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 It is the product of almost two decades of research and includes analyses, chronologies, historical documents, and interviews from the apartheid and post-apartheid eras.
05 Dec 1993: Keys, Derek
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POM. Mr Keys, last year I think my first question to you was whether South Africa might become one of Africa's economic basket cases and you said it had a chance of doing so, that there was a good chance it could go that way and a good chance that it couldn't. A year later how do you respond to the same question?
DK. Well I'm much more optimistic now than I was then because I've had eight months of close co-operation with the non-parliamentary parties on specific economic issues. This started in April of this year as a result of the international banks with whom we had to negotiate our final standstill agreement asking for a political endorsement. In order to provide them with this we put together what was initially really quite an informal group consisting of the economics spokesmen of the PAC, Inkatha and the ANC and of the major parliamentary parties, the Conservative Party, the Democratic Party and the National Party. This group in the first instance looked at the whole question of this final agreement with the international banks and whether it could provide a political endorsement which it agreed to do after a certain amount of additional negotiation. By that time it was clear that this group was working well together and we therefore used it in order to look critically at South Africa's revised offer under the Uruguay round of GATT and it was only after this group approved that offer that the offer was taken to the National Economic Forum and subsequently to GATT.
. We used the same group then to work with us in normalising our relationship with the International Monetary Fund. Members of the group came with me to Washington, attended the meetings with the management of the International Monetary Fund, also with the World Bank and the other World Bank associates, and they participated actively in drafting the statement of policy that has to accompany our application to the International Monetary Fund for the compensatory facility which will repair the damage that was done to our reserve position by the drought which we had 18 months to two years ago. Now the decisions in which this group has managed to participate and to arrive at consensus positions, these decisions have long lasting consequences. The agreement with the banks covers a future period of eight years. The offer to GATT will have implications that go at least that far forward and quite possibly further and involve a major rationalisation of our tariff structure and a progressive reduction of the levels over that period. And even the statement of policy for IMF purposes carries us quite a way into the future. The fact that in these three important areas we were able to find each other on a basis of pragmatism and with a total absence of ideological considerations has given me tremendous confidence in our ability in the government of national unity to produce an economic policy that looks credible to the rest of the world, that's market orientated and that will keep us from making the mistakes which most of the other African countries you referred to made initially.
POM. The IMF generally requires a letter of intent that there will be sound fiscal policy.
DK. That's the one I'm referring to.
POM. And you will keep a close eye on government expenditure.
DK. That's right. It relates to fiscal policy, it relates to trade policy.
POM. The structure, the World Bank want South Africa to have a structure and adjustment programme?
DK. No.
POM. Which is unusual since with most African countries it's been asking that for the last ten years.
DK. Yes. The statement of policy which we have agreed with the IMF management essentially sets out the policy that we've been pursuing for the past two years.
POM. What has brought about this metamorphosis so to speak?
DK. I think there were signs beforehand that it was taking place, it's just been nice to see it come through and of course in the ANC it culminated in the call for the removal of sanctions at the end of September. The chief credit has to go to the fact that wherever the ANC has gone for advice they have had extremely good advice of a market type. I think it was in Beijing that they got the advice not to let the public sector get too big. By the time the world is in that condition you know that all we've had to do is allow the process to take place.
POM. MERG, which came out with its report last –
DK. They haven't sent me one which I could look at. I've now asked for one and I believe I'm going to get it next Thursday.
POM. Well one or two things, one is that there was a critique of it in the Financial Mail which said, "The 350 page document does not advocate a return to Marxist economics but it qualifies free market concepts to such a degree, poses politics that are inimical to its own objectives and recognises so little of proven orthodoxy that the economic credibility is open to question. Essentially it plans to nationalise the marketing of minerals and banking, stimulate growth through state spending and interference and direct the allocation of capital resources by fiat. It advocates that the Reserve Bank should be subordinate to the Finance Minister, subject to parliamentary scrutiny and fully state owned."
