About this site

This resource is hosted by the Nelson Mandela Foundation, but was compiled and authored by Padraig O’Malley. It is the product of almost two decades of research and includes analyses, chronologies, historical documents, and interviews from the apartheid and post-apartheid eras.

14 Nov 1995: Keys, Derek

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POM. Mr Keys, the last time we talked I remember two things particularly from our conversation. One was that you were particularly upbeat about the prospects for the economy, that was one. Two, that you were still as pessimistic as ever about the possibility of job creation. And three, that you said that what the RDP should do was go out and publicise itself, every project it had it should put a billboard up saying 'This is your RDP tax rand at work', or whatever. Since then the RDP have actually, it took them a year to come around to taking your advice, but they have hired a new public relations firm and suddenly the RDP is all over the place. How much of this is public relations and how much of this is the RDP not only finally getting its act together but getting it's act together with the resources that it requires to do the job that was initially envisaged for it?

DK. I think there is substance underneath the better image that's now appearing. In the nature of things organising something like that, starting from scratch without the benefit of a department already in existence to do it for you takes time and I don't think it's taken an excessive amount of time. The tensions that have built up in the meantime have been quite considerable but I think are turning out to be manageable. And I think that now as the rate of delivery increases the general perception about the RDP will progressively improve.

POM. But it has been tied, the RDP, to the Masakhane campaign which has been singularly, it appears at this point, unsuccessful in convincing people that they must pay for services and they must pay for their houses.

DK. Yes, I don't know enough about Masakhane to comment authoritatively on it but my impression is that it worked quite well at the start and that then there's been a falling off again, so clearly the recipe wasn't the right one. That we need something like a successful Masakhane there is no doubt. Now it's a question of whether that programme can be revivified and made more successful or whether one has to start with a completely different approach.

POM. Why is it with regard to the RDP, which has always been seen as the centrepiece of the government's economic and social development plan, why is it's implementation being handed over to what will be the weakest tier of government, local government where you have the least skills?

DK. I think that's because that's where the consumers are and I think it's a mistake to look on central government as being crammed with capacity, etc., etc. That certainly wasn't my impression in the time that I spent in government. The centre is rather thin on capacity and it's certainly thin on getting the kind of community acceptance in the myriad of different communities which is necessary if the RDP is going to do the job.

POM. But local government will suffer from a considerable lack of skill, talent.

DK. Some of them will do it better and some of them of course will do it worse, but you've got to remember that local government itself is in a programme of tremendous change and it's not as though the same civil services as worked for the old political structure are working for the new political structure. The structure has been changed to such an extent that people have been in a state of uncertainty, they have been uncertain where to go for authority, they have been uncertain when they get to a certain level of authority whether that's adequate for what they want to do and so on. These are all teething problems. I'm perfectly clear in my own mind, you can't run a successful RDP unless you run it at the local level.

POM. Then you've got to have a successful - ?

DK. You've got to be part of the RDP, just as part of the RDP is developing the communities, part of the RDP is developing the local authorities.

POM. What about the state of the economy in general?

DK. Well I think my optimism there has been fully justified.

POM. OK. So I'm still the pessimist, so let me make the case for the pessimist. Every study that has been done on the competitiveness of the economy ranks South Africa near or at the bottom, whether overall or sectorally. You have a situation of

DK. Can I just say, that's not a new situation, that is the revelation of an old situation.

POM. Yes, but as you're moving into a global market and free market economy it becomes an increasing consideration.

DK. That's right.

POM. Two, you have the problem that the wage structure in the country is totally out of line with its level of productivity.

DK. Also not a new problem.

POM. Yes, but again a problem of increasing dimensions.

DK. I think it's about the same size as it always was.

POM. But putting the country in a poor position to compete with would-be competitors.

