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 It is the product of almost two decades of research and includes analyses, chronologies, historical documents, and interviews from the apartheid and post-apartheid eras.
18 Apr 1996: Mboweni, Tito
POM. What's changed in two years?
TM. When did we last talk?
POM. About a year ago, nine months ago.
TM. Really? I never saw the script by the way.
POM. You didn't? Oh I will have that checked on today.
TM. No, I didn't see the script. So what were we talking about then?
POM. Probably some of the same issues. Let's start at maybe the simplest place which would be the rand, the collapse of the rand, the impact it's going to have on wage costs and whether that will create another ...
TM. No, no, not immediately. A lot depends on what happens to the inflation rate. If the inflation rates goes high it obviously will have an impact on wages, if the interest rates go high as well because if the interest rates go high, if the inflation rate goes high the interest rates are likely going to go high to try and force down the rate so that will have an impact because people's bonds, mortgages and so on will begin to be affected.
POM. Petrol costs?
TM. Petrol costs they have an inflationary impact because of the exchange rate problem but I am not as worried as I was at the beginning of the devaluation process. I'll tell you why, because actually in previous ANC Economic Transformation Committee meetings, this is a committee of the ANC which I chair which is a sub-committee of the National Executive Committee (there's a reference on that in the Business Day today dealing with the growth and development strategy thing), some of the comrades were beginning to say, is the rand not over-valued? Should there not have been a correction when the financial rand was abolished and consolidated into one rand? Shouldn't a correction have taken place because there was a discount, financial rand discount anyway and the financial rand was trading at about R5 to a dollar whereas the commercial rand was about R3 to a dollar. Now you abolish the other one, finrand, some correction should have taken place to give the real value of the rand. Some comrades were saying perhaps there should have been a correction there and a bit of a devaluation. But you know you don't legislate for these kinds of things, they happen through the market, even when Trevor Manuel doesn't like the market. He says, "Who are these markets? When did they tell you that? Who are they?" Well the market appears to be sitting in many merchant banks and many commercial enterprises and many conglomerates in Johannesburg and also the Stock Exchange so you may go around there looking for the market. I just laughed at that.
. So the market needed some correction but I think it was quite unfortunate in the way in which it is happening. I think attractive interest rates in the US I think, more demand for dollars or dollar-related investments, which is doing some kind of international correction between the power of the dollar. I think what may be happening is that more and more, particularly American investors, Japanese investors and European investors may be saying more and more, "Please put my investments in dollar-related, put my savings in dollar-related investments." Certainly that's what one of the US merchant banks which is very active in South Africa has been saying. They say we have been told by our people and we must respond to that, put our money in dollar related investments. That means selling rands or rand-related investments and so it's having an impact, a correction.
. But I don't think that there is anything in the political system that one could say is affecting the market unnecessarily, there isn't. Some of the difficult areas were there before. KwaZulu/Natal we've had all along when the rand had a particular exchange rate value, general stability. From time to time there are rumours about Madiba's knee or his chest or an ambulance was seen somewhere. One day they said an ambulance was seen outside the offices here at what is still called Tuynhuys, which I want to see called something else very soon. Now an ambulance could have been seen anywhere. An ambulance could have been rushing past his residence in Johannesburg, his residence is next to a highway and an ambulance could have been seen running past and somebody says the President is sick. But those are activities which will always happen when people want to do some profit taking, a bit of speculation.
. I think serious ones may be the underlying economic fundamentals. Now as you know the classic text book advice is that when a currency seems to be a little over-valued devaluation may actually help exports and farmers and that over-valuation normally benefits the urban rich and the urban people more than it can do the country, and also for exports. Now if exports improve we may have a twist of events and perhaps end up creating a few more jobs if there is a demand for our goods.
POM. It could be a way of redistributing income.
TM. Not really, just creating jobs. The bosses here are not in the process of redistribution of income at all. Just exports. If those exports result in the demand, in increased production and demand for more workers to have in the production process that's good for us, it creates jobs. But as far as income is concerned it doesn't help us with redistribution because the income levels will still be the same, the entry levels will still be the same.
POM. But the problem in that sense is that even though it on the one hand can create jobs in the export sector you import so many of your intermediate goods and your capital goods that it has an impact on many of the goods you want to export anyway. So it has a dual effect.
TM. What has been happening over the past two years or so, most companies have been retooling, have been importing a lot of machinery and so on. I think most of the companies which were really geared should have gone over that period, over that two-year period. Now the danger which was beginning to happen actually was that there was beginning to be an increase in the import of tradable goods, consumer goods in particular, there was beginning to be an increase in the import of these commodities, of these goods. Now this correction actually begins to make imports more expensive and encouraging what the local people call 'local is lekker', local goods are nicer, cheaper.
