This resource is hosted by the Nelson Mandela Foundation, but was compiled and authored by Padraig O’Malley. It is the product of almost two decades of research and includes analyses, chronologies, historical documents, and interviews from the apartheid and post-apartheid eras.
11 Dec 1999: Morobe, Murphy
POM. Murphy, let's start with where you are. You're the CEO, so to speak, of the Fiscal & -
MM. Of the Financial & Fiscal Commission.
POM. Which is charged with?
MM. It's constitutionally charged with the responsibility to make recommendations to parliament regarding the equitable shares of nationally collective revenues of the national, provincial and local governments. That specifically is the main mandate of the commission, so it's a process that takes place almost every year with each budget that gets placed before parliament but before that legislation regarding the budget can be passed parliament is required by the constitution to take into account any recommendations that the commission might place before it.
POM. So you would have an estimate of what's available in terms of resources for the budget?
MM. Yes, we don't make that determination because that is still a prerogative of national government which sets the macro-economic parameters and we could then determine what the revenue stream is going to be and we basically
POM. So you work from projected revenue streams? What I'm trying to get at is that if there were ten rand would you say in order to have an equitable distribution given a per capita income in Gauteng and given a per capital income in the Northern Province that two rand should go to Gauteng and eight rand should go to the Northern Province?
MM. Yes, these are various considerations that would be applied in determining exactly what the relative share should be of Gauteng vis-à-vis any other province and clearly there is never any kind of absolute method hence the shares would generally be relative and what will then happen is that we then work out certain criteria to base the determinations on and the attempt of the commission will continuously be to try and bring those as close to the real situation as possible. So in the main we find that the overwhelming portion of the budget goes on the key social sector areas of education, health and social welfare. So those invariably determine how we approach the matter and the equitable share would not only relate to between provinces, we then have to translate it into a situation where individuals, irrespective of whichever province they are, would then have available to them a comparable level of service provision in these main categories of health, education and welfare. So that establishes the key basis on which we make the determination.
POM. So the goal is for all provinces to have the same access to health care, to education, to social welfare benefits?
MM. Yes. Well the operative word is comparable. At least that if one is to have access that access should be there whether you are in the Kalahari part of SA or in the city parts of SA. But there will obviously always be differentials insofar as a whole range of other aspects relating to that in terms of the distance you travel to reach that in the Kalahari compared to Johannesburg, but at the level of provision, as far as the minimum levels of provision are concerned, those would need to be comparable across the country. Of course there is leeway for provinces to top up or to give better services than any other province depending on whether they can raise additional revenue to make that possible.
POM. Then do you have nothing to do with the financial structures of local governments?
MM. Not with financial structures per se. I mean those would either be determined in law or they would have developed over time but as far as the allocations to local government, that is an area of work that will still fall under the auspices of the commission.
POM. What are, if you could give me an idea of what are the main considerations that you would take into account in (i) determining allocations, or that you take into account when you make recommendations regarding allocations to budgets, (ii) what considerations you take into account within provinces in determining what allocations should be taken into account, (iii) what considerations should be taken into account for making allocations to local government?
MM. Our main concern is to try to make sure that at least in making the determinations you take away as much as possible the subjective element. What we take into account, if one looks at the current formula that is being applied, where education is concerned it will take into account or in fact the allocation will be developed from taking into account the teacher/pupil ratios. For example, it will take into account the (what other element is there in education?), well the teach/pupil ratio is where the main consideration is in our formula. We will take into account also the cohort as to who we would provide education to. In this case it will be the total number of eligible pupils which is more of an age-defined parameter and then utilise those to generate the total quantum of funds that in fact will accrue to a province. Now the point is that from the FFC point of view that in itself does not necessarily mean that the province must spend that amount of money on education. It can re-deploy and spend it on any other priorities that the province would have determined but the methodology just allows us to develop the quantum of funds which in terms of the constitution once it lands in the province's treasury will be considered as an equitable share on which there can be no conditionality attached to it as to how it's spent. But of course we come from a situation where there has been an historical pattern of expenditure, certain levels of expenditure and education where most of the money in any case is locked into salary payments for teachers, that's one of the biggest components. So there's very little leeway at that level.
POM. I was confused the other day when I read that the government was going to top personnel costs in the public sector, I think it's 51%, they are now at 52%, they had been at 33% in 1994. I thought that they had been higher. Is it in the provinces that they are so high? In the average province what were just personnel expenditures on staff out of the total budget?
MM. It's a huge proportion. If I take, for example, the education component I think more than 80% is spent on personnel which is the teacher costs. You will find a similar situation with health because with health it is the professionals, the nurses and doctors and so on and then the drugs would be a major portion thereof. But personnel by far is the major cost. If you incorporate the security services where they will buy arms, etc., but as far as the main recurrent cost those will be associated with personnel costs. So across the board in government I think irrespective of what the actual percentage is there is an excessive amount of personnel expenditure. In the event what happens is that capital expenditure invariably takes a knock.
