Lunch with Thabo Mbeki

September 30, 1996 – I recently had the opportunity to meet Thabo Mbeki, the Deputy President of South Africa. A lunch in his honor was hosted in New York City by the South African Ambassador to the United States, and I was invited to attend with about 20 other investors/business people who had various commitments and/or business interests in South Africa.

Because Mr. Mbeki is a long-time member of the African National Congress (ANC) and also because he holds a top-level and important position in the new government, it is clear that he has emerged as the heir apparent to Nelson Mandela. Given South Africa’s importance within the Gold industry, this meeting was not one to miss, and I wasn’t disappointed.

I came to the meeting with preconceived notions. I had not before met Mr. Mbeki, but heard and read various reports that he was committed to the pro-Western agenda that seems to be emerging from the new South Africa. Given that background, I also came to the meeting with a puzzle. How could a long-time card-carrying ANC member and senior official of that party be a believer in private property and free markets? After all, isn’t the ANC committed to communism and the nationalization of private industry? Apparently not.

The ANC may have been committed at one time to the old and failed ideology of the former Soviet Union. Even today some of its members make no secret about their support for the philosophy of statism and their nostalgia for the return of those old ways that strive for omnipotent government, but not Mr. Mbeki. He seems to be intent on looking forward – not back at the past. Here is what he had to say about a number of the wide-ranging issues important to South Africa.

The movement toward reform has been too well established to be dependent upon only one individual. The institutions important to the preservation of freedom and democracy for all the South African people are firmly in place, and they will outlast Mr. Mandela, and by implication, Mbeki as well as their successors.

The level of crime is high in part because of the country’s history. The police today do not have the respect of the people because they enforced apartheid in the past. Moreover, the police have been handicapped by internal corruption and inadequate intelligence networks within the organized gangs responsible for most of the crime.

Corruption is now being addressed. Most of the serious offenders have been identified, and all the needed changes can be made in a relatively short time – mainly replacing the corrupt personnel. However, the police do not have the training to deal with organized crime, and any improvements in this area will require greater attention, resources, and time.

In contrast to the street crime and the organized gangs, the political violence is not new. He particularly focused on Natal. Armed groups are being arrested, and more police are being hired and trained to ensure that politically motivated violence is adequately controlled.

Privatization of government industry and assets is going forward. Telkom, the telephone monopoly, is the first enterprise being placed up for sale. Privatization is important not only to get government out of trying to provide services best left to private enterprise, but the money raised will help bolster the government’s overburdened financial resources.

Reducing the deficit in the national budget is an important priority. This goal will be accomplished by restructuring government expenditures. Low priority areas will be severely curtailed in order to both reduce the deficit and enable the government’s limited resources to be targeted for expenditure in those areas deemed to be important, notably housing.

The relationship of government and labor is emerging in a way in which trade unions are welcome to participate in the formulation of policy. However, this role is one of consultation only. All decisions will be made by government trying to seek broad approval.

I must admit that I was very taken with Mr. Mbeki. I found him to be intelligent, eloquent, and even charming. In short, he is very likable, and I believe his statements to be sincere. In retrospect, he was very much as I had expected.

There remains much uncertainty about South Africa to be sure. The fragile truce between the various factions seeking control and power seems tenuous at best. Moreover, the current government may yet turn away from those steps that have brought the new freedom and political openness to South Africa.

For example, does its determination to quell political violence in Natal mean that the freedom to express one’s individual views will be trampled upon by government police/troops intent in suppressing dissent?

Time will tell whether Mr. Mbeki’s upbeat assessment of South Africa’s prospects will unfold as he forecasts. But one conclusion is clear. There have been two revolutions in South Africa. Not only has the National Party abandoned its long-standing policy of apartheid, so too has the ANC abandoned what had been the major plank of its party – statism that would lead to the nationalization of industry.

It is therefore truly ironic, and perhaps tragic too, that as the new South Africa emerges from its mean and turbulent past, that so few investors recognize the potential for its future. I believe the Gold mining industry in South Africa represents a truly substantial opportunity, and I’m glad I met Mr. Mbeki. The meeting reconfirmed what I had heard about him and hoped for that country’s future.

The new South Africa seems intent to embark on a policy of free market reforms, allowing private enterprise to flourish, and privatizing the government into a mere shadow of its former self. One could not ask for more.