DK. The ANC has been very careful to distance itself from MERG in exactly the same way as I kept saying, and I still keep saying, that the Normative Economic Model (NEM) is not government policy, it's the advice that I get from my economists. The ANC, I'm pretty happy to note, are saying that the MERG report doesn't represent their policy, it represents the advice that they are getting from MERG which is an accurate statement. And in one case where the ANC has had to act so far is on the MERG recommendation, the one about the Reserve Bank, the ANC has firmly slapped it down and has agreed to the fact that the new constitution enshrines the independence of a Reserve Bank.
POM. Is that right? This has been done then in the last - ?
DK. Last two weeks.
POM. Two weeks. I would have thought that control of the central bank would be a big issue for them, that one man should not have control over the state of the economy with respect to interest rates and inflation.
DK. There it is in the constitution.
POM. Putting that in tandem with what Mr Mandela said in Birmingham on October 14th, he said that large scale state intervention was unavoidable to address the situation for 98% of industrial property was owned by whites and 86% of the shares on the Johannesburg Stock Exchange were controlled by five corporations. Do you regard that as electioneering?
DK. I'm interested to see what concrete suggestions he has to offer seeing that he also said in his speeches abroad that this has to be an investor friendly community. I'm not sure you can have the one and the other.
POM. When you look at the capital outflows, particularly in this last quarter, and the capital outflow since 1985 which would have paid off most, if not all, of South Africa's debt, looking at that and if there were a group of potential investors from overseas sitting in this room now what kind of case could you make to them to invest in South Africa when Southern Africans didn't have the confidence to invest themselves?
DK. It's quite easy to make a case because in spite of everything that's been thrown at this economy it's shrunk by a remarkably small amount. You take the capital outflow, that's only one of the bad things that's happened to us. Commodity prices have fallen drastically, precious metal prices have fallen, the economy has been used as a political football. We've had to complete very low yield projects like Mossgas which we inherited from previous administrations. In spite of all that happening, if we take the direct effect of the drought on one side, the economy has shrunk by less than 2%. If you compare that with what has happened to various economies around the world which have had a bit of a setback and so on then you begin to get an idea of just how tough this economy is. So when investors talk to me about should they invest in this economy, I have a very simple message for them. There apparently is no downside. You can do your worst to this economy and it hardly shows it so that if you think there is an upside and you don't have to worry about the downside then you're ideally placed. For a foreign investor too, he can come in here and he can buy his assets at a discount through the financial rand which South African industrialists can't do. A foreign investor also doesn't have the problem of having all his eggs in one basket which is the case for South Africans. So that the reasons why the capital outflow has taken place as far as South Africans are concerned really simply aren't relevant as far as foreign investors are concerned.
POM. They're not relevant?
DK. They're not relevant as far as foreign investors are concerned. Foreign investors are in a much better situation. Foreign investors can also get guarantees, they can get insurance through OPIC (Overseas Private Investment Corp.) if they're United States investors. If they're investors anywhere else they can insure through MIGA (Multilateral Investment Guarantee Agency), the World Bank affiliate of which we are now a Part 2 member. So they are able to cover themselves in a way in which South African industrialists can't do.
POM. Do you expect over the next five years for there to be significant foreign investment here?
DK. Probably significant in comparison to the position of the last several years when we've had disinvestment but just how sizable it's likely to be I'm not, I don't have a fair idea of it.
POM. If the unrest continues after the elections and the levels of violence are still fairly prevalent throughout parts of the country, do you see that as acting as a deterrent, that there will be a wait and see policy perhaps for four or five years?
DK. Well it's a deterrent of course at any time and the effect no doubt lasts beyond the events. It has a bad effect on tourism. That's probably our biggest immediate loss from that sort of activity and the reporting that it gives rise to. I think violence is the biggest single failure area of our community up to this point. I think it will be much easier to address when we have a representative government and I think there are ways of addressing it.
POM. Just from reading the literature in the papers for the last couple of months, I've been around since July, I sometimes get the impression that South Africans believe that there is going to be this windfall of foreign investment.
DK. No. But not very sophisticated South Africans I think.
