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 It is the product of almost two decades of research and includes analyses, chronologies, historical documents, and interviews from the apartheid and post-apartheid eras.
21 Jan 1998: Clewlow, Warren
POM Let me begin by asking you, the last time I talked to you, Mr Clewlow, was about 18 months ago and you were very optimistic at that point about the direction the economy was taking and the way things were going.
WC I was optimistic, not very but -
POM Well you were optimistic.
WC I was positive.
POM You were positive. So let me begin with GEAR since it's the most obvious one. Most projections that I've looked at on the growth of the economy in 1998 put it at under 3%, some as low as 2.1%, it generally varies between 2.1% and 2.5%. Last year the growth rate may have been about 2.1%, it's worked out about 2.5%.
WC I think it was lower now.
POM Even lower, so the target of 5% that was projected?
WC Has been missed.
POM It's not just been missed, it's kind of like a pipe dream. There is no job creation. In fact if anything, because of down-sizing among companies to compete internationally, there has been a loss of jobs. So number one, where is this economy going? Number two, if it retains this modest rate of growth, a little bit but very modest, where do the resources for this massive redistribution of income and uplifting of the African population come from? And in the absence of that what are the possible consequences? Is Mandela's speech, which I thought a very harsh speech that he gave at the Congress in December -
WC It didn't sound like his speech to me.
POM It didn't sound like him at all.
WC I just wonder whether, I mean it was a speech, it was spoken -
POM A lot of it was written by Mbeki.
WC Was it?
POM That's been established by in fact Mandela's official biographer who is a London journalist and he's written a lot about South Africa, Anthony Samson, and he did an article for the London -
WC Is he Mandela's biographer?
POM His official biographer.
WC Really? Publishing when?
POM God knows. I just read that he was the official biographer.
WC I didn't know that. Is he a good biographer? Is he a heavyweight?
POM I wouldn't have called him a heavy heavyweight. He did a lot of work in South Africa many years ago.
WC He wrote about the oil crisis.
POM That's right, yes, it's a long period but I'm actually surprised that he went to somebody outside of the country to do his biography.
WC I think you've got to get a very objective person and so -
POM Maybe nobody here can be. Now, you talk.
WC Well I didn't know it was 18 months since we last spoke but a lot of water has flowed under the bridge since then and, if I go back, in that era things had settled down very well, the transition had taken place, the new government was in place, there was a government of national unity which I always thought was a very good thing to start off with because I think it eased in the transformation a little bit better, etc., etc. But now we sit here today, the beginning of 1998, and we find we've missed our growth targets by quite a long way and that's a real problem that we face. Why have we missed them? First of all I think we're not just isolated at the bottom of Africa any longer. We're part of the real world. Things like the gold price has sagged dramatically. No-one two years ago would have been anywhere near predicting this sort of position that we're in, which always surprises me. You would have thought somebody would have but nobody could, which always seems to make me a little sceptical of all these predictions. There's a sort of a herd instinct. You see it on the Stock Exchange, if one broker says let's sell A, they all sell A. No-one wants to break out of the norm. I suppose it reflects in their figures.
POM It's like reporting, like the media.
WC Don't break the mould, everyone is looking left, let's all look left, and we're not seeing the brave man who used to look in the other direction. But when you look at our economy now the gold price is a big factor because it puts a lot of gold mines into difficulties and of course, the most important thing, there a lot of jobs (being lost).
POM Let me ask you, why are so many Reserve Banks across the world unloading gold in such huge quantities?
WC I think they've taken a view that it's not the stable back-stop that tradition had told them over many, many years. And again I think we're getting the herd instinct, I don't know, but if the Reserve Bank in Switzerland does it, does everyone else follow suit? I don't know, but there it is, suddenly there's a change of confidence in the metal as a wealth holder. But the fact is it's happened so we see the gold price down. That's not my concern. My concern is it's rub-off effect here in South Africa, jobs, and don't forget the countless industries in South Africa that depend on the gold mines to sell them paint, to sell them wire rope, to sell them motor vehicles, to sell them Caterpillar equipment, etc., etc.
POM The multiplier effect.
