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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 It is the product of almost two decades of research and includes analyses, chronologies, historical documents, and interviews from the apartheid and post-apartheid eras.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 Mar 1996: Pahad, Essop

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POM. Essop, I think since time is limited I am going to throw just a number of things out at you and then you just react to them. First, after almost two years of there being a government of national unity the five major conglomerates control as much of the Johannesburg Stock Exchange now as they did two years ago. In that regard nothing appears to have changed.

EP. Yes, I think that it's quite clear that in terms of economic power relations at the very top very little if anything has changed, and the question of control and ownership of capital in South Africa, very little if anything has changed. What I think the government has been trying to do, and understandably it must take time, is to open the markets in this country. I must say in addition it's not just a question that five have this immense control, it is that foreign investors, the biggest complaint of foreign investors is that the South African market is too closed and therefore they can't come in and every time they want to come in and do something you have the problem that you run up against these big corporations who then want to enter into some kind of bilateral deal with the foreign investors and Pepsi Cola is a wonderful example of that. In the end Pepsi Cola had the courage, the strength, the determination and the commitment to come in and they have come in and they have made a success of it. So the question of this excessive control which no other country would tolerate, and certainly I can't believe the United States would tolerate it with its own anti-monopoly regulation, closes the market. It's bad for the economy. It's bad for competition, and the only funny thing I find is that as a communist I am saying open up the market, let there be more competition. The so-called free marketeers, and I don't know what free market means anyway, but so-called free marketeers don't want to do so because they have got all of the control.

. So that remains, I think, a very serious problem in the South African economy in terms of attempts to transform the economy on the one hand, secondly, not only to open up to foreign investors but to open up to black economic empowerment in this country, and I also don't understand the capitalists. One would have imagined that the capitalists would have thought it's in their interest to open up the economy a great deal more than they are doing at the moment although they are talking about some unbundling on the part of Anglo-American. But Anglo-American, as I'm saying to you on this day in March 1996, are not saying what they said to the Afrikaners after 1948. They sold their mining shares to set up Gencor at a very cheap price to Afrikaners. When they want to now deregulate they want market price for what they own from African, basically African entrepreneurs, and this is wrong because in fact African entrepreneurs are starting at an even greater disadvantage than Afrikaner, white Afrikaner, entrepreneurs. So as we are sitting here today talking, Anglo-American has not yet fully decided to really open up the market and have black economic empowerment. So, yes, I would fully agree with you that we are facing a serious problem. My own view is that the government is addressing this issue but let's be clear, it's going to be a very, very difficult and uphill battle.

POM. I got a laugh too when I read a speech by the Chairman of Sanlam who was saying let's not have competition just for the sake of competition, and I was saying this is coming from the wrong mouth. Second, the poor are just as poor as they were two years ago and in terms of employment which is the largest single challenge facing the country, you now have the phenomenon not uncommon to other countries where you have economic growth but without any increase in employment.

EP. Let me say that, as you know, and I've told you this over and over again, South African statistics are notorious for being bad. They don't really know what the actual position is. But we do know that we have far too many poor people, far too many people living in destitution and their plight has to be addressed. I am not sure that necessarily their plight is as bad as it was two years ago but I am rather certain that in most cases that that would be so, but the way the job situation works is that at least those who have been employed have been able to do something for their extended family, if we are talking about African family relations, and I think there are quite a few more moving out into the informal sector, selling bits and pieces and so on and so forth. But the fact of the matter is that we are far too many poor people in this country and some of the delivery side is now getting better. As I am sitting here today I want to say to you I am fully, fully confident that the Minister of Housing has got the housing thing under control now. We are going to see a rapid increase.

POM. Joe Slovo is at last resting in peace.