POM. They're like the Irish I think, in the sense that now that we've worked out our problems, they're going to be so glad we've worked out our problems they're going to pour tons of money in here!
POM. When you look again, and we talked about this last time, some figures show that you have to have a 5.5% growth rate per year for the next ten years in order to keep per capita income at the level it's now at, coupled with the fact that that would require investment of approximately 100 billion dollars over the next ten year period.
DK. 100 billion dollars?
POM. 100 billion dollars.
DK. That seems too high.
POM. Maybe it should be rand. When you look at the constraints the new government will be under in terms of lowering government expenditure as a percentage of consumption spent and you consider the taxes even admittedly by the ANC are such a racial point and you can't really raise much more finances there, where does the money come from to (a) create jobs, the unemployment rate is now at about 46%, and (b) to take care of these massive disparities? Last year you said an accommodation would have to be arranged between the black elite and the government and you've got to keep the masses quiet.
DK. That was before we had done the work that we have now done on the development programme. Wiseman Nkuhlu (Chairman Independent Development Trust) with the help of Professor Jan Lombard has now produced a formal development plan. Did you see them?
POM. No.
FDK. OK. They have come up with a figure of the order of 90 billion rand, which is why I queried your figure, as being involved in current money terms in addressing the backlogs. Now these figures are always dangerous but let's play some games with 90 billion. 90 billion, that's an assessment today of what it would cost. 90 billion is equal to the government revenue for a year so that if you were to have a 15 year programme then you would have to increase your government revenue by a fifteenth in order to meet this which is another 2% off GDP, something less than 2% of GDP. Our current tax load is about 24.4%, so in other words if you had gone up to 26½% of GDP then theoretically, based on these sort of calculations, you could over a 15 year period successfully address this. That would be my approach now. In other words I'm more optimistic again.
POM. That's good.
DK. This is what you're measuring isn't it? How attitudes are changing. Well my attitude is changing for the better.
POM. You prepared a document for the World Bank that about 90 billion rand would be needed over a ten year period to do away with backlogs in specific social targets like pupil/teacher ratio, building of houses.
DK. Don't forget that 90 billion is all in costs, not necessarily what the government would have to provide. If you can manage to marshal private finance for a portion of your housing needs then you reduce the 90 billion.
POM. Last time we talked about that, because it's important in terms of what's going into the constitution, you said, "There has been one tax collection system, there has to be a Fiscal Council where the overall level of spending is agreed to. There has to be an agreed formula in place as to how much of resources are devoted to education, housing, health, etc. There has to be agreement about what will be spent by the central government and what will be by the regional governments. There has to be agreement on how much will be spend by the regional governments and by the centre. The economic parameters should become part of the constitution that would be the best guarantee for the future." Is there any sign that - ?
DK. That's all in place except that the parameters as such aren't in the constitution but they are put in the hands of what's called the Fiscal and Financial Commission now in the draft constitution which will fulfil pretty well all those roles.
POM. Job creation. With unemployment jumping this year to about 46%, when you look at the record of the west in creating jobs it's not exactly inspirational.
DK. No, it doesn't know how to do it.
POM. How do you do it here?
DK. Well we're better placed than most western countries in this respect in that, of course, the backlogs lend themselves to employing the unemployed. If you take the surplus capacity that we've got in various areas, whether it's corrugated iron or roofing tiles or cement or bricks or whatever, cables, and you take what unskilled males between the age of 18 and 28 can be trained to do in something like three months and you take that collection of under-utilised resources and you match it against what the communities with backlogs need, then there's an explosion of the best kind there waiting to happen in terms of job creation.
POM. These would be all labour intensive jobs?
DK. Well reasonably labour intensive, building houses and providing reticulation and services, simple wiring, that sort of thing.
POM. All those other components, will all those be in place in order to do the building?
DK. The idle capacity is there now. We have a complete cement plant standing, it's never been activated. There's very substantial excess capacity in the South African system as there is in the infrastructural system, the economic infrastructural system.
POM. What areas of the economy would you be most concerned about? You're painting on the one hand a very rosy picture.