POM. Let's relate that to jobless growth. This is one of the major phenomena the economy has had to endure and it's a phenomenon that just doesn't happen in this country, it is happening all over the world. You have a 3.5% rate of growth and yet the rate of unemployment is, if anything, certainly not going down and could possibly be going up, there's not enough jobs being created to absorb new entrants into the labour market. At the same time profits are soaring. You pick up Business Day every day and you read the annual reports of companies and their revenues are doubling, profits are tripling. What's happening to all the profits? Are they being ploughed back into companies to make jobs redundant? Are they being distributed to shareholders? Are they being used to purchase other domestic assets? How do you create jobs?
TM. One of the things that I learned at school was something called capacity utilisation in an economy and also in a company. Company X produces motor cars and has a certain capacity there. Let's say they have employed 6,000 workers, they produce 8,000 cars. They would like to produce 10,000 cars but because they have got competition from Company B they are unable. Their ability to produce 10,000 cars depends on the extent to which they are remodelling their cars, making them more fancy and their price structure and they've got a particular plant, the capacity of that plant working 24 hours a day is to produce 8,000 cars. Now normally the pressure they will get from a Minister of Labour like me would be to create more jobs. But they say, "But capacity utilisation, Chief, what are we going to do?" There's another concept I learned at school which was the marginal productivity. You employ one person to do a job, they do it very well. You employ another one to do a job, they do it very well and you think, "If I had ten they will be good", and they do very well. And then you think, "Jesus, let me get another twenty and while production was going higher you reach a certain stage of capacity utilisation when it begins to decline, marginal productivity theory. And I think also that that is a factor that one must take into consideration.
. So suppose you are a company, big corporation, and you're making profits, you're ploughing back, you're employing but you reach a point where you can see marginal productivity and your revenues are beginning to show you that capacity utilisation, the competition out there is a problem. They would raise a number of questions for people in policy making that perhaps we shouldn't be thinking of jobs being created in existing enterprises, we should be talking more about the protection of jobs in existing enterprises and the creation of jobs in new activities. And what are those new activities? It's quite clear there will be certain niche markets where some of our companies have not gone into and looking around you can see so many. Footwear for example. Most of the footwear market in South Africa is still dominated by footwear from abroad. Why not develop a very strong footwear industry in South Africa so new jobs can be created there? Strangely enough South Africa produces the bulk of the world's gold but imports the bulk of its jewellery for the market.
POM. We've been talking about this.
POM. Italian jewellery.
TM. Yes and we dig out the gold from the bowels of the earth.
POM. Why is that?
TM. It's more dangerous but we can't produce simple jewellery.
POM. Why is that restriction? Why does it continue to be there?
TM. The problem is structural, that problem is structural and I will explain what I mean by that. And the second problem is a history thing. You can correct that. Structural in the sense that Anglo-American which owns De Beers has developed as a colonial company so Kimberly and the other diamond mines in South Africa as basically the base to exploit natural resources and take them to England. In England they have the headquarters of the central selling organisation, CSO, which monopolises the selling of diamonds in the world. So it's very difficult for you as a diamond cutter here to walk across the mine and buy a diamond. You must buy from CSO in London. Why should that be the case? So there's a structural problem there which requires guts of steel from the government to break, to say, no more, we thought colonialism ended in the sixties and apartheid died in 1994, or parts of it, and therefore from now onwards you are going for a start, you are going to sell 50% of your diamonds in South Africa, the rest you can sell wherever you want to sell. Let's see what the impact would be, say, in the jewellery industry.
POM. Why is it not done?
TM. It's coming, hopefully. As I say, you need guts of steel to take on De Beers. You have to be very strong as a government.
POM. One of the first points ...
TM. I mean the Russians tried to take on De Beers and they began - now they're back with De Beers.
POM. One of the first points we ever discussed was the fact that four or five companies own 80% of the capitalisation of the Johannesburg Stock Exchange. Now moving into your third year in government that hasn't changed?
TM. No there has been a weakness in our policy. I am the first one to criticise that. One of the biggest mistakes that we made in my view was the non-production of an anti-trust law within the first six months of the government of national unity and it's an error that the department responsible, I think, has committed, which I think politically is going to cost the ANC quite heavy. They should have done it.
POM. It stands there as a beacon of non-change.
TM. It's a huge vacuum in the policy environment and that's why - I'm coming to that when I was talking about marginal productivity and capacity utilisation. At the end of the argument I'm coming to the question of how then do you ensure that these new sectors can develop when you have got such a stranglehold by the six conglomerates on the economy because they may not allow some other company to emerge and compete with them. They just strangle it. They control the banks, the insurance companies. Where are you going to go for your loan? Where are you going to raise your capital? Why is the market invisible but certainly some of the managers of the market are visible because you go to a merchant bank which is the market, the market makers, and say, "I need you to raise so much capital for me to start a footwear company", and in the board of directors of perhaps of one of the conglomerates they decided that Tito Mboweni is too radical so we are not going to give him that amount of money. So the market seems to interact with leaving people to deny other people money and they do these things. So you go into these new areas of production and you have a difficulty.
