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 It is the product of almost two decades of research and includes analyses, chronologies, historical documents, and interviews from the apartheid and post-apartheid eras.
21 Sep 1998: Du Plessis, Barend
POM. Let me begin with a question that has intrigued me and it comes out of Allister Sparks' book and it says that at the time of Botha's resignation as President of the NP, that you were his preferred choice to become leader of the party and it always struck me as rather odd that you, coming from the liberal end of the party, would have been his choice, or would have been his preferred choice or is that just one of Allister's make-believes?
BDP. I think more than one commentator has said that, but if that were true PW Botha had a very strange way of showing it. I personally never, ever had any direct indication from Mr PW Botha, or even a suggestion from his side, that I was a choice, that I was a possibility, never mind a preferred one. In fact the year before he got into trouble with his health, you will remember, I think on a previous occasion I told you that PW asked me that I should tell him when to go. Have I ever told you this?
BDP. It was round about July, August of 1988. When did he have his stroke? 1989?
POM. 1988. Then he stepped down at the beginning of 1989, February of 1989 and resigned as State President at the end of 1989.
BDP. A few months. In other words, before his stroke he one day said to me, "Colleague, I want you tell me when to go." I said to him, "Sir, are you serious?" And he said "Yes." I said, "Fine, I'm not in the inner circles of political discussions about this kind of thing, I have too much on my fork to be really involved with any kind of discussion of when you will go or should go or whatever, so if you ask me that I will have to do a little bit of research." And I said to him that we were having a session in the second half of that particular year during which I will make some discreet enquiries what the general feeling was. Then when we got back from the short session with parliament one day I had an extremely urgent matter to discuss with him and I asked his secretary, Tersh Ehlers, if I could rush in quickly and rush back - in fact I had people waiting for me, I had to go out and come back, but I had to check out this particular thing with him. So I rushed in and I dealt with the matter that I had gone for and then on my way out of his office he said to me, "Colleague, you owe me a reply." I said to him, "Yes sir, I know." He said, "Are you ready to talk to me about it?" I said, "Yes sir, I'm ready but can we make an appointment to do it?" He said, "No, let's talk now." And I saw that he was serious and I didn't want then to tell him I've got people waiting for me, he would have told me to make other arrangements. So I said, "Well, sir, I can't talk without paper, I quantify things." He said, "I'll get you a piece of paper." And he went to his desk and he got me a piece of paper and we sat at a little table on your way out of the office and I took a piece of paper and I said to him, "Sir, your popularity at the moment is going down very, very rapidly."
POM. Was that among his colleagues or among the public?
BDP. Among the caucus. I said to him that in the circles that I moved, I didn't comment about public things, I didn't make enquiries in that regard. I said, "It's going down like a parabola because if you put special effort in you can turn it around but my guess would be, and what's my guess? I mean what's it worth. But for what it is worth my guess would be that if you do certain drastic things then you can turn the tendency around and then in about three, four years time you can be at the same level where you are now." So he said, "What should I do?" I said, "I think you should get rid of some people in your cabinet and there are certain policy matters that will need to be addressed very, very seriously." And he asked me some names and I gave him some names, but I regard that as private, I wouldn't like to disclose that now. He said, "Now what does this mean?" And I said, "Well if you draw a parabola and you draw a horizontal line where you are now and if you want to be at the same level, it will be then in as ascending moment which is better but it's not so dramatic now that there is any chance of a motion of no confidence or something, then it will take three, four years as I said, so, sir, it's either in a few weeks time when you celebrate your tenth anniversary at your congress in the Cape or it is in three, four years time and that's my recommendation. If I were you I would have gone now."
POM. So you either go on the 10th anniversary or you go four years from now when you've turned things around?
BDP. Yes, and it's for him to decide because he was getting on in years already. Then he said to me, "What about my successor? How is De Klerky doing?" He had no respect for FW de Klerk in talking to some of us, he called him 'De Klerky'. And I said to him, "His graph is doing the same as you, sir, but he's still ahead, first in the pack but his graph is going down very rapidly." He said, "Who is closest to him? Pik?" I said, "No sir." He said, "Heunis?" I said, "No sir." He said, "Who then?" I said, "I am sir." And to my great astonishment I found that out, that I was all of a sudden a contender and that all of a sudden also explained to me very much why from certain quarters I had so much trouble in getting my budgets balanced because they had their own agenda with me politically.
POM. They being?
BDP. I was being treated by some of the contenders in a way that will not give me a good public image. If we have a huge deficit, if we end up every time with a huge deficit before borrowing then I'm a bad Minister of Finance and I will be a very bad President. But I wasn't that serious about it. And he said, "And what will the private sector say about this whole business?" I said to him, "Sir, as far as I am personally concerned my own position in this whole affair" - two weeks before that I had a very important person from the business sector in SA coming to my office and he said that he had already secured several million rand to help me to become president. And he didn't like that, he didn't like that at all. So if anybody says that I was a preferred choice there was an opportunity for him to say, now listen, let's plan the next number of weeks up to the tenth anniversary and let's plan it. If you are an ascending entity in this race and if I were his preferred choice he would have then stepped forward and said let's do something about it. Obviously he didn't. In fact my interpretation was that in a certain way he resented it.
POM. That he resented it?
BDP. That he resented my whole message to him. I didn't question him and I don't know which aspect of it or the whole idea of his having to go. Oh yes, he said to me then also when I said that - at the tenth anniversary he made a remark which I didn't really understand, he said, "Africa will be chaos". And later on when I got to know that we were giving aid, military assistance to certain parts in Africa, which had never been to cabinet, when FW de Klerk had taken over we found out that there were moneys going in certain directions, and then I understood that remark for the first time. Anyway, there was a golden opportunity so that remark of Allister Sparks is worth nothing.
POM. Just a couple of points around that and I will take the last one first. Even though you were Minister for Finance it was only when FW took over that you were able to trace where some of the money - would it have been extra-budget money or money that - ?
BDP. Remember that during the two years that I spent under FW de Klerk he appointed me as go-between. He appointed a committee consisting of, I think, Professor Kahn and some people to investigate or to go into the expenditures under the heading of secret funds of both the police and all other departments.
POM. So funds would be allocated to the SAP and the - ?
BDP. Yes. Then I got to know, I don't know, I think the defence force possibly.
POM. And they wouldn't have to account for the way they were - ?
BDP. That was all part of the secret funds and the secret projects of the military of which I knew code names and a very brief description, as we say in Afrikaans, within which you could have turned an ox wagon. It came under the Special Defence Account and just as I couldn't accept responsibility for what a teacher wrote on the board with a piece of chalk which had been financed by the budget, so equally I couldn't accept responsibility for what the Minister of Defence did with funds in line with the existing legislation went into certain secret projects described under 'stabilising South Africa's regional position'. I had no locus standi to enquire into that and later on during the investigation into certain things I learned that there had been some arms given, or whatever, to other countries, and then I understood what PW had said earlier that Africa would be in chaos.
POM. Because those moneys would no longer be forthcoming?
BDP. Maybe. That was only my assumption. I may even be wrong on that but in my own mind I understood what he had said.
POM. So he stepped down on the tenth anniversary?
BDP. No he didn't. Oh no he didn't at all. He carried on until the next year and then he got his stroke and then matters took the line that you are aware of.
POM. How did you find working with him? And I say that, and the context I give is that last week I spent a couple of hours with Niel Barnard who actually thinks very highly of you and thought it was a pity that you didn't become State President. (That's just for your own view). But he was very much at pains to say that books written by the likes of Allister Sparks or Patti Waldmeir or other commentators grossly underplay the role that PW Botha played in creating the conditions which enabled the release of Mandela, the fact that the release of Mandela in the end was kind of a formality, not a decision that FW had to go into a closed room and pace up and down and wonder am I doing the right thing or the wrong thing or whatever. In fact a sequence of events had been set in motion of which his release was a foregone conclusion.