DK. The same poor position it was in before. The only point I'm making is that the points on which you are pointing out the defects and so on all existed previously. Now the thing that matters to me is, is something being done about them? And I think certainly as far as the competitiveness side is concerned there's far more attention being paid to it now, there's far greater action from government in terms of the question of reducing tariffs and so on and doing it over a fairly short period. There are schemes, development schemes, which are operating in the clothing and textile and in the automotive industries and there are others that are in the process of development, so a fair amount has been done. You won't see the effects of it for some time but my impression is that these issues are being realised as being of prime importance for the first time. The labour one is more difficult because of the fact that COSATU was part of the ANC alliance and because the COSATU leadership isn't particularly keen to tackle the full implications of their high wage policy. So that's an area where I don't see much progress as at this point, but I see a sharpening of the issues as far as the other affected parties are concerned.

POM. Part of becoming more competitive would be restructuring and restructuring invariably results in the laying off of people rather than adding on.

DK. There's been a lot of that as you know.

POM. That's one. Then you have, again, if you are in a high priced labour economy and you enter into a more international market is that you have part of your basic manufacturing work done in lower cost countries. Here you have the clothing industry moving to Zimbabwe, to Lesotho or whatever.

DK. That's it.

POM. It would seem to me that as you enter into an international economy that in the short run, and I define the short run as between at least now and the year 2000, as tariff barriers drop and you are faced with more competition that more companies fall by the wayside and more restructuring is done in which labour is laid off and there is more production outside of the country and then re-importing value added, none of which add up to creating jobs. In fact you're creating a situation where you're losing jobs not creating jobs. Now, this is a central problem, every poll taken of the black population puts unemployment way above housing as the number one problem and yet it seems to be the problem that no-one has any answer at all.

DK. In your opening recollection statement you noted the fact that I was pessimistic about the unemployment problem.

POM. You have been since I've met you.

DK. That's right, so that's nothing new. In terms of how the economy is behaving, just viewing it from that point of view, I'm pleased. I'm pleased when the trade union bargaining power in this country is weakened by the fact that manufacturers start establishing clothing factories, etc., etc., in the surrounding area and of course that's not a loss if you're looking at the region and in a sense there's a way in which South Africa can't in fact solve its problems unless it looks at the whole region. So I think this is setting up stresses and strains and so on which at some point will have to be accommodated. In other words we will need, if you like, a different attitude from the labour movement coupled with, I think, some direct action on unemployed, unskilled males.

POM. My figure here is that 87% of unemployed males are unskilled. So between putting training programmes in places

DK. Well I think this in a way ties up with the community rehabilitation side. What the communities lack, which is housing and services and so on, requires a fair amount of unskilled and semi-skilled labour and it's a question of being able to organise this. I'm not implying that organising it is simple. It ties up, if you like, with the Masakhane approach, it ties up with the community rehabilitation, it ties up with a certain amount of training to enable people to build walls and erect houses and pave streets, that sort of thing. This, in my opinion, still needs to be done.

POM. Just take the housing programme, this was number one priority and it was to create jobs that didn't require an awful level of skills so it would assume that rather quick action would be taken. In effect in 18 months almost nothing has happened. 10,000 houses have been built, the private sector is beginning to opt out of it because of the non-payment of bonds, because of the rate of repossession of properties and it has ground to a halt rather than moving forward.

DK. The private sector had already moved out before the change of government. That was clearly established. There was a lot of progress in my opinion in the period until Joe Slovo got seriously ill in terms of working out schemes and so on which would have fitted into the kind of direct approach that we talked about and which would have made use of the market mechanisms to the extent that they could be used. His demise and my leaving the government more or less happened in the same time span and I'm really not up with what's happened since then but I think there has been a falling off in the degree of progress, degree of drive applied to this.

POM. I want to couple that with unemployment. You say what interests you is not that the problem exists but what is being done. I can't see what is being done.

DK. That's what I say, I don't see movement. It's as if the new government has bought the market theory lock stock and barrel and thinks - I know this isn't what they think but they're behaving as if they think the trickle down effect will do the job. It won't.