POM. There's only 20% left then for capital expenditure, development programmes, for everything else?
MM. Exactly. Yes. So that's been a major problem I think and the problem is that government has not been able to get out of that personnel trap and this is something that people have been trying to deal with since 1994.
POM. Every year I would visit Zola and get this
MM. It's a major thing. You can easily divert funds from capital expenditure to maintain peace because the machines won't talk back at you or they won't go marching in the streets and they don't have to vote for you. But where personnel is concerned there are always invariably political sensitivities about that so in the end it becomes one of the slowest areas to be changed. Now we've got unions involved, we've got individual rights, labour laws have changed more favourably towards the individual employee so irrespective of what the grand design is we're caught in our own trap of making good.
POM. I was going to say that one of the ironies that has struck me is that the sunset clauses that were put in the final settlement in 1994, they expired in 1999 which would mean that theoretically the government could dump the excess civil servants they had inherited from the old order, yet in the meantime the government had passed labour legislation that was so comprehensive that it requires almost a long consultative process before you can fire anyone. You're almost back in their claws, you protected them from being fired.
MM. At the end of the day the issue is if you want to consider government as being an enlightened employer that clearly would be contrary to that ethos to just willy-nilly start firing people left, right and centre, because there are all kinds of implications associated with that so there is not a clear and easy solution. I would say perhaps, no I am wrong, I think there is an easy solution but whether it will be one where historians will look back and say it was just a Pyrrhic victory or it was a long lasting solution because for just coming and saying we need to cut down by 40% and everyone must be fired you're talking about people, you're talking about families, you're talking about children, you're talking about health, talking about education issues, all of them are associated with the fact of one person being employed and in the context of today's SA where in fact we have high unemployment, where we have a significant welfare budget and clearly there is no one particular thing that one could say is a total solution to this problem. Certainly from where I sit I can understand the dilemma that government is in because at the same time you can't have passed a constitution entrenching the rights of individuals and at the same time because you are in power now you need to feel that just to be able to trim down the numbers of employees you just must turn people out into the streets. The moral dilemma is significant. But of course at the end of the day it's the economic imperatives that impose themselves on any leeway that government may have.
. There is an austerity programme in economic terms in place and normally in other countries I think many of these employees who were excess over what is required would be out into the streets. I remember Ronald Reagan when he fired the air traffic controllers, it didn't seem to take much it was just a decision, bam, it was done, they were all fired. I must say he was not going through a transition of trying to establish democracy and trying to establish respect for law and order and trying to establish decency for everyone equitably. Once you put a constitution its requirements must apply across the board, it cannot afford to be selective.
POM. This again threw me. It was in the paper, it may have been two or three days ago, it was the statement from Geraldine Fraser-Moleketi who said when you review the figures SA, for a country at the stage of development it is, has no higher per capita number of public employees than other country at a similar stage of development and in many cases it's got a lower number of civil servants per 100,000 people, which threw me again on an angle as I thought the problem was that there was an excess of civil servants.
MM. Look I haven't been following that argument. The only point from me is the fact that there's always a relationship between personnel expenditure and capital expenditure and the fact is the more you place on personnel the more you take away from future capital development of the country. So your deficit gets carried on continuously because the present conjunction is really what's going to be happening if not enough attention is paid to the fact that to constantly tie up government funds or funds from government and personnel expenditure you basically are taking away from future generations. It's one thing to say there are schools, there are clinics, but those must be maintained for them to remain for generations to come. They need to be maintained but once you keep on siphoning funds from there to play consumption pattern as represented by personnel expenditure you will have a situation where those
POM. Not maintaining your infrastructure.
MM. It will basically deteriorate and it becomes even more expensive for future generations to deal with that. So it's just merely a postponement of the problem. Now as to whether there is a bullet to be bitten on this one then the arguments will then come as to whether we are really excessive in terms of the staffing profile of our public service compared to other countries or are we not. But that's neither here nor there, the question is what do our own conditions tell us in terms of the current personnel structure relative to what capital build-up is required for the country and what the future needs for the country are likely to be. That's really all that matters. The comparisons are nice to make.
POM. Sometimes they're a nice way out of a political dilemma by saying, well, we're no higher than country X, Y or Z, but it's not addressing the problem that you're talking about.
MM. If you look at SA in terms of its provision for health education and social welfare what might be defined as basic social services, SA compares to amongst the best insofar as that is concerned, but that's when you look at numbers. You're not looking at what really underlies those numbers, the fact that our education provision for countries at the level of development which we are is much, much higher. The issue is not the quantities, it's not the total rand amounts that are spent, it's not even the total number of teachers that you have, it's the quality of those teachers, it's what they dispense and that same argument will apply to civil servants. The quality of the civil service, what do they deliver and the efficiency with which they do so because there might be so many of them but in the way in which they conduct themselves the only results from the way in which they perform is one where society is not better off. I need only repeat what you've been reading about Home Affairs recently, the issue of their not processing
POM. The backlog since last June.
