that the whole public sector should shut down as well. That's a fact. The other things are speculation. But the fact is that COSATU was not prepared to enter the charter agreement and make it a one-day or even a three-day shut down instead of a whole week unless the public sector was prepared to shut down as well. And the government was not prepared to shut down the whole government sector for one day; it couldn't do that, shutting down hospitals and all essential services, it couldn't do that. No government in the world would have done it.

. My conclusion from that is that COSATU had made up its mind that it wanted a week's mass action for other reasons. So while there may have been people on COSATU's side who were quite sincerely involved, quite sincerely involved in these negotiations with SACCOLA in trying to work out a charter, the fact is COSATU did not want an agreement. If it was an agreement or mass action, mass action was what they wanted.

POM. Looking at the ANC's economic policies that were published subsequent to their policy conference meeting, they look really very tame, unspectacular, straight down the middle. There's hardly a thing there that

RB. It could have come right out of the Democratic Party.

POM. It was one yawn.

RB. It could have come out of the Republican Party! Look, I don't think that's the issue. The ANC and certainly the hierarchy, the leadership of the ANC in the ANC's Economic Department, don't cause business a great deal of anxiety because they evidence a lot of thoughtfulness about the economy and while Tito came out the other day with a statement about nationalisation again, it was so pedantic and confusing that I couldn't understand it, and sort of raising the nationalisation bogeyman again, albeit highly qualified. That's not the problem.

. The real problem, in a sense some of those people in COSATU we're negotiating with are not a problem either. I'm talking about Alec Erwin and Marcel Golding and I'm talking about Ebrahim Patel and Jayendra Naidoo, these people you can see that their minds function in a more or less rational way. What we're concerned with is whether leaders on that side of it are really using the breakdown in their own constituency for tactical reasons or whether they're driven by a radicalism that they cannot control. And it's a problem. You've got happening in SA at the moment mad things, strikes, demands for wage increases is it in the coal mining industry, no it was NUM's negotiations with De Beers. They're asking for 15 21% increases, when what has happened is that the bottom has fallen out of the diamond market. You've got a situation where SISA is being confronted by wage demands which make no sense in terms of what these industries are going through. An industry that is not properly geared can face oblivion in these kind of circumstances. In what way does it serve the objectives of COSATU, or of the ANC, to damage the economy in such a severe way?

. If you look at what happened in the gold mining industry, it took a long time for NUM actually to come to that point but we had some very interesting and valuable agreements between the Chamber of Mines and the mining companies and NUM in the gold mining industry. The gold price peaked $850 in January 1980. Admittedly that's an extraordinary high level.  To come back to the gold mining industry, gold averaged over $600 an ounce in 1960. It's been on a hiding to nothing for twelve years. It's present level is around $350, under, less than. Throughout those twelve years, year after year, NUM came with exaggerated demands of wage increases which inevitably got pared down in the ultimate agreements. However, we got to a point in the industry where both sides had to test each other's strength. NUM lost that battle. But the consequence of this kind of wage policy on the part of NUM has resulted in the erosion of employment in the gold mining industry and the gold mining industry could have had a lot more employment had it been prepared to cut back its income level. It's a problem for the whole of SA because the gold mining industry is a leader in setting rates' trends in the mining sector and the mining sector is very important to everything else.

. SA has had a problem with gold. When the gold price goes up everybody jumps on the bandwagon because it's a windfall that everybody wants to participate in, and the whole cost structure of the country moves up with the gold price. This is the history of the 1980s. When the gold price collapses incomes aren't adjustable downwards. People will not accept income adjustments downwards. And the most problematical people in this regard are the workers and the union, not the shareholders. The shareholders take it, they take the punishment because when the companies aren't making a profit there's no dividend. Their incomes get adjusted downwards but it's people who are on wages and salaries who will not accept the adjustment of wages downwards. The end result of SA was the only way in which you could effect the necessary adjustment, because no longer were we earning in foreign exchange, was that the currency had to collapse and inflation, cost push inflation had to eat into the real value of wages and salaries so that wages and salaries were eroded by inflation as the only way in which real incomes could be reduced.

