Interview with President Mbeki following the State of the Nation Address, South African Broadcasting Corporation (SABC) 2, 20h00
11 February 2007
Siki Mgabadeli: Good evening and welcome to this SABC News special broadcast on SABC 2. My name is Siki Mgabadeli. Tonight we debate and tackle some of the key issues that arose out of the State of the Nation address. Our special guest this evening is the President of the Republic of South Africa, Thabo Mbeki, here to help us explore and examine the vision he has set out for South Africa to both Houses of Parliament just a few days ago. Mr President, thank you very much.
President Thabo Mbeki: Thanks, Siki.
Siki Mgabadeli: With me on this broadcast is of course my colleague and the SABC's political correspondent, Miranda Strydom, to help me put some of the questions that you South Africans would like to put to the President.
Miranda Strydom: Good evening and thank you very much from me Miranda. I just want to kick off immediately with the President; looking at a very honest assessment, Mr President, since 1994 the overarching emphasis has been on poverty. Are we really making an impact, particularly if you look at the question of income poverty?
President Thabo Mbeki: I'm sure we are. But as you would have seen in the State of the Nation address we are raising this issue of doing some work to ensure that we have an integrated anti-poverty campaign. Which means, if I can put it in its simplest form; that we really need to be able to track the individual households, with as mother, father, four children and ask: What is happening? What's your level of poverty in terms of income, in terms of assets and so on? Plus an important issue – to the extent that they may depend on social grants, is there anything that can be done to get them out of dependence into employment?
So we will do that because we want to make sure that we are able to estimate properly what sort of impact we are having on poverty, in order to institute whatever measures might be necessary to accelerate. I'm absolutely certain that since 1994 lots of people have come out of those poverty levels.
Siki Mgabadeli: Well, let's talk about some of the things that are being done or could be done to look into all of those issues that you have raised, Mr President. There seems to be a general concern about our international trade balance, we're definitely not exporting enough, and that is something that has been recognised. Yet this is an area, of course, of massive growth potential and an area where jobs could really be created in certain industries. What are we doing about that?
President Thabo Mbeki: What's happening in terms of our international trade balance, this balance of payments deficit, is a result really of growth in the South African economy. It's an old phenomenon in fact, whereby when the South African economy grows at certain high rates, it is affected by the capacity of the South African economy to produce capital goods. So in the end when you have to open a new factory you have got to import the machinery. So we are getting that sort of phenomenon.
What we have to do is to concentrate on further development of the capital goods sector, for one thing. You would have noticed that we mentioned this in the State of the Nation address. If you take the infrastructure programmes of the state-owned enterprises, whether it's Transnet or Eskom, the expansion programmes are going to require a lot of equipment. So we are saying why can't we take advantage of that to encourage further growth of our capital goods sector, and we think we can.
There are other areas. We are the world's main producer of platinum and there's no particular reason why we can't work on plans with the platinum companies to ensure that as they dig out more platinum and process it, a lot of the equipment needed would be domestically produced.
But of course there's the other part to this story, which is the competitiveness of what we are producing in international markets. Again that's the matter which has been raised quite repeatedly about whether the currency is overvalued, which makes South African goods uncompetitive. For that reason, and partly also to address the volatility of the currency, you'll see that we said that we must look at the relationship between the exchange rate, inflation and so on to see what impact we can have on that.
Siki Mgabadeli: Ja. Particularly, Mr President, on the exchange rate and the volatility that we're seeing there, barring an intervention on the monetary side where the Reserve Bank acts, is there anything that we can do? Isn't that necessarily a market thing, market forces impacting on that?
President Thabo Mbeki: That's one of the things we are looking at. You see, the relationship among these macroeconomic variables - the exchange rate, the rate of inflation, interest rates, budget deficit and all of that - to see whether there's a way in which we can impact on the totality of those aggregates together. Indeed there are some ideas that it isn't necessary always to use what is a blunt instrument, interest rates, that you could come at this matter in a more targeted way. That's what we've got to look at. In fact we have started looking at that question and I'm quite sure later this year we'll be able to say something about that.
Miranda Strydom: So President, I know you've been engaging say with the Harvard economists and local economists. Are some of these questions… or what are some of the suggestions that are being considered, based on especially what the Harvard economists have said with regard to reviewing some of our macroeconomic policies, would it be part of this?