. If you have time you should go and visit the Diamond City in Johannesburg, the Diamond City is a project by some very far-sighted visionaries of the new South Africa. They have identified a huge area in Johannesburg and they are buying buildings in that area and converting that into what they call the Diamond City. So they want all the diamond cutters and gold and jewellery makers to be together. It's like a huge military camp when you go in there, huge security doors, everything is a huge secret, and they are in production. They are producing rings and all these jewellery things. So I go and see them and they say, "You know here we are, here is the machinery to do the cutting, here are the people who work here. They are idling. Can you see the machines are idling there?" They are idling, nobody on the machine. I said, "Why?" They say "We don't have diamonds to cut." I say, "But how can you not have diamonds to cut in a country which produces diamonds?" They say, "It is because we must get our orders from London." And if there is one thing that if we can do to raise jobs here, do something about this cartel which controls this. And I said to them, I was so touched and impressed by what they are doing I will be going back there with Deputy President Mbeki, I want him to see, and the under utilisation this kind of capacity which there. Then I said to them, "If we change the laws to facilitate you gaining access to the diamonds and so on, what impact would it have on your ability to create jobs here?" They said, "We will create jobs about three, four times and be able to supply the local markets in South Africa but also the southern African market and we can also export." There are lots of rich people from Africa who come to South Africa just to buy jewellery. The market is there. They won't even have to come here, we can export to those countries.
POM. When we were in Rosebank and just passed a jewellery shop that had a big sign up outside 'Italian gold'.
TM. Italy has no gold, it's South African gold. The point I'm making is that these people say they could three, four times they can increase their jobs. Then I went into one of the jewellery cutters, but gold, she makes gold rings and I was very impressed. I thought this things of skills was true, it's not true. There are lots of people there who are being trained by the industry together with the Labour Department to be diamond cutters. She had about 25 people working there and I said, "That's very good. What is your difficulty in expanding this operation?" She says that unlike in Italy here in South Africa we don't have the gold loan system. In other words you go to the Reserve Bank, they give you a specific amount of gold on loan to allow you to produce and sell, because there's a time lag, and then once you have sold you are able to pay them. It's a system like that. That's what they use in Italy, a gold loan system. She said, "If I had that gold loan system I promise you that 25 working here today, you come back and you are going to find 100, 200 people working here." So I was saying it is structural, it's also historic. We've got to sort out those problems.
POM. You have a Reserve Bank that's conservative?
TM. Not really, no. You see government is a big thing and the government cannot be hamstrung by institutions which are supposed to manage the country. So I think there can be a discussion to try and sort that out. What I am saying is that for us to be able to begin to deal with this employment question, we must look not only just at the existing companies only but where capacity can be improved, created. So the Department of Trade & Industry has a major project to look at these new possibilities and begin to encourage the establishment of companies and we as a government are going to be able to use our muscle in the economy. I will explain that just now just in case the rand takes another fright. Our muscle in the economy to encourage those, the muscle is the Industrial Development Corporation, IDC, it's a government entity whose primary purpose is to enter into those areas where government thinks it's strategically important to start businesses. Now they pool private sector partners and engage in those things. For example, not far from here the IDC together with some private sector companies are developing a major steel plant called Saldanha Steel. Actually it's the government that puts the money first and then the others come around. So you can do that once you've identified the other places. The IDC puts money, invites private sector companies on a shareholding basis then proceeds in those areas. Now those will create jobs, but we are busy trying to model all of that.
. The Department of Trade & Industry people have gone a long way finishing their work, of course they are interacting with our people in the Department of Labour now. Once that work is finished we are going to model all of these things I'm talking about to have an idea about how many jobs may be created in which sectors and how sustainable are those jobs. So I think that it is beginning to come together. Then we must ensure that simultaneously we deal with this question of conglomerates because they can stifle and therefore that anti-trust thing is more than urgent, it's more than urgent. Finally, the Labour Market Commission which I appointed some time in 1994 is about to complete its work. Very interesting conclusions are emerging and one of those is that we are so poorly informed about the numbers of the unemployed that we are actually blowing our horn in the wrong direction. I said, "Can you explain that to me?" They said, "No." You see first we define the economically active population as all able bodied people beyond the age of whatever, then you look at those who are actively looking for a job, the numbers reduce a bit. Others were not actively looking for a job and yet in the figures they are calculated and included. There may be many reasons why they are not actively looking for a job.
POM. They may have given up.