BDP. It was a foregone conclusion. You will remember that I told you before that between Niel Barnard and PW Botha and myself, when I received an invitation to go to Mrs Thatcher I had two briefs. One, to ask her in the light of Mr Botha's planning to release Mr Mandela, and he did not at that stage, on that occasion, attach any conditions to it whatsoever, that in the light of his desire, and that was in 1986, to release Mr Mandela which he kindly refrained from asking for his release because PW Botha would like the conservative black leaders in SA like Buthelezi to get the honour for it because at that stage Buthelezi was already very reluctant to speak to PW Botha at all because he said that, "Release Mr Mandela so that I am not fighting a phantom at the elections, so that I can really be elected democratically." In other words at that stage already PW Botha had given me that private brief and I mentioned it to Mrs Thatcher. What happened subsequently about that whole thing I don't know. One day I would like to talk to Niel Barnard about it because the whole war thing escalated and in Namibia - and I think that destroyed it, or whatever. I don't know, but Mr Botha never followed up on that.
. Anyway, so I fully agree with that statement that the role of Mr PW Botha is being grossly underplayed and very unfairly. It's remaining unmentioned. He created the atmosphere for it. My opinion of him in that respect was that he was very heavily influenced by the military situation and by the evaluation of the security situation inside of SA and if the securocrats at that moment in time decided to exaggerate, for instance, the vulnerability of the state and the government in terms of the internal situation then he could have held back on Mr Mandela's release, but he was talking about it for a long time. So it wasn't a new idea after FW de Klerk took power.
POM. I suppose the important thing is that he asked you to convey a message to Mrs Thatcher that didn't have any riders attached to it, like if he renounces violence or if he does this or that.
BND. Oh no, he said nothing of that sort. Now in the greater scheme of things, with your head of Intelligence and your State President and you've got your relationship with another head of state like Mrs Thatcher, maybe it had a different meaning, maybe it was a little piece of a puzzle which I didn't fully understand, but there were no riders and that to me was an important thing.
POM. When was the cabinet or senior members of the cabinet, to your best recollection, first informed that the secret meetings with Mr Mandela had been going on since late in 1987, that a team of four had met with him some 48 times?
BDP. I was totally, totally unaware of that, totally. I was totally unaware of that contact. The only contact that I knew about was that Mr PW Botha had Mr Mandela in his office and he asked Tersh Ehlers to take a picture and he showed us the picture.
POM. He never mentioned at that point that - ?
BDP. He never mentioned anything at all. I was never formally or informally told about that. In fact not even in FW de Klerk's time did I become aware that discussions had been going on with Mr Mandela. I wasn't aware of it.
POM. Yet you would have been the most senior minister in Mr de Klerk's government?
BDP. No, no, no. Pik Botha, Gerrit Viljoen and Dawie de Villiers were all more senior than me.
POM. Was that in terms of - ?
BDP. I wasn't part of FW de Klerk's 'Kitchen Cabinet'. I wasn't part of his inner, inner circle. Neither was I of Mr PW Botha. I was never part of the inner circle.
POM. What was the reaction of the cabinet when the photograph was passed around? Incredulous or what?
BDP. No, it was a surprise but I think it was by and large regarded as a very encouraging step forward.
POM. When, as a collective, were you informed that meetings had been taking place?
BDP. I can't remember any, and you know I may just have a lapse of memory because things are getting shelved in my memory. I can't recall ever having been formally informed that there were these discussions on a wider scale. From that moment in time I accepted and I would assume that we were informed from time to time that there were meetings, contents of which were never discussed.
POM. Again, one of the conventional wisdoms is that when Mr Mandela and the ANC and the SACP unbanned, that it came as a kind of momentous surprise to everybody and, again, it's returning to the point of, well his release was inevitable, it was only a matter of when rather than whether at that point so it shouldn't have come as a surprise.
BDP. Yes. I only learnt about that a day or two before 2nd February 1990.
POM. You did jump, "Oh my God!" It was more like the natural -
BDP. No, I was one who, particularly as far as Mr Mandela was concerned, who thought that it should have happened before. I was never outspoken about it but that was my inner conviction. That was an area over which I didn't express myself because it wasn't my line function, it wasn't in my political arena and if you wanted to pick up trouble with PW Botha you had to interfere in that kind of thing and I had enough troubles with my budget.
POM. There is this book by Richard Rosenthal called 'Mission Improbable', I don't know whether you've seen it? It's about that as a lawyer he wrote a letter to Mr Botha offering to act as an intermediary between the government and the ANC in trying to arrange something about talks about talks about talks and was Mr Botha susceptible to that and I guess the matter was referred to Stoffel van der Merwe who became involved with Mr Rosenthal in this initiative that ultimately involved the Swiss government. It went on for some years, through 1989. Now in his book he -
BDP. Stoffel van der Merwe? Really?
BDP. I never knew anything about that.
POM. OK. Well this is what's interesting. I asked Niel Barnard, because ultimately he contacted Niel Barnard or was told to contact him and Barnard says that PW and Mandela had both reached a decision beforehand as part of the prison discussions that there would be no foreign mediation, that the problem was for South Africans to solve for themselves. Barnard was very much into 'we only and keep it secret' kind of modus operandi. He says he didn't know that this initiative was going on and he says he thinks of the NIS as being this kind of omnivorous power that had its hand in everything and here was this guy trotting back and forth between Geneva and Johannesburg and the Swiss government and PW's office. He used to go directly to PW.
BDP. Amazing. Never heard of this. I didn't read the book either. So far I've not really read these books. Maybe if I get hold of it I'll do it.
POM. They all more or less tell the same story but the thing that finished this initiative was that PW actually had a meeting with the Swiss Foreign Minister. The Swiss Foreign Minister who apparently was new to the job and didn't know Mr Botha very well said regarding the release of Mandela, "This whole question about the renunciation of violence is really no big deal." And PW hit the roof and told him he meddling in the internal affairs of SA and the whole thing was over. But what I'm getting to is that these talks, if you say there were moneys allocated to secret funds over which line ministers didn't know what happened to the money -
BDP. Line ministers were supposed to know. I had no locus standi to know the detail but there was a secret fund under the Minister of Finance. I'll give you an example. Those departments which did not have secret funds of their own, like police and the defence force and Foreign Affairs, when they had a secret project which they didn't want to take through the parliamentary debate procedure, they could approach the Minister of Finance and with the approval of government it could be financed from that central secret fund as it were. For instance, the financing of a rebel cricket tour, who was that other British captain at the time? The English tour? Their tax was paid by a secret fund.
POM. Their tax?
BDP. Yes of course.
POM. Their income tax?
BDP. Yes their income tax which in SA they had to pay. They contracted for a certain amount and they thought that would be a net amount. That was quite open. But then eventually they felt after the Receiver had had his share of their remuneration they would get out too little and that was the first half of a tour. The second half would have taken place the next year. It never did. So then the Department of National Education, which had sports under them, approached us in Finance and we approved a few million rand of secret funds to be used in order to restore their earnings to net earnings, not gross earnings before tax. But the line function minister knew all about that.
POM. But if I were Minister of Defence and I came to you as Minister of Finance and said I have a project about which I can't talk but it involves the security of the country and it will involve some funding but I am really not in a position to tell you very much about what the project is and you took that to government and said I've had a request from the Minister of Defence for X amount of rand for a project involving the security of the country which he feels at this point he's not at liberty to speak very much about -
BDP. It could be entertained.