WC The multiplier effect. One of your base economic force drivers is not going. So that's one of the things. The second thing is I think we're finding that the transformation of government from political party has happened reasonably smoothly, hind-sightful I think it's true, but has the administrative change taken place smoothly? And I don't think it has. Look at the problems, look at the problems we face in education. Whilst one can easily say it's a legacy of the past, and it certainly is, is it all a legacy of the past or is the legacy of the past now superimposed with an administrative deficiency of the present? You look at the crime situation, is that a legacy of the past? Perhaps, I don't know, but certainly it must be part of an administration problem of the present. When you're looking at the pension pay-out debacle of this last week that's administrative. It all points back into that. One sees as a business, as an industrialist, the amount of money spent by government departments has slowed down tremendously. Now you might say that's a good thing, government expenditure is being curbed, but I think it's a bad thing when we are not seeing delivery of housing, for instance, when we are not seeing delivery of infrastructure which we need for that 5% development. If we don't get that infrastructural development going we won't get that growth factor.
POM But where must the funds come from given that GEAR calls for keeping the budget deficit under 4% of the GDP, tax revenues are growing slowly, just where do the resources come from?
WC Well first of all better efficient collection of existing taxes, realignment of government funding into more productive areas. It's a shift of taking what you've got and re-deploying it and are we spending for every rand of tax that we're collecting, is the government spending in the right direction or is it being dissipated in too much bureaucratic cost and that sort of thing?
POM 85% of all the budget goes towards paying salaries.
WC It seems very high.
POM And the public service that was supposed to be cut by at least 100,000 is the only growth industry in the country.
WC The problem is are you getting top productivity out of all that salary bill that the government is paying and I think the answer must be no, we're not getting it, so shouldn't we be aiming for a leaner and more producing public sector taking funds to add to more water, more roads, more dams, more whatever? We are seeing in South Africa, for instance, a cement growth this year of maybe 1% in volume. Now 1%, whatever the figure is going to be, 1%, 2% something like that, I mean that's ridiculously low for what this country needs. And after all you take a product like cement, it's a basic commodity product. No-one eats it, no-one hoards it, no-one treasures it. You only buy a bag of cement if you want to use it. Now if you're seeing growth this year, 1998, predicted to be about 2% and last year was of that level and the year before was a little bit higher, the year before that it was much higher and then it started to come down. Now that's a true indication that we're not spending money on basic infrastructural development.
Now we as a country, we're talking about redistribution of wealth, you can't take the wealth in this country and redistribute it. What we really need is to be a wealth generator, we need to generate wealth, we need to be putting into action the things that we need to get conditions better, better housing, etc., etc. We don't need more schools at this point, we just need to make the schools we've got more efficient and having done that then start looking at more schools. All that sort of thing. Now I think we've been bogged down administratively now in this country. You might say why, is it because we're not capable of doing it? Are the new administrators or many of the new administrators not able to do their jobs? And I think that's part of the thing. How long will that take place? Have we under-estimated the time it's taken to put a different person into an administrative job to get that person going? I think we have, and it's a question of then how long will it take us to get the ship back on to a keel that faces in the right direction? That's where I sensed in that Mandela speech which you said to me, which I found very uncharacteristic, for someone who has always followed what Mandela has said quite closely, even the terminology looked un-Mandela-ish.
POM White, white, white.
WC He didn't normally go down those alleyways and I thought it was an odd time for him to do it. To me it looked like the speech of a politician under pressure, under pressure from his constituents, yet Mandela isn't under any pressure from his constituents. If anybody is riding high, he keeps on the crest of the wave and he's got this incredible knack of remaining there. I don't think he's tarnished his personal aura, esteem, it's incredible how he's maintained it. So I see within the ruling party, I can see the frustration where they are certainly not delivering and I think they are running out of excuses. The old reasons are starting to wear a bit thin. We talk about the poor matric results. There were some black schools who achieved outstanding results, so the question was: well if this school did that why couldn't that one do it too? It's those sort of questions that are now coming through.
POM Did it worry you in any sense, again looking at Mandela's speech for a moment, that there was a tone in it that suggested that anybody who criticised the ANC or anybody who put their finger on faults of non-delivery or faults of incompetence or pointed out what a problem the crime situation was, was not just being unpatriotic but that they were undermining the process of transformation and in the long run out to destroy the ANC, that there was a tone of - and this combined with references to elements of the third force and counter-revolutionary forces suggested a kind of a building paranoia that is anti-democratic in its nature?
