This resource is hosted by the Nelson Mandela Centre of Memory, 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 It is the product of almost two decades of research and includes analyses, chronologies, historical documents, and interviews from the apartheid and post-apartheid eras.
22 Aug 1989: Terreblanche, Sampie
POM I'm talking to Dr. Sampie Terreblanche on the 22 of August. Doctor, we've heard a lot of different opinions from people about the state of the economy; the growth in white unemployment, the astronomical growth in black unemployment, the fact that the infrastructure is unable to be replaced because of the lack of capital imports and that sanctions are perhaps doing more damage to the economy in terms of the long run than the short run. Could you just review the economic situation for us?
ST Yes, to do it I think a good way to start is say the period of 1960 to 1973 was quite a high growth period. We experienced what we called our roaring sixties in comparison with the roaring twenties. And from 1960 to 1973 the growth rate was about 5.6% annually and the real per capita growth was almost 3%, that was an excellent performance for a developing country like South Africa with a very high population growth rate, especially in the black community. But from 1974, the last fifteen years, we are now experiencing relative economic stagnation and it can't be regarded as a cycle phenomena it is very much of a structural nature. Over the last fifteen years the growth rate has been less than 2%, 1.8% annually. And the real per capita income has declined over the whole period with at least fifteen% or almost 1% annually. Now this downturn coincides with what happened in the western world with the oil shock and the lower growth rate during the seventies, early eighties, the growth rate of sixteen most important industrial countries declined quite sharply but not as sharply as South Africa. While the real per capita growth was before about 4% it dropped to less than 2%. So the international environment was less conducive to growth in the seventies and eighties. That can be a factor.
While the gold price and all prices, etc., increased sharply, one asks what might be the reason for this? Now the government is inclined to say that the price increase, the price of gold did not keep pace. That's not true. For the whole period from 1973 until today the price of gold, the South African price of gold, has increased by 1400%. And the index of imports has increased by about 880%. So we are actually on the winning side as far as this is concerned. But the problem is that the more important increases of price of gold took place in the seventies and not in the eighties.
Now another factor that has influenced South Africa's growth rate negatively is in the beginning of the eighties severe droughts hit the summer rainfall areas and they were poor years. But all these factors are not enough to declare this very poor performance over fifteen years. And without doubt the most important reason for this poor economic performance is sanctions, disinvestments, short term debt problems, the growing international isolation. Before I expand on that let me first say, you mentioned it, what happened with unemployment. This shows poor growth performance and a decline in the per capital income affected the lower half of the blacks more seriously than the rest, especially in the seventies. This so-called creeping poverty was shifted on the lower half of the blacks. In about 1970, you see it is not a hard figure, but about 1970 one and a half million of those that wanted work couldn't get work in the formal sector. They were mainly into subsistent farming in the so-called homelands. At present it's estimated at five million blacks, five million from out of a labour force of thirteen million can't find jobs in the formal sector. Many of them are now active in the so-called informal sector. But that five million belong to households counting up to twelve to fifteen million and that's the lower part of the blacks and they are living in very serious poverty.
POM When you talk about the decline in the standard of living that set in the mid or early seventies, this would have, of course, been unequally distributed. Did the white community begin to experience a decline in its standard of living at that time or was the burden of the declining standard of living shifted onto the black populations?
ST Given the economic and political structures, to talk in general terms, it was during the seventies still possible to shift almost all the creeping poverty on, as I said, the lower half of the blacks especially because the upper half of the blacks made quite good headway in the seventies. When the price of oil and the price of gold increased the wages on the mines increased sharply and right through the economy and there was lots of talk about closing the wage gap. So one of the problems is that black wages of those that had employment were perhaps increased too sharply. And this is also a factor in this growing underemployment and unemployment. But during the seventies many of the whites were still protected from this low growth rate but because of the droughts and the ongoing creeping poverty during the eighties the creeping poverty started to have its effect on whites without a doubt.
POM Do whites associate this with just the inability of the economy to grow or do they associate it more closely with sanctions, disinvestment and the restrictions put on South Africa internationally?
ST Being that I am now politically involved I can perhaps answer that in a way as a politician. The Conservative Party (CP) are telling their supporters the reason for this creeping poverty in their ranks is because the National Party government is doing too much for the blacks. The National Party explain it in terms of the total onslaught; they said it is the outside world in its vendetta against South Africa having these punitive measures and they don't understand the complexities of the situation, that they, the government, can't be blamed, that the blame must be put squarely on the outside world for trying to harm South Africa in a very unreasonable and unjust way. The Democratic Party on the other hand said, well the reason for this creeping poverty is the growing international isolation, sanctions, disinvestments, short term debt problems and it is because the rest of the world want to send a message to the government. We don't agree with it as the Democratic Party but we realise that because the National Party is not willing to listen to the rest of the world, the world has no other choice but to take measures to make them feel. But unfortunately the negative effect of these punitive measures is not only harming the government but innocent black people.
