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 It is the product of almost two decades of research and includes analyses, chronologies, historical documents, and interviews from the apartheid and post-apartheid eras.
11 Jul 2001: Keys, Derek
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POM. This is probably the last of eleven or twelve interviews we've conducted on the state of the economy in SA. Of course the first question I would come back to, the obvious one, the AIDS epidemic here is no longer an epidemic, it's gone past the proportions of being an epidemic. What impact, in your estimation, do you think it's going to have on (a) the short term and (b) the long term, the impact on the economy?
DK. Obviously it's going to have a negative effect. Perhaps we should divide the economy into the formal and the informal from this point of view. The main problem in the formal economy is going to be coping with the costs of the diseased and dying. It looks as though the larger corporate world is going to shoulder those costs which of course reduces the corporate earnings and so on which is one of your effects on the gross domestic product. Just how large those costs are going to be isn't clear. It's not going to be of catastrophic proportions for the simple reason that most of the large corporates have over the years shaped their employment policies in a way which meant that they've got a lower percentage, in some cases a much lower percentage of AIDS sufferers from the population at large. So the point if you say there are 1.5 million employees in large corporates, you certainly aren't dealing with 20%. You might only be dealing with something like 5%. In other words it's a selected, in a way, group.
. In the informal sector and the small company, small enterprise sector, you will get population percentages and the effects there will be serious.
POM. What about on the level of, say, skilled workers, does it have an impact?
DK. Yes certainly but there are varying percentages for different occupational groups. Skilled workers tend to have much a smaller percentage, except for truck drivers. Truck drivers are the male spreaders and victims simultaneously. It varies so much it's hard to make general statements.
POM. When you see this whole process of black empowerment, what impact do you see it having on that or do you see AIDS as being a disease, or whatever you want to call it, that can be confined to the poorer sections of the population or is it inevitable at this point for it to spread into those who will become part of the skilled population?
DK. I think it will spread a bit but if we look at the under twenties what you're dealing with there is people who don't figure in the gross domestic product. Of course you have the costs of treating them and so on but they aren't contributors. You're just wiping out a percentage of what ought to be the natural growth or if birth rates have dropped as much as some people think you're actually precipitating population decline.
POM. There are some estimates that the population is going to decline by the year 2011.
DK. Because of AIDS you mean?
POM. Because of AIDS.
DK. Well you know you have this flattening out as people are urbanised and so on in the birth rate anyway. The US census has worldwide by country population projections, you get it on the Internet. See what they do for SA. There was a levelling off coming anyway. AIDS will accelerate, that then possibly will result in a decline but it will be a decline of people who never entered the contribution in statistical terms.
POM. Then if you take the other end, if you don't think it will have a significant impact on the development of the requisite skill base?
DK. We will be a smaller country in population terms.
POM. But you're also cutting off, if you look at the informal sector, the poorer sector where perhaps the disease is more prevalent, you are in fact eliminating a lot of your unemployed people?
DK. Well and employed I suppose.
POM. And employed within the informal sector.
DK. A lot of little entrepreneurs.
POM. Entrepreneurs. But people are just going to die so in that sense it could be actually a net gain.
DK. I would hate to think of it in those terms.
POM. I know but it could be.
DK. Remember so far we're talking about diminishing the contribution. Now we have the costs.
POM. Cost on government?
DK. If you erected a treatment centre for people with AIDS, everything else remaining the same, you'd be raising the GDP. You know how the GDP is calculated? It's calculated by adding all the salaries that are paid, so all the salaries of those doctors and nurses. It's a false figure isn't it?
POM. But are you moving people sideways?
DK. People who are dying. One wishes that they'd never contracted the disease but they've contracted the disease. Now you're dealing with it. What I'm saying is that the costs of dealing with it to a fair extent are going to enter the GDP in a positive way. So to the extent that we have to buy medicines from abroad, that's just a minus which has upped the imports, so predicting what the effects will be on GDP is very difficult. You could take two standard GDPs, two GDPs are the same, one has 10% of the GDP attributable to treating AIDS victims, the other one has no percentage. They look the same and in fact the first is infinitely preferable to the second. All I am saying is predicting the effect on GDP is very difficult.
POM. One of the things we've talked about over and over and over was unemployment, the unemployment situation is bad if not worse now than it was ten years ago.