President Thabo Mbeki: That would certainly be part of it, yes. This particular matter of the impact of the exchange rate on the competitiveness of our manufacturers, is indeed one of the issues that's arisen, and indeed the question I was mentioning just now that it may very well be that if for instance you alter the liquidity requirements of banks in order to impact on credit extension, that that might be a better way of coming at it, rather than just responding globally with higher interest rates. So indeed these matters are very much part of that discussion with these economists, both domestic and international, that the government has been engaging with.
Siki Mgabadeli: One of the key ways of course of fighting poverty and rolling it back would be looking at job creation, and something to be celebrated over the past 13 years… of course over the last three years what we've seen is one and a half million jobs being created, and largely because of some of the post-1994 reforms that have been put in place. But there's an argument, Mr President, that while jobs have been created in some sectors, some have been lost in other sectors. To what extent are we reviewing our industrial policy? You have said that's been completed. What interventions can we make in the sectors where jobs have been lost?
President Thabo Mbeki: The restructuring in certain sectors of the economy will take place, necessarily because of the development of technology. So it's not as though for all time you can maintain particular proportions between capital and labour, because technological development will change that. It is a fact that there would have been job losses in some sectors, but I don't think that you can attribute that to all sorts of other things that exclude the impact of technology. I think that's the first thing.
But with regard to further expansion of the economy, we have said many things, perhaps we may come to them just now, but in terms of industrial policy we had identified various sectors which we believe are growth sectors. I'm sure you're familiar with these. We have spoken about biofuels, about tourism, about reducing the cost of inputs in the chemical industry, in the metal industry, and all these import parity pricing questions, to reduce the cost of inputs and therefore make these sectors more competitive.
The industrial policy framework has been completed, and, having looked at everything, we go back to those sectors - chemicals, wood and paper, metalworking, tourism etcetera. And we say that we need to institute systems and mechanisms to make sure that we do indeed encourage growth in those sectors. So that's the process in which we now are, to spell out these specific steps - step number one, step number two - and not just to say this is a group of steps you must take, but how you sequence them. What tax incentives do you need and all that kind of thing. We're in that process, but having identified these specific sectors where this must happen.
Siki Mgabadeli: Mr President, some reports suggest that with the current rate of job creation and the current growth rate that we would need to aim higher than 6% in order to absorb more than the one-fifth of that number that is being created in terms of jobs. Your response to that?
President Thabo Mbeki: I would agree with that. Indeed I have been trying to insist that we should say a minimum of 6%. We shouldn't suggest that 6% is a cut-off point as it were. I do think that we need to achieve a growth rate that's higher than 6% and sustained over time, and we're got to work at it. I think it's correct to say we should indeed aim for more than higher 6% growth.
Miranda Strydom: Mr President, we're celebrating these jobs that are being created, half a million a year. But there's one area that we seem to be failing quite dismally, which is that of 'de-racialising' the economy. The figures you spoke about, 5% on the Johannesburg Securities Exchange (JSE) and 27% in top management, there must be something wrong. What is going wrong there?
President Thabo Mbeki: What we are reflecting in those figures is the upper end in terms of social development. Below that I think the figures would be somewhat different. If you talk for instance about the growth of the small to medium business sector, I would think that you would see a much bigger rate of deracialisation. And quite certainly I'm sure also if you looked at skilled workers and lower to middle management levels, you would have a greater rate of deracialisation. It may be that we are not moving as fast as we should, but I think change is taking place.
I think you can see this generally in society. Intake at universities and then throughput out of the universities into the job market will impact on questions like this. Black economic empowerment from the government's side - I'm not talking about private sector black economic empowerment - from the government's side black economic empowerment is about creation of new economic actors, new people who add value to the economy, and there are many thousands who are part of this. They're not on the Johannesburg Securities Exchange - as I say, we were reflecting on the upper end, companies that get listed on the JSE and people who will sit as Chief Executive Officers (CEOs) and that kind of thing. But below that I think there's a much better pace of change.
Siki Mgabadeli: Sure, sure. Let's go back to the macroeconomic issues, and let's talk a little bit about regulated or your administered prices. In the past you've said that this is something we need to look at to make sure that it doesn't stifle growth and investment potential here in this country. What are we doing about them?