POM As an economist would you say that sanctions and disinvestment have had a specific impact on both blacks and on whites?
ST Yes, without a doubt. Sanctions and disinvestment and short term debt problems, the whole lack of confidence in South Africa, the legitimacy crisis, I want to take it all together, are the main reason for this decline in the South African economy. And the most important one perhaps we can talk about is the short term debt problems. In that sense sanctions, broadly defined, are working in the sense that it harmed the South African economy. It has not worked to that extent that it has changed mainly the government's point of view. It may have brought them to the point that they are more inclined to use reform rhetoric. De Klerk talked about drastic changes to create a just system but he is not telling what he means with those words.
Now, perhaps I should say something about the short term debt problem. The situation really became serious after 15 August 1985 when President Botha made his renowned Rubicon speech and this defiant attitude against the rest of the world. This is also part and parcel of it, that since the government must be blamed, a country now positioned can't be as hostile and defiant against the rest of the world. But Botha even last year told his man in Washington, in New York, to tell the world do your damndest. But immediately after the Rubicon speech the Chase Manhattan Bank withdrew short term debt facilities and luckily for South Africa the short term debt standstill agreement was reached but still South Africa had to pay three to four billion annually since 1985. Twenty seven billion rand flowed out of the country, more or less half the repayment of short term debt, the other flight money. But to make it possible to have the foreign exchange to repay that foreign debt and to make possible for the flight money the government has deliberately to cool down the economy to a growth rate of at least less than two and a half percent, in effect it boils down to less than two percent. If the growth rate should be allowed to grow, let the economy be allowed to grow at 4.5% which is not impossible, then imports will soar and we will run into terrible balance of payment problems and not be in a position to ...
POM Sort of a catch-22 effect.
ST A catch-22.
POM Has there been any propensity for the domestic economy to replace imports, like import substitution, where the domestic economy begins to manufacture articles that no longer can be imported because of the trade sanctions? Or has there been a tendency to develop new export markets to replace those that are prohibited through sanctions?
ST I understand that the South African economy, the exporters, are doing quite well even allowed the value of the rand and I am told that alternative markets can be found, big secrecy, etc. Exporters are doing quite well. But the problem is the very high capital intensity of the South African economy that has developed over the sixties, seventies, early eighties. That was part and parcel of the Verwoerdian approach, to make the economy less dependent on black labour. It is highly ironical and our economy is so capital intensive. As soon as the growth rate goes up, soars above three percent, there's an unbelievable demand for imported capital goods you see. And that is the reason that the economy has to be cooled down to create more or less artificially a surplus on the balance of payments, to be in a position to repay according to our commitments under this stance, debt standstill agreement. Now we are estimating, by my colleagues in the department, that over the next five years another 20 billion will still flow out of the country.
POM That's the right capital or ...?
ST Another 12 billion still under the stance, under the short term debt agreement, the other still flat money. Now there was, perhaps you can try to get a copy of that, I haven't been able to get a copy, only newspaper reports. On the 8th of May the previous Governor of the Reserve Bank, who died about two weeks ago, made a remarkable speech in Cape Town. Now given this conservative turf, the kind of person he always had been, and there you see South Africa, given our state of development, given the high population growth rate, poverty, etc., ought to be an importer of capital. But since over the last four years, four and half years, we have been a heavy exporter of capital and we cannot afford it. Then he said only if the government can make sufficient progress with political and constitutional reform can we hope that the international world's attitude to South Africa will change hopefully sufficiently and conditions can be created for a inflow of capital again. By saying this, Dr. de Kock actually acknowledged that given that the National Party has dragged their feet on a reform and by not doing anything they've actually lost control of South Africa's destiny. Only if we can move forward and get on with reform that will satisfy the international community, only then and then alone the possibility will arise of an inflow of capital.
POM What about the costs of the apartheid structures themselves? I mean there is enormous duplication in services.
ST Yes, Now this, I've made several speeches on this and I normally rank five factors that are responsible for this decline in the economy, factors that are under the control of the government because the government spokesmen are saying the factors that negatively influence the economy are not within their control. It's acts of God, droughts and storms and the price of gold, etc. Now firstly, the sanctions, growing international isolation, this defiant attitude against the rest of the world, the internal stability, the ongoing township unrest that started in 1984, very negatively influenced the economy. Now again the government said that the extra-parliamentary groups must be blamed but it is not that easy. The government is discriminating against them. The blacks were not included in the tricameral parliament, etc., etc. The fourth factor in a way, according to my story, I'm really a politician now, I'm thinking on those terms ...