WC I didn't, maybe wrongly, but I didn't. I rather put that to one side as being political rhetoric. What I found odd there was that that wasn't normally the Mandela line. He left the political rhetoric to other people. But I think that's something that slipped in, or something that was put in for him. I don't think he would normally have quite followed that line, and I just put that to posturing. That didn't worry me at all. What I did find positive is that for too long we've basked in the transformation success of the country, which was necessary and there was a time for it, but I think it went on for too long and it was time to roll up our sleeves and get down to the realities. I think what Mbeki, what his big problem is, he won't have the position or the aura and neither the time to do the Mandela overall picture. He's got to roll up his sleeves and get down to the day-to-day issues and get down to sorting out what the problems are. I think he was putting warning shots that that's the sort of guy he's going to have to be, he's going to have to do it and I think he will get support. He's going to be far more unpopular than Mandela because he's going to have to take a lot of unpopular measures and I think where we've got to be careful, it's going to be easy to sit on the sidelines and criticise a lot of the unpopular rhetoric and measures that he's going to have to do. We've got to be careful that one doesn't - it's not a question of being unpatriotic, but one's got to be careful to say look, this is some of the medicine that South Africa is going to take and we'd better take it like a man. We can't live in this aura of the Mandela aura.
POM Will Africans buy that? If you're an African in a township - I talked to a man last night in a township, his electricity got cut off on 8th December, he spent a black Christmas, black new year. He was sitting outside under one of those, about 100m away, huge lamps that throws some light, trying to read his newspaper. He cooks by paraffin and he said, "This is my country?"
WC That guy is important because first of all it's going to be easy for the rabble-rouser or the critic to stir up anti-government feeling and that particular guy that you mentioned is not going to be told on Monday that the reason that you didn't have your electricity, etc., etc., was because of something that took place in the past. His answer is forget it, that is not the reason. The reason is there's something gone wrong today.
POM No he says they tell him that he owes R6500 from previous assessments and unless he comes up with a down-payment of R600 they won't reconnect him and he can't afford the R600. He's caught in a trap.
WC Well I don't know the circumstances but if he has spent R600 on beer or something like that it might be a lesson that maybe he's got to get his priorities right. But if he hasn't got a job and he hasn't got any money and he's been desperately trying to do that he's going to be pretty disillusioned isn't he? And he's going to be ripe for somebody else coming in and saying, "Vote for me because I will deliver."
POM What I mean in terms of, like when you say Mbeki will have to roll up his sleeves and tell everybody else to roll up their sleeves -
WC He will have to do it by example.
POM How will this go down among the people who haven't benefited at all in the last four years? They'll say, are you telling us we're going to have to give up more, is this what freedom is about?
WC That's going to be Mbeki's number one problem, getting his credibility and he's going to have to start delivering quicker than Mandela had to. I think the other problem that any successor to Mandela, not Mbeki but anybody who succeeded Mandela, is first of all that of succeeding someone who's aura and power far, far exceeded what the most optimistic person thought of at the time. Everybody thought when President Mandela came into power he would be a well-respected leader but I don't think anybody predicted exactly - it's a little bit like the funeral of Princess Di.
WC Yes and it was a world tragedy to many people, but I don't think anyone would have predicted the full extent of grief and support that she conjured up. I don't think anybody really predicted that aura, Mandela is the world's number one politician. Put him on any political podium - it happened when the United Nations was celebrating that anniversary, I forget which one it was, and all the world leaders were there, who took the centre of the stage? Mandela, who was absolutely pissed off. Clinton was pushed out of the limelight. He was the number one star attraction. Now nobody can succeed him there. The other problem that his successor, who is Mbeki, is going to have is it's going to be quite hard to hold together what you glibly call ANC because it represents such a diverging and wide band. It's almost too wide an alliance, it was right to achieve what has been achieved but now that's all been achieved and it's pants down time to start getting things going, I think you're going to find the sectors of the ANC, the holding together is going to be much more difficult. Something which Mandela was able to do with ease because of his standing, but anybody else following him is going to have that problem.