President Thabo Mbeki: The Cabinet started discussing this in detail during this past year, 2006. Already some proposals have been put to Cabinet regarding administered prices. I'm quite sure that not terribly long from now we'll be able to say what it is that we are doing about it. So we are certainly looking at it. It's not necessarily a simple question.
For instance, where you have the electricity regulator, who would, bearing in mind the cost of electricity to the consumer, and taking into account inflation rates etcetera, perhaps say one thing. In the meantime we are saying that Eskom must invest heavily to expand its production capacity. But what you say on the other hand is to deny them the resources to be able to do that. So it's not that easy to address the matter. From the point of view of the consumer, yes, of course: please I want to have a lower price of electricity. But you must also be able to say that there must be electricity to supply to the consumer, and you need these very large investments, unless you are going to say the company must just depend on borrowing to finance that, rather than internally generated income.
But we are indeed working on this, and I really do hope that not too long from now we should be able to say what we are doing about it.
Miranda Strydom: President, I just want to look at the question of skills, that's an area where you've talked quite at length about. And of course with all the government's programmes and projects in especially your infrastructure projects that [unclear], has there been any sort of greater moves say from, for example the Freedom Front, who came with their 90 retired… ; have there been more people coming through with these kind of offers?
President Thabo Mbeki: People have indeed come forward with offers and we've taken them up. In terms the local government there would have been at least 225 people, something like that. These are professionals, fully skilled, fully experienced and so on who have been taken in and spread around the municipalities. Yes indeed that's happened.
But on the skills front I think the most important initiative, really, is the re-capitalisation of the further education and training colleges, and everything associated with that. This is where the kinds of skills that are required in the economy are going to come from. We want to push that programme very hard, and that's why we also said that we will provide bursaries for young people who come from poor families, who are unable to access these colleges, so that we make sure that they are taken in properly.
But of course that also requires that we link up properly with industry, because part of the problem in the past has been that a Further Education and Training (FET) college training people as electrical technicians has equipment to train them that is 15 years old. You train them on that equipment, they get competent on the equipment and when they go to work they find that they were trained on old technology which nobody ever uses again. So I'm saying that that is a critically important matter; that we link up properly with industry so that the people who qualify from the FET colleges are qualified in terms of actual demand.
The other matter of course that we clearly have to pay closer attention to is the functioning of the Sector Education and Training Authorities (SETAs), to ensure that the resources they have are put to really good use. You've got this current case of one of the SETAs having put money, over 200 million rand I understand in a company that's just been put under curatorship. But why did they have 200 million rand in the bank? Why was it not being used to train people? It's clear that we have to look at the SETAs a bit more closely. As you know government doesn't run SETAs. It is a matter for industry and the unions and so on, to intervene a little bit more vigorously, to make sure that they also play their role in terms of this skills challenge.
Siki Mgabadeli: And staying with skills, are you happy with the progress that the Joint Initiative for Priority Skills Acquisition (JIPSA) is making?
President Thabo Mbeki: Yes, I think they have made very good progress. I think everybody now is agreed on the skills that are in short supply. It was on that basis that it was possible to engage universities, to say to them, here are the skills that are required at these levels of education - engineering, financial management, whatever. How do we respond to this?
So I think that JIPSA has indeed been very good. It's also enabled us to take advantage of opportunities in the rest of the world that we have not been taking advantage of, because since '94 many countries have offered us places and scholarships at institutions of higher learning. But because we didn't have a good handle on what it is that we actually need, there are many of these that we didn't take up.
But we'll be able to do that now because with the skills we have here the capacity to educate isn't enough to meet these urgent needs now. So it's very good indeed that we have access to other training institutions elsewhere in the world.
Siki Mgabadeli: Mr President, since 2002 government has been engaging on this issue of providing a comprehensive social security programme. Again in the State of the Nation on Friday you talked about it. We know you said that we'll get more details in the budget with Finance Minister Trevor Manuel. But can you put this into perspective? Will it in some way address some of the issues that people have brought up in terms of a basic income grant?
President Thabo Mbeki: I think you know that as government we have said we don't support this idea of a basic income grant. But we need to be able to ensure that our social security system does protect the vulnerable, and has other impacts.