DK. I don't think the figures bear that out. It's not improved much but it's not worse.
POM. It's not? It's just hanging for the worse. You said a figure of 1%, I think ten years ago, but there's been no what one could call significant improvement in the level of employment.
DK. We think the informal sector may have grown a bit. That's what the households' census seemed to show. But the unmeasurable is unmeasurable.
POM. The second one we talked about was foreign investment. It seems that this country is simply unable to attract foreign investment.
DK. It's not a location of choice. Foreign investment comes here to the extent that existing global brands have to be services worldwide, etc., etc., etc. But someone who has a free choice as to where to invest in the world is unlikely to choose SA.
POM. Because?
DK. Thousands of reasons. We are the country that is furthest removed geographically from any major source of spending power. Australia has South East Asia. South America has each other and the United States. We have a spending power desert to the north of us until you get to the Mediterranean fringe, Nigeria being an exception.
POM. That's two reasons. Three?
DK. The perception of black government in general in the world amongst investors, whether justified or not. Competition from Ireland.
POM. I was there last week. I no longer recognise the country I was born in.
DK. That's right, you're as good as turning the regulations to your own advantage, as the Italians and the Spanish.
POM. Our GDP per capita is now higher than Germany.
DK. There you are, and you've got other human attractions as well.
POM. And we object to the because having squeezed the EU for 20 years we decided that
DK. And it looks as though they're going to ignore you.
POM. What about, again, an investor who was thinking of setting up a plant here, a manufacturing plant, to what degree do you think AIDS would play in the decision making process since now the thinking in the US is that SA as the AIDS capital of the world has been hammered into the consciousness. If you were an investor, the risk to your investment, I put up a plant, I employ people, I train people, my health costs immediately rise, my costs of doing business are really getting higher because I can assume that one in five of my employees, it could be one in three, are going to be dead within X number of years.
DK. I think it's a question of how seriously the person is looking at the prospect.
POM. At the prospect of?
DK. Of investing here. At the sort of media level, and that general prejudice level, all this may be valid. But in this merger of Billiton and BHP, BHP had effectively no investments in Africa. That merger was accomplished on a valuation basis that amounts to a massive vote of confidence in South African industry, minerals. They put their money where their mouth was.
POM. It was a massive vote of confidence in an extraordinarily successful large corporation.
DK. Which has successfully coped with all the problems which are here.
POM. How much would you say that what would you call, if you had a list of the large 'corporations'?
DK. What would I call them?
POM. You said Anglo.
DK. Bring me the Stock Exchange Handbook.
POM. How much would they contribute to GDP?
DK. I don't know. On the 20 principle I suppose the 20 largest businesses contributed 80%, even government
POM. Would this merger result in creation of more jobs?
DK. Well it's doubling the Moselle. It's one of its first decisions.
POM. Would you see the path to growth being through mergers and acquisitions between large corporations here as distinct from new investment coming in?
DK. It would be one of the avenues. Doubling the Moselle, there is new investment coming in. It's not sleight of hand, it's new investment coming in.
POM. Since 1994 has foreign investment here increased to a significant degree?
DK. Yes, more or less negligible level.
POM. Has it increased to a degree where it can in the foreseeable future probably maintain or generate a 3% rate of growth, or a 4% rate of growth, or a 5% rate of growth?
DK. Three is more or less where we will be able to go, what we're capable of with occasional deviations downwards.
POM. So if you're taking a 3% rate of growth, and there have been some figures published I know on what a certain level of AIDS detracts from rates of growth, you might be talking about 2.8%. As I say let's just leave it at 3%. A 3% rate of growth leaves you where in terms of coping with, again, unemployment?
DK. I don't think it has much effect on unemployment, 3% growth. We've grown at around that figure for a few years now without any significant change.
POM. How about government? An increasing proportion of jobs? It's kind of a stupid question but when you look at the budget for the Department of Health there is an increasing proportion of the budget allocated to the Department of Health to cope with AIDS. It's diminished in its capacity to pour money into there's an infrastructure whether into mechanisms that contribute to the redistribution of income.