DK. I'm concerned about the outflow of capital which is still continuing. That's my main concern now. All my other figures are moving in the right direction. Reserves aren't going down, we've stabilised the reserve position, but I would like to see the reserves building up.
POM. You said in August that the economy had turned the corner, yet to the 46% unemployed people they certainly won't think much of a corner has been turned.
DK. Quite right and by the time we've done fantastic work along the lines that I've been outlining now there will still be 44% unemployed. After that there will be 42% unemployed, so the problem doesn't go away.
POM. It's been the case where in most countries that have undergone transition, that when the new 'national liberation government' comes in or whatever, it embarks on massive social spending to deal with the backlogs in its own constituency and it doesn't pay much attention to inflation. What curbs are there, if any, to prevent a future government from doing so?
DK. We've got one of the best curbs that you could possibly have and that is the fact that our reserves are so low. A government that went off the rails here and started printing money and so on would find that it's reserves dwindled away to zero before it could turn around. If we had Taiwan's foreign exchange reserves we could have a government here that went on the wrong lines for years before it became a crucial matter. With us it would be a question of three weeks.
POM. In meetings you've had with people who represent the economic policies of other parties and came from such disparate places in the beginning, what was the process of bringing them around?
DK. As I say it's mainly the advice that they got all over the world. They all employ advisors so when the foreign governments rush to provide them with funds so that they can employ the nationals of those governments to give them advice, thank goodness this is a market orientated world, they've got market orientated advice, apart of course from the bad examples of what socialist economic planning has resulted in.
POM. The manufacturing sector, as distinct from the backlog sector, is the engine of economic growth that employs fewer people today than in 1980 and if, and I've seen polls that say the major concerns of people are (i) violence and (ii) employment, and if you say with addressing all the backlogs that you're still going to reduce employment from 46% to 42%, this represents one huge political problem for the government of the day.
DK. And it will do so for every government in my lifetime. That won't change.
POM. COSATU, for example, is still making noises about what they will be looking for and in fact they called the MERG recommendations weak and that it didn't cause any great excitement among their members. Given the confrontation recently between COSATU and the ANC over the matter of lockouts, do you see a situation developing where the trade union movement would move in its own directions, looking for more for its own members?
DK. I think it's done that already. I think that's well established that they are interested in how their members are doing. I think they are more likely to be touched by responsibility in a better direction. We have certainly seen that through the operation of the National Economic Forum so far, we've lowered the whole temperature of confrontation and we've had a much better year since that was started than the year before that. I have a hopeful feeling about the trade unions.
POM. Hopeful that they will recognise the larger interest?
DK. They are becoming, through participation in the National Economic Forum, they are becoming involved in our failure. They are becoming involved in the failure to stimulate economic growth and the failure to provide jobs, etc., etc. They are becoming an identifiable part of the problem instead of sitting on the outside and criticising, you know, where are the jobs? They are now inside. We're now asking them where are the jobs. Well there aren't any jobs. Why aren't there jobs? Do you think it might have something to do with the minimum wage here?
POM. Another arm of the strategy is built on an export drive and the fact is that if you are thinking of lifting the South African economy in terms of competitiveness among developing countries it doesn't do very well. You've had, I think, a threefold increase in wages over the last ten years not accompanied by any increase in productivity.
DK. We've had productivity increases in the past four years of about 1% a year.
POM. So how do you bridge the gap in between the two?
DK. I've got to convince them first that they've failed, which I'm busy doing. The National Economic Forum is now sitting on the question of job creation projects. We've got them involved in that. They are discovering just how unsatisfactory that kind of approach is towards creating jobs. They have been unable to come up with a list of approved projects. I think they are about two months overdue by now because they are realising, I think, for the first time that for every one that you're able to approve you have to turn down ten and that's not a very nice prospect for them. It's all part of bringing reality home to them. Have I given you my quote from V S Naipaul, his book on the Caribbean? It's rather nice. He goes to see one of these newly independent states in the Caribbean and he goes to see the Prime Minister. He says, "I detected in him a certain melancholy which I've seen before in those who have exchanged the security of agitation for the insecurity of power." This is what's going on here. The top twenty guys in COSATU are going to become Members of Parliament, God bless them.