POM. And then that might be rubber stamped?
BDP. Yes, sure, it could be. But normally - I can't recall a single incident where that had to happen because a large portion of the overall defence budget went towards the secret, not secret, the Special Defence Account and the SDA was secret in its entirety, the contents of that expenditure were not discussed in parliament, it was secret from the point of view of if it became known how much SA spent on armoured cars, on this, that or the other, then it would be detrimental to the country's security position and from those secret funds certain projects were financed also. Eventually we made, between the then Auditor General and myself, we made a lot of progress to get more and more insight into that and to secure more controls over that but as far as the police were concerned we had no insight whatsoever in their activities.
POM. And they had a secret fund, they had a similar fund to defence?
BDP. A similar fund and there we didn't even know project names, the Department of Finance and the Auditor General.
POM. Are you saying that on the one hand you had a considerable amount of funds that were in secret accounts that were at the disposal of the security forces in general about which cabinet had no control and no knowledge regarding their disposal?
BDP. Exactly. Cabinet were never informed how the Special Defence Account was used.
POM. Two, you had a situation where the State President could be carrying on a number of activities, whether it was the team under Dr Barnard who were meeting with Mr Mandela or this independent individual and his initiative reporting through Stoffel van der Merwe to PW, that also cabinet were not informed?
BDP. Of course. And finance for that could be obtained either from NIS because their funding was also secret, or it could be obtained from the Special Defence Account where they could fund it, and indeed even the police could do that.
POM. So when you hear the statement made again and again and again both by President Mandela, or Mr Mandela before he became President in the years leading up to it, at the Truth Commission that there was no way but that the cabinet must have known what was going on and there is blanket cabinet denial, so to speak, you are talking about a system that was set up in such as way as where this wasn't only possible but feasible?
BDP. Well that's exactly what happened. I didn't even know that a man by the name of Webster existed. I didn't even know that a Dr. Nogera, or whatever his name was, the gentleman that was shot by the security forces in some Pretoria township, I never knew that he existed. Dr - what's the name of that advocate who was murdered by Dirk Coetzee in Durban?
POM. Griffiths Mxenge.
BDP. I didn't even know that his name existed. If I didn't perhaps read it in the paper as an advocate defending people in a security trial, which I can't even recall that I did, I never knew his name. There was no way that those things were taken to cabinet and the system provided where that kind of decision could have been taken at a very low level without even involving the head of the department. Unlikely, but it could happen and without then even involving the particular line function minister. Minister Adriaan Vlok said at a recent hearing of the TRC Amnesty Committee that they never shared these things with me and Pik Botha because we would have blown our minds or whatever, we would have flipped our lids. We would not have stood for it.
POM. That he would not have stood for it?
BDP. No. Pik Botha and I would never have stood for this kind of thing. That's why they never talked to us about it because, what he mentioned was that we were sensitive about external, foreign reaction, let alone the morals of thing. He didn't express himself on our moral situation or our ethics as far as these things go. I was then battling to keep SA afloat financially without the ability to borrow one bean. Pik Botha was then trying to keep SA afloat internationally as far as diplomatic matters were concerned also without any support. So the two of us we were not only motivated by our own convictions to do what and to say what we tried to do, but also we saw the immense danger for SA like that explosion in London. Pik Botha went crazy about that. I remember that very, very distinctly, that he expressed himself, I don't know if it was at the time or at a later stage, where he used it as an example but I knew that openly in cabinet circles he would take a stance against that kind of funny business.
POM. Again it is when people who would have been in your position, cabinet minister, senior cabinet ministers or senior officials in government, it is said that all they had to do was to read the newspapers and they would have known something funny was going on. Nine people in two weeks don't slide on a bar of soap and disappear out of the window of John Vorster Prison. At least somebody might say what kind of soap are they using?
BDP. Let me tell you what happened there. We had our regular security briefings and -
POM. This is the whole cabinet?
BDP. No not necessarily the whole cabinet, the Security Council.
POM. You sat on the Security Council?
BDP. Oh yes I was on the Security Council all the time. But we would have a security briefing by a person from the State Security Secretariat and he would then have collated information from all the various collection agencies and then they would vet it and evaluate it and so on. For instance, Goniwe, I remember Goniwe gave us a lot of trouble in my ten months as Minister of Black Education, but I knew that he was a good teacher and I knew that he was politically very active and so on. I think then what they did, the General came to me and said, "Minister, this guy is causing such trouble, we want to get him out of that area. We want to transfer him to another school. Take him out of that political environment and see if we can still use him as a teacher." And I would approve that kind of thing. But then on the State Security Council when they were murdered, and I can't distinctly recall that that is exactly what happened, but it would have been painted in the following way, that we were always made aware that there were factions inside the ANC and power struggles and that the ANC and the PAC weren't even very friendly with each other, but there were always factions and there was always a struggle for power and so on and that in this particular case it was obvious that it was a power struggle. Like what's happening in Richmond today, I think the security forces can wipe out a lot of people there and everybody will believe that it's a faction fight in Richmond in Natal. You understand what I mean? You agree with that? So. If an atmosphere is created that there are these factions also going for each other's blood and eventually something like that happened, well? Maybe I was gullible and certainly looking back one could have asked more questions but at that time, as I say, I had my troubles and I went on doing my job as Minister of Finance, period.
POM. One other thing said, and this is in terms of strategy, and it would I suppose relate to government strategy when it came to negotiations or pre-negotiations with the ANC, that the objective was somehow to split the ANC if possible into the moderates and the communists and then to isolate the communists and deal directly with the moderates and that Mandela was the route to the moderates. Was that a strategy? Was there within cabinet any discussion of strategy? When you were head of one of the working groups at CODESA 1 - ?
BDP. Yes, after Mr Mandela's release yes. Then Mr Mandela and strategies were the order of the day and special committees and so on. Oh yes. But never before Mr Mandela's release was there ever a strategy discussion. But afterwards yes, all kinds of efforts to make an alliance with the IFP and so on but it never happened.
POM. Was there ever any serious attempt to say, well what we ought to do is try to turn the ANC on itself between those who want to continue with the armed struggle, the left, and the moderates?
BDP. I think it was always on the agenda but I don't think that anybody ever believed that it was possible. I think the consensus of opinion was that some day it will happen by itself because, for instance, and it's very simplistic, there was a view at that time that the ANC provided an international charismatic image of the power struggle. The communists provided the intellectual input, manipulating, propaganda, but they were the think tank, and COSATU provided the voting fodder, the masses, and the administrative structure to take the struggle to the streets and to organise rolling mass action and all this kind of thing and that eventually the country would have no choice but to go into a direction of real democracy because having been supported all these years by the so-called democratic countries they will have a major influence and if SA falls down today it will be an embarrassment to both Britain and the USA and other countries that really interfered very heavily with the whole affair through all these years via their Secret Services and via infiltrating or supporting the ANC and coaching them and so on. And then economically the only way to go is to go whatever is regarded out there as free enterprise. So if you really had a very dogmatic socialism prevailing or surviving that eventually there must be a clash. But it can never happen before two or three elections have passed.
. The Afrikaner overcame all his major differences. We haven't even got a common gene pool in Afrikaners. We're a bedoorned lot. You know what bedoorned is? It's a very good Afrikaans word for 'there's a funny streak', you know lightening must have struck you or something. Afrikaners coming from Dutch and crazy Dutch and crazy Germans and crazy French running away from a country where they were beheaded for their religion and so on, and the British coming here, thousands of miles away. Have you ever thought of putting all this together and trying to make a white nation out of these Europeans? It's ridiculous. But we could overcome that.
