CHECK AGAINST DELIVERY EMBARGOED UNTIL DELIVERY
SPEECH BY THE PRIME MINISTER
LAUNCH OF APARTHEID AND INTERNATIONAL FINANCE
CANBERRA 8 AUGUST 1989
I'm not the first person to observe that success has many
fathers while failure is an orphan.
Now I will not join the throng of people claiming paternity
of this successful and significant publishing venture,
Apartheid and International Finance.
But I will lay claim to being perhaps one of the
grandfathers.
When the Commonwealth Heads of Government last met, in
Vancouver in 1987, it was against an extraordinary backdrop
of events in South Africa.
The mid 1980s had seen a dramatic sharpening of the
courageous protests by the black people of South Africa
seeking to gain fundamental political rights.
The response by the South African authorities had been
violence, further repression, blanket censorship and, in
June 1986, the declaration of a state of emergency that has
been extended continuously to this date.
The period was also one of acute crisis for the finances of
South Africa.
In late August 1985, South Africa came under such intense
pressure from its creditors that it defaulted on a portion
of its international debt and as a result, became, as Sonny
Ramphal says in his foreword to this book, an unacceptable
risk. Facing a foreign exchange crisis, South Africa was forced to
close its exchanges for four days while officials arranged
not, it was understood, long term solutions, but short-term
rescheduling.
Clearly, here was a weakness in the South African system
that posed a very real threat to its very existence.
For the opponents of apartheid, the situation demanded
closer scrutiny and, where possible, tighter pressure.
So at Vancouver, I proposed that the Commonwealth examine
the links between South Africa and the international
financial system.
The report that emerged was presented to the second meeting
of the Commonwealth Foreign Ministers on Southern Africa in
Toronto last year.
It was decided and here Gareth Evans might like to claim a
degree of paternity that the report was so significant
that it should be brought to the attention of a broader
public through a revised and expanded text.
For the authors I have nothing but the highest praise.
Tony Cole, a deputy secretary in my Department, was the
chairman of the committee of Commonwealth officials who did
the primary research for the report.
Keith Ovenden, hand picked for the job by Gareth Evans, is
one of those fortunate, and rare, writers who can with
lucidity draw out and communicate the relevance of even an
arcane matter like an intricate by-way of the international
financial system.
I do not think it unnecessary to add that the complexity and
confidentiality of the research they undertook required
great diligence on the part of the researchers and
considerable trust by their anonymous sources in the
financial community.
Together, Ovenden and Cole worked at breakneck speed to
finalise this text and Penguin Books have performed a minor
miracle to produce and publish their text.
The result is a book incisive in its analysis and so
up-to-date that it deals with developments that happened a
mere ten weeks ago.
The story that Keith Ovenden and Tony Cole tell has three
great themes.
First, they draw attention to the economic aspects of
apartheid. It is not difficult I think to comprehend the moral
dimensions of the fight against apartheid, or to appreciate
from our vantage point in a Western democratic nation the
political outrage that is apartheid.
Without in any way downplaying the importance of those
aspects, it is stimulating to read such an informed account
of the economically offensive elements of apartheid.
Apartheid, as the authors say in their introduction, is
synonymous with waste: the waste of human potential and
human resources.
To illustrate this point, the authors tell the story of the
" homeland" of KwaNdebele, which lies about 110 kilometres
north-east of Pretoria and was created in the 1970s to
prevent the large number of black people who were being
forced off white-owned commercial farms from settling in the
cities. Its current population could be around half-a-million
people, but in this artificially created entity few of them
have jobs.
Its workers either take work contracts, which force them to
live away from their families for months on end, or else
they shuttle between KwaNdebele and Pretoria every day to go
to work.
This second option means four hours of travel in the
morning, out of the so-called homeland to the white city,
and another four hours back again in the night.
They leave home at 3 am and return at 9 pm a qualitatively
different experience, you can imagine, from travelling
minutes by coach between a downtown luxury hotel and an
international rugby or cricket ground.
This extraordinary daily movement of people requires buses,
and in the 1988-89 South African budget the sum of 400
million Rand was appropriated to subsidise the buses that
service these people.
In the same budget, the upgrading of residential housing in
black areas received 106 million Rand about one quarter of
the bus funding.
So apartheid doesn't fund industrial development near major
population centres, it doesn't care about social dislocation
or even the standard of housing: it subsidises buses!
And just as strikingly, apartheid's priorities for providing
for its people lie well below its priority to maintain its
armed forces. The South African armed forces account for
per cent of the South African budget, or some 5 per cent
of its GDP.
In the degree of Government intervention, in the stark
inequalities between the living standards of the white elite
and the black majority, in the distortions of its financial
institutions, apartheid represents a fundamentally
inefficient and internally contradictory system one that
is utterly incapable of meeting the demands of the
post-industrial interdependent global economy.
As the authors put it in a masterful understatement, " the
politics of race have introduced distortions and the
misallocation of resources on a scale that is now making for
most interesting developments."
This of course leads to the second great theme of this book.
Sanctions do work.