POM. Did you teach them too well? It's not your fault.

DK. I never taught them anything.

POM. You said you left when your job was done, they had learnt the right ideas. If you take then the two biggest problems, housing and unemployment, there's really been no substantial advance made on either front or no clear strategy in place to make advance happen.

DK. I'd say that's correct.

POM. In the light of that, and you're pleased with the performance of the economy, then is it the private sector of the economy? Is it exports?

DK. It's the fact that we've got back to relatively normal status as an economy. We're having a moderate but reasonable capital inflow which a developing country needs. We've got our inflation under control. We've got a positive growth rate which is in excess of the natural increase rate.

POM. Marginally.

DK. But compared to what we had it's on the positive side. If you think I'm saying everything is fine and there's nothing to worry about that's not the case but your questions seem to imply this. There's plenty that still needs to be done.

POM. I suppose I see the optimism as not misplaced optimism. If one drives from here to Pretoria the whole route is full of new companies shooting up all over the place and construction.

DK. Fixed investment is rising.

POM. But nothing is happening to the lives of the ordinary people and the most recent survey by the Kaiser Foundation found that the levels of deprivation essentially haven't changed in any fundamental way.

DK. But we agree on this.

POM. I know. So how do you equate your optimism about the economy with the fact that on some of the most crucial social and economic problems facing the country there is no movement at all and no apparent strategy in place to make things happen?

DK. Because I assume that at some point there will be. I think the fact that the market alone won't do it is going to be progressively understood. If you take all these problems together, the non-payment for services, the unemployment, the lack of housing, this, that and the other, if you take all those things together they point you towards some kind of sweat equity solution for trying to cope with that problem and I think that's the next step.

POM. Sweat equity, could you just expand on that?

DK. Sweat equity is where you get people to put in labour to provide for their own needs in certain areas. They are unable, they can't generate savings, they probably don't have a cash income but by getting them to allocate a portion of their working day or a portion of them to allocate their entire working day to certain social things you can in fact generate quite impressive investments with that contribution.

POM. But that depends upon people having the right attitude?

DK. Correct.

POM. And there seems to be a singular lack of a change in attitude here. A 'revolutionary' attitude still seems to prevail in the sense that the people who railed against the previous government are quite prepared to rail against the current government.

DK. Yes, yes. It's crucial for the government to solve this problem.

POM. But how does it go about doing it?

DK. Well this is not my field of expertise.

POM. That probably makes you better equipped to take on the problem!

DK. One will have to generate a feeling of national mission and one will have to define the objectives in clear and simple enough terms. There will have to be objectives with which the people can identify. There will have to be commitment on the part of the communities to achieving those objectives. It's a programme that has to be gone through.

POM. Then again, why despite the not just enormous popularity of President Mandela, but his almost mythical presence, hasn't he been able to project that in a way that people react to it?

DK. I think it hasn't been clearly enough defined. I think the programme as a programme hasn't been clearly enough defined for him to do that by the responsible people, his ministers. I don't think there's enough co-ordination looking at all these different problems which occur in different ministries, I don't think there is enough co-ordinated effort in order to come out with a programme which he could very well promote.

POM. But isn't this what the RDP is supposed to be doing?

DK. Yes, the RDP could have served, and could perhaps still serve as a framework for this but the RDP is, and here we come back again to the central government/local government, it's been too much in the central government's sphere for this to be a possibility up to now.

POM. I read a statement of, well two statements, one where the Swedish government took money back because it was not being allocated and because of the bureaucratic mechanisms within the RDP itself it took so long that they said we just can't wait that long. And Jacob Zuma in KwaZulu/Natal explaining why their allocation of RDP funds hadn't been spent and it was for the very same reason that there are so many procedures built into the approval mechanism that they seem to have not only inherited but are using the worst habits of their predecessors, excessive bureaucracy.