MM. Exactly. I can refer you to similar things in education where teachers don't teach and if they do try to teach they all seem to be clearly infused with the wrong things given the way society is today. They can only teach the wrong things that will not advance us in the next five years. And you look at the welfare provision, there are problems there in terms of how that is conducted. Look at the security service, the police; are they doing a good job? Sure they're trying very hard but you don't sense impact whereas more and more they are crying for more money to pay increased salaries, etc. But we want to see a commensurate increase in the levels of efficiency, in the level of crimes solved, in the decrease of criminal activity. Now for me it's those quality issues that in fact are more important perhaps than the question of whether you have more numbers. If the numbers were as they are and the level of productivity was two times, even at least two times higher than what it is, I am sure we would probably be saying something different about whether we have too many civil servants or not.
POM. So if you were put in the invidious position of having to make recommendations to deal with this problem which the government says they will deal with, what would your suggestions be?
MM. My suggestions? I think government is already doing things that will try to begin to address the matter. You don't wake up and say there a hundred too many teachers than what we need and how do you get those hundred out? You don't just write a notice and say we want to reduce the number of teachers by a hundred and these are the incentives we are putting in place, early retirement, etc., because what happens is that in that case it will be your best teachers, those who have more probability of greater potential for movement into something new who will move and those who you would really like to get out of the system won't leave. My view is that a case can be made to spend more in order to spend less in a few years time if you are to get out of this problem because you are not going to be able to just shut classes and throw people out because even if you do you will be so caught up in labour litigation, etc., that will follow that the costs of that not only in monetary terms but even in terms of goodwill and with the elections coming, etc., it's a very risky proposition. So you make a much more long term strategy to allow for people to die, to allow for people to get sick and then from that put a programme in place that would more or less anticipate what's the word they use, to allow for attrition to take place over time, budget accordingly because to get rid of teachers doesn't mean you don't have to train teachers, that's the paradox. You still need to train more teachers. Our biggest problem has been the fact that the teachers, and talking of teachers, they're all in the wrong places because of the way the Education Department was structured. They're all in the wrong places but then to move people around especially where you no longer have the whip as the old regime used to have, where voluntarism is required, where agreement is necessary, where negotiation is the key, so ability to move people around becomes less possible now than was the case before. In a sense my own view is that we need to take much more of a long term view, allow for attrition, train more teachers, upgrade, spend more money in upgrading the current levels of teachers that we have and in the end what is the optimum size? I don't even think that experts are agreed on some of these things.
POM. Before we started we talked a little bit about HIV and AIDS. The US Embassy did two reports, one was classified so I've no idea what's in it, but the other was an analysis for American firms doing business in SA on what the impact of AIDS in SA would have on their bottom lines. It was looking at it purely in economic terms and it's conclusion was that it wouldn't have much effect on the economy, that as long as it was confined to the poorer sections of the community it could have, in an odd way, a beneficial effect by cutting the large pool of the unemployed. Similarly if it were confined to women - and the trick in managing it was not to allow it to, or to curb its progress to the middle class, the skilled classes, the class with management talents. If it hit them hard then the country would be in trouble but if it didn't hit in those areas - do you ever think that subconsciously policy makers think that way, that this is something bad that we can't do anything about, we don't have the drugs, we don't have the vaccines, we don't have the facilities, we can't change people's behaviour? We can make them aware but we can't change what they do and we've a surplus population, a surplus number of people who are unemployed.
MM. I am sure there is a school of that that will approach that from that angle and some would probably even argue that that's more of a cold, unemotional and detached consideration of the matter. There might well be nothing wrong in that kind of postulation. You could arrive at that conclusion and some might even have a religious connotation to it that that's basically the way in which nature establishes its balance. There's a school of thought which would move that way, as they will say the same thing when the east is ravaged by monsoons every so often. Almost every year in the monsoon thousands of people get killed. Malaria has been on the rampage for many years and in fact some figures will suggest that in fact malaria kills more people
POM. It does, than AIDS.