DK. That's a decision for government to take. I don't know it depends upon what their attitude to this is. The need for increasing health expenditure. They may just not increase the health expenditure. It's already high. I don't know. So far they've tried to keep the tax level around 25% of GDP and they seem to be quite sensitive to that figure. While doing so they've managed to reduce the deficit to negligible proportions.
POM. You are the last Thatcherites.
DK. Yes, yes, OK. We're slowly swallowers of the Washington Consensus.
POM. Still?
DK. Yes, oh yes. It seems to be the fashion. So if they insist on doing that, that increases in health expenditure have to come at the cost of expenditure in other directions, education, etc. At that point it becomes really difficult.
POM. Even as you're investing in education you're investing in probably 20% of those you're educating are going to die anyway, including your teachers and everything else. The return on investment even in human capital is reduced. Nodding your head doesn't help me on the tape recorder.
DK. But you're making statements that are unarguable.
POM. Putting aside Mbeki's initial stand on AIDS, given the fact that he didn't bother to turn up at the funeral or at the wake or whatever of Nkosi Johnson, that he did not bother to attend the latest summit on AIDS among African countries, do you think he's doing, like other symbolic things he hasn't done, he didn't send a minister to Nkosi Johnson who was a worldwide figure. His death was covered extensively in the US.
DK. It was a media event.
POM. Is he doing this country a serious disservice?
DK. What do you want me to say?
POM. I want your personal opinion.
DK. Do you mean would this country be better off without Mbeki as president? Is that what the question comes down to? Because I don't think that's the case. I think Mbeki's the best president we could have.
POM. OK, what has he done to improve the quality of life or the human indices of development during his presidency? Can you point to any significant achievements?
DK. Can you point to any significant achievement of George W Bush?
POM. His golf swing has got a lot better.
DK. This is a ridiculous conversation at this point. Take any head of state and say, "What has he done? What fantastic initiative has he done that's improved the lot of his people?" I can't think of any examples at the moment.
POM. He controls his government -
DK. That's right and he's done that very well.
POM. - to an extraordinarily tight extent.
DK. He's done that well and it was necessary.
POM. So how would you rate his performance on that given that the impression I get coming back is that the question of delivery of services really hasn't improved that much after two years. The housing situation seems to be developing an anger that wasn't there two or three years ago, that more people are becoming increasingly disillusioned and disappointed with what was supposed to be the promise of the 'miracle'.
DK. Can we go back and quote Keys from 1993? "The blacks don't realise how little is going to change, the whites don't realise how much is going to change."
POM. What has changed for whites?
DK. Well employment prospects, the value of the rand, crime, etc., etc.
POM. So the white sector is hurting.
DK. Sure.
POM. And the black sector is not that much better off except for the emergence of
DK. You only have to do the sums to realise that that had to be the case.
POM. A black elite, an emerging black elite that would benefit.
DK. And you've got a growing black middle class, that's also a benefit.
POM. I thought it would lead to the observation that because educated blacks were moving into the public sector, a la Afrikaners in 1948, that Afrikaners found themselves in a situation that if they were to survive the only thing open to them was to become entrepreneurial and start going into business so you had a movement of the mentality, mindset of Afrikaners moving from government, dismissing it as an option and looking at business and enterprise as their way forward and they're proving very successful at doing that. Would you agree?
DK. Afrikaners are a very, what shall we say, resilient people, much better than English-speaking Wasps.
POM. Do you think that's taking place?
DK. Yes. I think we've covered this ground before but the historically Afrikaans universities are all doing extremely well. The black universities are losing students at an alarming rate. The English-speaking universities are struggling to stay on an even keel and losing students. The Afrikaners are resourceful.
POM. Just looking at the question of education which was in a mess, a huge mess in 1994, has that mess been cleaned up?
DK. I think the new minister, we lost five years because they had the wrong minister, the new minister is doing what he can. I think at the moment he's breaking his head against the Teachers' Union which is, I think, in an extremely poor way in terms of coping with the educational challenges.
POM. Again going back to the informal sector, the townships, the schools in the townships, the quality of the teachers, the classrooms, the books, the general ambience, attendance, have any of these things changed to a significant degree?
DK. I don't know. All I know is there are a lot of black schoolchildren in what were previously white schools in Johannesburg. We seem to be paying for half of them and they're having the time of their lives and they're getting a decent education, that's for sure.