So you see already, how is the Zulu faction in the ANC going to look at the future? Are they going to still cast their eyes back to Natal? How does the labour faction, the strong COSATU side look at it? How are the progressive financiers side of the ANC who are looking to understand more clearly what the World Bank, what financial norms are needed, the sort of people who meet with the bankers of the world who realise what the bankers of the world want to hear or do not want to hear. Those sort of people are going to be hard to reconcile that point of view with a person who is representing the labour, say, on the extreme side. The people that are going to lose their jobs on the mines, and there has to be, how are they doing it? We are already seeing, I detect almost a division between the blacks that have moved - I mean many blacks in the last 18 months have moved into the business world, if you want to call it that. There are many black people on boards of the leading companies and not as they were twenty years ago, ten years ago as -
WC Well not even so much tokens, but Dr Sam Motsuenyane, for instance, was a director of the Barlow Group, he was never a token I can assure you, and he was a director twenty years ago long before it was fashionable and he was a very good director. He brought a very good point of view to many, many problems. But now you're seeing more of them, not just the one Dr Sam's voice, you're seeing more and more people coming into that business environment. I think they have a problem maybe from where they came from. I don't know how easy it is, how does a successful black businessman or lawyer or someone who has moved into the financial stream relate back to his brethren that he has left behind in the township, because there must be many of those instances. Not that many have come through yet but those that have come through look visibly successful, better living conditions, better appearances. Now how do they relate back from where they came? It's quite a difficult thing for them to look at. They've got to look forward and yet they can't lose touch with their roots. So that's going to be part of a twenty to thirty year situation. And whilst we know all that's going to take place and if it doesn't take place within a growth era all those issues are going to be so much harder to succeed. So to me it all gets back to what I've been believing all along, our number one priority in South Africa is still growth because without that we can't do anything.
Now a lot of people say that's a typical attitude of a white industrialist, he's looking for growth. Believe you me I'm not looking for growth for growth's sake, I believe it's absolutely prime. I used to see lots of politicians when I was Chairman of the Economic Advisory Council so that was why I saw lots of politicians. Now that Council no longer exists and I don't see these people anything like with the regularity that I did in the past, but I see them from time to time and in my reading I think the key politicians, the key political leaders realise that that growth factor has to be there and many of them are still groping as to how do we get it. I think when Mbeki gets into power he might take more tougher decisions that the Mandela era didn't take.
POM You mentioned, I want to relate what you said to the impact of globalisation and the degree to which any national state has control over its own destiny in terms of things like economic growth. You mentioned the fall in the price of gold, something over which the country has no control and can't do much about and can't do much about the side effects or the multiplier effects. You also have the country becoming a member of GATT, having to open up its trade barriers and already you see the textile industry has largely moved out of the country because it's cheaper to produce out there. You've down-sizing of companies, you've the crisis in south east Asia which has had ripple effects across the whole world.
WC Which no-one predicted incidentally. So if we have so many clever people sitting in Boston, Massachusetts -
POM They once did a study of where they took the stock market and all the predictions and they took a dart board and had somebody throw darts and he did just as well. So is it not making the task of South Africa more difficult to develop in a global economy where it is at risk from many factors that it simply has no control over at all, that the best plans - ?
WC We would have had a much better chance if, for instance, south east Asia was booming, therefore it was taking all our coal and all our exports so our base minerals were finding a home there. It would have so much easier. But what we've got to turn round and say to ourselves is it's no good wringing our hands and saying what do we do about it? I think we've got to say, what can we do? To me things like the privatisation of the Airways, we must accept that what we should do in South Africa is choose a partner, be it British Airways or Lufthansa or somebody, and say, right, now let's privatise our Airways and let's get going on many of the things which we can in fact do.
I'm a minority voice, I have always been on this GATT thing. I think it's suicide to have GATT. Look at our textile industry. To me the ability of retaining all those textile jobs was far more important than getting rid of tariffs. So I don't mind paying R1-50 more for a pair of underpants that would be made in East London or Port Elizabeth instead of buying a pair of underpants that have been made in Hong Kong or Korea and brought into this country. I believe we should have been much more selective and said to GATT, look I'm terribly sorry but there are certain industries where job creation has got to take precedence over GATT and you have got to accept that over the next ten years we will do something but at this stage of the game we're not going to jeopardise all those jobs. I don't think we paid enough attention to that aspect.