EP. JS is resting in peace because partly I think Slovo's original positions were not incorrect but perhaps they were a bit narrow, didn't take into account stock for rand, didn't take into account the problems you are going to face with the incremental thing, didn't take into account sufficiently that our own people might reject that as the sole answer to their housing needs, and all of these things. So one learns from experience. But I think that's going to happen. It's quite clear that the school feeding scheme, the medical thing, today the Minister of Health has announced yesterday another thing in terms of the medical scheme. That's beginning to have an impact upon people's lives. So when you're talking about poverty it is there and it's undeniable but if you're talking about quality of life I think in some areas there is improvement, certainly some improvement in the capacity of kids to go to school and get education, we haven't resolved the problem, far from it. But I would say that in a number of those areas there has been some improvement. The relation of no increase in employment, again partly to do with statistics so the extent of it one would need to see but what is true is that the money that has come in is not going into productive capacity, it's going into buying stocks and shares in companies and so on. That's why you don't get the kind of job creation because job creation would come if you put it into the manufacturing sector or you put it into the service sector.

POM. But at the same time every day you pick up Business Day you see company after company reporting record profits, doubling their revenues. Where are their profits going? They are not being ploughed back into the company, but to make people redundant, or are they being distributed to stock holders or are they being used for other indirect investments?

EP. I'm very glad you're posing the question because I think that's the question to pose rather than just a question of there hasn't been an increase in employment although we've had 3% growth. What is the private sector doing? If you take their latest document on the economy, that entire document talks about what they think government should do, which is fine, but they don't say what they are going to do and that's one of the biggest weaknesses of the private sector in this country. They will not sit down and say this is our plan for the next five years, this is the level of investment we're going to have over the next five years, not in shifting their money around the stock exchange but in actual productive use and therefore if we go and invest so much money in such and such a plant we will create so many jobs. They are not doing this and this is a fundamental problem we are facing here. Therefore the question of job creation has to be seen together with the lack, at least as I can see, of foresight of the private sector.

POM. Is this because the private sector was so spoilt and protected under the National Party government that it lacks the capacity to think in the way one would expect a private sector to think?

EP. I think that's part of it. The other may be is that we have blackies here in power. They have been used to whities in power for a very long time and I frankly think at the moment they still don't trust these blackies in power and that's part of the reality we face in South Africa. They might make all of the statements they are making and some of them are genuine I have no doubt about it, but I think this is the fact that at the moment they are showing less confidence than many foreign investors are showing in the South African political process. Everybody from the world comes and tells us what a miracle we've had, I don't know if it's a miracle but anyway we have had a fantastic transition. Our lot here are forever carping about everything else. And let me add this same thing about the 'after Mandela' factor, it's not the foreigners that are asking, it's this lot here who pose the question then they tell the foreign people this is a problem, then they come back to us and say, but you know that the foreign investors are asking this question. But in all my contacts with these people, insofar as I have had any contacts none of them have really posed this question. It doesn't worry them.

. So I would agree with you. I think fundamentally the problem we are facing is to some extent this lack of confidence of domestic South African capital. I am not sure that they are hanging on and want to use this as a leverage to influence government policy, to say if you don't do certain things that we want you to do we can bring the economy to a standstill. They are very powerful economically as we agreed with the first question. So you are not talking about small fry, you are talking about people who are very powerful, very influential and obviously any sensible government has to take into account the views, feelings, concerns of that sector. So my own view is that at the moment they have not been playing ball with the government, they have not been playing ball with the country, they have not been playing ball with their own stated ideological positions that competition is good for capitalism. As far as they are concerned competition is no good for capitalism, at least in South Africa.

POM. This is related, and you have answered it in a way, but the Johannesburg Stock Exchange is becoming known throughout the world as a speculator's paradise.

EP. Yes well that's part of the problem. I think if you looked at such as Britain, I haven't got the figures completely at my disposal now, but I think you would have then seen that in Britain there is this decline in manufacturing but a lot of money doing the rounds in the London Stock Exchange, and obviously London has been the financial capital of the world for a very long period of time. But what it meant was that your manufacturing sector was declining and once it declined to the extent where you shed a great number of your labour force it was very difficult to recover it again. Now of course there's the service sector which we haven't spoken about and I'd like to say something about. It is clear to me that an important area of job creation in South Africa is the service sector which is connected to the tourist industry.