. Now I'm saying that in the steel and engineering industry and in the gold mining industry and in the coal mining industry, labour is pushing a policy that doesn't make sense economically. But also it's not only driven by an economic consideration, it's driven by political considerations. It's creating a great deal of anxiety and a great deal of pressure at a time when the economy can't take it. Now you'd say, well OK, industry's going to hot foot it round to government and say and say, "No we need it now, you've got to give in." And people like Ronnie Kasrils believe that they're on the brink of pushing the government into the abyss. How can it be that way?

POM. In your view the ANC has lost control of elements of its constituency?

RB. They've lost the initiative. The initiative lies very particularly with COSATU.

POM. The initiative lies with COSATU but COSATU is unable to exercise restraint over many of its component members.

RB. It's lost the initiative with COSATU. I'm not sure how to assess radicalism in COSATU but let me give you a picture of Jay Naidoo. I know Jay Naidoo, I've met him personally but I don't know him well so I can't give you a good evaluation of Jay Naidoo. There are people in business who know Jay Naidoo well and who say that privately he's very reasonable. But I'm looking at it now objectively and I see that Jay Naidoo says private things that are very different from the public things that he says. So now you've got to assess what is true of the man. You've got to now evaluate his actions in terms of his words. His actions are radical and his radical words sit with his radical actions. Where does that leave his reasonable words that are privately articulated? It's a problem. It leaves me with a feeling of uncertainty about Jay and what his agenda is.

POM. Do you think they've moved centre stage in the alliance, they've kind of become the dominant partner so to speak?

RB. You know, I withdraw from generalising from generalising about the ANC/COSATU or the SA Communist Party. I know a lot of people in these organisations and I am convinced that there are people in the SACP who are working to obstruct it all to promote a transition that is rational and balanced and reasonable. I am convinced that there are people in the SACP who do continue to harbour illusions of grandeur with regard to demolishing apartheid. I think that there are people in the ANC, even in the leadership maybe, who are radical as opposed to reasonable and the same applies to COSATU. COSATU is doing very good things; it's doing interesting research on the economy. It's got people who are intelligent and thoughtful about the economy and with whom one can talk. But there are people in COSATU also who are pushed by this political vision.

. Now I might be wrong. It may be that they are correct, at the end of the day the government is going to collapse.

POM. So the new government, a new minister for finance, he walks into an office

RB. Derek Keys.

POM. No, no, this is in a new government not the present government.

RB. Let me say this, the transitional government is a problem government because it's a power sharing government. And it's a problem government from a number of points of view. Firstly because it's a power sharing government the different elements in that government will need to be satisfied in some kind of way and that government is going to be under very immediate pressure to deliver things and quickly in terms of the economy. We may be forced into doing short term expedient things which do not make long term sense for the country, that contribute to its longer term destabilisation. It's a problem government. In a sense one doesn't want the interim government to last too long from that point of view, and I would agree with the ANC in that sense. One wants to get this constitution sorted out. I do believe that the government that is formed by the ANC after it emerges as the largest single party in a democratic election will be a power sharing government. It will have to be a government of national reconciliation in order to avoid bad things happening, capital flight, flight of people. But that kind of government which now has a clear senior element in it will probably be able to avoid some of those pressures and it won't be under such pressure because it now has emerged, it's got a kind of legitimacy.

POM. But you are the minister for finance, you're the new government, what would be the first several economic priorities that you would have to address?

RB. Well this is where are you putting that question to me as if I was the minister?

POM. If you were to brief the minister, you would say?

RB. If I were to brief the minister I would have to say if there was one thing that is new in this situation, once you democratise SA that is new to the situation compared to what it previously was, mass unemployment is now new, but the enfranchisement of the mass unemployed is new and once you enfranchise the mass unemployed then you change the priorities of policy formulation. There is no way in which dealing with mass unemployment doesn't become a critical issue.

. Now let's get back to the question you put to me right at the beginning when you said you were going to see Derek Keys. I say Derek Keys the other day as the SACCOB delegation and he gave us a presentation privately after our meeting had ended and he indicated that there were four things that he considered to be priorities, and I forget what they all were. One is getting rid of violence, dealing with violence, eliminating violence. The fourth item on his agenda was development. I interrupted him to say, I happen to know him personally so I didn't feel so timid about it, about interrupting him, I said, "Minister, just tell me, where does mass unemployment come in?" It wasn't among his four points in development, and in any event I can only deal with four points at a time. He said you've got to restrict yourself to a limited agenda, if you try and do everything you're going to get confused. You must have a focus on four critical issues and he gave us his four critical issues. One was development. You can't put mass unemployment with development because development is something that you have to plan rationally into a long term framework and into a macro framework and mass unemployment is something which is knocking at your door while you're trying to think quietly.