And then we will say in South Africa there are certain products which are holy cow products because they are job creators. But then on the other hand the people that have got those jobs have got to say, we're lucky we've got those jobs so we have got to keep our demands within good reason. I think it must be terrible, take the Volkswagen problem at the moment, here they've got this massive export order to satisfy and at the moment it's being held up because there is a labour problem. Now I don't know the details, I don't know how valid it is but it would be a tragedy to lose it. To me the timing of the labour issue and the export order is either just total bad luck or bad planning or devious planning. It's one or the other.
POM Is one of the things the country could do that the government has at some point to take the unions to task and say as long as we are unreliable, i.e. uncertainty in our capacity to deliver orders because of random strikes or whatever, we're simply never going to make it, we're going to be like Britain in the late sixties and seventies before Mrs Thatcher came along and curbed the power of the unions. Britain couldn't make deliveries, companies couldn't make deliveries on time.
WC Union powers should be curbed if demands are unreasonable, etc., etc. But don't forget there's always another side to the story so before one immediately jumps to a conclusion that the unions are being irresponsible, etc., etc., let's make sure that they are in fact that and I think in many cases, my experience is that one needs to carefully analyse the situation before jumping to any conclusions. I say, touch wood, in our Barlow group we have had a very positive labour relationship with the unions and staff, etc., etc. I think it's because we've spent a lot of time planning and being involved in it and I think the problems are nipped in the bud and if it's a genuine problem you've got to make a genuine effort to solve it. It's no good trying to be -
POM So you would have a non-adversarial relationship with your unions?
WC I think common sense. And I think if South Africa says from today onwards common sense is going to drive everything we do, we will be a better country in the next five years and we will get a much higher growth rate if we just apply basic common sense and put aside previous positions, postures, etc., etc.
POM Just two or three quick last questions. The rand continues to fall.
WC I think it's stabilised now, it hasn't fallen. In my personal opinion it's under-valued now and you take that if you buy a beer in London, you buy a beer in Paris or buy a beer in Australia, it's an expensive beer as compared to a beer here and it's not as good as our beer. So I say to myself, your instinct starts telling you that - I travel a lot, I seldom buy anything when I'm away, anything other than buying something like this here which probably I won't get it cheaper here, but gone are the days where I would do any shopping, because it's too expensive. And why? Because I think the rand is under-valued at this stage. But if I was an expert at that I wouldn't be working at Barlows. All I would be doing is make one or two phone calls and be a very wealthy man in a week's time.
POM The over-spending in the provinces where the administrations appear to - ?
WC Administration problem. That's my view.
POM But they are borrowing heavily from the banks where the banks are charging certain rates of interest.
WC It's not solving the problem by borrowing. And the question is why is there over-spending?
POM Isn't it also weakening the banking system as such by giving indiscriminate loans, say borrow as much as you want and don't worry about paying back because we're charging you 19%?
WC Well I hope my bank, Standard Bank, is not following that procedure.
POM Well First National Bank has come in for some - but it's a bad practice.
WC And a 19% interest rate is also one of the biggest problems of not getting the growth that we need. I'm not saying we can cut it, I know you just can't cut it indiscriminately, but again you won't get 5% growth at a 19% interest rate. I'm going to Australia next week, the interest rate is 6%, inflation 1%. It's not even an issue. You can run your business completely differently as opposed to, even now inflation has come down. Incidentally if you recall our earlier meetings I've always predicted that our inflation was never as high as it should have been.
POM Exchange controls? Not likely to go in the near future?
WC They've adopted this attitude of being frayed at the edges.
POM It's that more capital would flow out?
WC I don't think it would.
POM But the official thinking is.
WC Well conservatism. Already a fair amount of capital could in fact go out. Very few people have availed themselves of even the limited amounts they've allowed to go. I haven't taken any money out, I wouldn't dream of it.
WC A real problem but could be solved if we're prepared to adopt some state things which they do in China. In China they still build certain roads by hand. There are certain things I believe that we should be doing in this country and I've always pushed that.
POM And last, foreign investment? You have to rely on yourself?
WC You know, what do they invest in? They can buy Barlow shares if they want to, but that's not investing in South Africa. If someone is going to find - I doubt whether any foreign company will find a new mineral resource under the noses of our existing mining houses here. So what is foreign investment like? Buying our airline, part of the airline, that sort of thing, that's privatisation also.
POM Is privatisation going much too slowly?
WC Much too slowly.
POM And is that because of the influence of the SACP and COSATU?
WC All sorts of - that's where the politicians get into the fray.
POM OK. Thank you.