DK. Yes. I think there are two topics here. The first one is disciplining aid donors, I am all in favour of it, and if they decide to take their ball away because you don't want to kick it in the way they want you to kick it then that's a decision that they have to justify to themselves. But you can't let aid donors run riot when your need is actually for a national integrated co-ordinated programme. They have got to be prepared to fit in. Why aren't they prepared to fit in? Because the action of voting the money is what they like to go through and they then like to turn it over to their own firms. Most of the aid is tied. I don't know what the position is with the Swedish aid, that may be better, but the aid in general, 80% is tied to expenditure which takes place in the giving country, into the firms from the giving country. So we can't solve this country's

POM. Sorry, could you expand on that a little?

DK. Sure. When the United States donates so many millions and so on you will find that there are provisions in terms of which it has to be spent with United States firms, etc., etc., etc. You have to more or less take what's on offer. Well I don't think that's the right way for us to do the things. Some countries are much better, they have a larger percentage of untied aid. Very few countries will give you the money. They will all give you their consulting firms and their this, that and the other. So on the question of disciplining donors I am quite clear that what Alec Erwin has been doing in that regard I think is absolutely right. On the question of the bureaucracy that all ties up with the fact that you started with a mess and you're going to have a great deal of difficulty in untangling the mess. The homeland administrations that the previous government set up, almost without exception, didn't work and didn't perform this kind of function. So to expect that because you've changed the central government now everything will work properly is a dream.

POM. There was a paper given by, you may know the man, Professor Fanie Cloete from the University of Stellenbosch from their Institute of Futures Research, and just to quote from his paper he said : - "As many as 50% or more of approved posts in various departments including key decision making positions had been vacant for months with prospects of recruiting experienced bureaucrats extremely thin. Highly skilled professional staff in particular were for various reasons leaving the proverbial sinking ship. These reasons included low morale, non-competitive service conditions and a belief that positions could be insecure as a result of affirmative action. The process of replacing lost expertise was mired in red tape with the preference for centralised government control of the transformation process causing bottle necks. For example many of the 11,000 posts advertised about a year ago were still vacant."  The headline is 'The Public Service Crisis Deepens'. Is there a public service crisis?

DK. Yes and there has been for years and there will continue to be one.

POM. This is like the chicken and the egg.

DK. Basically what's happened with the public service is that there was a gross expansion of the numbers in the public service during the ten years before the change of government. This was largely associated with the homelands, setting up the homelands structures and so on but it resulted in the fact that government consumption expenditure in this country at 21% of GDP is higher than almost any other country I can find. Japan's is 9%, Malaysia's is 13%, ours is 21%. In 1983 it was 15%. That missing percentage and so on is what we are not investing which therefore means that you cannot grow. You certainly cannot grow at anything substantially in excess of the rates we are achieving now unless you recapture that percentage of GDP for investment. The biggest obstacle in its way is the size of the public service. Now that has been recognised for four or five years now and consequently there has been an attempt to throttle back the service conditions of the public servants and so on to try and cope with this problem. As a result of that you are going to get very poor morale, etc., and then you have a change of government, a fundamental change of government, and a whole new strata of people that has to be absorbed, you're going to get exactly that kind of result. So statistically it's a certain outcome.

POM. And civil services don't tend to shrink very much by their very nature. They are a source of patronage, if the new government wants to create jobs this is one area where

DK. Can I just say there is no sign of those kind of appointments being made.

POM. But the pressure to do so will increase when unemployment remains, in fact begins to increase if we're really talking about the situation of restructuring and everything else.

DK. Right, correct. Then in many ways the public service crisis is the key crisis that needs to be solved both in terms of its structure. You had one structure that didn't work. You guaranteed all those people their jobs and their pensions, replaced it with another structure which is only slowly coming into place, coupled with change of leadership in the different civil service departments, and the need for the kind of appointments that you're talking about which I say I don't see any evidence of yet, but also the need for simply changing the input mix.