MM. - than HIV and in fact its ability to contain it is even just as tenuous as it is because of the capability of the strain to overcome and to mutate, etc., and become immune from any drugs. So there's a continuous fight to keep up with its ability to replicate. So in a sense AIDS, and it is I think when people look at AIDS in relation to all of these other things, that you begin to wonder, some people can begin to wonder where exactly do we put our emphasis because the resources are limited. It's not as if even for SA, it's not as if we have resources that you could spend on HIV only. Some people would wish that that were the case and perhaps depending on whether you have a sense of HIV wiping out your population. But unless that comes through the probability is that it will always be put in a basket amongst other contagions that are facing society and in a sense I think that might be doing a disservice, injustice to the ability to find workable and more long term solutions to stopping it. I can see why, because at times you can't deal with these things purely from an emotional basis only. You need to have those kinds of argument that to look at from a purely economic perspective but at the end of the day that perspective must then come in and be superimposed on the human aspect of it and that's where in fact issues of ethics and morality, etc., politics and you name it, religion, etc., come to play and they either mediate in favour for or in fact militate against. So it depends on what people's various positions are. For some people who may not put too much stock on morality and ethical issues they will probably be much more in favour of that kind of code and clinical, almost laboratory kind of economic approach, but if you come from a religious perspective or from a more ethical disposition, you will have a very different conclusion. You might find what the economists have concluded as being fairly useful and in fact for some people they might even find that it might just be useful to go according to that. It is just something that will help carry over for the moment but that in itself is not necessarily the solution because the economists may look at it that way but they do not have the in-depth understanding of the potential of the virus to wipe out everyone and of course they would not know at what point it's going to stop because between the middle classes and the lower classes there is no Berlin Wall there. It is only as thick as from the one skin to the other.
. So for me, whilst I would look at that it's not really something that I would want to base policy on but unless I'm a capitalist, a typical capitalist who is unfeeling, there is going to be no care about humanity, just there for the money and nothing else then that argument is fine. But in the end and in fact if you take that view it might not even be in your interests to find a solution to develop the appropriate drug, you still hold the drug back. There is a conspiracy theory back into fashion I suppose.
POM. When you use criteria to make determinations on what relative appropriations to provinces should be is the prevalence of HIV/AIDS one of the factors that you factor in?
MM. No we haven't done that. We have thought about it but at the same time we found that the information on which you can make that a much more, I would say, useful category to consider is not that robust and it's actually not adequate for us to be able to do that. We have been thinking, we haven't done that previously. In our considerations now we have been thinking about how that might be captured so the approach then would be to find a way of developing some mechanism through which you can capture that without necessarily being specific in terms of actuals because one of the problems with HIV, for example, I mean I am aware from where I'm sitting just in terms of the reports that you get, that it's a major problem out there, it's a major problem. But the problem is many people don't report it as HIV or even where it occurs the records do not necessarily express that it's HIV. When people get sick they don't, I mean I know a few people myself who have died from HIV, with a few exceptions one only hears that they died of the secondary infection, pneumonia or some other condition that gets exacerbated, TB and so on, but not necessarily as being HIV. So you have to do some extrapolations and eventually, even when people go to that kind of funeral you would hear, there would be whisperings, "Did you see him during the last days? He had lost so much weight and it must be AIDS." So it's all like speculation and people speak in hushed tones if they think it is HIV and almost like something that people shouldn't talk about. So it's very difficult to utilise that kind of data for purposes of developing objective formula. So we would then have to find some other ways in which you can capture that incidence that will be in the formula.
POM. Is there any, like the Department of Health, do they have a unit within the Department of Health that is trying to get better statistics and more sophisticated ones?
MM. I am aware that that is there.
POM. But there's still ?
MM. Still our researchers have not been satisfied about incorporating that. But also the issue, especially with some of these it has to do with the cost side but we are now moving away from our previous approach. We are actually beginning to talk more and more about costs, about developing the allocations mechanism from a cost basis, what we call a costed norms approach. In the end if you talk about costed norms you might end up with numbers and figures that will really blow your budget sky high because there is no way in which any budget of the country can sustain the needs or the costs associated with some of the norms that are defined as to what we need to provide, what we want and so on. So we're developing a methodology that would allow us to take those into account and to begin to cost these things because if you want to provide health at a particular level to deal with certain things you have to move away from the general statement to what it actually means in cost, on a cost basis, and then build that up. Once you arrive at a number you then have a sense of whether it's preposterous or it's too high and then from there you can then appropriately mediate downwards, improvise downwards and you can adjust the norms and eventually come to norms that you can sustain. But at least you're much better off in terms of knowing what it would cost to make policy statements and what it would cost to reach certain levels of provisions so you can adjust your own aspirations according to what is realistic. This is the approach that we're trying to take.
. Presumably then if one proceeds that way and if after ten years or even five years or if it's possible, if all AIDS related costs were to be established, you could then more or less work out your averages on ways you can base what your allocations should be to cater for AIDS on a province to province basis. But it's not possible to do that at this stage because the numbers are so varying and the information is extremely filtered, you have to make all kinds of deductions.
POM. I am asking this for my personal information because I'm trying to locate people. Do you know people at universities or at institutes, or wherever, who are in any way active in trying to figure out what the economic costs to the economy as a whole would be? What impact do you think that would have on growth, on developing skills bases, on the number of people available as teachers?
MM. I am sure there is something but I'm not aware of any study so far. One hears about preliminary comments people make on the basis of what they observe, especially if you go into Soweto you going to hear a report that says about 50% of a school is HIV positive.
POM. 50% of the school teachers?
MM. No, no, of a school, pupils.