. Now if you take a place like Cape Town in the long run I don't think Cape Town is going to be saved by whether or not parliament sits here, but whether or not Cape Town has the capacity to absorb a great increase of tourists. I think this is in a sense Cape Town is like a tourist Mecca, absolutely beautiful city, it has everything that you would want, very near Plettenberg Bay, George, everything else, but do we have the infrastructure? I don't think we have at this moment in time enough five-star hotels to cope with that level of tourists who want to stay in five-star hotels but who are therefore the kind of people that you want to attract as part of the tourist industry because that's where the money is. And of course everybody claims, I don't know whether it's true or false, that for every ten or twenty tourists, whatever the figure is, you create one job, which is the figure they are taking from experiences of a number of European countries. Well I think there is great room for expansion for the tourist industry, certainly in the Western Cape and then in Durban. But that's an area in which there would certainly be growth and job creation.

. The third area would be in terms of the infrastructure, the question of building of roads and other infrastructure connected with the building of houses and all of these things. So it's not that there aren't a series of areas within which if there was a more rapid implementation of existing policies that one would not be able to see an impact on job creation. Certainly it couldn't be enough in the short term because we do face unemployment of maybe 40%, 50%, 60% of the population. So how you cover that is very difficult because there is a tremendous backlog we've got to make up. But I think we can make some dent into the unemployment if we utilise more effectively some of our existing natural resources, so certainly the tourist industry and certainly infrastructure development.

POM. Also as you make the economy more open and tariffs are reduced and domestic industries are less protected, you leave yourself open to far cheaper imports coming from abroad, particularly from low wage countries and already you have the textile industry moving out of Port Elizabeth in a big way and locating its facilities in Zimbabwe and elsewhere.

EP. Certainly, and that would apply to Cape Town and Durban, all three have a sufficiently large textile industry. The issue there, as you know the trade union movement have been pretty angry about it and they have had these whole series of discussions with the Minister of Trade & Industry, Trevor Manuel. The original World Trade Organisation agreements were as far as I know discussed quite extensively by the minister with the trade union movement. But I think there's a larger question we need to answer, but before I come to the larger question, first of all quite clearly one needs to look, the Minister of Trade & Industry hasn't asked my unsolicited advice but if he was going to ask me I would certainly say, no I think what needs too be done is to look again at the timetable we're setting ourselves to comply with WTO agreements. I don't see any reason why we should move faster than we have to move. Two, if within the existing agreements we are able to argue, and I think we are able to argue, for some special dispensation, in the long run they have to go as part of the WTO agreement, I think that's quite clear, then you might stave off a little while longer the question of job losses in the textile industry, but if there is compensatory development in other areas whether in the telecommunications sector or service sector or infrastructure sector and some parts of the manufacturing sector, it could then absorb some of these people. So that would be my first approach. The larger question would be to ask that in the long run I think if we look at developed economies you would find by and large that the textile industry is the first to suffer. It certainly happened in Britain when you started getting large exports of consumer textile goods from South Korea, Hong Kong and other places, the heart of the British manufacturing, if you like ...

POM. An industrial revolution.

EP. Yes. Yorkshire and Lancashire were no longer the heart of that. Textile factories just began to close by and large. Now it may well be to some extent a kind of objective law of capitalist development in my view that at a certain level of the economy that kind of manufacturing sector begins to fall.

POM. I am looking at the larger question of you would be more open to imports from countries with low wage costs, lower paid labour.

EP. I am saying even if you had large tariffs then, in the end you would still run into problems because your economy is moving in a different direction. But allied to that is what would happen if we reach a situation, and I hope we do soon, where we actually have a kind of free trade agreement in the region. If you would say to somebody, no you can't open a factory in Zimbabwe because we're going to put tariffs on products from Zimbabwe, so quite clearly if you have free trade and free movement of goods and everything else then there is no tariff from production coming in from your region. If you then say, well what is it that South Africa can produce which the region requires? Well it requires a different kind of economic thinking so you don't get stuck into a mould of saying, well we're protecting one sector jobs, we're looking for a broader development which can then absorb people who lose jobs in some other thing. So I think if in the end we are moving in the direction, and I hope we are, towards greater regional integration and a much larger market then the question of shedding jobs in the textile sector or another sector isn't as severe as it might seem and therefore I see this as a larger question to say, well what is our economic policy? What is the way forward? And if we can resolve the question in my view of the larger regional economic integration and try to find, it's very difficult, some kind of more balanced and equitable growth in the region as a whole obviously the South African economy would benefit a great deal.