So you are quite correct. I did say that the Minister of Finance will address this matter more in his budget speech, which he will do. But, in a sense it's related to the issue of poverty that we were talking about. You have many interventions which address social security - whether it's retirement schemes or old age pensions or unemployment insurance, and so on.
We are saying that one of the things that needs to happen is to take the basket of these things and then look at all of them together. There are health interventions that we are making, free healthcare, etcetera. Here is this totality of these things. Do they make for a comprehensive social security system? Indeed they may. If for instance you get into a situation where your unemployment insurance fund is in surplus, and with more job creation and so on, less people losing jobs, this surplus increases: what do you do with it? You can't just keep it in a bank account.
But if you integrate that unemployment insurance fund within this comprehensive social security system there are certain things that you can do. And that's the reason we are saying for instance we must within this context even look at the question of subsidisation of first entry jobs, as part of the job creation strategy. So that it's not just social security, but let it also play a role with regard to reduction of unemployment. But you need that integration in the whole system.
So in particular the National Treasury, the Departments of Social Development, Labour and Health, are the ones interacting in a most intense way on this matter. And indeed, it's not an issue that can just be resolved exclusively in government - it must come to the National Economic Development and Labour Council (NEDLAC).
You can't just say: R100 basic income for whatever, and that's the end of the matter. What about the health of people? They can't finance health from R100. What about retirement? They can't finance retirement from that. What about indigents?
So it needs a targeted approach, not a blanket approach. We don't think it would work. So we will go this route, which is more targeted, more precise, and as I was saying with regard to poverty, we need to be able to say what is the condition of this particular family, is it indigent? How many people are employed. How many people need to be trained? How many are on social grants? How many children are there at school? Can they afford the uniforms? We need to be able to get to that and this idea of a basic income grant is not going to get you anywhere near there. You would in fact be abandoning people under the illusion that you were handing out R100 to everybody a month.
Miranda Strydom: So President, when do you… I mean once all these departments have had a look at this, when do you anticipate that this will be implemented - now?
President Thabo Mbeki: Well we have to consult with our social partners in this matter. It can't just be a matter of government. So I'm afraid I couldn't make a prediction, because it's going to depend on how long this engagement takes place. But it has to take place, because it's quite a major intervention in terms of the national arrangements with regard to really impacting on the quality of life of the people. We want to speed it up.
This is in fact an old decision to do it, but it's taken time even to get to where we are now, where the Minister of Finance can make some more definitive announcements as we tried to do in the State of the Nation address, regarding what are some of the principle elements that we think should go into such a comprehensive social security system.
Siki Mgabadeli: Just looking at one of the elements around this social security system and what might come into it. The Congress of South African Trade Unions (COSATU) responding to the subsidising of first entry people, jobseekers or people who are low wage earners. Their concern was that that might create two wage classes, which then business might engage with differently. Are we not concerned that one creates a separate wage class, where if the guy's being subsidised why should I give him an increase?
President Thabo Mbeki: We have to address this matter. Yes indeed new jobs are being created, but we as we create more jobs more people are encouraged to enter the labour market. So we have to address that matter, to say that the economy needs to be able to suck in these new entrants, and say how we will do that?
Take the initiative under the leadership of the Deputy President to identify unemployed graduates, interact with the corporations to say here are these people, and for the companies to send us information as to their job needs. We've merged those, and already you've got something like 890 formerly unemployed graduates who are now employed.
So is that a second tier market? What do you do, do you just leave it? You can't. So people might very well have better ideas of what it is that we need to do to facilitate the entry into actual work of these new entrants to the labour market. We'd be perfectly happy to look at that. But global experience would not suggest to me that there's anything particularly wrong with facilitating entry into work of new entrants who might otherwise find it difficult. And what do companies do? This is one pool, do we want to increase production, do we increase employed people, or do we just get more modern machinery? Then they take the route of more modern machinery. They've got a profit responsibility. But if people have got other ideas about how to facilitate access to jobs by these new entrants, by all means let them table them. But we believe that this is one of the means and measures, one of the interventions we can use to achieve that.
Siki Mgabadeli: Mr Mbeki, one of the issues is of course the social security tax that's being put forward, and we know that South Africa is always labelled with this non-saving thing, that we don't save enough, we spend too much. And the retirement sector and the pension fund sector says that they are the one conduit for that type of saving. Would this not discourage those savings?