MM. Yes. And then you go to KZN and it's one of the highest numbers of HIV incidence in KZN and if you think about that in terms of its and you think about the orphans that have been born, who are left behind in that situation, with greater mobility, with people now able to move across provinces the probability is that unless you are able to if a vaccine is not found your only option is education and more and more education because how then do you deal with it? Especially because the issue of HIV is about sex, by and large that's the main form of transmission. Blood transfusion, that can be managed, the incidence of needle pricks, etc., that's something that is more manageable but this other one because it relates to sexual activity it's more difficult to contain simply because if you think of our history of migrancy in this country, the migrant labour system, a lot of that, especially when we look at the rural areas which are heavily afflicted by this, you can see the relationship between that system that obtained because we only got to know about HIV now in the eighties certainly and I don't know even whether they've put their fingers with any certainty as to when it actually began. I don't know, it might have been in the seventies, it might have been there because we only knew of pneumonia and TB and so on and where people get it.
POM. People could have been dying of AIDS and we didn't know it.
MM. We didn't know because there was no way, it hadn't been discovered so it is said, so it might have been with us for much longer than what is being said.
POM. Let's go back to the issue of sex and stigmatisation. I've encountered exactly the same things, I've heard other people say exactly the things you said. They go to funerals, everybody knows the person has died of AIDS and it's never mentioned, it's never given as the cause of death. If you live in a village and you do mention that you are HIV positive you're ostracised, you're no longer part of the community. Why do you think there is such a great stigma attached to it here?
MM. My view is that you will probably find a similar situation in any society where strong religious beliefs obtain. Our country, people are fairly religious in this country and there is a feeling that (what is the biblical word used?) I think it's the word 'fornication', this is meant to be a very bad thing for anyone who believes in the bible, fornication is bad, it comes across as that. But also I think it's not only that, but also even some of our traditional systems, they limit the extent to which people can confess on these matters and where the element of the privacy of the act is elevated so much so that adults can never talk to children about that, it doesn't happen, even though kids go on and experiment on their own simply because there are these ethical and immoral notions that society has developed.
POM. I grew up in Catholic Ireland in which the word 'sex' was never mentioned.
MM. Exactly and this creates all kinds of barriers so there are all little cubicles where these ones are the ones that actually maintain the edifice and these ones are the ones that are the subject of the maintenance. However, they can't relate to those on the subject and they have their own little sets as youngsters, 18 year olds, 20 year olds, they know what the adults do and they also want to experiment and do that but they don't talk to the adults and they talk amongst themselves when they do these things. So invariably you'll probably find that your higher incidence is really in those age groups today.
POM. The younger age groups.
MM. The younger age groups and if you associate the stigma it's not only AIDS, I mean for years people wouldn't talk about sexually transmitted diseases especially if you are a woman because invariably it is the woman who always carries the brunt, as being the one that transmits. If for some reason after having slept with one woman and they end up with venereal diseases and irrespective of what the coincidences might have been, it's a question of who was the last one you slept with and then the blame falls on her. In the meantime she might also be contracting, the probability is that you might have contracted it elsewhere and it came up post your last experience. Therefore women always tend to take the brunt and are the ones who are blamed for transmitting these things. So in a sense what then happens, then a culture of silence develops because you get ostracised, you get scorned, you get sworn at, you get either thrown out of your house if you're a woman or your family rejects you and so on, but if you are male it's fine. Society basically is one where the male is put out as being the king, they can go around spreading it as and how they wish. Clearly there is something to be said about the way our societal structures are and the way in which they encourage the spread of the contagion, the religious constraints that do not make it possible for people to talk freely of this because these are supposed to be matters of the flesh not worthy of Christians to spend their time on this earth about.
POM. So when you said earlier on you put a lot of the blame on the churches, is it for their failure to almost make their congregations first of all talk to their congregations about the issue and encourage their congregations to talk to themselves about the issue?
MM. I think all what one is saying is that they have to be real, this is the real world, this is a world where there is male and female, this is a world where there will always be attraction between male and female, it's a natural thing. This is a world where in fact people are increasingly having to have sex at an early stage because people don't live in rural areas, people have to go and work at a much earlier stage than perhaps was the case in the past in environments which are extremely stressful, etc., where the fabric of society and family gets loosened through various strains and stresses. So clearly the reality of the situation is that unless because the church is one of the biggest institutions that mobilises, galvanises people almost on a daily basis, on a weekly basis, more than what political parties can do, or do, you just need to go to churches and look at the number of people who belong to the Zion Christian Church, look at the number of people who belong to the Anglican Church, to the Catholic Church, to the independent churches. It is millions of people and on any one Sunday it's the one activity which has got millions of people under one roof, or in fact in front of someone of influence who can say something to them about this. Clearly one doesn't have the sense of this happening already and there are always debates between one group or the other about whether the church is doing enough and others not even wanting to mention the word 'condom'. So for me I think well I am not suggesting that the church is responsible for the spread of AIDS. All I am saying is that the church can play a much greater role to help in curbing its spread.