POM. Corruption. The IDASA poll, the controversial one which suggested or concluded that at least according to their sampling that the public were more likely to see the present government as being more corrupt than the previous government. How big a problem is corruption?

EP. I don't actually see the IDASA poll but from what I am reading in the newspaper they are saying their interpretation of the figures might not be what you are saying.

POM. They are back-pedalling?

EP. Well I am not sure that they are back-pedalling. What is the fact? The fact is that in May 1994 we inherited just about the most corrupt system in the world, never mind all these whites wanting to look north and say, you know you can't trust these blacks they are so corrupt. This is the most corrupt country in the world. The Editor of the Sunday Times, with whom I don't agree on almost every question, has written innumerable articles and editorials denouncing the corruption of the old system but the corruption seeps through every pore of South African society. All of these institutions were corrupt. Now here we are two years down the line, we have not changed very much the civil service. No, there are a few black people brought in, skilled black people to run the ministry, but by and large the civil service remains the same. Now if they were corrupt in April 1994 why should they be any less corrupt in May 1996 or March 1996. I mean quite clearly it's not possible. So I don't want to talk about public perceptions because the public doesn't really know what's going on. They read a few newspapers and depending on who they service, that's all the stuff that you would want to look at if you see this about examining a survey that was done. So that's a fact. We have a police force which was corrupt and corrupted by the apartheid regime who asked them to do things that no police force should really be asked to do, which is to be the arm of the security police. Instead of policing crime they were policing us terrorists. Every now and then you get a situation in which leading police officers are arrested for criminal activities. So heads of hijacking syndicates might be policemen.

. Now what do we want? We don't need the public to tell me that we are still with a very corrupt system. We are, we know that. What I think the IDASA people failed to do is to say if there is a public perception that the new lot that have been brought in are corrupt then I think it becomes the responsibility of these public organisations to begin to produce evidence, then we must deal with it because there is no way we can develop this country if we don't deal with the issue of corruption. Quite clearly we must deal with the issue of corruption. It's wrong, it's bad and one denounces it but words are not enough, concrete action has to be taken. You talk about cheap imports; Customs and Excise, corrupt as hell. Go to Pretoria now and you will find the people sitting with lots and lots of videos and TVs for which they have paid no customs duties at all. They are sitting there, where are these people? It's a longstanding thing in South Africa for double invoicing, all of these things, in order to circumvent exchange control regulations. So here you are. I didn't need an IDASA survey to tell me that we still face a severe problem of dealing with corruption. We absolutely do, but because the old system was totally corrupt. If anybody thinks in their mind that we can deal with this problem in two years I think they are out of their minds. We can't deal with such a difficult, difficult issue in just two years, but I must reiterate that the government is absolutely committed to do everything possible to root out corruption. That's quite clear.

POM. The RDP seems daily to be losing its credibility in terms of delivery and the implementation has been given over to local government which is the weakest branch of government where you have the most untrained people.

EP. No I am not sure it's been given. Let me say certain things, insofar as delivery of services are concerned that's one part of RDP. RDP is a whole philosophy, outlook dealing with economic development. It's not just doling out of money. But insofar as the doling out of money is concerned, and anyway that's wrong because you want to invest money in sustainable projects which I thought Jay and them were very correct in doing. You could have taken money from the United States and European Union and opened up a whole set of clinics, in three years time they say our funding has stopped and the clinics close or the government has to take them over, but the government doesn't have the resources. If it had the resources it would have opened the clinics themselves in the first place. So you needed to have sustainable projects which can become sustainable on their own or there is longer term funding guaranteed for this purpose. I thought Jay was very correct in approaching it in that manner. Part of the problem, let me say, is that you, I don't know to what extent you, but people get influenced by the media in this country and they don't like it when I say so because they think I am making unfair attacks, but it's still white dominated, white owned, white controlled, very lazy journalists we have in South Africa who keep on writing that Jay is in trouble. It's not a question that Jay is in trouble. That's not true. As soon as Jay beefed up his media team over the last few months his publicity in the media is much better now. I don't think he has done anything more dramatic.

POM. I've noticed that.

