SPEECH BY F W DE KLERK TO THE NATIONAL ASSOCIATION OF PHARMACEUTICAL WHOLESALERS: ARABELLA, 4 OCTOBER 2004
I do not know how many of you remember the High Road/Low Road future scenarios that Clem Sunter presented in the mid ‘eighties. If you attended them – as I did – you may recall that they were the result of months of deliberation by a very talented multi-disciplinary group – the best and the brightest that Anglo-American could assemble at that time. The scenarios were fascinating – but revealed the many difficulties that we encounter when we try to predict the future. For example, nobody at that time had any idea that the Soviet Union and the whole bipolar structure of global politics would collapse within the next five years. Nobody foresaw the coming of the internet and the world-wide web or imagined the revolution in global information systems that would ensue. Sadly, nobody foresaw the AIDS pandemic or imagined that within 20 years some six million South Africans would have died of this new and terrible disease. In the same way, few people foresaw the dramatic changes that would take place in South Africa itself.
Who could have foreseen then that within the next ten years
South Africa would have undergone a peaceful revolution:
- that the National Party Government, the ANC and the other leading parties of South Africa would have reached agreement on a liberal non-racial constitution?
- that we would have peacefully held our first universal non-racial elections? and
- that the ANC dominated government of national unity would have adopted exemplary free market economic policies?
If one had drawn Clem Sunter aside after one of his presentations and whispered these things in his ear he probably would have regarded them as hopelessly optimistic. He might have said something like this: “Look, we’re trying to present a positive scenario here – but we have to keep our feet on the ground. What you are talking about would take a miracle.”
I think we should all remember this when some or other aspect of the new South Africa annoys us. The fact is that despite all our undoubted problems and challenges we have done very well – far better than any of us dared hope twenty years ago.
South Africa’s first ten years were marked by some remarkable successes.
- We consolidated our new democracy.
- We held three free and fair national elections;
- we observed the seamless transfer of power from our first President, Nelson Mandela, to President Mbeki;
- The institutions that we established to protect our rights – including the Constitutional Court – began to function effectively.
On the social front
- the government built more than a million new homes;
- it significantly increased social payments to pensioners and to children;
- it supplied electricity and fresh water to millions of households.
- We succeeded in integrating schools, universities and public facilities with very little trouble.
Our economy has also done well.
- The Government has implemented sound economic policies that have reduced inflation, the deficit and interest rates to the lowest figures in decades.
- The stockmarket is booming and the economy is – at last – starting to create sorely needed jobs.
- South Africa has recorded ten years of uninterrupted economic growth – averaging about three per cent per annum. This is not the 5% – 7% that we need to address our social problems, but it is by no means a bad performance during a period of global volatility and uncertainty.
- South Africa has also proved that it can compete effectively in global markets. During the past ten years we have increased our manufactured exports from 36% to 58% of the total. The country now earns more from the export of excellently built BMWs, Mercedes and Volkswagens than it does from gold.
- Our tourist industry is booming: our game parks, beaches, and mountains have become increasingly attractive destinations for visitors from all over the world.
Despite this progress, we all know that we continue to experience serious problems and challenges.
The most serious of these is AIDS. The disease has already reduced life expectation from 63 years in 1990 to only 47 years now. 5.6 million South Africans – 28% of the sexually active population – are HIV positive. Many of these people will die within the next ten years and will leave behind them more than a million orphans.
Our second most serious problem is poverty, the widening gap between the rich and the poor, and the inextricably linked problems of crime and unemployment.
Despite the strongly egalitarian tone of our new constitution, South Africa has become an even less equal society than it was ten years ago. Since 1995 the GINI coefficient has risen from 0.6 to 0.63. There is an increasing cleavage between our emerging multiracial middle class and unionised labour elite on the one hand and a growing poor and unemployed underclass on the other. Despite the government’s best efforts almost half the population – most of them black – now lives below the poverty line.