POM. And then they could be speaking on behalf of the parliament and not the –
DK. The chickens are going to come home to roost. So far when they have, these chaps have come up trumps. I'm not too worried. When you say how badly our productivity has performed and so on you have to ask yourself, what reasons did a black man have for becoming more productive when he couldn't buy a better house, couldn't have his children better educated, couldn't move to a safer area.
POM. OK, what would you see as the main priorities of the incoming government?
DK. Come out with a credible market orientated economic policy as soon as possible, produce a national plan for addressing the backlogs which is sensible and affordable. I'm sticking in the economic area. Give undertakings about future levels of taxation at the earliest possible moment which will probably be in August next year when they can produce their first budget.
POM. For example, should expenditure on education take precedence over expenditure on housing?
DK. They are susceptible to different approaches. Most of the education spending will have to go through the budget but most of the housing expenditure can be marshalled in the private sector. It's easy to set that question but there's no abstract answer to it.
POM. I was asking it because in other countries, like in Zimbabwe or Kenya, there's a big increase in education.
DK. That's right and they didn't have jobs.
POM. And it didn't result in any jobs so, again, it's back to the need for more fixed capital investment and again that comes back to your resources.
DK. Well it comes back to the investor friendly, the entrepreneur friendly environment.
POM. What I'm trying to get at, it is a very competitive world in terms of capital with all the incentives being offered in any number of countries all over the world.
DK. Absolutely.
POM. There's no particular reason why a company should come here.
DK. I quite agree. If we did find a particular reason another ninety countries would make it tomorrow. It's hard to establish a competitive advantage.
POM. A federal system or a centralised system, in terms of jump starting the economy in some way, in terms of getting the economy moving in the direction that you want it to move and moving efficiently in these directions, is a highly centralised form of government better for that purpose than say a very loose federal system?
DK. I suppose anything is better than a highly centralised system in terms of preventing the wrong things from happening but basically I don't think the form of government makes all that difference except that the federal system is probably going to be a bit more expensive to run with the extra legislatures and extra bureaucracies and so on. But that's all to be more than counter-balanced by the degree of identification that people can get with their regions, hopefully. So I think there are those differences but you can have an entrepreneur friendly federal system as you can an entrepreneur friendly centralised system. I don't think there's an inherent difference between them in that respect.
POM. So if I were the resident of a township what would I have the right to expect from a government of national unity after five years?
DK. After five years? Well you'd have the right to expect that your educated children had found decent jobs and that your uneducated children had been drafted into some kind of job school, that the level of services had improved in the community that you were living in, that the degree of over-crowding in the housing had diminished to an extent.
POM. It's quite possible that as you address the issue of housing that it bounce back on itself. A housing official in Namibia was telling me that when they started building houses word went out to the north that houses were being built and the rate of organisation was greater than the ...
DK. The Liverpool phenomenon, but the level of unemployment never goes down because it's at the misery level and more people come in from miles away, or used to, I'm now thirty years out of date. I suppose they come in from elsewhere now. If you don't have a rural development programme you're going to have that. Perhaps even if you do have a rural development programme.
POM. Illiteracy again inhibits economic growth.
DK. Firms are quite good at teaching their people to read. Again if we get the business dynamo going adult education will take a leap forward.
POM. In the last couple of years there have been any number of scenarios painted. Going back to the Nedperm scenario, what do you think is the most likely scenario to emerge in the future in which the economy will then have to play itself out?
DK. I think we will have a line nicely in the middle of the normative economic model and MERG (Macro Economic Research Group) approaches. We will have more government activity and more government intervention than the normative economic model thinks and much less than the MERG model thinks and we will have a degree of overseas interest but it will be pretty mild in effective terms. I hope we will have a community that gets more and more confidence in itself and where we can get the outflow of capital to moderate, come back to zero.
POM. Do you see a government of national unity emerging that is a strong government of national unity?
DK. I don't know.
POM. Would it be better for the country if the ANC secured 66 or more percent of the vote?