EP. So it has to do with the media projection. OK that's fine, I suppose all politicians do that, but the issue is that it doesn't address the fundamental issue. The other problem which wasn't Jay's problem, and it wasn't Jay's doing either, nevertheless is the conception of some of these things. When we originally conceived it we hadn't given enough attention to the fact that it may be that there had to be far closer interaction between the RDP ministry and the line ministries. Obviously every minister wants to be able to say, "But my ministry delivered." They don't want to have somebody else saying, "I delivered", on behalf of somebody else, it's not going to do much good for somebody else's political standing. So I think there was a problem here but that wasn't the fault of Jay Naidoo at all. I think it had to do with not sufficient conceptualisation of some of these things.

. The third element was that therefore delivery to some extent in that sense became slower than would normally be the case because the money was there but it was not being dispersed because people wanted to have proper projects, which I think is a good thing.

. Fourthly, we do face a problem of capacity building, not here in the urban areas so much but in the rural areas, sometimes in the townships. Now if you are going to empower a community with money and resources, I don't know to do whatever, build houses whatever, but you need somebody who has some accounting skills. It's as simple as that. Now if you don't have those skills you can't just give the money because the money is going to disappear. I'm simplifying the problem but that's the reality and I think that's a reality that had to be faced and so overall the question keeps on arising and at some point it may or may not be addressed, I don't know, is whether or not such a ministry is necessary, whether the work can't be done by line ministries. And my understanding of that issue is that Jay himself is discussing this matter with a whole number of ministers in order to find a solution to this problem. But I do believe that it would be wrong to blame Jay for something that is not his fault. I think he has worked very, very hard. He is still working very, very hard to try to give, to put some life into this thing. I would say on the whole Jay hasn't done a bad job at all. He certainly put, if you like, a lot of the projects on the map. Nobody can deny that.

POM. The role of local government?

EP. Now obviously sometimes we exaggerate the role of government but it's not only by the local government, it has to be by all three. But what I was thinking at the back of my mind was to say the ones who are obviously closest to people at the local level are your ones who serve in local government structures. So naturally insofar as certain kinds of delivery would have to take place, they would necessarily have to take place through your local government structures and in that sense we talked about the local government but in the run up to the local government elections exaggerated their own capacity as well as what they can actually do. My own approach would be to say you have three tiers of government, all three tiers bear an equal share of the burden to ensure that these things happen so that they don't turn around in three years time and say, well, the reason nothing succeeded is because actually our local governments are so bad, they don't function properly. Whereas in fact it's in central and provincial government they didn't do their jobs possibly. So my approach would be to say all three must have an equal share of the burden and in the end if we are not succeeding then we need to examine all three tiers of government and see where the fault actually lies.

POM. Two last quick ones. One is on the question of mediation with the IFP. You had the man who brokered the agreement between the IFP, the ANC and the NP, Professor Okumu who said recently, "I think morally Mangosuthu Buthelezi and the IFP have a point when they feel betrayed, whether you like it or not that is the issue. Once an agreement is signed and it gives certain understandings, surely those understandings should be adhered to unless all the signatories say the agreement is no longer valid."

EP. Well I would have thought that Okumu should explain what part of the agreement has not been honoured. It's no use just saying you must honour agreements. The IFP was asked to say what part of the agreements were not honoured. If you actually look at the agreement and dissect it, so then you can say, well, OK this part of the agreement was not implemented. But when you are already in a situation in which you are negotiating a national constitution to address precisely these questions, Inkatha itself takes the initiative to go for a provincial constitution to address precisely the question of the role of the monarchy which came up, so what is this international mediation going to do? What does it do because either Inkatha should have then said that we are not going to go for a provincial constitution because on these issues we don't think that we can have a provincial constitution until we have had international mediation, then say that they went full steam ahead on this thing, so Washington, if that's what he said (I know this quote by the press but I don't know if he actually said that) should then have to explain what is it that international mediators are going to mediate on. How do they mediate on substantial issues of a constitution that we are now sitting and drafting? I think that question needs to be answered. If in the end you say these people come then it seems to me that you need to say more than just say there was an agreement and somebody is reneging on an agreement because I don't think the ANC is reneging on an agreement at all. It doesn't mean that it may or may not change its mind about having mediation but for political purposes not for constitutional reasons.