POM. So what I hear you saying is that unless the proportion of GDP devoted to salaries in the public service sector can be radically reduced from 21% back to 15% -

DK. You talk about radically, it's not all that radical if you have an economy growing at our present rate and it does it for five years, which I think this one will do, and you simply keep your total level of public service consumption spending level in real terms, then your 21% goes down to 17% because your GDP is growing.

POM. But that GDP is being offset by, I mean the rate of growth is being offset by a 2.5%/2.6% rate of growth in the population?

DK. Yes, but let's just get the percentage right. We have to find the money for investment. Mexico has shown that however favoured you are by international investors you can't run a major investment programme based on foreign capital. They got their inflow of foreign capital up to 8%, ours is 2%. I don't think it's sensible to plan on much more than 2%, perhaps 3% at the outside. Eyebrows are being raised about Australia's inflow now which is 6% of their GDP. So you can only get a certain amount from abroad if you're going to develop properly and the rest has to come by pushing up our savings rate and the biggest dis-saver in the country is the government. If you want to grow sustainably and at a higher rate in the longer term you have to solve that problem. That problem is that problem.

POM. So it's the government that's the problem?

DK. Not the government, the size of the public service and the size of consumption spending by government is the problem. That's a problem which this government inherited.

POM. Now this is just a question I'll throw out at you because it seems one way to re-utilise some of the public resources, is to take something like the army which is sitting there consuming a large amount of the budget, doing nothing. They did step in during the nurses strike, but with tremendous skills, resources at its disposal, engineering capabilities or whatever which could be deployed all over the country building houses, a domestic peace corps and yet all these people are being paid to essentially sit in a barracks and do nothing.

DK. Yes, what that represents in terms of opportunity costs I'm not sure, I'm not sufficiently familiar with the army and what it could do. I think it's fair to say that the defence vote has taken by far the biggest real reductions in the last four years, really quite substantial. Whether it's now too high or too low I don't know. As a percentage of GDP it doesn't look particularly out of line. But let's assume one could get something out of that, that might be good, that might be one of the areas in which this 21% has to be corrected. As to how useful the army would be, I think if you could incorporate the army perhaps as an administrative capability in the more all-embracing comprehensive plan that I'm now looking for I think that might be a sensible use for them, they do have a decent administrative machine.

POM. Now you in the normal course of events being not only a former minister but would have a lot of contact with ministers and they would certainly seek your advice and I think you look upon Trevor Manuel as being one of your protégés. He certainly speaks a different language than he did in 1990 and you must have pointed out this need for an integrated plan either operating through the RDP or independent of the RDP that will come up with vision that can only be sold in a way by one man in the short run, that's the President, and time is running out. Why does there not appear to be a recognition and a response on their part?

DK. I've been crystallising these thoughts in the last 12 months and arising out of my concern about the chronic nature of the unemployment problem, so I think it's not correct to view me as having given this kind of advice let's say from the time we started talking or even from the first day of the Mandela government.

POM. But you are giving it now?

DK. Yes through such channels as I have available, but as an ex-minister one also is to a certain extent constrained from simply pointing out problems to one's successors without being able to offer a comprehensive solution.

POM. You said one of the indicators of whether there should be foreign investment in the country is the degree to which South Africans themselves were prepared to invest in their own country rather than send their capital abroad, invest abroad. Do you think that imbalance has now been addressed, that a sufficient amount of internally generated capital is being invested in the country?

DK. Yes, it's improving. Whether it's sufficient, you get back to the sources of savings but certainly there's a much greater preparedness to invest.

POM. I think ABSA came out recently with a report that had a kind of a pessimistic look at the future in the sense that it talked about the need for 30% of GNP needed to be in fixed capital investment in order to produce

DK. The IMF thinks 25%. 30% would be very nice, 30% is kind of an East Asian figure. To come back to Malaysia for instance, our private consumption expenditure is 62% of GDP here. I've mentioned that the government expenditure is 21% consumption expenditure. In Malaysia the figure for private consumption is 50%, giving you an immediate extra 12%. It's when you have that kind of percentage for private consumption that you can really become one of these very high investing countries.