DK. I think it would be undoubtedly bad for the country in the first instance. If it secures 50%, and because it governs so well that builds up, I would have no objection to that but I think for it to be in a position of untrammelled power from day one I think would be as bad for them as it would be for anybody else.
POM. Do you see a stable South Africa?
DK. Yes. We've been stable through the process that we've gone on with so far. That's why I tell people there's no downside. We've handled the revolution on all three levels of government, coupled with a certain amount of economic restructuring, all around the table and here we are.
POM. Which would be fine except that you still have 44% of the people unemployed.
DK. And after the most successful programme that you can imagine we will still have 40% unemployed. Is there a difference of order between those two?
POM. Figures show the expenditure on food has gone down by 25% in the last two years, so while one sector of the population has been taken care of, i.e. your educated sector, you've got this immense pool of labour that has the potential to be –
DK. If you read any modern book on development economics you will find that this question of chronic poverty is just that, chronic, and it takes a world of shifting and there are a hell of a lot of people before South Africa that have tried to shift it without succeeding and a lot of good growth records represent 40% of the population becoming richer and richer while the basic 60% remains just as poor as it ever was. To this I do not have the answer.
POM. It poses a tremendous political problem.
DK. Surprise, surprise. It's a problem now, it'll be a problem then. In twenty years time it will be a problem.
POM. What they want are jobs and it's what they're not going to get.
DK. So you can do a lot by working on the community upgrading side.
POM. I think you would agree with this, that Sir Lawrence Klein said when he spoke here some time ago that the country should rely more on foreign investment rather than looking for foreign loans.
DK. Given a choice!
POM. I'll read this now and you can just comment on it, "This is an interim who will inherit", this is said in July, "painful constraints on growth. Of the 24 billion dollars of foreign debt as standing in 1985, 17 billion dollars still have to be repaid. Unless repayments of about 5 billion dollars in the standstill net can be renegotiated" -
DK. They have been.
POM. "on reasonable terms, South Africa will face ongoing capital outflows."
DK. We have negotiated that successfully and we have capital outflows which are perfectly handlable in any situation other than one in which everybody decides to leave the ship.
POM. The suggestion in the MERG report that the Reserve Bank be brought under the control of the Minister of Finance, do you see any virtue in that proposal at all?
DK. No. I don't see any need for it frankly because Reserve Bank policy is so predictable and, in my opinion, correct in that it concentrates on the value of the currency that it's perfectly easy, as I've proved for two years, to make policy around the bank, if you know what I mean. Take what the bank wants to do and you know exactly what its going to do in this, this and this respect, then you can construct your policy network around that. If I had to tell them what to do it would be just one more thing as far as I'm concerned. They tell me what they're going to do and that's fine, that's all I need.
POM. I've never seen you so, the most upbeat person I've met since I've got to this country. White flight. Is it a significant factor in terms of skills leaving the country?
DK. It has been and it still is and I suppose it still will be for a while.
POM. The entrenchment of the civil service jobs and affirmative action. Essentially affirmative action is good for the people who get the jobs but it creates inefficiencies and is not a good road in the long run to take to redress inequalities.
DK. I've got kind of a mixed view about this. Let me give you my background. When I was running Gencor we thought we were doing very well in terms of providing equal opportunities for all sorts of people and we made progress at a certain rate. We then bought Mobil which had been on a far more aggressive programme in terms of non-white advancement with a definite quota as far as where they hoped to be in five years time and consequently a very definite higher quota on engagements. Comparing the two I thought their system had worked better than ours. So on that simple bit of experience I think there's more to be said for affirmative action and quotas and so on than I would previously have allowed. Just to give you some details associated with that, they decided that in five years they wanted to get up to 40% non-white staffing and that meant that to have a hope of getting there they had to take their engagement policy up to 80% non-white which they did. They found the people and it became a different sort of organisation fairly rapidly.