. Now the IFP chose to walk out. They could have stayed here. They could have, for example, asked, we've had a panel of experts helping us from day one ever since we began this constitution process, they could have then said, all right why don't we bring some international experts to help us on this question. They could have put that, I don't know whether we would have agreed, but they didn't do so. They walked out. They didn't bring their international experts with relation to the KwaZulu-Natal constitution, they just tried to ram it down everybody's throats. So I don't think that they were very serious. I think it's a political ploy and therefore there is a political response that's required, not a constitutional issue.

POM. And very last, the Magkoba affair, the professor, what does it say?

EP. It says a number of things. The one is that these people who enjoyed the privileges of institutions in South Africa are not going to let go of their privileges very easily, they are going to fight like hell to retain them and all these funny liberals who keep on claiming that they are all for a non-racial society, they are not for a non-racial society when it affects their interests directly. So there's Wits, it's a nice cosy institution of theirs. I am a graduate of Wits and when we were at Wits we couldn't even use their swimming pool, we couldn't even use their sports fields. Never mind the nonsense they are talking about that they were anti-apartheid. It's just a lot of rubbish. They were anti-apartheid insofar as they wanted to protect some of their independence so that they could still have relations with overseas universities. But educational institutions like every other institution in this country have to be transformed. You can't transform South Africa into a non-racial, non-sexist, democratic society without transforming those institutions and they have to be transformed and these people are going to resist. Let's be clear about this. These so-called liberals are going to resist. I'm not sure that they are even liberals, I would call them conservative-liberals in South Africa to be honest with you. Magkoba, he was hired by these very same people, Charles von Onselen, brought from London because in my view they thought here is a nice blackie that we could manipulate and when this blackie turned out to be a cheeky black boy they don't like cheeky black boys the liberals, they never did in this country. I'm talking about South African white liberals. So then they went for him because he didn't turn out to be what they wanted him to be and Magkoba in his words and deeds was saying, 'I want to transform this institution'. Now they had hand-picked him and then they turned on him.

POM. Does it matter whether or not he embellished his CV?

EP. He did not embellish his CV. In fact he understated his CV. That's a fact. He did not embellish his CV at all. Nobody disputes that he was quoted more than any other person on the thing, it's just that he used the first set of figures he had. The second set of figures even says more people quoted him.

POM. In his field?

EP. Yes in his field. He never embellished his CV. And if these people are so worried about the embellishing of the CV why didn't they wait at the point at which the job was advertised then say, no but the CV is inaccurate, you can't appoint somebody who comes with an inaccurate CV. They just went around by subterfuge and getting information about Magkoba which then turned out to be wrong. They have been wrong. Again it's your white media who are not being honest in putting the facts forward. Magkoba might have made a mistake in relation to making public confidential information because I think that upsets many people who are working in this institution to think that if they fill in forms in which you give confidential information, then they want to be pretty sure that the information remains confidential. Personally, if you ask my opinion, I would say Professor Magkoba was not correct in making public information that he gleaned from confidential files at that moment in time. But that has nothing to do with his capacity to be vice-chancellor, nothing to do with his CV which is unchallenged.

POM. How do you then interpret his statement that he agrees that certain things in his CV could lend themselves to misunderstanding?

EP. Well I suppose in the end whatever agreement, I don't know whatever agreement they arrived at between the two contending parties, each had to give something in order to arrive at a compromise solution, it's very possible that he arrived at a compromise solution in order to resolve the problem. But as far as I am concerned there is nothing he embellished in his CV, at least from what I have seen and my knowledge of it, I am not completely certain, I have not investigated the matter so I don't have all of the documents at my disposal. Now what the Magkoba issue tells you is what I'm saying; here are these historically white universities but now operating in a non-racial, non-sexist, democratic society. Wits cannot be an island of I don't know what in the very heart of Johannesburg. You must go and serve that city and they must go and transform that institution and that has to be done whether it's done by Magkoba or it's going to be done by somebody else but it is going to be done. They can hang on and hang on for a few more years but that institution is going to be transformed whether they like it or not. That much I am sure of. We can't be this island of I don't know what refuge for ill-considering liberals for ever and ever.

POM. OK, thank you for the time.

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