. I will give you just one example. The Voortrekkers trekked away from the Cape to get away from the British. They weren't even out of the shadow of the Union Jack and then they started fighting among themselves. We've got basically three churches and lots of other churches as well. We can't agree on anything in the Afrikaner community. But we politically stood together against a common enemy. As Van Zyl Slabbert very eloquently put it one day, years ago when we were still in parliament, he said, "Colonialism is the wire that keeps the bale of hay together. Snap it. Get rid of colonialism and eventually the bale of hay collapses into its natural dynamics pertaining to a particular country." So this will happen eventually with the ANC. You've got some incompatibles there and ultimately it will happen but they will stand together this next election. They're going to get their two thirds majority probably, although just miss it, and then the next election they will still be together but then thereafter I think ambition and a shift in having created a lot of wealth among themselves will make the division.
POM. Do you think they will get a two thirds majority?
BDP. I think it's pretty possible.
POM. Is that a cause of concern for you?
BDP. To me personally it's of grave concern, very grave concern. You will see an even greater exodus out of the country than you see today. The Afrikaner, you've got this irony, the Afrikaner always thought of himself as a kind of a Jewish or Israeli people, so eventually we are now like the Jews, we have a Diaspora. There is not a single family without one or more children outside of this country. We're spread all over the world. They've started an Afrikaans church in Auckland where my son is.
POM. That's what Koos van der Merwe told me. He had been there and he said he went to an Afrikaans enclave where -
BDP. 200 people come to a church service. My son is there, he's a doctor there. They had a presentation by one pharmaceutical company, they've got more than fifty doctors from SA coming to that particular area. So the Afrikaner eventually has become like the Jew. But anyway we've spread all over the country. What I'm saying is it will escalate.
POM. Do you think that any attempt by the ANC to tamper with basic provisions of the constitution would produce, again, an international backlash which whatever trickle of foreign investment is coming here would not only dry up but that you would have mass disinvestment beginning?
BDP. Of course. Who's going to invest in a country where there is no prospect of the taxes coming down to internationally acceptable levels for investment? We have now become part of the world, the small village that the world has become. Look what's happening to our currency, what's happening to interest rates.
POM. In a sense that's what I mean. Aren't these in a way the safeguards that concepts of sovereignty have so changed in the last ten years in particular, the last five years probably even more particularly, that countries no longer have the capacity to determine their own fate, their own fate is determined to a considerable degree by forces external to them?
BDP. I would have loved to leave my position as Minister of Finance with SA deeply in debt with the IMF. I would have loved to leave SA in debt with the IMF because we were under-borrowed internationally anyway.. I would have loved to leave SA in debt with the IMF because we were under-borrowed internationally anyway.
BDP. Because we would have had to stick to certain parameters as far as our fiscal and monetary policies are concerned. Now we have a degree of freedom which I think is restricted, yes, by what's happening internationally because we are part of this global village, but that didn't stop Tito Mboweni from putting through these labour laws. That didn't stop Trevor Manuel from talking about a lot of other taxes that are coming. That didn't stop Mugabe from doing what he's doing. There's no security in it that it will be a safeguard. With respect, it's not really a safeguard.
POM. Sorry, which isn't a safeguard?
BDP. To be so internationally controlled almost, as it were. Governments still do what they like. Look at our deficit before borrowing, it's far too big. Look at the way that we're spending capital on current expenditure, it hasn't stopped. In my time it was as bad, maybe even worse but at least we really tried in those circumstances where we had no international flexibility, and how do you run an international company without bridging finance? How do you run a company with so open an economy without bridging finance of the same kind?
POM. So you would give limited credit to Trevor Manuel's efforts to bring the deficit down?
BDP. I don't even give him limited credibility, I give him due credit. I think he's been doing very well in very difficult circumstances because he's being pressurised to deliver. I was pressurised to deliver for the acquisition of arms and for our war effort which brought us nothing. He's got to deliver in terms of housing and what have you.
POM. But in part the target is set, this is part of the COSATU/SACP argument. Who came up with this magic number of 3%?
BDP. It makes an awful lot of good sense because if you look at how budgets are structured in healthy countries, countries with a good economy, you will always see that 3% is more or less the capital that is spent by the government. So if you borrow for capital purposes it's fine but if your deficit becomes larger and if you don't even spend 3% on capital it's all current, you know what you're doing then? It's like a car and you're on your way to Cape Town and at Uncle Charlies outside here, you sell your spare wheel to buy a hamburger, in Bloemfontein you sell your battery and you go downhill to start it, you're devouring your car. By the time you get to Cape Town you've got nothing left.
POM. Now your brother Attie was close to the ANC, attended a number of meetings at Mells Park outside Bath.
BDP. With the cricket tour there, at that time.
POM. During that period. Did he ever discuss with you, serve as a kind of a conduit what the ANC's thinking was?
BDP. No, no. I was fully aware of the fact that he was doing it. That brother of mine is a very, very discreet person and despite the fact that we've been so close, lifelong, he is extremely discreet. He will not discuss with me anything that he regards as inappropriate in relation to the situation that he found himself in.
POM. But would it not have been, to put it the other way, to me I read part of - I mean Wimpie de Klerk also, I find it interesting that FW de Klerk's brother was involved, your brother was involved, Constand Viljoen's brother was involved (talk about the Afrikaner, as you were saying), that part of the reason for their invitation to these meetings was in fact to send back discreet messages that these guys aren't loonies, they know their whiskies and their brandies and they all like a good cigar and they are not all agitated revolutionary communists.
BDP. I think that message was obviously very clear.
POM. Very clear from?
BDP. From them, from my brother and others.
POM. That's what I mean. Would he convey even that to you?
BDP. Oh yes, he would talk about the socialising and so on but that didn't surprise me, with respect, it didn't. I knew we were dealing with cultured people. I had bumped into some of them. Louis Nel and I went to a conference in Titisee in Freiburg. Friedel Hanff, that researcher, the German researcher who wrote a book with Van Zyl Slabbert. I met Dr Pascal, remember the name? A flying doctor from Lesotho, he was from the ANC, he was there. That was in John Vorster's time.
POM. So you had knowledge of, not just you but others, of what might have been called the governing elite or whatever, that these guys weren't lunatics and weren't about to come in and -
BDP. Sure, but what I'm talking about that he wouldn't discuss was when it came to the substance because there he had a brief from the business community and he would not discuss the substance with me. On one occasion he said to me, "My dear brother, I am sorry but we can't go along supporting this cricket tour."
BDP. We, the business community. "I'm just telling you that I'm part of that decision, I'm not only part of it but I'm supporting it." He would do that kind of thing.
POM. So again when the ANC to this day say capitalistic business continually exploited labour to build profit and was against change and is against change today and is not playing its role in transformation or in the necessary transformation of both the institutions of the country and eliminating the inequities that exist, do you find that - ?
BDP. I find it obnoxious I really do. The only way that I can try to understand it is from a party political propaganda point of view. But if that is their real conviction then I see dark days ahead in this country because business in SA is not a charity organisation, business is mobile, business is there to make profit and jobs are created because profit is made in the process. Jobs are not created by government. If government starts creating jobs then they -
POM. Mandela himself has said that government isn't an employer.
POM. But it's an attitude still that business is not playing 'the role' it should be playing, that it is resisting change.
BDP. Absolute nonsense.
POM. That it is reluctantly being drawn into the process.