. That's the one thing but there's also the other religious thing, there's also the patriarchal nature of society and how it actually places the male as the dominant element in the relationship between men and women and that men can go all over and still come back. There are many cases, sad cases of wives who got infected by their husbands, etc., so it is in itself a serious problem I think. Of course now we're looking for ways in which, because we don't have a vaccine to cure and perhaps to prevent, so the primary point, the primary mechanism for prevention is always information, it's always knowing. If you start by knowing you then begin to make conscious decisions as to how you might then prevent yourself and knowing implies communication, implies people talking, implies in fact more and more people knowing how this can be transmitted or how it can be prevented. And it is possible except that if I think back to my childhood when health education was introduced at school, we would be told about the importance of cutting your nails all the time, keep your hands clean and so on. At home we grew up not eating without having to wash our hands.
POM. It sounds very familiar.
MM. You had to wash your hands before you eat because there was an understanding that if you don't do that you transmit diseases. So here is HIV, it's actually the same principle, it is important. It doesn't mean that there are no people who get sick from - who might wash their hands but might not be too clean but you might still transmit diseases right through, either holding on to things or touching things that are infected. That will still happen but if the preponderance of people are aware of the basic elements of hygiene and cleanliness that of course I think is what is important. I think by and large that's what most people involved in the AIDS campaign in this country are trying to do. But to actually do it properly you need a great deal of motivation, a great deal of resources to be thrust into the campaign and the point is that this is not only for government. If you're a business person it is as important for you as it is for government because the resources at government's disposal are never going to be enough because to get more basically means there have to be increased taxes to meet the costs.
POM. So among government officials that you mingle with is it just one of a number of problems that come up or does it ever really come up at all?
MM. Oh no, no, no, it comes up because there is no minister in today's cabinet who doesn't know someone, not about knowing of, but who doesn't know someone who has died of HIV. Whether someone from exile or whether someone from inside the country, as I say even in my case I know quite a few people who have succumbed to it and the point is that then it's a question of what then, how do you deal with it? I think there is a campaign that government is involved with. I have been to various functions with government which have been involved in trying to promote aspects of prevention of HIV, etc., let alone the headline type of things about Virodene, etc. If you put that aside the fact that you had that kind of thing indicates the extent to which there is an attempt to engage with the issues. There will be controversies on the way, etc., but for me that's beyond the point. The fact is there is a tremendous sensitisation of this. The question might then be asked whether the interventions are as effective as they could be.
. Now that is a function of a whole number of things and it's not only government that will resolve that. Government can only create an environment for society to come in because in the absence of something like a drug that would prevent or stop, what does government do? Government must provide an environment for society to be more informed, it must disseminate information, it must actually educate, find ways in which in the school systems, etc., there is education. It must put in place legislation, get people to understand what HIV is because government also has the responsibility of protecting each and every individual that is so afflicted by HIV from being discriminated against because of their condition. All of those things are happening. There is legislation in place and in fact in my organisation right now we are re-evaluating our own conditions of employment, especially in respect of matters like HIV to ensure that whatever we have in the company or in the organisation is as close as possible if not the best AIDS policy you can have in the organisation.
. So clearly for me it is bad facilitation but also it's a question of where the government can marshal further resources to bring to bear on dealing with this matter, either from local sources or in fact at an international level because this is an international problem, it knows no boundaries. Today there is migration between countries in Africa, SA in particular is open to that with lots of people coming into the country. One can no longer even suggest that they are bringing in HIV. It might well be that someone comes from Nigeria being perfectly healthy and ends up meeting a local woman here and gets HIV. So you can no longer say it's a Ugandan problem.
POM. Sure, and that person can go back to Nigeria and infect somebody else.
MM. Indeed. So it's an African problem, it's a world problem.
POM. This is a two-part question relating to former President Mandela. Why didn't he use his unique moral stature during his presidency to hammer home the message again and again that if there were to be a new SA that would prosper and grow that in the short run everyone, and that included the newly liberated, would have to make some sacrifices?
MM. But he did.
POM. You think he did that?
MM. Yes. I am not aware of him not having done that. I am aware that he has on various occasions addressed himself to the issue of HIV.
POM. No, no, that's secondary. I'm talking about just that to build a new economy, to build a new society, that in the initial stages everyone would have to make sacrifices. Unions had a responsibility not to be looking after just the self-interest of their own members but they would have to think more that they were the lucky ones, their membership had jobs while there were millions of people out there who had no jobs at all, and that everyone was part of having to make sacrifices to bring about real change.
MM. That message has come out. In fact COSATU was the main recipient of that message in terms of its approach to various things like the government's GEAR policies.
POM. Well GEAR, it was in his term but yes.