POM That means you can be more honest than if you are an economist.
ST - is this overgrown apartheid bureaucracy. I really think it has more or less got out of hand. And the Minister of Finance to a large extent has lost control of government spending, this overspending year after year. But it is more than the overgrown apartheid bureaucracy with all its duplications, it also linked up with the style of government of PW Botha. In an attempt to consolidate his position he built a quite extensive, comprehensive network of patronage co-opting a little elite in all the different population groups in an attempt to stabilise the situation, and it didn't work. You see if one compares the core of the bureaucratic establishment in 1989 with what it was in Verwoerd's time its very different. In Verwoerd's time it was a pure Afrikaner establishment. Now it has something of every population group in it. It's cost a hell of a lot of money. Now the fifth factor that links up with the growing international isolation in the Rubicon speech is the balance of payment problems. I think it is necessary to concentrate specially on it. The balance of payment problems also lines up, as I already said, with this very high capital intensity of our economy that has developed over the sixties and seventies. It was deliberately built in this way so it's a rather sad picture.
POM What about the system of taxation and redistribution of income? I think one or two people mentioned to us, whether correctly or incorrectly, that the white community pays proportionately a far higher share of its income in taxes than the black community, so what you have seen in one respect is that whatever expenditures have taken place in the black community are really being subsidised by the whites paying taxes.
ST I can explain this to you. This was in 1975. At that stage the whites was paying 77% of the taxes, the coloureds and Indians 7% and the blacks 16%. Now if one look at it this way, this is government expenditure on welfare services. 56% was spent on whites. Therefore less than what they pay in taxes. 16% on coloured and Indians and 28% on blacks. Now these were often used in the seventies to say that South Africa is doing better in development aid than the western world, that the whites are now part of the first world and we are doing more for the third world in our midst. But if I look at it this way, as far as the population is concerned again, the whites were only 17% but they are receiving 56% of all welfare spending. And the coloureds and Indians are in a reasonable middle position but the blacks are 71% and they are only receiving 28%. Now this is an indication of discrimination. If one takes a one nation perspective then one sees what discrimination is. Now as far as tax is concerned, well the tax rates are the same. It's an indication of the very unequal distribution of income. Now where my colleagues have made a guesstimate for presently more or less, that unfortunately we do not have the taxes, but that doesn't matter, at this stage about 45% is still spent on welfare services for whites, 20% for coloureds or Indians and 35% on blacks.
POM That is today?
ST More or less today, yes. But the white population is now only 15%, 10% and 75%. Now in terms of this guesstimate, as far as welfare services, broadly defined education, housing, pension, health services, etc., at least six times in per capita terms, six times more is spent on the welfare services of whites than blacks. Now this is also our dilemma. If there is going to be, and that's now a very serious problem also from the democratic point of view, if there is going to be a transition towards a non-racial democracy, well the new partners in the government when blacks get parliamentarian bargaining power, they will try to close this gap. And the South African economy does not have the tax capacity to make it possible.
POM Already the personal income tax rate must be among one of the highest in the industrial world.
ST Oh the highest, yes. If one can dismantle parts of the apartheid bureaucracy and get rid of all the duplication and spend less on defence, etc., amounts will be available but that will be marginal. See now, this is our problem in a transition towards a non-racial democracy and in the meantime the tax base is getting weaker because of this decline in the economy. So for me, it is important. Although I am very much in favour of a transition towards a non-racial democracy, I'm hoping that there will be a reasonably long transitional period to rebuild the economy, to rebuild the economy with high growth rates to create maximum job opportunities, to broaden the tax base etc., etc.
POM I was going to ask you in connection with that if, say, by some miracle tomorrow morning there was a majority rule and a new government, would majority rule really make all that much difference in the lives on the average black person? Would it do anything to get rid of the shanty towns? Will there still be townships that would exist really separately from urban areas?
ST No. If it happens tomorrow it can't be dramatic given the capacity of the economy. But if we can start tomorrow I would like to frame it differently. If we can start tomorrow what I will call the transitional period and also as part and parcel of this complete new government etc., not necessarily a non-racial government immediately but a government with legitimacy that can restore internal stability, lift the state of emergency etc, make a declaration of intent about apartheid, and a government that can normalise relations with the rest of the world and we can again get an inflow of capital, hopefully a Marshall Aid plan, then within ten years it can make a hell of a difference. But we need time. And we very much need a kind of rebuilding period, a transformation period, you can use whatever word you like, that in which the present system of white dominance can be phased out and black representation phased in towards what I would like to call a democratic government; not a black majority government, a majority government and in all probabilities the majority of that democratic government will be black but hopefully we will be part of it. But now I think that it is important for us, and it will not be easy for us, to convince the world about the need for a reasonable transitional period towards a truly genuine democratic government.