BDP. I'll tell you, you know what really interferes with business? Tito Mboweni's legislation, so businesses are just restructuring themselves. I know of several guys, they're going to break up their businesses into employing fewer than fifty people. They will find a way out. So money is spent unnecessarily to overcome stumbling blocks that legislation, with all the good intentions of legislation, really had in mind.
POM. So if you had one business with 200 employees, you now have five companies with forty?
BDP. Yes exactly. I am just talking about the principle. So the private sector will find a way around. I am not talking about the fact that we should have, I'm not suggesting that we should have a laissez faire thing here, all I am saying is that this kind of legislation is an indication of a lack of understanding. That's why I find it obnoxious. It's that kind of remark. Business cannot create jobs for the purpose of having jobs. If unions came, in the light of the fact that we're going through a huge international adjustment to find our place in international competition and to adjust businesses that thrived in sanctions environments, to convert them into internationally competitive businesses, that whole transformation process will of necessity sometimes destroy jobs in a certain respect. But if unions then came and said, listen fellows if this is the only way that this business can survive, why don't we cut our salaries or do away with this increase and rather employ more of our members - like happened in the USA at one stage with Chrysler I think. But in SA the unions don't understand that.
POM. Now I would assume you saw the article that first appeared in the Wall Street Journal and then was reprinted in Business Day by David Roach.
BDP. No I didn't see it. What was it about?
POM. Well it said that SA was teetering on the brink and about to push itself over the brink with the level of its uncompetitiveness, its level of savings, but he had quoted a figure. There were a number of replies to it saying a lot of his factual data was incorrect. He quoted before the depreciation of the rand that the manufacturing wage per hour in this country was $4.5 which struck me as inordinately high. He was queried on other things, he just got that wrong.
BDP. Yes, that's crazy. Maybe he mixed up his rands.
POM. He translated into dollars because then he said with devaluation it came down to .8 or something which made it more competitive with emerging markets at a similar level of development. Anyway, it's an interesting article in terms of its thrust.
BDP. I'll try to get hold of it. Can I just say this? What they don't understand -
POM. This is whom? The unions?
BDP. The unions, and that kind of statement and while they play a major role inside the ANC politically they will still have that kind of statement also coming from the political leaders to placate them and so on. So that's why I say the cracks will be plastered over and the momentum of the struggle, the loyalties and so on will carry the ANC for many, many years to come. What I am saying is that what they don't understand are the basic fundamentals and I tried always to explain it to people this way: there is a fundamental relationship between the value of the money that you put in your pocket and the calluses on the inside of your hand. If you destroy that relationship by putting more money into your pocket than was deserving looking at the calluses on the inside of your hand, then eventually the money will assume the value of the calluses on your hand. If you produce more, then the value of the money in your pocket will assume a greater value. That is a fundamental, in simple terms, a fundamental economic truth and it will reflect in our - we're an international player now - this lack of productivity and the demand for wages here in excess of productivity, will just reflect in an ever decreasing international currency.
POM. Well the example I was looking at, and I've been following with a great deal of interest, is the case of NUMSA and the strike in the motor industry where as of yesterday, which was to be the last round of talks, is going to continue and they're going to pull other workers out on another one-day strike, but that the manufacturing plants which are not on strike are having to lay off workers or close down or they're having to import the components and once they start importing the components and those components start coming in cheaper it means they don't need the domestic industry. But this is being done at a time when the country is in crisis. By any measure or standard this country is in an economic crisis of grave proportions but nobody is saying that.
BDP. Our interest rates are in real terms the highest in the history of the country, the highest in the history of the country! And there is no way that you can carry on like this, but the creation of credit is not abating.
POM. I was going to jump to a poll that was carried out. I had a thesis but I think it was destroyed sitting outside the door waiting for you.
BDP. Destroyed in your mind or destroyed by - ?
POM. I picked up a piece of paper and read it and said, "Oh God!, There goes the thesis." But this was carried out by the Bureau for Economic Research at Stellenbosch and it said:-
. "Consumer confidence for the third quarter of 1998 fell sharply reversing all gains made in the three months to June on the back of the recent hike in interest rates and continued financial market volatility. The decline was marked by a significant differentiation in the confidence of white consumers and black consumers with black consumers' confidence largely unchanged in the third quarter while white consumer confidence decreased 25 index points, the largest fall since the fourth quarter of 1984 when the prime overdraft rate also increased to 25% and the rand depreciated by more than 50% against the dollar."
BDP. It was 1985 actually, they're wrong.
POM. That's what the ANC say about every report in the press.
. "Black consumer confidence remained largely unmarked by currency market volatility."
. Why? If you had to give an explanation as to - ?
BDP. It's a very simple thing. Who controls the capital? Who controls the capital still? It is just a fact. It's just a fact.
POM. So my question would be, I suppose, does the devaluation of the rand have a more severe impact on the white community in general because (i) it's the more affluent community?
POM. (ii) It has a higher marginal propensity to import therefore it either cuts back on its imports or if it doesn't cut back it's going to pay more for the imports?
BDP. I would put second, they've got experience. Having been affluent over a longer period of time they've got experience of what happens to your personal wealth in these circumstances. We've got a huge ballooning black middle class without that experience and with tens of thousands of black people through affirmative action having been taken into various levels of government at very, very much higher salaries than they had earned before, with tens of thousands of people having been promoted also, having been given opportunities. In Sage, I'm a director of the Sage Group, we've pumped in many, many hundreds of thousands of rands, maybe even a few million already into upgrading our skills of previously disadvantaged people. So tens of thousands also in the private sector all of a sudden earning X-fold, many-fold, X times what they had earned before. They don't to the same extent have experience of what happened to us in 1984 when I had to increase those interest rates and what happened to us in 1985 when the rand depreciated after PW Botha's Rubicon speech. So they've got their facts wrong there. Anyway it is a fact that by and large your confidence factors centre around: am I going to invest; am I going to in the process create more jobs; am I in the process going to generate some exports; am I in the process going to buy from other factories in SA? And if the answer is no, then it reflects in that confidence figure.
POM. But this is a consumer, not producer.
BDP. Sure, but as a consumer some of these questions still apply. Am I going to save? Am I going to invest? Am I going to invest in the stock exchange? Will I be in a position to save? Also, am I going to buy things? I am not going to buy things.
POM. If you take the millions of unemployed, the under-employed, marginal employed and those employed in the informal sector, what impact would a 20%/30% devaluation of the rand have on their standard of living, on the way they live compared to the impact such a devaluation would have on the middle class be it black or white and the upper middle class?
BDP. I think there's a two dimensional difference. In the case of the more affluent it will have a direct impact and it will have a rather quick indirect impact. But in the case of the spending patterns as I understand them of the first group that you mentioned -
POM. That's the unemployed and -
BDP. Yes. It will be slower, it will not be direct. Those are not the people who go overseas. Those are not the people who buy imported clothes. If there's a massive devaluation they don't buy brand new cars and we've got quite an over-population of second hand cars around. My gut feeling just tells me that it will not have as great an impact on them. So I have no problem understanding that difference but in terms of confidence on which business decisions are based what counts is where the money is.
POM. One of the conclusions of this study is that black consumers expect continued improvement in the economic performance and their financial position over the next 12 months. The majority also rates the present as the right time to buy durable goods like household equipment and furniture. In contrast a sizeable majority of white consumers expect the economic performance and their own financial position to deteriorate during the next 12 months.
BDP. I can understand that. You've got affirmative action where - my younger son applied, as Van Zyl Slabbert says he's wrongly coded genderwise and colourwise, and out there in my circle of friends and people that I come into contact with there is real fear among their children and real experiences of where there is discrimination against them. They don't get the jobs that they thought they were going to get. I will give you another example and I'll take a real one, I know the man who in any objective evaluation will be the best qualified to run the Kruger National Park. They went and they appointed an ex-teacher. He knows nothing of that particular job. He did not satisfy those job qualifications and everybody that knows about that will not have confidence in terms of job creation.