. So I don't think he's thinking, he's got the right priorities for an interim government. Somehow you've got to bring development and mass unemployment together, you've got to say: we've got to start solving the problem of mass unemployment in a development context. That's what we are trying to do, or at least I'm trying to do here in the Economic Forum. I'm drafting here for the Business Forum the research and working agenda for the  working group of the Economic Forum. That's exactly what I'm concerned

PAT. Did we read this correctly the other day, only one out of ten new entrants into the job market will be able to be employed?

RB. A few years ago it was 80% and now it's less than 10% who will get absorbed into jobs. It's not something that just affects black people. You must realise what's happening to the SA economy and why we say we need a restructuring of this economy, but we do need a little help from the world.

. We advertised a job for an economic statistician in my department a year ago. How many applications for that job do you think? We got about 80 applications, more than that. We eventually cut it down to a list of six or eight people we thought were realistic candidates and we wrote to the other people and said "Thanks for your interest". I suppose you'd find that in the United States today.

POM. Mass unemployment, the first critical issue?

RB. The issue. Full stop. And it's a big issue because it's going to require that we manage it, we manage its demands, monetary and fiscal policies have to be kept appropriate in terms of that. We run the great danger if we try and do everything to solve the problem of mass unemployment that we have a horrendous inflationary state and we've got to do what Chris Stals says save the rand.

. Let me just say to you that for all the apparent stringency of the Reserve Bank Governor's address yesterday he is still saying, and he said it to us privately, he doesn't go flat out to abolish inflation in SA, he goes flat out to preserve some kind of financial stability in the country. The best that he can achieve is some sort of graduated depreciation of the rand in foreign exchange markets because we're running our inflation rate higher than our leading trading partners and there's no way in which you could keep the rand up if that happens, on a weighted average basis the rand would collapse. And to abolish inflation would be so severe, so damaging, that we can't afford it. He's got to allow this economy a growth rate of 7 10%in the money supply otherwise we will have a level of violence which we will not be able to contain.

POM. Some advocates, obviously I know the answer but I'd like to hear you, there are some advocates of devaluation, particularly the means of trying to stimulate export markets

RB. Those advocates of devaluation didn't realise that we are devaluing the rand every day. The rand has been devalued steadily by the weighted average basis against the currencies of our leading trading partners. The rand is beginning to look correctly valued where it has been previously seriously under-valued against the dollar and perhaps, depending on what your base is, you can even argue that it's looking marginally over-valued. Anybody can come along and say that your base is up.

POM. The ANC says the way you tackle mass unemployment is you embark on a huge ambitious programme of housing and infrastructures and building roads.

RB. I agree with that.

POM. You agree with that?

RB. Yes, I have all the time. That file over there contains a presentation which I gave to the ANC on that very issue. But it's very important how you build housing into a macro strategy. At the moment we've got 26 different agencies in the country that deal with housing delivery and the big ones with the big money are finding it difficult to spend the money. The IDT, for example, has not succeeded in spending its money. You're not going to just go and waste the money, you want to spend it in a way in which you have durable impact on the economy. The IDT has not succeeded in spending its money, and in any event the IDT is not part of a macro strategy. These 26 different delivery mechanisms for housing need to be brought into focus under one ministry.

POM. The wherewithal for this programme comes from would this be government sponsored?

RB. I just need to say this quickly, we've got a problem, and that's why we need this political programme because anything that this government does in the way of a significant unilateral initiative will be dead in the water, dead in the water. So we've got to have common ownership of a strategy   The way to have common ownership may through the Economic Forum, but we need common ownership of these initiatives.

POM. Let's leave it there.

RB. It's tough, isn't it?

POM. Have you any papers, recent papers that expand on some of these areas?

RB. I'm sorry, I've got a paper but it's a highly technical paper. I'm sorry, I don't have really. There are chapters that I've written and have been published in books. When are you going back?

POM. On Friday.

PAT. We'll be back.

POM. Yes, we'll be back. I'll be back in June.

This resource is hosted by the Nelson Mandela Foundation, but was compiled and authored by Padraig O’Malley. Return to theThis resource is hosted by the site.