POM. Now would these be the children of domestic workers?
DK. In our case they are the children of the driver who drove sommer when I was in government. They are the children of our Gencor driver, the grandchild of our housekeeper. They're getting a first class education.
POM. Is it a special coterie of blacks who were in some way connected to whites in the apartheid era?
DK. Largely.
POM. You don't have large-scale bussing of black kids from Soweto into white schools in Johannesburg?
DK. You don't have large-scale bussing. What you have is like taxi movement. That's how the 500 black children get there every morning.
POM. That would be the total amount?
DK. No, no, this is the school one school. They get there every morning and they go home every evening but they go in ones and twos and so on. In the case of our housekeeper they come together in the morning and when our housekeeper finishes at about 2.30 she goes down to the school, collects the child and off they go back home again in a taxi. That happens over and over and over.
POM. I had a small question which I've lost. I have been struck since I've been back, and I've only been back a week, but even given the four or five months I've been away, every paper every day is riven with stories of corruption at every level of society. It just doesn't stop whether it's Rectors at colleges using funds to buy cars, taking students' loans, it's everywhere. It seems to be pervasive, it seems to have become part of the culture of SA among the black elite, among the ANC. Would you agree?
DK. It's all coming out. Is that bad?
POM. Is that bad? Is that a bad answer or is that bad?
DK. No, no, is it bad that it's all coming out, that the buggers have fallen in?
PAT. Transparency.
DK. Do you have corruption in the US?
POM. But it doesn't fill the papers.
DK. Exactly, exactly.
POM. So you're saying that ?
DK. Rejoice in the free press, old boy.
POM. So if I had asked you, do you think corruption here -
DK. Is endemic?
POM. - is becoming increasingly a problem rather than the other way round?
DK. I don't know that I can detect a trend.
POM. Would you say it's very high? Would you say it's high enough to deter, again, foreign investors, making them think twice?
DK. I don't think foreign investors are much influenced by that, deciding where to open a mine or where to put a factory. They are not particularly influenced by whether there's a lot of corruption or not.
POM. Is crime still a factor in - ?
DK. You've driven through the northern suburbs? You've seen the streets closed off? You see them behind nine foot walls with the electric fences. Action and reaction. I think the victims by now are protecting themselves much better.
POM. Or do you think it's Tshwete putting a moratorium on the publication of crime statistics?
DK. They've started publishing them all again. I don't know how much more reliable they are than the unreliable ones that he decided not to publish.
POM. Your prognosis? Whither South Africa?
DK. My prognosis is that we remain the sort of economy that we were before, and even before 1948, largely a commodity producer, a fair amount of manufacturing industry directed towards the local market, growing trade with Africa, realignment of industries, fewer textile companies, etc., bigger automobile industry based on integration into the worldwide set-up, pretty stable government, unlikely to foresee a change, certainly in my lifetime, good fiscal and monetary management, slowly improving situation on the human values, things like education, housing and health.
POM. So the dream of a country that was going to generate a 5% growth rate?
DK. It's not on.
POM. It was just a pipe dream, it's not going to happen and those who keep promulgating that are really deceiving the people?
DK. They just don't understand the situation.
POM. But all in all, to go back to the first point, if you were a foreign investor and making a hard decision and you looked at I'm going to place $100 million in building a plant to manufacture X, SA would enter into a list of countries that you immediately consider?
DK. If it was designed for sale in Africa, otherwise not.
POM. That's about it. That's it. Some people say that things now overall have not really changed that much since the apartheid days.
DK. A lot of things are better.
POM. The free press?
DK. Parliament is better. Parliament is actually fun if you get onto those committees and they're gaining in confidence and generating a lot of good stuff. When I was a minister I was never called to account by a parliamentary committee that I can recall. I think I made one appearance and I gave them my standard. Then I left. That was it. Nowadays, Manuel is in there trying to explain why this, why that. Good. You know that parliament has been renamed 'the loyal opposition'. It's working.
POM. OK, thank you very much.
DK. A great pleasure. Sorry it was the last time.
PAT. It's never the last.
POM. Sorry, we were just talking about Cyril's I've a thing going with Cyril. His black empowerment report is just a report?
DK. I think so.
POM. That will sit on a shelf.
DK. I think so.