President Thabo Mbeki: The point you're raising is very important. Indeed we do need to increase the rate of saving in the South African economy. And therefore we would have to be careful that whatever we do doesn't have the opposite impact. We ask people to save. So a poor person like Siki Mgabadeli saves. Then when she reaches pensionable age and she's entitled to a statutory old age pension, we see how much money you have saved for your retirement and deduct it from your old age pension. It doesn't make sense. It means that you are better off not saving, because then you would have access to a full state old age pension.
It's clearly wrong. So you've got to change things like that. Even with regard to tax we've got to see what impact that has on savings, and balanced that with the fact that it is important that as many South Africans as possible should have access to social security. We need to look at the balance all of these things, including the totality of the tax system. You can't just say here's a tax tomorrow and not look at the general impact of the taxation system relative to the Gross Domestic Product (GDP) and all of that. So we would look at it bearing in mind among other things that requirement about savings, but also bearing in mind that you do need that as many South Africans as possible should have access to social security. You can't just kind of leave them to the wolves.
Miranda Strydom: President, I just want to move onto another issue, you spent almost… what… 17% talking about crime in the State of the Nation address. One of the things that one thinks about immediately is this whole issue of the First National Bank (FNB) ad campaign. Many people are asking the question, the president has something called a presidential business working group. We would assume therefore that in that presidential working group the matters of crime do get discussed. It also raises the question whether this means then that either government and business haven't yet come to a common understanding on how to tackle crime, or the business community itself is disunited on this issue. How do you read what has happened? Because that has just come out in the media all of a sudden.
President Thabo Mbeki: Well I can't talk for the FNB. I know that they've asked to see me. I will see them. I don't know what they'll say but I will see them. The matter was raised at the Presidential Big Business Working Group. We had a meeting in Cape Town sometime last year. They raised this matter quite sharply, and indeed said that despite the continuing engagement between business and government they thought that we needed to take that a step further.
We agreed to that, and indeed immediately a process of engagement started between the Ministry of Safety and Security and the police, and particularly Business Against Crime. Corporate leaders said that even in terms of intervention, they would want more senior people from business to be involved, including CEOs, and we welcomed that. On the government's side we make sure that ministers are involved.
So indeed there is certainly engagement at that level, and very, very constructive with everybody focused on this matter. As to why particular elements of business would want to extricate themselves from a collective business intervention, I don't know. But as I say, regarding the FNB, I was told they want to see me. Maybe they'll explain why they would have thought it is better for them to act on their own outside of the rest of the business sector.
Miranda Strydom: So you were surprised by this whole ad campaign issue?
President Thabo Mbeki: To the extent that it said, we need to put pressure on the President to act on crime, it seemed to me to reflect in part that perhaps we have not been loud and vocal enough in terms of what actually is being done. In reality, if you've got the practicality of what's being done - in terms of increasing police, taking police officers out of administration into police stations, your more experienced ones, the regular annual expenditures on policing every year, all manner of interventions, every State of the Nation we address this matter. I would imagine that anybody who was actually following what was happening in South Africa would have seen that there's no point at which the government has acted in a manner that it did not recognise that this indeed is a serious problem in the country. So to tell the President that it's a serious problem - well I don't know, maybe people have got money and time to do that. But it's not saying anything new, which is why big business in its direct engagement with government said, let us look at the specific things that need to be done and we agreed very readily to that. That is why we are having the engagement we have with them.
Siki Mgabadeli: Are you concerned that this might compromise that engagement?
President Thabo Mbeki: No, no, it won't. It won't, no I'm quite certain that the bulk of big business is very, very much committed to this partnership, and indeed I'm sure we will engage. You see, and it's not anything peculiarly South African. If you look around the world, countries that face problems of serious crime like South Africa take the same route. No, I’m quite certain that it won't compromise the co-operation between government and big business, certainly not from the government's side. And I'm quite sure certainly from the overwhelming majority of businesspeople.
Siki Mgabadeli: Mr President, when one thinks State of the Nation one starts to think social cohesion. It is now almost 13 years into democracy, how would you assess national reconciliation? Are we one South Africa?
President Thabo Mbeki: Difficult question to answer. I would say no. That doesn't mean that there hasn't been any progress. We need I, think, to move further to dismantle this legacy of the past. Let's have more integrated human settlements, so you can see that black and white live together, things like that.