MM. So that was one of the retorts from government to the union to say, look, the fact is there is more than 40% unemployment in the country so the demands for higher and higher wages would need to be mediated against that understanding that there are many more that need to be brought into the employment pool. But that was not directed only at the unions, it was also directed at the private sector in terms of the way in which they made their decisions about what to do with their money, their profits, speculative activities, investments in fact, investments, long term investments and capital in plant, etc., especially with locals. You find that more with the foreigners coming in but the local South African business community haven't really shown the way as well as they ought to have because even the foreigners they will always take the cue, if you guys from SA don't invest in your own economy in meaningful activities, in the economy in the medium to long term requirements, you can't expect them to come in and do that. So those issues have been raised particularly in terms of getting people to realise that you can't be selfish in today's environment. As you get your little morsel of bread you must think of how much further you can go to share it with someone else who is in a more desperate situation than you are. So that's one of the major things that has come up I think.
POM. But has that message gotten across? One of the things that has I've been talking to people in the ANC about the emerging what's called 'black middle class' and what responsibility it has to the masses who are still downtrodden and the ANC still talks in terms of we need more political education to make them aware of their responsibilities, but the middle class in any society have a way of developing a kind of common mores and that is they buy, become consumers, they get into debt and they're not very giving by saying, well I should be taking 10% of my income, almost like tithing 10% of my income so that those who are less well off or have nothing can have something. They would not actually scream with joy if they were told that taxes are being raised so that more money can be devoted towards those who have nothing. Every three or four weeks I go round the malls just to look and see who's there and there are more and more black people who are buying. You see it growing every year. It's good but everyone's becoming a consumer and consumers think in different ways than in terms of their moral or ethical responsibilities.
MM. That tension will always be there and it will never be an automatic thing. It's not, I suppose, something that is inherent in everyone. It's something that has to be worked on if as an ethic it's the right ethic or it's the preferred ethic, because I don't think there is a right or wrong ethic. It's probably more of a preferred ethic and then you work towards expanding its support base so that more and more people support it. So there will always be people who spend their time in the mall chasing after the consumer goods, etc., but the fact of the matter is that it will just go towards accentuating the differences that are in society and for me it just sustains the dictum that the struggle is the one thing that will be permanent in respect of where society is at.
POM. Is the fulcrum of the struggle going to change in the sense that as you have an emerging black middle class and in terms of numbers alone they have exceeded numbers of whites, not proportionately but in terms of numbers, that they can develop a commonality of interests?
MM. Naturally it must.
POM. But then the divide starts changing from being a racial divide to being a class divide, between the interests of those who have and the interests of those who have not and the interests of those who have will be racially intermixed and the interests of those who have not will be primarily still black but it will be a different kind of divide than a racial divide.
MM. The fact is that it will move in the direction as it must. I have never been one that believed that you could sustain the perspective of the divisions purely on racial terms because for as long as you open up and have blacks coming in that racial perspective must go. But what will happen is that those who are on the other side will start looking at their condition as being the same, that's why you will have now more and more whites and blacks ending up in the same unions and their perception of where the problem comes from, the management that you deal with is not necessarily white in colour or it could be a white person or a black person at the management echelon and clearly what you will probably find is that for survival those who have been the black middle class category would continue to try to use the racial tag for purposes of protecting themselves and try to use that to either gain the sympathy of those who are black on the other side of the class divide but the chances are those across there will see through that. That is all just a smokescreen and the fact of the matter is that you have, I don't have, you might have, because to get there the fact of your colour became the ticket but in the end what perhaps is more important is the end result of your having not how you had but is the end result of your having which gets you to begin to think the same way as anyone else of any other colour who has. So invariably you move towards a situation where the class definition becomes much sharper, not in racial terms but in its broadest context.
POM. I'll ask you one last question or two. One, is why has SA been such an adherent of the Washington Consensus? Why has it almost turned into a matter of principle the reduction of deficit to GDP to 2%, 2½%, whatever it is, as though some divine hand laid down that it must be 'this is the ideal thing'? Whereas it would seem to me that they should be doing what you have said, running larger deficits, allowing the currency to find its own level, it will take a while to do that, and not adhering to policy, as I think you may have seen the other day that Joseph Stiglitz, one of my favourite economists, resigned as the Vice President of the World Bank because his differences with the IMF over the Washington Consensus had just reached a point of where he thought he could do more outside the World Bank to fight their prescriptions than inside. Why is there talk now here of getting the budget deficit down to zero? For what purpose? It hasn't attracted foreign investment.
MM. Yes, well the experience of that has shown that it really doesn't you see the point is that even as it goes down more and more people lose jobs and the point is what is the efficacy? So there clearly are two schools of thought on this matter and the problem is that the one school is not in power, the other school is.
POM. Part of the other school, part of the alliance is in power.
MM. No I mean where I operate from I don't make adjustments on government's macro-economic programmes, that's not my responsibility. That is the prerogative of national government and the outcome of that can only be a function of the political environment. If politically government can make those decisions it's perhaps less a reflection on government than it is a reflection on anyone else who has an opposite opinion in not being able to make that opinion to prevail.