POM. Is there a particular economic model, like you have mentioned Malaysia a couple of times, that South Africa should be looking very closely at or has it got to build it's own?

DK. Well we've done enough model buildings to know what the problem is. The problem is being able to maintain an adequate degree of investment if you're thinking about growth.

POM. But if with the 3% growth rate per year, maybe 3.5%, is there no sign of the rate of growth of the population diminishing?

DK. I think it is diminishing a bit with the move to the towns. I think that's what people are finding.

POM. Why is more emphasis not put on that side of the equation?

DK. On population control? I think it's very difficult for people to find a politically acceptable formula for it. It was true for the previous government and I think it's probably true for this government. At the tough end of the spectrum you have China. I don't see us doing that, making it a criminal offence to have more than one child.

POM. As you look at the debate on the constitution, on which I believe they are about to release a working document this week, without taking sides in the debate, or maybe take sides in the debate, does a federal model with the maximum devolution of powers to the provinces and from them down to local government, is that the best system to promote sustainable development as distinct from a unitary state where the centre runs things and the provinces and the local government structures really become the implementers of policy?

DK. I think either one can be efficient and clearly you can have either and be inefficient. I think where we find ourselves at present it's a tough choice. You will find many people who will tell you the best deal for us at present would be a benevolent dictatorship. From an efficiency point of view that might be true provided it gets the support of the population, which I don't think that would. So I don't think one can approach the federal/central argument simply on the basis of efficiency.

POM. Taxation. That problem doesn't abate. The tax base is as narrow as it always was. The middle classes are taxed just about as far as they can be taxed. What kind of solutions should be found?

DK. If you follow the programme for reducing the consumption expenditure of government, you solve the deficit problem, you solve the debt trap problem and you solve the taxation level problem at the same time.

POM. How realistic are you that that will happen?

DK. Well I think it's the option. It's the option that works and I think as people recognise that, so far the government is trying to go down this route. It's one reason why they give an appearance of being slow about things. Every rand they want to spend on something new they have to find a rand spent on something old that they can stop spending.

POM. So there are two or three problems. You've got a problem of the redistribution of income which is really not occurring.

DK. It has been occurring.

POM. OK through the labour, through the centre.

DK. That process is still going on.

POM. That has narrowed, but for the 40% or so who are unemployed it has not been happening and we're really talking about those people. You have the problem of down-sizing the government consumption and expenditure and you have the problem of meeting these multiple needs of building so many million housing units over a relatively short period of time all of which requires not just the redirection of expenditure but in many cases increased expenditure.

DK. Which has to be found from savings elsewhere.

POM. With your tax rate high the level of savings is going to be low.

DK. I was thinking of savings in the budget. In other words if you want to spend more on housing you have to spend less on defence if you want to keep your consumption expenditure level.

POM. Do you find just through your informal contacts with the government that there is consensus about this?

DK. I don't detect theoretical dispute about it, that it's turning out in practical terms to be very hard to do is quite clear and ministers tend to box the corners of their own ministries in this government just like they do in any other government. So the overall control situation is tough but Chris Liebenberg seems to be managing it so far.

POM. Where would you place affirmative action in all of this? Go too rapidly and you create inefficiency, perhaps more social justice but certainly more inefficiency. Go too slowly and you aggravate the problem of the disproportion between the haves and the have-nots and the opportunities open to some people and the lack of opportunities to others.