POM. Even Milton Friedman, there was an interview with him, the 'god' of the monetarists in Financial Week, I think, had an interview with him a couple of weeks ago. He said that what SA should do is lower interest rates and let the rand find its own level.
BDP. I agree with the second one.
POM. Let the rand find its own level but then if you lowered interest rates, I mean if interest rates stay at the level they're at for any sustained period of time you are not going to have economic growth, you're not going to have job creation.
BDP. Now that enters an area which to me personally is of very grave concern in terms of what sound monetary policy should be able to achieve. All of a sudden you have millions, a few million new, rather affluent, consumers, and with respect they have no idea of credit.
POM. So they're over-extended already.
BDP. They're over-extended and to hell with you, excuse me, as my creditor. I can't pay, I can't pay. You see there isn't the same kind of cultural damnation, for want of another word, attached to be a delinquent debtor. That's why high interest rates in our particular circumstances will not necessarily bring about what it's supposed to do. So from that point of view Milton Friedman may have a point but what the exact answer is I don't know.
POM. Well do you not face a second possibility and that is that you have, and I got the figure that the number of - I don't know where this measurement standard comes from but it's called The Living Measurement Standard, and I guess people are put in different grades for standards of living or whatever, but middle class or better would be in six, seven and eight and the number of blacks in that category increased from 7% to 22% since 1992 or something, the last six years.
BDP. Very dramatic.
POM. Now, this would be the class that has bought a new house at R250,000 -
BDP. BMWs, new house.
POM. New house, electronics, the lot. Now they're facing a squeeze on every side yet the creation of a stable black middle class is almost regarded as one of the prerequisites for the creation of a stable and ongoing democracy. If this collapses at this point you're in real trouble.
BDP. I agree. I agree completely with that. That is why I believe that Milton Friedman has a point when he reckons that we need a remedy that may be different from your classic monetary policy, money creation, money supply - or money creation control measures.
POM. If you lowered interest rates, let the rand go where it will, it's going to hurt some people but it's going to cut back dramatically on imports and those who wish to still buy them, well they'll have to pay for them. It lowers the price of exports where it might even overcome the gain that should have been there through devaluation in commodity prices except that commodity prices were falling quicker than you were devaluing so you were losing even on your commodity exports and what you do is you give a stimulus to the economy in terms of investment and growth because if you have rates where they are then all the job summits in the world mean nothing, you're not going to create -
BDP. But at least with high interest rates you have been able to keep some of your overseas investors although it's hot money in very, very liquid or very fluid money, very volatile money is the word that I'm looking for, at least you've got some of that. You can precipitate a major crisis, maybe that is what should happen in terms of our reserves so that we're forced to go to the IMF and at last I will get my wish fulfilled because we need, as it were, a force majeure so that the politicians can - what I'm trying to say to you, so that the politicians can blame outside -
POM. Well they're already doing that by blaming globalisation.
BDP. Yes of course.
POM. Nothing's our fault. Everything would be fine if it weren't for we are part of the contagion of the Asian flu.
BDP. The man in the street can't really understand why the Brazilian crisis or Mexican crisis or Russian crisis should affect us but in the end if it's said enough he begins to understand it.
POM. If you've a monetary policy whose primary purpose at this point seems to be to hold on to that flight of capital -
BDP. It's a combination also to be anti-inflationary because the money creation goes on unabated and, as I say, you've got a different population.
POM. But there's an estimate in the paper today that shows that even as things stand with the rates of interest as they are, that the estimates for the rate of inflation have gone up from 5.2% for the year to 9.7%, so it's going to hit double figures even with interest rates at - now if you lower interest rates -
BDP. Then you get stag-flation.
POM. But if you get growth going, if you lower interest rates but you get some economic growth going and you create some jobs.
BDP. For two or three years you could sweat it out.
POM. Where does the trade-off come? Where do you trade-off? Is the creation of jobs a more pressing social concern than, say, a rise in inflation from, say, 10% to 13% or 14%?
BDP. It makes a lot of sense.
POM. But which would you - ?
BDP. I personally would prefer to rather live with a little bit higher inflation and to get some investment going in SA and to stabilise that community that has just acquired a modicum of wealth because if we see the collapse of that class it will have a disastrous effect on the political scene in SA. If the trade-off is a little bit higher inflation but a restoration of possibility of growth, I would rather live with higher inflation. In my time our problem was always once inflation starts running how the dickens do you stop it? Then it's very painful. But if you can educate the society that is coming about in SA about the disasters of inflation then maybe one can get it right.
POM. If Chris Stals tomorrow morning announced that he was reducing interest rates because he had given due weight to all of these considerations and believed that a reduction even to 24% or whatever was in the best long term economic interests of the country, what do you think would be the reaction in the business community?
BDP. I think it will be negative to a very large degree. There will be some positive signs as well, or reactions, but at this moment in time it will be negative because a large portion of your business community who would give you a professional reaction rather than an emotional reaction coming from - the majority of the positive will come as an emotional reaction, particularly from your consumers, your professional reaction will be - the only way to reduce those interests rates is to allow the money supply to increase. If the demand is there give the money otherwise the price goes up. It will immediately reflect in a very drastic drop in the currency.
POM. OK, so you increase the money supply.
BDP. And you will have an outflow of foreign money which will at the same time have a very detrimental effect on your inflation rate. But those are the things that you have to deal with, it's a calculated risk.
POM. Now let me ask you the same question, if instead of Chris Stals being the Governor, Tito Mboweni was to announce the same thing, what would be the reaction.
BDP. The same reaction. I think it will be a bit more cautious though so as not to create the impression that they're particularly harsh on Tito. They will give him a few months.
POM. You don't think it would be - I'm assuming now that when he is saying that, there would be no reaction of, say, 'See we were right, he was a political appointee, the government wanted to bring down interest rates, the first thing he did was to bring down interest rates, we were right.'
BDP. There will be that as well. Sure, you will get that reaction as well. But I think your responsible business quarters will react a bit more cautiously than they would with Chris Stals.
POM. Just a couple of last things, and this is something I know nothing about which I want to be informed about. I have been told that the civil service pension fund is fully funded and that that law was passed shortly before the De Klerk administration -
BDP. No, it's not fully funded yet, not to my knowledge. The civil service pension fund? No. We were making very good progress towards funding it.
POM. Fully funding it?
BDP. Yes, eventually fully funding it and the reason for that was eventually to get to a stage to make it a defined return, a defined benefit instead of a defined contribution. You see what I'm getting at? So the government commitment should become eventually that you basically get - you work towards getting a particular return and you must pay in line with getting that out of the pension fund, not like now, pay as you go.
POM. What I get is the opposite, that it was pay as you go.
BDP. Yes it was.
POM. And it was moved to fully funded and now there's a move on to turn it back to pay as you go. For example, the analogy would be with the American Social Security is pay as you go, I pay today so that you can retire tomorrow. But to have a system that would assume that everybody reach 65 tomorrow and would receive their full benefits, to fund in that direction would be a fully funded system.
BDP. No. It will be a disaster for SA if we go back to pay as you go.
BDP. Because we've got a hugely growing population, we've got a fast growing population and if you have a fast growing population then you have a fast growing civil service and if you have a stable society you're in danger anyway because the people get older.