TM. No, no, because those who were actively looking for a job come to the Department of Labour through our Job Placement Agency, we have a Job Placement Agency. They come in there and I kept on saying to our people, "Why is it that the numbers of people coming to use our facilities are so low? The people actively looking for a job are very low, why?" They say, "Well there is such high unemployment." And I said, "Let's look for the answers, let's try and find them. Do the departmental officials chase them away? Do the police arrest them when they come? What is going on?" Now part of the answer is coming up with the report of the Labour Market Commission but I will talk to you about that after June. The other issue is that in many instances your husband or wife, all part of the economically active population, and one of them is either actively looking for a job or is in a job and they have their own internal arrangement. Maybe the wife is working and the husband is not, for whatever arrangements they have made. Of course I will prefer that both of them are working, it also helps to reduce domestic tension if both of them are working, it helps.
POM. I'll take your word for it.
TM. Then there are the self-employed people. So if you go through, begin to sift, I think the figures that are going to come up will be very interesting. Nevertheless we should try and get as many jobs as possible for people.
POM. But wouldn't one of the reasons why somebody is not actively looking for a job be that they have simply given up looking for a job, that they've spent seven, eight years out there looking for a job and they have become disillusioned, they have become disengaged from the economy as such, the formal economy as such, and just don't go looking for a job. That's one. Two, we've talked to young people in townships who have matriculated, against all the odds have matriculated, they are looking for jobs all the time, they can't find jobs, they don't have telephones, they can't pick up a newspaper and look at nine or ten different adverts.
TM. Why don't they go to their local government Department of Labour Placement Office and they can use the phone there?
POM. That's a good question. Do they even know that such a place exists?
TM. They should know because we keep on publicising this thing on the radio and so on.
POM. I'm just telling you that people ...
TM. I know, that's one of the things I said why are ...? They say, "No we have got people" and word of mouth in the community. The other question that you should have asked these youngsters is, particularly the urban youth, those outside in Johannesburg, Soweto, should have asked them, "Have you gone to the Carltonville area to look for a job in the mine?"
POM. To look for a job in the mine?
TM. Yes, it's about 15 minutes away, gold mines, it is 15 minutes away from Soweto. It would be interesting what answer you get. They are likely going to say, "Me? Go and work in a mine!" It's just 15 minutes away.
POM. That's because that mine has associations of exploitation?
TM. I don't know. I want some of my research people to go to check that. Why is it that the urban youth won't go and work in a mine? They rather sell flowers in the street. Why? It's a sociological question. But I am saying there are many. But most of the urban youth who are being studied by the Labour Market Commission give very interesting reactions to questions such as that. I'm whetting your appetite for that report on the Labour Market Commission. They have banned me from saying anything.
POM. Now there was a rumour once that I saw in a paper and that was denied so it was one of these things reported as fact that may not have been fact at all and that was that you had hired Samuel Bowles from the University of Massachusetts in Amhurst to do a study of the effect of increasing wage rates on employment.
TM. No it wasn't understood at all what I had said and despite persistent explanations it kept on being persistently misunderstood so eventually we had to make a deal with the newspaper that we close the story and they would apologise, just apologise that they had made an error and we left it there. But it's coming up in the report. The issue really is about not the increase in wages being a problem. The issue is what is the impact of productivity gains which are swallowed up by wage increases on accumulation and job creation, because the accumulation, you remember that old Marxist thing about the accumulation process, that the ability for the capitalists to reinvest and create jobs also depends on the rate of accumulation. The rate of accumulation is dependent on a number of things, tax regimes, productivity and so on. But it's a complicated explanation and that's why I said, eventually I decided it's better to make a deal with the newspaper that they don't understand the issue, let's close it, because you must go then into the equation and do an interactive - first you do some derivatives and after which you must do some integration, integration in the mathematical sense, do an integration to check what the actual implications are. And the basic conclusion that you come to would be that indeed if your productivity gains get swallowed up by taxation then your ability to create jobs diminishes because the accumulation chain is affected because the accumulation chain depends on you making gains and those gains must be split between accumulation and tax and wages and all other things and, indeed, dividends. If all the productivity gains are swallowed up by dividends then you will not be able to at the same time create jobs, pay tax, whatever. So it's a whole complicated series of things. So Sam Bowles and others were looking at this, Sam is part of the commission so he's not just alone, he's part of this Labour Market Commission that I was talking about. So it's a very complicated process. On the other hand if there are productivity gains and those gains are not shared at all with workers why should they be motivated to increase productivity?
POM. Hasn't one of the problems been, and this comes down to one of the basic things we wanted as a kind of continuing discussion, that one of the problems here is that you have high unit labour costs in the sense that over a period of time the rate of increase in wages has exceeded the rate of increase in productivity so that the economy is becoming more uncompetitive and there have been a number of studies done, national and international, that show that among developing countries that South Africa's competitive position is slipping, not getting better. Now you take a model of development where you have trade liberalisation, you have the Asian countries and other countries that have low cost economies and suddenly they are flooding your markets with all kinds of cheap goods. The textile industry is a classic example, it's already in Port Elizabeth plants are closing down or they are moving to cheaper, lower cost wage countries to do some of the intermediate work. So you're in a wage trap.