DK. Well you've posed the main considerations, but I think it's very difficult to say where would you place it. Quite clearly, starting from where we're starting, you can't do without some affirmative action. Now what's practical and what works and what keeps on working and so on in different circumstances is a different thing. The mining industry is making a lot of progress in terms of replacing the white miner level with black miner level which is a question of blasting certificates being obtainable by anyone who is properly trained and it's great. That process obviously needs to go on, it's associated with increased productivity and works very well. Affirmative action at the mine manager level is a different matter. Gavin Relly said years ago it takes 18 years to make a mine manager, that's what he has to go through. He starts at the miner level and then moves up through the different grades and gets the different kinds of experience so the scope for affirmative action there just doesn't exist to a very large extent.

POM. Is that understood by the mining unions?

DK. I think so, I think so. They seem to find each other in their annual negotiations.

POM. How would you rate the private sector's commitment to affirmative action over the last 18 months on a scale of one to ten?

DK. I think that they are making advances at the pace that they feel they can afford. In other words they know that they want to move in that direction and it's just a question of whether they can afford to do so, short term.

POM. You always leave me in the sense of not having a question to ask because your answers are so self-contained.

PAT. You answer the questions like you're asking them.

POM. We want to get an argument going! I suppose five or six years ago when one read the materials, studies coming out of universities or whatever when they talked about redressing the imbalances in the redistribution of income and the provision of services, they talked about the massive amount of investment that would be required mainly pointing to foreign investment that would bring about something like a 5% rate of growth over a ten year period which was at that time the conventional wisdom of the rate of growth you would require to make serious inroads into imbalances. You seem to talk about a situation of where the best that more or less can be looked for is what's happening at the moment. You're going to get a 3%, 3.5%.

DK. No I think we can get the 3% up to 5% and I think we can do that on a consistent basis but your problem is that the other 2% comes from increases in productivity which are associated with laying off people. So the employment effect tends to be the net of those two processes and the amount of employment that will be generated by a 5% rate that we can achieve doesn't change that core problem from being the chronic one that I think it is now.

POM. You see I would call that pessimistic.

DK. It's only pessimistic if you don't do something about it.

POM. Then at what rate would you have to get the economy to grow at in order to - ?

DK. There's no conceivable rate for this economy. You would have to postulate completely unreal assumptions.

POM. Is that part of the larger problem of the region as a whole?

DK. Well yes, I don't think the problem of surrounding countries is any different in that respect.

POM. So if I'm not misreading you, not drawing conclusions that are unwarranted, it seems to me you're talking about the development of a two-tier society, a society of the haves and a society of the have-nots and that the best you can hope for is to make the size of the sector of the have-nots a little smaller and to provide them with some better amenities, but by and large the conditions under which they live in the foreseeable future are not going to change a hell of a lot.

DK. The thing that I was saying a year and a half ago was that the whites don't understand how much things are going to change and the blacks don't understand how little things are going to change.

POM. Have whites felt it?

DK. Well they are feeling it.

POM. I find it extraordinary going out to, I mean taking local signs, going to Rosebank or going to Eastgate, Westgate, the throngs and crowds of people shopping and eating out every night of the week, don't exactly point to a group of people whose standard of living has deteriorated very much in the last couple of years.

DK. That's right but the changes are starting to impact. Crime is the obvious area and employment opportunities. Brilliant children will always have employment opportunities, but employment opportunities for average children are very different now from what they were.

POM. That's true world-wide not just here.

DK. Sure, but it wasn't true here. And progressively, if you're in business then you're seeing your tariffs being cut, you're seeing cheaper imports coming in, you're being forced to make big changes as far as the nature of your business is concerned, much bigger than ever before. So in area after area there is a growing awareness of substantial change which people don't like of course. Who likes it?

POM. But it will cause a lot of pain mainly among whites while at the same time not causing any opportunities among blacks.

DK. That's it.

POM. Are you sure you wouldn't like to get back into government?

DK. Three years of trying to cope with problems that (a) you didn't understand and (b) you couldn't cope with when you did understand it is enough for any man.