POM. But if it's fast growing it wouldn't work and if you do pay as you go, if you had faster growing civil service, they're paying for a smaller number who are retiring so in fact you're expanding the base of the people. The very opposite is happening in America where because of the baby boom you have fewer people through pay as you go who have got to pay for a larger number of retirees. Whereas then if you did pay as you go here you would have a larger number at the base paying for a smaller number who are retiring.
BDP. If you have that really growing tax base and not only a population base, and we don't have a growing tax base.
POM. That comes back to creation of jobs.
BDP. To the same extent as we have a growing population base. That is the point. If you had a fully or virtually fully employed society, fine, then you can run the risks of a pay as you go system but not in our society. I don't foresee that we will be really having the tax base to support that. I think it is just fair ultimately to get to a point where you say, fine, I've got a defined contribution, I've got a defined benefit coming my way and if I want to increase my benefit I have to pay more and that goes into a fund and that fund is invested and it's actuarially assessed from time to time, that is the way. But if I'm told that, listen old fellow, we take 8%, 8%, 8% of your salary as a contribution and all of a sudden five years before you retire you get this huge promotion putting you into a massively higher category of earnings, translating into a huge pension which you never contributed towards, to the extent that you're getting out now, so you need a subsidy from somewhere. I think that's extremely dangerous. In our country, for how long will we still have population growth very rapidly outstripping the rate of employment?
POM. Just a couple more things. Were you at the first meeting at Groote Schuur?
BDP. Yes I was there.
POM. What was the atmosphere?
BDP. It was tense in the beginning and it was a little bit of ping-pong playing. There was a lot of basic goodwill as well. There were a lot of suspicions. When I walked out I saw Joe Modise standing there and I asked him how things were and he said he couldn't believe what he had seen, he couldn't believe what had happened. It was his opinion, he said, and he told me, that these Boere they're leading us into a trap here of some kind. He used the word 'Boere', and he said the opposite had happened.
POM. He went in thinking that and he came out thinking differently?
BDP. He came out thinking totally differently. And that was a very sound basis to go ahead.
POM. So, again, one of the prevalent 'wisdoms' is that when it came to negotiations that the NP and the government were supremely confident that they would be able to take the ANC to the cleaners, that they had the skill, the expertise, the knowledge, the administrative backup.
BDP. I don't think so. I think there may have been people in the NP or the government feeling that way but I don't think it was the general feeling. I think we were very much aware of the fact that the ANC had a virtually unlimited source of the best skills available in the whole world because of the fact that they had been the suppressed and they had had the support of academics and the intelligentsia of many societies for many years and now was the time to call on them. So I don't think that we were in the least, at least not as far as I'm concerned and in small cabinet circles, that we were not in the least under the impression that we're going into a walkover situation. We knew that we were going to be in a very, very tough situation.
POM. After that meeting was there any sentiment, gee these guys are tough, they're good?
BDP. Of course yes. You know Thabo Mbeki is one of the most impressive formulators of macro ideas, generators and formulators of macro ideas that you can ever wish to come across and Cyril Ramaphosa is a very skilful chess player, so we were very much aware that quite apart from their own personal skills, there were a few characters that we were not impressed with, and I think that goes for both sides, but we were aware not only of their own skills but of the huge backup that they had.
POM. Of their negotiators, this is just because I like to find out what people think about other people, but of their negotiators who impressed you the most?
BDP. Cyril. In terms of practical negotiations, Cyril. But Thabo is a much wider - he operates at a different level. Thabo is a more macro person. That's why I never thought that they should be in competition. My own personal evaluation of those two key players was that Cyril needed Thabo as much as Thabo needed Cyril because they were playing on two fields, or played the same game differently. Excuse me, I'm battling to get the idea across. Here you have Thabo -
POM. That they complimented each other, it wasn't that they were in competition with each other.
BDP. Yes. They were one-on-one, it wasn't two, it was three when you put them together because the one is much more a philosophical macro thinker and strategist, brilliant, brilliant political strategist, Thabo. And then you had this brilliant negotiator, this guy who had been moulded in the Mineworkers' negotiation situation.
POM. I know what you think about the Equity Employment Bill so we can skip that. This is an 'if' question. If you were the now Minister of Finance what, as minister, would you be advising the government to do to deal with the situation it's in that is different than what the government is now doing?
BDP. That's a very difficult question for me because I'm not a very close follower of the detail of what's going on in the country. I'm still emerging into a new life as an ordinary citizen and I have cut down rather tremendously on the extent to which I allow myself to be informed, as it were.
. I would in the present circumstances do as I did in my five years, particularly in my five years of tenure where I had the privilege to have Chris Stals as my Director General and the late Gerhard de Kock as Governor of the central bank and I was in constant communication with them every day of my life. I would have obtained their support to develop a particular strategy for this situation that we find ourselves in, looking at the socio-economic development and dramatic changes that have taken place inside SA in terms of the population, the consumers and so on. Then in order to get a global perspective I would have invited, or requested, the IMF and the World Bank to send me each at least one person with the global perspective that could have given us guidelines or could have given us input for us to develop a strategy that would put us in the best possible position to deal with the present situation where we have these exceptionally high interest rates and the inflation rate going up and with no apparent reduction in growth in the money supply and with our currency still under pressure. I think you really need a comprehensive strategy to deal with that which can be complementary to GEAR although there are certain aspects of GEAR that may need adjustment. That's what I would have done in the present situation.
. I then would have gone to government. I would not consult government, as I did, I always tried to diminish from government pressure on the central bank because, with great respect to my former colleagues, if ever on those few occasions where the debate developed into a fiscal and monetary policy and macro-economic policy debate, I think there was material for quite a few mock Nobel prizes. I don't think you can accuse cabinet ministers without experience in the Ministry of Finance of any great understanding of real macro-economic questions and I say that with great respect.
. Therefore, to sum up, I don't believe in the formulation of a strategy on the basis of a consensus of a lot of politicians with different objectives in mind. I think a strategy, a comprehensive strategy, should be developed by specialists in monetary and fiscal policies and macro-economic tendencies and real experience of what happened in comparable countries elsewhere and that government should then consider that in terms of its effects socio-politically and economically in the country. But I don't think the drive should come from a cabinet in order to address the present situation. Then you're going the wrong way.
POM. But do you think, given the level of foreign reserves, that the question of using foreign reserves is at this point moot? That if I were an international speculator and saw you throwing your foreign reserves in there I would say, we can take these guys to the cleaners, they don't have the resources, they've given their foreign reserve resources to - ?
BDP. You mean to support the currency?
BDP. I don't think it will happen again. It was done a few weeks ago and it was still the same policy as obtained in my time where the Reserve Bank was supposed to smooth out the peaks and the deep valleys, not to interfere structurally because it's a waste of money and it renders you very, very vulnerable. I don't think that will happen today again. I think Chris Stals has also committed himself to that if I understood him correctly.
POM. The only tool are interest rates, are let the currency find its own level in another market?
BDP. Yes. You see the point is the main brief of the Reserve Bank, also as enshrined in the constitution, is to protect the currency. Now how do you protect the currency? You protect the currency, you can't protect the currency from fluctuation because you can't take it out of the world economy and pin it wherever you like but I think the interpretation of that is to protect the currency against unnatural or artificial influences. But if the natural tendency is for it to go down, as is the case in SA, then for goodness sake allow it to go down. The sooner it finds its root the better one knows as to how to deal with it and that goes for both internal and external people interested in SA economically.
POM. Last. Just one question on the Employment Equity Act, and I don't know, have you read the Act?
BDP. I've just read comment on it and I've listened to a lot of businessmen talking about it.
POM. Maybe you can answer this, I've read summaries of it too and some of them say that it requires race classification.
BDP. Well I've heard people whose opinion I take seriously saying that it's just reintroducing race classification.