With regard to integration of schools, I hear regular complaints. For instance even where you have schools with relatively well mixed black and white children, the school governing bodies are not composed in this manner, which has an impact on what kind of education is then given to the children.
So I think that we would need to make more progress with regard all of these things, further deracialisation of management systems, more black people in parts of the economy that add value. All of these things are needed, I think, in order to be able to say we've moved significantly forward with regard to that sense of a common national identity. There is progress. Surveys say that the majority of people, if you ask them their first point of identity, say I am a South African, and then there might be something else after that. So there would be a stronger sense of national identity, but I think we do need to move more on questions of gender, questions of race, questions of human settlements, questions of job patterns, really to be able to say there's better coherence in terms of a sense of national identity.
Miranda Strydom: President, if we can just move onto foreign policy now. We are now on the United Nations (UN) Security Council, the non-permanent seat, but South Africa came in for heavy criticism. Our inaugural vote on the Myanmar resolution, was that actually a wise idea in your view?
President Thabo Mbeki: It was very correct. You see the point that we were making there is that the Security Council has got a specific mandate in terms of the UN Charter, and you can't just wilfully put on the agenda of the Security Council any matter that you choose.
We demand that everybody must respect international law, and the first body that breaks international law is the Security Council. It is wrong. And I'm sure we will continue insist on that, that the Security Council functions in a manner within a framework that's defined by international law. It can't be the first one to break the law, and put any matter on the agenda that it wishes. With regard to the Human Rights Council, if you had taken that matter to the Security Council it would block the intervention that the Human Rights Council can make on those human rights questions in Myanmar. You might be satisfied that you've passed some resolution, quite illegally, at the Security Council, feel satisfied and applaud and say I'm very happy. But you actually block the possibility of this institution of the United Nations to intervene to make a practical impact. No, it was extremely correct. We won't agree that people can just do as they wish. The rule of law must apply even to the Security Council.
Siki Mgabadeli: Mr President, is having this seat just nice to have? Can we really play a role particularly in the transformation of this organisation?
President Thabo Mbeki: No it's not, I do not believe that it's nice to have, I think it's very difficult and challenging to have, because as you know there are many, many problems. The principle task of the Security Council as we were talking just now, in terms of the UN Charter, is international peace and security. You've got these massive problems of international peace and security in the Middle East, a whole region in flames. We must be able to say what is the Security Council doing to find a solution to these problems. You've got the challenges on the African continent.
We have been saying with regard to the matter of the restructuring of the Security Council that there needs to be put in place a specific process, rather than to say, which is the situation now, let everybody discuss. Let's put a system in place to discuss it. So we should say, here is a body of 15 countries or whatever that will discuss this matter, and must report back in 16 days or whatever. We'll continue to push for that. But principally the task of the Security Council is international peace and security. And I think the challenges that we have to respond to as a member are really quite considerable.
Miranda Strydom: Of course South Africa continues to play its role as an African Union (AU) member on the issues of Somalia, Cote d'Ivoire now [unclear]. But one area that South Africa continues to get criticised on is that South Africa is quite lenient towards Zimbabwe. The last time we spoke you said you're hoping for a dialogue, national dialogue. What's the progress in that country, President?
President Thabo Mbeki: Perhaps again we are not communicating effectively enough about this. We have consistently said we are convinced that a solution to the problems of Zimbabwe lies with the people of Zimbabwe.
When we entered into negotiations in this country in 1990, we took the same position about ourselves. We said we don't want anybody from the rest of the world to come and convene us to have negotiations, we'll convene ourselves. We'll have those negotiations ourselves, we'll produce whatever outcome we want as South Africans. It's the route we took and it was very wise and it worked. The consequence of which is that what we agreed becomes owned by the people of South Africa, we can't blame somebody else.
We've taken the same positions with the Zimbabwe issue. Really that leadership has to get together, interact, and as I've said we remain in contact with the government and the opposition party, the parties now, to say to them it's your task, it's your responsibility, we will support. We will always insist on this.
Siki Mgabadeli: Mr President, thank you very much for being in conversation with us this evening.
President Thabo Mbeki: Thank you very much.
Issued by: The Presidency
11 February 2007