POM. Maybe since you mentioned crime, the relationship between crime and unemployment is kind of an obvious one. I think the South African Chamber of Commerce has said that crime now is actually an inhibitor for investors, that it's assumed that level of proportion. I just want to tie that back in a loose way to the statement made here by President Mandela, the famous Hollard Street shouting incident, or, depending upon who you believe, two-fingered fingers incident, now I assume you were present on that occasion and I have been collecting the versions of people's recollections of what happened and how it happened, so I would like to add this to my collection. You understand that nothing is going to appear in print until after the year 2000.

DK. This is dessert? I can't help you much, I was at the back of the crowd.

POM. That's what everyone says.

DK. I was at the back of the crowd and I didn't actually know that the thing had taken place until I saw the newspapers on Sunday.

POM. The statement at one level seems such an obvious statement, that crime is the legacy of apartheid and Mr Mandela did not, according to any account that I read, specifically put the finger of blame on Mr de Klerk but really said "the previous regime" which really covered a regime that lasted from 1948 until 1994. Why would he take so much umbrage at what is so obvious?

DK. I think they perceived the thing in two different ways, Mandela and De Klerk. Mandela thought this was a prime opportunity to talk to the business leaders of Johannesburg about a problem that's uppermost in their minds. De Klerk thought this was the proper occasion in which to celebrate the good things of the past 100 years and keep it at that level, not a time for political activity. That I think is the fundamental difference. But people react in different ways and they have experiences which make them react in that way.

POM. Finally, the results of the local elections. Did the results surprise you in any way or is it still fairly predictable that people are going to vote along racial lines and that's about the size of it?

DK. I didn't expect to see huge changes but the thing that's pleasing is to see the small percentages for the fringes on left and right. That is a bit of a surprise to me, pleasant surprise.

POM. I was talking to General Viljoen this morning who was quite pleased with the results in terms of their proportion of the vote, almost doubled from 2.2% in 1994 to about 4% this year and yet many of the headlines said given this indistribution of the Afrikaner vote that the dream of the volkstaat was in tatters, that the results of this election showed how ephemeral it was. He would say, he was quite emphatic in saying, that unless this problem is addressed there will be conflict. Would you agree with this?

DK. I think President Mandela has gone out of his way to try and address the problem. Viljoen, I'm sure would agree with me that there has been a good deal of attention paid to it. Just how to go forward is not quite clear at this stage.

POM. What about the impact of the continuing unstable situation of KwaZulu/Natal on the economy as a whole?

DK. Well I don't think it's adverse. We would be better off without it but it's a problem that's got a very long history and it's not too easy to see how it will be resolved.

POM. Will it inhibit foreign investment?

DK. I think it's doing that.

POM. So you are one of the people who would be in the column of saying that if we are relying on foreign investment, everyone thinks that poor South Africa, it's been such a good boy in changing it's bad ways that we will now reward it with huge sums of foreign investment, people are talking pie in the sky, that there's not going to be a huge level of foreign investment?

DK. That's right but it's not just due to the KwaZulu/Natal situation. Basically, as I say with the help of the Mexican example and so on, a consensus is developing about the kind of percentage of GDP which it is healthy for a country to be receiving in overseas capital and that percentage lies somewhere between 2% and 4%.

POM. And here you're at 2%?

DK. We're at 2% now, yes.

POM. But the conventional wisdom before was that without this huge inflow there could be no sustainable growth?

DK. Let's put that in perspective. As we've said the IMF thinks that we should be investing 25% of GDP. If we were getting 4% of foreign capital, foreign investment would still be less than a sixth of the total investment that we need. Foreign investment is important but it is still a smallish part of what the total investment needs to be. I don't say we should cast it aside but

POM. Someone said, kind of facetiously, but one of the indexes of more confidence in the economy was the doubling in the rate of car sales over the last year and a half, and at least one person said that given the rate of car theft that that wasn't very surprising.

DK. Yes.

POM. Are we missing anything?

PAT. No.

POM. OK, thanks very much.

DK. OK, you're welcome.

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.