POM In a sense you are saying that the ending of apartheid can only really be meaningful if it is accompanied by a restructure of the economy?
ST Yes. So much the more given that we have had this decline in the economy over the last fifteen years. If I can use Gorbachev terms in this connection, we need a perestroika and we need democratic action. They may have pronounced it. The question is how to synchronise our perestroika and our democratisation because there is the real danger that if we are making too quick an advance with democratisation, put too much bargaining power in the hand of blacks that have been poor, deprived, discriminated against, they can easily misuse that power, that political power, parliamentarian power. The possibility is there that it can generate quite a large demand for spending, for uplifting that can overstrain the economy.
POM What role do you think the growth of black trade unions is playing in the economy?
ST Yes you see, black trade unions are quite important. 1973 was quite an important year in South Africa's history, the real turning away from the Verwoerdian apartheid towards this new period started in 1973 with illegal black strikes in Durban. In 1979 new legislation was put on the law book and the so-called black insiders, those with trade union rights now have quite remarkable bargaining power. I think the government looking back, now realise that they have given them too much bargaining power. They have done that with the presupposition that the growth rate is going to be high again, we have a cyclical nature not of the structural nature.
POM We were just talking about the power of trade unions.
ST Given this poor performance of the economy perhaps the trade unions in a sense misused their power to get working conditions, wages, etc., that are relatively too good given the total situation. Annually about more than 300 thousand are entering the labour market and at best 50 to 60 thousand new job opportunities are created in the formal sector. So a quarter of a million every year entering the labour market can't find jobs. Now the relative strength of the trade unions and the high demands are a factor, are a further stimulus towards the high capital.
POM Has the growth in black wages exceeded the growth in black productivity so that in fact the success of SACTU is adding to the inflationary trends?
ST Yes, and to unemployment.
POM What role has the development of a black middle class played in the aspirations of the black community? For example in Northern Ireland it wasn't until you got the emergence of a Catholic middle class, educated middle class that began to make demands on the system, that the system began to respond. Now other people have said to us that here the middle class is like a buffer between the masses of the black community and the white state itself.
ST Yes, that's an old capitalistic theory. No, it is a good question but what is remarkable, you see, as far as black protest is concerned, black protests really only become important in 1973 with the Durban strikes and during the seventies, early eighties blacks exerted themselves only so we talk about the power, the bargaining power of the black insiders mainly in trade unions. But since the township unrest started in 1984 the whole nature of black protest changed. And it is now much broader than black insiders. It's now the UDF, it was formed in 1983 and now it is called the MDM. Now this emerging middle class, so it seems to me, is playing a very important role in this MDM. And the level of co-ordination between all these different small organisations that are together the MDM is quite remarkable. And it couldn't reach that high level of sophistication and co-ordination if it was not to a large extent a middle class phenomena.
POM Final question. If you had to compare the attitudes of the white communities on the eve of the first emergency in July of 1985 with the mood and attitude of the white community of the eve of this election, what do you think are the most significant changes that have taken place?
ST Yes, the first emergency. That's a good question. A lot of change has taken place. Well for one, that this Democratic Party hopefully will get at least 30% of the popular vote. Then it brings about polarisation in whites circles. I'm afraid the far rightwing, my namesake's people, are even more rightwing, extreme rightwing orientated. Within government circles, the National Party circles, it has changed the mood. Instead of complacency, they are very much worried and they don't know how to handle it. There are lots of people within the National Party who have become highly disenchanted with the National Party, with the system. But, strangely enough given that the National Party is more than a political party, I know that it is a kind of clan, there's an organic thing, they can't really break away from the National Party. No, lots of the complacency in white, especially Afrikaner, circles but also English circles is gone. The level of concern, even to the point of panicking has become very high.
POM Would you say, just two very quick final questions, would you say that most white people subconsciously accept the inevitability of majority rule but they are at this point in time not willing to accept the reality of it? That they are putting as many obstacles as possible between where they are and what they think must inevitability come?
ST You see, I have written an article, I have to offer it to a paper for this weekend, I'm saying what worries me is as far as supporters of the CP and the NP are concerned there is a terrible lack of history. That is quite characteristic of people here. People are not thinking in these terms. At this stage I will say a third of the white population realise it, know that we will have a majority government. And many hope it will still be a period. Another third can be convinced, half of them subconsciously, as you put it, know it but are not prepared to admit it. They are supporters of the National Party.