TM. No, no, we are not in a wage trap. This thing about South African wages, my view is that it's wrongly analysed and the Labour Market Commission I think will provide some data on that as well. What does it cost me to produce a particular commodity in South Africa? Fixed cost, average costs, variable costs and so on. The debate now is tending just to focus on the labour costs. What about the other costs? What about the management costs? What about the apartheid costs? I will explain what I mean. What about the apartheid costs?
POM. Is this what you refer to as 'the apartheid wage gap'?
TM. Yes, apartheid cost. You know why I am saying so? I asked my people to quickly run me a graph to see what is happening and they said if you take total manufacturing in South Africa, it's a pity I don't have that graph here it's so stark, they said if you take total manufacturing - (you will have to switch off that thing).
. You think it's consumed there but it's consumed here, so I said desegregate this for me because I don't want to attacked, desegregate this. Then they begin to desegregate it to indicate what kind of data they fed in. And it comes out that this is the apartheid cost. So what it does at the same time is it pushes the demand here to come higher, so it pushes. Now who is in that share of the income? It's most of your people, say below the Chief Executive, all the management and so on and so on, and as it goes down up to a particular place where it stops then they talk about the weekly paid. That is a problem and it's beginning to be a focus of major struggles on the shop floor. Now that's one thing I wanted to say.
POM. So you're saying it's not the level of wages it is the distribution of wages?
TM. It's the distribution, distribution of the income. That is one of the stark pictures that demands redistribution of income more than anything else. It's an apartheid cost because you know that you will not be able to increase African wages to come to the same extent as the current white wages. You need to find some average somewhere otherwise you will have a ballooning of the wage bill. Most of the companies can never be able to sustain this. They have to deal with the apartheid costs. That's one point. The second point is most of the African workers have been poorly trained so you therefore need to link remuneration with skills, development and career pathing so there is no - one of my people calls it the job skills career ceiling, the glass ceiling, we just keep hitting it, never go beyond that, and you need to destroy that ceiling. There should be no glass ceiling at all, there should be career mobility. In the South African jargon it's called the skills/wages nexus, you have to involve all those. That begins to deal with the issue of productivity quite effectively. Therefore when we are talking about the cost of labour, it's not just the costs, the traditional economic terms are wrong. What is it that this enterprise benefits as a result of the employment of one, two, three, four workers in terms of productivity, in terms of the quality of the product, in terms of whether we are able to sell this product out there? It's a good product. It makes no point to say, "Let's increase productivity folks", and therefore we end up with a situation where they have 1000 cars produced today and about 500 of them are defective tomorrow. Skills, quality become important in this whole debate. But there is a lot of racism that we still have to deal with and structural problems.
. I think two years now into the government of national unity I think we are better informed, better understanding of really where to unblock things, much sharpened in terms of the needs. But for me, I don't want this interview to be parochial because I don't see myself as a Labour Minister, I am an ANC activist, it's when I look at things out there I can see any number of areas where economic fundamentals are beginning to be dealt with, still a lot of work to be done as I was indicating. I see the economy beginning to pick up, it's not creating enough jobs, that's why we must focus on specific job creating issues. I see poverty out there and I think that we have to be very careful that we don't end up in a situation of not jobless growth but poverty growth. I mean one cousin of mine said to me the other day, "You know before the elections the street outside our house was dusty, in bad shape. When it rains the rain carries the soil, it's not a nice place." He says, "Two years after the new government has been in place the street is still as dusty as anything and the soil erosion on that street has gone worse. So what is this new South Africa that you are leading?" And he says, "No, no this is not right." So I said no that's not right because one of the major programmes of the RDP is urban renewal, infrastructural upgrading. Now that's a kind of programme which six months after you come into government must be up and rolling, no bureaucratic excuses, it must be up and running. It has to run.
. Now, weaknesses in the system are administrators, most of whom were not interested in that. Because you only need to look at a City Council, they have to constantly make sure that the streets in the city are graded, they work, and they should actually - I begin to say to them, "Perhaps your focus must not just be in the cities, it must be where people live." So as an ANC activist I feel particularly hurt about it. I drive to the airport all the time and see the squatter area around Crossroads just expanding, it is growing and growing. Now that's a scandal, that's a scandal really, it's a scandal. One of the things that we should be doing quite urgently is to have a rapid impact programme for that place. Here is a specific amount of money that must be designated to sort out that situation, building of flats, prefabricated housing, some shelter.
POM. The only thing I've found being built on the road to the airport are higher fences so that it looks as though tourists on their way in won't see Crossroads.
TM. Yes I saw that, but in all fairness to the new South Africa it's an inheritance. It's not as much about tourists as security.
POM. Yes but it gives that impression.