POM. That it is?
BDP. Yes, because if you come down to quotas and you have to justify then I must ask our friend here whether he's white, black or indifferent. I must do it. How can I then transform my work force to be in line with government thinking?
POM. Representative of the population.
BDP. I've been involved very closely with a company the last number of years and on many occasions against the background of a contractual tender situation it was necessary for us to say what are we doing about affirmative action. Then it's difficult for us because we decided not to keep, it's a company with sixty odd people in service, we don't keep the records on a racial basis. Now if I look at the names I can't respond to that question to satisfy the issue of the tender that I'm employing people purposely, purposely on the basis of giving preference to people from disadvantaged communities, if I don't keep the records that way. So we had to start keeping the records that way. But what we're doing is on the shop floor anybody who has the potential to be trained we do that and we find a lot of potential among the people who were previously disadvantaged. But we're back to race classification as far as that is concerned. You are compelled, if you want to respond to a question, "What are you doing about affirmative action?" You are compelled to keep your records on the basis of race classification.
POM. So if you have a company with sixty people there is a motivation of sorts to say let's retrench eleven and that the costs of not having to keep all this documentation, then we're under fifty and we don't have to set up an elaborate administrative system, report and count and report and count, so the loss we take on the one hand will be outweighed by the gain on the other?
BDP. I'm not so sure about that and our company is not in that position. We're not going to do it. But I am told that it is a serious consideration not to exceed that, to steer away from that Act as far as possible. But as I say to you, regardless of whether you're more than a few dozen or whatever, the moods will be in the future, you do have to score brownie points on affirmative action and on economic empowerment as far as your share-holding is concerned in order to qualify for a tender. I was told by the chairman of a major state controlled corporation, "Listen, unless you have an acceptable record of already achieved affirmative action you will not even be considered for a tender involving state or quasi-state money." I was told that, personally, already four years ago. So whether you're more than forty or less than forty you do have to keep records on a racial basis.
POM. Last question.
BDP. Is that the one?
POM. This is the one. And it was Patricia who asked you when we first met you and it was on AIDS. She asked you what provision was made, or was any provision made in the budget for AIDS and you kind of looked at her, then looked at your watch and kind of shot out the door as though, "My God, is that all she has to talk about!" Figures coming out on AIDS in SA are truly frightening, over three million, the fastest growing number of HIV infections in the world, the second largest number of HIV infected in the world. According to one British expert who was speaking over the weekend at some place one can expect a cut in life expectancy from 60 to 40 by the year 2010 unless this is brought under drastic control. If that were to happen, if control were not established and in fact average life expectancy fell to 40, it would destroy the society given again that AIDS is more prevalent in the more educated classes than it is in the less.
BDP. I don't fully yet understand that. I may have to be forced to accept it. I don't fully understand it because in the rural areas in SA, and I'm not an expert obviously, in the rural areas particularly, or in the areas where you find a lot of infected people they certainly do not count among the more educated.
POM. I suppose the proportion would be taken that if you took of those who were educated what percentage have AIDS, relative, not in terms of absolute numbers but in terms of proportions.
BDP. Now I understand what you mean. In other words if you made two classifications higher and lower educated, then the higher education will have a higher percentage than the lower?
POM. Yes. So if you had 100 people in your higher educated class and 1000 people in your lower and then you might have 20% in your higher and you might have 10% in your lower but your 10% of 1000 would be greater than 20% of 100.
BDP. I understand.
POM. When does it become, even though it's not on the popular, it doesn't appear on any opinion poll as being a question of national, of concern to people as jobs, houses, crime, one, two, three, when does the government start pouring in the resources that are necessary? Does it have to pour in the resources that are necessary or is it just easier to toss - ?
BDP. You're asking me a very difficult question in terms of a global strategy because the question is, looking purely at the spending of money firstly, it's going to cost you more to deal with the affected people once they get really ill than what you can reasonably spend to try and prevent it. What I'm trying to say is per capita, per individual ultimately affected, you're going to spend money on him. You might as well decide whether if you spend now, it's like going on a toll road or the alternative route, if you spend now do you have a reasonable chance of avoiding the ultimate expenditure as far as a particular individual is concerned? And that question I cannot answer. All I can say is that I know for sure that you're going to spend a lot of money on him ultimately by exposure to ...
POM. But if you don't bring the level down drastically and you have this catastrophe of the average life expectancy falling to 40 years?
BDP. Ultimately in the economy it's -
POM. The economy's gone.
BDP. It can be disastrous, completely disastrous, particularly in a country like SA where your percentage of developed people who can really make an exceptional, an adequate contribution to the economy is still relatively small compared to the rest of the population. I don't know, my problem was with all this Sarafina nonsense, how do you try to get those numbers down? What do you do? Education? I don't know. How much must you pour in to education and in what form of education? That is the question. You can go completely overboard and then it becomes uneconomical in the end. Then rather deal with the problem ultimately purely from an expenditure per individual point of view but taking into account the economic disaster if you lose these people in a country then it may compel you now to have to spend more but you don't have it anyway. It's a catch-22 situation. I didn't have the answer then and I have even less of an answer today. All I know is that it is here and has it in any developing society ever been adequately addressed? I don't know. In the USA I'm told that in the early days sometimes they even had to cancel concerts but now it's OK.
POM. Well it's very different. You see in the USA it was a disease of homosexuals and drug users. In other words it wasn't heterosexually transmitted and the degree of heterosexual transmission was something like 2% and when it didn't become an issue of the middle classes of normal society it dropped out of the public agenda. Secondly, the homosexual community is a very, very well organised community in itself, politically and socially, so it was able to police itself and it was that policing that brought the level down dramatically.
BDP. Self control.
POM. Yes, in the homosexual community. Whereas in the drug community there was no anything, so they were the dregs anyway so it's increased in that segment and continues to increase but they're the poor and the drug users and drug pushers and who cares about them. They have no political constituency and it's stabilised.
BDP. They're not making a contribution anyway.
POM. They're lost and not considered. In fact it's now reversed itself in the gay community where they have been so successful in eradicating it that young gays are now going back to the practices which their older peers had strictly forbade. You know all this talk about AIDS, let's go back to the exciting old days. They've never experienced it, therefore -
BDP. You know in developing and relatively uneducated societies and particularly with the ghosts walking in Africa, you know that it was designed to eradicate African people. There was this ridiculous story once that it was genetic engineering that caused it and that it was planted here in Africa to reduce the numbers and all that kind of nonsense. So in other words it's something that comes from - it may have the image that it came from the developed world, from the western world, that it originated there or whatever and that here in Africa we look at it differently. I heard the other day that they believe in certain of the tribes elsewhere, maybe not here, that if they have sex with a young virgin then they would be cured. And in societies where you get that kind of belief how do you penetrate to their minds what should be done? And since it's got this image of coming from outside if you punt the use of condoms then there is a suspicion that all they really want to do is they want to stop us making babies. Because in Africa if you stop AIDS with condoms you stop babies to the same measure, except in married couples where it's non-promiscuous. So it carries a lot of social baggage and perceptional baggage which will make it extremely difficult in Africa. So therefore a government, how does it invest? How much does it invest?
POM. Do your friends ever talk about it?
X. I talk about it.
POM. To your friends? Do they talk about it to you?
X. Yes they do. It's exactly what Mr du Plessis just said that people believe that if you use condoms the government is telling you to minimise the black nation.
BDP. And the irony is that by not using the condoms they're achieving exactly what they're suspecting the government of trying to do.
POM. So on that very optimistic note -
BDP. It was nice to see you again.
POM. You too. I always like to talk to you.