POM. I'm troubled by one thing and I suppose that's the, I won't say the way you dismiss because that's the wrong word, but the way you know there will be unemployment of 42% or 44% and that's just the way it is and you look at other countries and that's just the way it is, which essentially is building a South Africa which is a South Africa of the haves and the have nots, so that it's not the racial barriers that are important any longer it's the money barrier. Do you have a job or do you not have a job? If I were Mr Mandela and I were sitting here and I'm saying, listen what I want is a plan, I have told the people we will give them jobs and I want a plan that the unemployment rate in the black community is going to be cut in half in the next ten years. Now go out and develop me a plan and come back with that plan. I don't want to hear this nonsense about what's happened in other countries. Our people want jobs, that's their first priority so you are presenting me with all kinds of scenarios which are going to make everyone better off except the bulk of my constituency. This is intolerable to me. How would you respond?
DK. I suppose I would respond in due course by saying, please find somebody who thinks he can do this for you. I'll continue to watch the situation with keen interest. Clinton has had great difficulty in creating jobs. Europe hasn't created a new job for 15 years. Who am I to say that I can solve these problems? What's the Ireland rate?
POM. The Irish, it's only 20% now and that's because of emigration.
DK. One has to come to a point at which one realises what can be done and what can't be done. It's better for me to make Mandela realise that he's going to have a high unemployment percentage as long as he lives than for me to pretend to him that I can do something about the problem which I know I can't do.
POM. Yes. But he's stomping out there.
DK. As I say the high unemployment is personally obnoxious to me.
POM. Do he and the other ANC leaders have a sufficient grasp of the real reality of the situation?
DK. No they don't. It probably depends on how you define the word sufficient. They probably have as good a grasp of it as most politicians do before they come into power but part of the process will be bringing it home.
POM. If you had a cross-section from here right now and you said, listen, after ten to fifteen years the unemployment rate is going to be just about as high as today, it might come down four or five points to be 40% rather than 46% and there's not much you can do about it.
DK. I think it would be a hell of an achievement if we could get that unemployment rate down by 1% a year. That would be a big thing in a growing population like ours, that would be a huge achievement. You say it's 46% now, if we could have it 36% in ten years time it would be superb. All I'm saying to you is the political and social consequences of 36% aren't that different from the political and social consequences of 46%, so don't look to the economy to solve the problem of how we live together. We'll make our contribution.
POM. Do you think the difference in other countries is that they are used to things being that way, they have no expectations?
DK. Things have been this way for a long time here already.
POM. When you look at surveys and when you look at what people's expectations are particularly in the African community, there's no correlation even after 2½ years between the level of expectations and what reality is. In fact no-one in the next six months is going to encourage people to believe otherwise.
DK. So you have the expectations gaps that you have to try and deal with. You have to persuade people that making progress at the rate of 1% a year represents a major achievement, which it is.
POM. The housing backlog, how difficult is the situation there?
DK. I think it's a fifteen year problem on the arithmetic that we looked at together.
POM. And the same for education?
DK. Yes because by the time you've got everybody housed to the standard that you now think is your minimum, in fifteen years time the standard isn't the same any more. That also shifts.
POM. You've got to start all over again.
DK. Yes.
POM. I think you should go back to the private sector!
DK. Probably. I think it's only my private sector background that allows me to live in this environment. Not being a politician I can contemplate the fact that certain problems can't be solved.
POM. Let me just quote, one last thing. This is Cape Town ... picture of a likely ... socio-economic ... yesterday by the Stellenbosch University Bureau for Economic Research Director Okkie Stuart. "At the Bureau conference Stuart forecast the studied deterioration of the quality of the labour force and said workers were on the average likely to become poor. The business environment would continue to be characterised by a high level of uncertainty and high capital outflows would continue as South Africa ..."
DK. He must have got out of bed on the wrong side.
POM. "Taxes were forecast and increases ... considerable downward pressure on after tax income. Employment would remain scarce".
DK. What about the drought? Can't he bring in the drought there?
POM. "Government expenditure would increase."
DK. Give me this piece of paper. Let me tear it up for you. This is my reaction. I'll tear it up and stamp on the bits.
POM. OK thank you ever so much.
DK. It's always nice to see you.