The constitutional transformation of the past decade has had very little practical effect on the lives of this part of our population.
- They have the vote – but most of them do not have jobs or adequate housing;
- they enjoy the full spectrum of human rights; but in practice they continue to live in poverty and deprivation;
- they have been promised the world – but in reality they feel that they have received only crumbs.
Too many of our institutions are still insufficiently representative. From the perspective of many black South Africans very little has changed: whites still own the big houses; they still hold down the best jobs; they still drive the fancy cars and still own more than 80% of the country’s farmland.
Naturally, this is not the total picture. South Africa’s privileged and middle classes are now more than 50% black. According to one estimate there are now are about 7.5 million South Africans who have per capita incomes over R35 000 per annum. This number includes 3.5 million black South Africans (10% of the black population); 3.25 million whites (60% of the white population); half a million coloureds (15% of the population); and a quarter of a million Indians (25% of the Indian population).
Also, if one takes into consideration black control of all levels of government, state owned enterprises, the informal sector and their growing direct and indirect ownership of equity on the JSE, it can be postulated that black South Africans must now control more than 45% of the economy. Foreign-owned companies – listed and unlisted on the JSE – must control at least another 10% of the total.
Nevertheless, we are still very far from achieving ‘the human dignity, the equality and the advancement of human rights and freedoms for all’ proclaimed in the first article of our constitution.
President Mbeki is accordingly quite right to emphasise that our second decade must focus on economic and social transformation. If we wish our young democracy to succeed we must ensure that all South Africans benefit from such transformation. This can be achieved only if, inter alia, the following requirements can be met:
Firstly, we need real transformation that will, within the next ten years, substantially address the poverty and deprivation of the most disadvantaged South Africans. The main beneficiaries of black economic empowerment must be black South Africans who are truly disadvantaged – and not only a relatively small percentage who are already exceedingly rich – or part of the rapidly emerging black middle class.
To achieve this we have to address the roots of black poverty. They lie on the one hand in unemployment and on the other in the fact that the poorest South Africans continue to have the largest families. The main cause of black poverty is unemployment, which increased for the black population from 36.2% in 1995 to 46.6% in 2002. Less than 10% of the total number of people in the poorest decile of the population are employed compared with more than half of the total number of people in the top income decile.
What then is the main cause of unemployment? Many relevant answers come to mind – including
- retrenchments resulting from the intense competition in the globalised economy;
- lack of skills and training;
- sluggish foreign and local investment in the economy; and
- competition for jobs from the huge and growing number of illegal immigrants.
However, another central cause is that South Africa’s present labour legislation has raised the real cost and inconvenience of labour to such an extent that employers are now reluctant to create new jobs or maintain existing ones.
Clearly, we need to develop a labour system that establishes basic minimum standards for all. However, in a country like South Africa much greater flexibility is required, especially for meduim size and small businesses.
Family size is another factor in the perpetuation of poverty. It stands to reason that the more people there are in a family, the fewer the resources there will be to provide decent care and education.
All these factors lying at the root of poverty in South Africa need to be dealt with in a concerted and imaginative manner.
The second requirement for successful transformation is that it must take place within the framework of the basic rules governing the globalised economy. Any attempt to dilute property rights, economic freedoms or basic standards of administration and management will prevent South Africa from effectively competing in the international economy and will relegate us to economic and developmental marginalisation.
Some transformation practices are now coming close to undermining the property guarantees in the constitution. In effect, companies are often expected to make substantial provision in their shareholding for individuals and groups that would not qualify for such shareholding from a stricly business point of view. Entrepreneurs will inevitably be reluctant to start new ventures if they believe that they will be required to take in partners who did not share their risks and who did not contribute to their initial capital investment. One does not have to look far to discover one of the reasons why there is such sluggish domestic and foreign investment in South Africa.
Clearly we need an empowerment approach that will do exactly that: empower people.