TM. Stones were being thrown. But if anything, that serves to demonstrate my point. If you could build that security thing for such a long way why can't you build houses there? Why can't you build some flats, some shelter for people? And I'm talking now as an ANC activist. I find that to be a gross violation of human rights. I don't want that and I think that the biggest challenge facing the ANC in the government now is to make sure that we deal with this situation.
POM. That that situation changes.
TM. That situation has to change. I think that's the next challenge. The next two years really. I don't want to be driving to Cape Town and seeing that kind of thing.
POM. I want to just go back and pick you up on a couple of things to get some clarity. One, you talk about the institutionalised racism that exists in the economy. Does this manifest itself by white owned business, corporate captains saying you can't have an increase in black wages, that's a real problem because it will make us unproductive in a global market, it will destroy jobs not create jobs therefore you must keep wages down to the level that they're at in Malaysian countries or countries like Malaysia or other places. So they put the burden of keeping the economy competitive on the deprived black person not on the advantaged white person?
TM. Look that lot we will always have to engage in a struggle with. They are monopolistic in their approach, very self-centred in their approach. They want to use the companies and the economy as the retreat of the laager, like they retreat politically but into the economy. Very insensitive from time to time. Have you come across this latest issue of Millennium magazine with a title page called "The Empires Strike Back"? It's a picture of all the empires, it's a frightening article, the way in which business is reorganising itself to challenge what they see as this labour friendly social democratic government. The cover says "The Empires Strike Back", I call it the Vampires suck back or suck deep. And that's a problem that's coming because the unions have targeted those companies, those empires for action during this year. So this year is going to be a very difficult year.
POM. The South African Foundation report would be an example of that.
TM. Those are the vampires, that's what the article is talking about.
POM. And labour came out very strongly. They are not even on the same wavelengths.
TM. There's nothing to debate. Are they putting the burden on the black workers? They try to indicate that black workers are being paid too much but if you look at this picture, the scientific picture tells a different story. They are trying to shift the debate away from focusing on the real issues there at the work place and just taking this thing about costs and what looks like international language. I sometimes think that they think we are foolish. I genuinely think sometimes they think so. They think we can't see what's contained in this well wrapped up language of theirs. Of course we can see it. Once you do this kind of analysis you come to the conclusion that no, no, there's a lot of work to be done. And they are very excited when they talk about the wages of workers, talking about black workers really, and they refuse any discussion about their salaries and benefits. Two weeks ago there was this huge hullabaloo, them refusing to disclose their salaries. They are refusing, a huge battle, they say under no circumstances are we going to. Because I gather on average a Chief Executive has a package of something like R1,5 million per annum and I am sure that could improve the wages of a number of workers. So the consumption up there is quite high and when you ask them, "But these salaries are very high", they say "No this is international experience." You say is this what a Korean manager earns or a manager in Thailand earns? You will find in most cases they are comparing themselves with an executive in the US and Britain, Germany, but they don't want their workers to compare themselves equally. This gives a lot of evidence to what one studied at university about the subjective preference theory of value. But I don't want to go into that now.
POM. Are there studies being done that would indicate what a black blue collar worker with ten years experience in a job and his white counterpart would earn? What's the differential, the wage differential? Are there studies?
TM. There doesn't even have to be studies. You just go to the offices of the National Union of Metalworkers, they have got the figures and data because they use that in negotiations all the time.
POM. In the United States the gap between what men earn and women earn is astonishing. If you are a woman with whatever, a professional person, you will earn with the same degree and experience as a man only about two thirds of what the male makes and it's showing no signs of diminishing. You put your finger on so many things. My question would be, I remember one of your, part of what you organised when Zola led a team of people that went around the country looking at different models of development, of how you jump start the economy and at our university in Boston we did a two-day session on the New Deal and how Roosevelt came in with it and how he used public works and how he used this and how he used that to jump start the economy, and everyone was very interested. Yet I come back here and watch the takeover, so to speak, and I'm waiting for this explosion in public works, I'm waiting for exactly what you're talking about, pinpointing poverty areas and saying we will eliminate this settlement within 18 months, we will show visible change quickly, not totally but quickly, yet it doesn't get done. It comes back to, is it the delivery because you have still a bureaucracy that's inherently white, that is uninterested, that puts obstacles in the way, or is it because what you said in the very beginning, government is very complicated? You've got to consult everybody, you've got to talk to everybody and you end up in endless discussions going around and around and around but tough decisions are not made.
TM. I think we have learnt a number of things. If I had my way as an ANC activist I would create a war room on housing, a war room on housing, we should be housing, infrastructure, infrastructural development including water services and all those things, electrification and community planning. I would create a war room for that and with all the elements. In that war room I will have the task force working there every day with a commander, I am putting it in military terms, put a commander and people from the different affected departments. Those departments must nominate somebody who is going to work there in the war room and if we need anything about water that person must go and make sure that their department unlocks and have a team of ministers overseeing this war room and let's get going. When I say let's build houses here in Crossroads nobody must say, "Oh but there's no water." You're a water person make sure that that water is sorted out and come back to us with a plan tomorrow, not next week, tomorrow. If you can't we fire you and we get somebody else. You need that, so that's beginning to emerge now. It's possible that we may create in Deputy President Mbeki's office some kind of that kind of thing, but it's urgent. We must draft in the army. The army can build a bridge overnight.