Keith Ovenden and Tony Cole demonstrate that the embargo on
loans to South Africa that has been in place since the
crisis of 1985 has been the most effective tool of
international pressure in forcing the South African
Government to consider reform.
It has, they argue, had the effect of restricting economic
growth in South Africa by forcing a continuation of capital
outflows, and compelling the regime to generate current
account surpluses.
The follow-on is clear: with a desperate need for new
employment opportunities for a rapidly expanding population,
low rates of growth will mean declining standards of living.
And, as Ovenden and Cole put it, while South Africa clings
to apartheid, and while financial sanctions persist, South
Africa's freedom of financial and budgetary manoeuvre will
be steadily reduced.
So internal pressure for reform by the oppressed black
majority, the economic cost of maintaining apartheid's
grotesque structures and the international credit squeeze
have combined to bring about a fundamental economic
instability an instability which the South African
Government is unlikely to rectify unless it commits itself
to wholesale political reform.
For this assessment we have not only the evidence offered by
the economic data and statistics produced in this book, but
also the expressed views of white South African leaders
themselves.
On 5 May this year, Finance Minister Barend Du Plessis said
that austerity measures were necessary to enable the
country's foreign exchange reserves to withstand what he
called " the economic onslaught against South Africa"
A few days later, South African Reserve Bank Governor
Gerhard de Kock acknowledged in a public speech that
international pressures, particularly financial sanctions,
had crippled South Africa's ability to deliver sustained
economic growth.
This trend could not be reversed without " adequate progress
in the field of political and constitutional reform"
" South Africa's economic future", said de Kock, " is
inextricably entwined with its political future".
So the message is getting through.
The third theme of this book is that the world-wide
revulsion against apartheid has been a vital source of this
pressure for change in South Africa.
The authors argue that it has been the pressure of churches,
shareholders, clients and customers, public and private
bodies, indeed, ordinary citizens throughout the world which
has persuaded, if not compelled, major financial
institutions, multinational conglomerates and other
companies to stop doing business with. apartheid.
Theirs is a convincing argument and it is a welcome one.
Ladies and gentlemen,
I began by talking about how the Vancouver CHOGM took place
against the backdrop of the 1985 financial embargo on South
Africa. It is clear the Kuala Lumpur CHOGM which takes place in
October will have before it the next step in the playing out
of South Africa's financial difficulties the June 1990
crunch point when the current agreement for bank loans
expires and when a number of bonds require repayment or
rolling over.
It is my very strong hope that the financial community will
maintain the pressure that has so far proved such a powerful
force for change in South Africa and that public opinion
will continue to exert its constructive influence on this
process. I hope too that the Commonwealth will use all its influence
to ensure that pressure is maintained.
we could have hardly hoped for more powerful ammunition.
with this book, we can deliver even more confidently to the
world our message about the efficacy of financial sanctions.
Economic and financial sanctions should not just be left to
the judgement of the market place.
Government action has an important and legitimate role to
play in this process.
As the Commonwealth has shown, governments can be effective
in taking a lead through regulating trade activities,
through drafting codes of conduct for business, and through
examining other sanctions in driving home to white South
Africa that while it practices the policies of apartheid, it
will be at the margin of the international community.
In the end, what we want to see in South Africa is reform
real reform.
Nothing less than a complete and total abandonment of
apartheid, nothing less than the full participation of all
South Africans in every aspect of South African life, will
fit the bill.
Recent signs that the South African Government may be
willing to negotiate are encouraging, but as yet they have
delivered nothing.
Certainly there are no indications that apartheid will be
abolished.
Until a meaningful reform process is in place a process
based, for example, on the principles put forward three
years ago by the Commonwealth Group of Eminent Persons
South Africa should expect the international community to
condemn its behaviour and examine ways in which pressure may
be brought to bear against it.
AS I said in opening the current meeting of Commonwealth
Foreign Ministers, sanctions are adopted with a sense of
regret, with the aim of bringing South Africa to its senses,
not to its knees.
They are not a form of punishment rather, if carefully
targetted, they are an effective way in which we as an
international community can apply pressure to encourage
change in South Africa.
Australia has adopted the full range of sanctions, including
financial sanctions, agreed to by Commonwealth leaders at
recent CHOGM meetings.
Obviously the impact of these measures on South Africa would
be far greater if they were adopted also by South Africa's
major trading partners, and in the past two years I have
personally written to the leaders of those countries asking
them to consider adopting that course.
Sanctions are supported by the leaders of black South
Africa: Archbishop Tutu, Nelson Mandela and Oliver Tambo.
Yet despite this clear endorsement, despite the demonstrated
effect of financial sanctions in particular, there is still
frequent confusion surrounding the debate on their
desirability. This book will, I can confidently predict, help to disperse
that confusion and will substantially increase public
understanding about this important issue.
I am pleased that Gareth Evans took the initiative in
encouraging this project, and I am proud of my Government's
involvement. This is a well-crafted book that represents an invaluable
contribution to illuminating what is surely one of the most
vital issues of our time.
7.
It is fitting that it should be launched in such
distinguished company today, among a group of people who
through their work on the Commonwealth Committee of Foreign
Ministers on Southern Africa have done so much to lead
international debate on South Africa.