- The best way to do this is will be to improve our education system. We need primary and secondary schools that will produce matriculants with proficient language and mathematical skills. Dilution of standards and introduction of over-sophisticated education approaches are no substitute to the development of sound basic aptitudes. . We need universities and technicons that will provide the engineering, technical, scientific and managerial skills that will enable South Africa to compete effectively in globalising markets. We must build on the existing SETA base to encourage companies to provide excellent education, training and mentoring to their employees.
- We need to remove any remaining prejudices or obstacles to appointment or promotion that might stand in the way of any South African from achieving his or her full potential.
- We need to develop natural approaches to extending ownership of economic resources to disadvantaged South Africans – particularly by enabling employees to become shareholders and through wider participation in pension and insurance schemes.
- We need to encourage and nurture entrepreneurs from disadvantaged communities.
I am confident that if we do these things we will achieve black empowerment targets much more quickly and naturally than will be the case if we artificially interfere in market mechanisms, management autonomy and property rights. The white population cannot nearly provide the numbers of skilled workers, professionals and managers that a growing economy will require. Inevitably, and quite rapidly, the South African economy will grow to reflect the population composition as a whole.
However, the economy will not grow satisfactorily if we do not appoint and promote people with appropriate skills whatever their race; if we interfere with the ability of companies to manage their affairs; or if we dilute property rights.
The government has done well on the economic front precisely because it has consistently implemented economic policies that are in line with a tried, tested and successful global consensus. After having done so much good work, it must beware of the temptation of trying to legislate economic outcomes. We understand and sympathise with its wish to ensure that all South Africans have easy access to doctors and to affordable medicine. However, government cannot force doctors to work where they do not want to work and it cannot dictate the prices that pharmacies must charge without causing serious and unintended distortions in the market and in the supply chain. The correct role of government is to ensure that markets remain competitive and free. It is not to intervene in markets by artificially dictating prices. The correct role of government is to provide the working conditions and incentives that will attract doctors to rural areas. It is not to limit their constitutional right to live and work where they choose. Experience teaches us that such well-meaning initiatives inevitably have negative and unintended consequences.
Thirdly, if we want transformation to succeed it must be implemented in such a manner that it does not undermine national unity or lead to inter-community friction. South Africa’s constitutional transformation has worked well precisely because it was the result of negotiations and compromises between parties that represented the great majority of all South Africans from all our communities. The problem is that South Africa’s minority communities have not been sufficiently consulted with regard to economic and social transformation – even though their interests are directly affected by the process.
As a result, transformation has become a divisive issue. Minorities often perceive it as a new form of racial discrimination while the majority regards it as a long-overdue rectification of the deep injustices of the past.
There is very little frank debate. Many whites publicly express politically correct, but qualified, support for transformation – while they privately educate their children to work overseas. Some black South Africans – on the other hand – see transformation more as a passport to personal wealth and advancement than as a process that will genuinely address the underlying inequalities in our society. The result is that too many whites are emigrating – either overseas – or inwardly into their own communities. They are withdrawing behind their security fences and are not making the contribution to the broader society that they could make – and I believe would dearly like to make. South Africa cannot afford to lose skills and commitment on this scale.
We South Africans need to talk to one another about economic and social transformation. We need to work toward a national understanding that will ensure that we achieve the central objectives of transformation without jeopardising the reasonable rights and interests of any of our communities.
The stakes involved are very high. Our ability to reach a balanced national consensus on transformation will be a key factor in determining whether South Africa will become the first African country to join the ranks of the first world nations.
It will determine whether different communities can live together in goodwill, equality and mutual respect.
And finally, it will determine whether the brave experiment that we South Africans launched fifteen years ago will continue to succeed and offer a beacon of hope for other divided societies throughout the world.
I am confident that we South Africans will rise to the occasion – just as we did between 1990 and 1994. I believe that if we do so, South Africa in ten years time will be a much better country than it is today – and an infinitely better country than it was twenty years ago.