POM. We've been asking that question right up to Tony Yengeni.
TM. Why have you got the same thinking as me. I'm worried about that. Why do you ask the same questions?
PAT. He's an ANC activist.
POM. No, we've been asking that question all this year. You have an army sitting in barracks with skills, with medical skills, with engineering skills, why are they sitting there? Why aren't they out there?
TM. I will draft them in. They can build a bridge to cross and attack SWAPO in Angola overnight. I am sure they can build 2500 houses in a day, so let's go chaps. Give them some additional remuneration for that. But I am saying this is what I call rapid impact programmes. You need these ribs.
POM. What leads you to believe that given the present composition of the government ...?
TM. It's got nothing to do with that. It has to do with decision making. But the composition of the government is meaningless, the ANC is governing. All the other people are just fellow travellers. Did I use the wrong word? Fellow travellers?
POM. If you were in the US it would be the wrong word.
TM. The ANC is governing and the ANC must take decisions. So the fault really lies with the ANC eventually and I think that we take collective responsibility but we have begun to reorganise ourselves better. I think at the beginning we had such a massive task to do just at the beginning but I think our energy has got a little bit too spread out. So what we have done now within the ANC is to reorganise ourselves to give political decisions because when you are in government you must always be careful that the government departments do not begin to leave the party that is governing the country.
. Let me just quickly finish this reorganisation business. So we said then the National Executive Committee which meets every three months of the ANC, the policy making body in between Congress, then we created Standing Committees of the ANC or sub-committees of the NEC. One is on governance, what is happening around governance. Two is around economic transformation. Three social development. These two sometimes have to come together.
POM. Economic transformation and social development, they come together?
TM. So there's some feeding-in process, but they have got their own programmes but sometimes they come together to share so the social issues are not forgotten. Public Administration I think. And then there is the Security and Intelligence Committee. These committees must remain seized with activities in the area of work throughout and make reports to the NEC, reports and requests for decisions. So if the NEC decides that we want you to form a task force for ribs it's decided there and the ministers have no choice but to implement it. That's how the party now guides the government and it's beginning to come right gradually. So the ANC activist, here you see, can guide the government, not the other way round. It's beginning to look good. You see we have never governed before so some of these things are becoming clear.
POM. Sure, it's a long learning curve but you don't have much time.
TM. We'll catch up.
POM. Just on that, and I'd just like to end on the issue of privatisation and the manner in which that was handled. If I had come to you, when I met you say in 1989 we talked about nationalisation and restructuring of whatever, but the word privatisation, a Thatcherite word like that would never even have crossed your lips, it would be worse than the use of the words 'fellow traveller'. And yet here we had a programme of privatisation now called the restructuring of state assets but basically privatisation very much at the forefront of economic policy.
TM. It's not actually.
POM. Well the unions are very much opposed.
TM. But it's not at the forefront of our economic policy at all, it's just lack of information. What's happening is that the ANC conference in December 1994 adopted a resolution on restructuring of state assets, said that we were going to a number of things. One, an audit of what we have as the public sector. Two, we need to do what we called interim restructuring particularly of boards of directors and give them mandates of what to do, to align them to government policy. Three, we said on a case by case basis let's decide which ones of these corporations we require to be in the public sector and which ones we don't on a case by case basis and if we conclude that the following we don't need then what do we do with them? So the issue then arises, some you sell off, those that you don't need, form joint ventures with black business people, do all kinds of things to making them cooperatives, to some if there is a tourist venture somewhere, tourist facility that the government owned before we would say but we don't need this any more, then you can give it over to a community trust or something to sort it out, create jobs for themselves and manage it. So all kinds of things are possible.