POM. But at some point it doesn't make economic sense. I will understand it if the goal had been to show in a post-transition period that this country was fiscally responsible, whatever that is, so that outside investors would say this is a fiscally responsible country therefore we will invest in it. I can see merit in that. If I look at it after five years or four years and say every year the government gets prouder and prouder of the fact that it's meeting its budget deficit goals and everyone claps at the government and says, oh, we're down track when it comes to fiscal restraint. In the meantime jobs are being lost and foreign investment isn't coming in and I would say what's the point of this policy? Shouldn't we have public works programmes? Shouldn't we be contemplating something alone the lines of what Franklin Roosevelt did with the New Deal, almost going back to basic Keynesianism?
MM. One of the things a lot of those things are spoken about. From the Department of Public Works Jeff Radebe has spoken about those things but in the end it's not so much talking about them it's about how you put that into effect. But clearly for me to get public works programmes going implies that government evaluates its deficit, its approach, looks at it very differently because certainly you can't move in that direction if you have the kind of deficit targets that are there.
MM. The two just don't go together. OK you go the route of commercialisation, of privatisation, it will be fine for the companies involved, it will be fine for perhaps creating extra revenue streams or streaming them down, making them more efficient. The objection, if you think about the transport institution, it will be more to make transport more available perhaps at a cheaper rate to commuters but it does not in itself automatically necessarily translate into creation of more jobs and so on. So as to what the appropriate mix ought to be between private engagement and public participation or public generation of those programmes, I don't think we've reached a point where one could point to anything with any kind of significance and awareness.
POM. Just finally before you run out the door, there's a phrase that one hears over and over again, the economic fundamentals are sound but some would say foreign direct investment is falling for the first couple of months or the first two quarters of this year and it's never come in the amounts that were envisaged in the first place and it's not going to come. Why, if you had to look, why do you think foreign investors (what I mean by investors, I mean direct inward investment, not stock market investors), what is their reluctance to invest in SA, the gem of the continent?
MM. I don't know. I don't know whether anyone has an answer. I don't have an answer, one can speculate but I don't know.
POM. Well speculate.
MM. I'd rather not speculate.
MM. I don't know what the answer is.
POM. Well I can read your speculation and ask other people whether they would agree.
MM. The point is that the world is so huge, the opportunities are so vast and we're not the only ones that are trying to get as much of the foreign investors to come in. I made the point earlier on, as developing countries go we're one of those countries that has a significant private sector in the country and an assessment of its investment patterns would suggest to you that those are not patterns that send a positive message to anyone who might want to come in from outside and hence the tendency is basically to end up only on the speculative levels of investments as opposed to putting plant. Even when we had some, earlier on, whether it was the Asians or Malaysians and Chinese, etc., those were come quick, grab your buck and move out, and there was no long term basis to that. But I think right now if one looks at some of the arrangements that have been brought into place, even when one looks at the current arms train, the counter-trade aspects of that begin to deal with the situation in much more ingenious and perhaps more sophisticated ways than has been the case before because there's a recognition of our narrow skills base and the need to develop greater expertise in a whole range of areas which are necessary for today's modern economy. And the fact that the way in which the markets have changed just in the past ten years, past fifteen years for that matter, with the information technology and the fund managers and the role of fund managers internationally and how they move money around that quickly and they are less inclined to be more long term because they make a quick killing very quickly and move out. So that has been the trend that has developed over the past ten years so that the guys who want to come and bring in the machinery, etc., and have problems with labour relations and countenance the myriad of local laws, etc., they are more disinclined to want to move that route so they find other ways of raising capital, etc.
POM. So in fact the really interesting thing I think to me that you've said is that it's the speed with which capital can be moved to get a return rationally militates making it stationary.
POM. So the more developed the IT sector becomes and the even quicker you can move capital, the less incentive to make it anything than immobile would be sorry, to make it anything other than mobile would be a non-rational economic decision if you were an investor?
MM. The other thing for SA also, the point is that we have a fairly highly developed financial sector. It's highly developed in the sense that it's able to operate at that level, it's able to offer those levels of speed, etc., but in the end for me it's really what local capital does that is more critical in terms of putting plant and equipment on the ground.
POM. As you walk out the door, where can one get data on the flows of where local capital goes?
MM. There's a new, I don't know how good they are, I was at the launch of this organisation, it's called ISA , Investment South Africa. You would probably get them via the Department of Trade & Industry. They were established mainly to facilitate, to almost act as for any potential future investors that want to come in they would basically assist in linking them and providing information on the development required. They are called Investment South Africa, ISA. I don't know where their offices are based but via Trade & Industry you will be able to get them. They probably even have a web site or something that would give it. But the Reserve Bank also publishes those things.
POM. I'm seeing Tito next week so I'll ask him.