POM Would you characterise those people as kind of being anti-apartheid but not pro the MDM?
ST Yes they are anti-apartheid and think with ongoing reform we can stabilise the situation for quite a period, living still in that kind of fool's paradise, although half of the supporters of the National Party deep down know but they are not prepared to interpret it. But then there's the other 30%, and that's the reason for worry. The supporters of CP, 25% to 30%, they can't accept, not even subconsciously, the idea that South Africa is going to become a non-racial democracy and that's a little bit dangerous. Look what happened in Zimbabwe, those people left and they had the easy escape route to South Africa. What will Eugene Terre'Blanche and these people do, where are they going? Pardon me but if we can send them to Uruguay and Paraguay we must start tomorrow. Perhaps it's important from your point of view, that's the conflict element. How are we going to discipline, to handle that group if we really get to the point of a transition towards that kind of government?
PAT I have a question. It gets to your politician hat. The Democratic Party is totally different than the one Padraig been asking you about, but we have talked to a lot of people about this negotiation process and if you in your political role were involved in the Democratic Party, tell us what side of the table, where the Democratic Party would sit in terms of the negotiating process, with the ANC, with the government even though it might not be part of the government itself but is part of the parliamentary?
ST I'll answer it this way. If one takes it for granted that the National Party will again be the government for five years, during these five years negotiations will start, perhaps not the real negotiations, it will be an erratic start. The Democratic Party I hope will in these five years already play the role as a mediator, as facilitator, with good relations hopefully with the ANC and the MDM and also in a position that we and the government are at least talking the same language in more than one sense of the word. But, no, to put it differently, if we have to be still in the political wilderness as far as parliamentary politics are concerned in the next five years, we really must work very hard to build the best possible relations with the ANC and the MDM and actually start with a process of negotiation. That if we become the government in 1994 that will not be the point when the real negotiation started. Lots of ground must have already been covered.
PAT Do you find in your element of this, in the economic role that you play, that you have people in the MDM, in Lusaka that you could talk to about the future?
ST Oh yes, very much. I have been at several conferences over the last two and a half years with ANC people and MDM people and UDF, and the government and the National Party may say I bluff myself, but I and others both have very good relations. I have learned a lot. I think they have become more moderate. I have been ... about this whole thing, being an economist, in the last resort the necessity of an orderly transitional period. And I think there is growing appreciation for the need of that in ANC and in UDF and in other circles.
PAT Do their economists, and their economic thinking come from the trade union movement or is it broader than that?
ST It is broader than that. Well I also met Joe Slovo, his background of course has been Stalinist, but no longer, he's a strong socialist element. We had a talk about that also. But now there is a growing realisation about how difficult it would be to rebuild the economy and how important it is to have a strong and prosperous economy to support and to sustain a more or less democratic system in South Africa.
PAT So do you think that the mixed economy that's coming out now as part of the future is real or is political rhetoric?
ST No. I think we will have to see a mixed economy, hopefully. Often people call me a socialist, I am not one. I think the real name of the game will be to create economic conditions in South Africa during the transitional period, during the first phase of a truly democratic system, economic conditions that will be of such a nature that it will invite foreign capital, instil confidence because our dependency on the rest of world is extraordinary high. We must acknowledge the complete international dimension of our situation. And the government is still not prepared. The South African problem has become completely internationalised and we can only solve it if we can do things, including the MDM and others, that will instil international confidence and will invite foreign investment. I hope it is possible.
PAT And you see trends within the people who will be part of developing this economic policy both in terms of white government as well as in terms of the ANC and the MDM that it is going to attract - that there will be a stable policy that will attract western investment.
ST Yes. We have the task to convince the ANC and the MDM about it. As far as the ANC is concerned, it is interesting that they have more international embassies than the South African government. In this period of being thrown out of the country they have the opportunity to have a lot of international experience.
PAT They have offices in international capitals?
PAT That is a little different than embassies.
ST Yes, I should put it that way.
PAT They don't deliver their credentials to George Bush.
ST No it was for short I put it in inverted commas. I haven't talked to that many of them, they have, again a feeling of that they are part of the international community. Hopefully this experience will suit them well when we try to convince them that we all we cannot go it alone. One of the reasons why I broke from the National Party is because they wouldn't listen to us when we told them economically we cannot go it alone. We are very much dependent on the international community. Hopefully it may have be easier to convince the ANC than it was to convince the National Party government to give it up this deviant attitude against the rest of the world. People can say it is a pipe dream but we'll try.
POM Thank you very much.