. Now this selling off is what one can perhaps call privatisation B. I want to make the conceptual, for me it's very important to have conceptual clarity because privatisation A is sell the public sector. Privatisation B in my view is this selling off of those things that you don't need. So you don't start off saying I am going to sell off everything, you are saying this I don't need, then you enter a process of how do you then sell off. But let me be very clear, the public sector is big now, that audit would have shown that you've got ports or harbours and it's run by a company called Portnet. You've got railways, it's run by a company called South African Rail Commuter Services. You have airways, run by SAA. You have goods transportation, that's run by Autonet. You have electricity, that's ESCOM. Telephones, Telkom. Now if you said to me do you want to sell Portnet, I am going to say you are crazy. Want to sell Portnet? Want to sell the thing that's running the ports to the private sector? You're mad because that can also become a centre of subversion. You're crazy, not only just from an economics point of view but from a political, security point of view. You don't want to hand over an entry point of the country to a private company. Even if it is losing money I won't care, I wouldn't sell it to anybody. Do we want to sell away the railways? I will say you are out of your mind, you can't sell any railways here. Airline, question-mark, question-mark. Why? First, who travels on that airline? It's not serving basic needs. The railways are used by the workers, they go to work and the airline is not a basic need really. So I will say let those who fly around pay for it. Now how do we do that? I would structure a joint venture here personally and I would say 55% government stake 45% private sector, and it becomes a joint venture. That's what I would do because I don't want to be pumping money into an airline which is not a basic need, let's get private sector people. Autonet, it distributes parcels around and so on, PX Express, this and this, that's competing with other private sector ventures, distribution of parcels, urgent mail and so on. That's really not a strategic thing for the government. You can parcel that out to black economic empowerment, they can run it, it's not strategic. ESCOM I will say you are out of your mind if you want to sell that, you would sell electricity distribution and end up with the British fiasco. Telkom, that's the telephones, I would say telephones have not been extended to the majority of our people but in order for us to run these telephones and extend the network to our people as we want we will require about 20, 30 billion rand. Now that's like the education budget. Where is the government going to get that amount of money? Seek a partner. I will say we will get a partner here. So Airways, Telkom I will say let's go for a partner. This Autonet thing that distributes things I will let go, but Telkom I would like to seek a partner, again a partner on - there I will be more strategic, I will say on a 60%/40% basis, 60% government, the reason being that it's also got other strategic interests. You need to be able to make decisions that the partners don't want sometimes. Now in the language of merchant bankers in New York and London that's privatisation. In the real scientific analysis of this it's not privatisation, it's taking on a strategic partner.
POM. What happened that the reaction of the unions, COSATU ...?
TM. I'm less concerned about their reaction, no it's not negative, they will go along with what I'm saying. I'm less concerned about their reaction. You can't run government policy on the basis of whether somebody else likes it or not. If it has to be done it must be done. You can't build houses if somebody continues to occupy land that you are clearing out to build houses. So you have to come and say, "Look comrades, you can't occupy this land, we're building houses. Comrades, we don't have 30 billion rand to put into Telkom for this purpose. If you want us to govern, like you elected us to govern, we need to restructure this thing." So I think that if you go - I know you have had some experience, interaction with people, and if you go there and meet, "Comrades you know there is this problem, how do we deal with it?" Oh they are going to take you to the cleaners those comrades because they have a constituency to look after. Sometimes they may not be looking after it in the proper manner and there is a lot of insecurity.
. When I came into the structure of the Department of Labour there was a lot of insecurity but you can't then not restructure the department, you have to restructure it, so we restructured it. We have to do this, we kept people on board and lots of concerns but we went to the Departmental Negotiations Chamber and said we have to do this, we can't not do it, and we have the following time frame to do this. We will proceed. You have to govern. If you are in government you must govern. That's like if you are in the union you must run it properly for the members. So a bit of that, I would seek a strategic partner. I would then be careful though in choosing strategic partners. Fortunately in telephones, this is very interesting incidentally, next time we meet we should be able to talk I am sure about corporate trade unionism. In telephoning the trade unions already have a major interest and stake there because they have bought into these cellular phone networks.
POM. With their pension funds?
TM. They are shareholders there. So I think that if in structuring deals and so on somehow they could get part of that 40% I don't think they will be opposed to it. But that's the emergence of corporate trade unionism in South Africa which we can talk about next time. The unions are now, there is an interesting situation where they are part of a deal to buy Johnnic, this is part of JCI. I sat and wondered what do you do in that case when they say strike and they are part of the ownership of this thing? It's very interesting. But what they are doing, they are structuring companies, independent companies which are the ones that then get into these business ventures. So they are taking some of their pension funds and so on and using them as muscle to buy into companies. But one day it may just happen that the National Union of Mineworkers finds itself in a situation where its company has bought a stake in a mining company. Very interesting how it turns out. So they are continuing to discuss this issue of restructuring, they have signed an agreement called the National Framework Agreement which governs how they want to manage these processes and Stella Sigcau is running with that.
POM. So on the Labour Commission, it's report will be out in June?
TM. It's a two volume report. The first volume is done by the ILO, the head of the Labour Market Division. He's running that together with a number of people, John Sander who is doing the rural labour market study, and then there's Guy Standing, the ILO fellow. So that's the first volume. They have been looking at data on the labour market, what's happening in the labour market, what's the unemployment rate, what's going on, what are the movements like and changes and patterns, race and gender composition of workplaces and wage rates and comparing them. It's very interesting what's coming out. The second volume is what kind of policies are required to deal with the situation. That will be exciting when it comes out.
POM. I look forward to it.
TM. I am looking forward to it too.
POM. Thank you, it's always a pleasure. You're the first person from the ANC we talked to.