TERESA CLARKE: Good afternoon and welcome to today's Council on Foreign Relations meeting. Before we get started, just a couple of housekeeping announcements. We'd like to ask you to completely turn off your cellphones and Blackberrys and any other wireless devices, not just put them on vibrate. If it's not keeping you alive, please try to just turn it off. As a reminder, this meeting is on the record.
NICKY OPPENHEIMER: Yep.
CLARKE: Mr. Oppenheimer, would you like to deliver your remarks?
OPPENHEIMER: Me to go? Very good. Well, ladies and gentlemen, it's a great pleasure for me to be here, to have this chance to talk to you and then have a conversation afterwards and then answer some questions.
I'm very lucky that I've got my son Jonathan here accompanying me, because it means if any of the questions are too difficult for me to answer, I can delegate to him. It's one of the great things of being the oldest in the family.
But it certainly is a great pleasure for me as a proud South African -- and I am really a proud South African -- to be here today at the Center for Foreign Relations (sic). And I appreciate the opportunity to share some of my ideas about Africa and what Africa can do in the future, particularly taking into account the very uncertain world in which we live today.
And I believe that the recent crisis that the world have been through has given us in Africa an opportunity to look at how we do business and to think about the future. And it's a future which we aspire to, which needs to be grounded in fairness, integrity and sustainable development as opposed to greed and cronyism, which has all too often been the case in the past.
And I believe a key factor for the future will be the role played by that partnership between the private sector on the one hand and government on the other; the government creating the playing field in which private sector will then be able to flourish. And for the politicians to do that, particularly in my continent, it requires them to be leaders of character and leaders with a vision for the future, not for the next minute.
And really, it's interesting to reflect back when you say the world's been through this extraordinary financial crisis. But actually for us in South Africa, there was a worse crisis before that. And that was the moment when the apartheid regime morphed into a true democracy and the time when the ANC was recognized and returned to South Africa. And there was every potential in that situation for a really desperate situation.
And there, we in South Africa were blessed to have a true leader in Nelson Mandela to get us through that very difficult time, somebody who could talk for all South Africans of every color.
And so I think leadership, as you will see as I go on, is hugely important all the time. And then as we think about the future and how to drive the growth which is so important on a continent which has an ever-increasing young population, a young population who are looking for jobs, then we need to look back to the past, what was good and bad in the past; and if we then understand what was done then, I think we can build for the future and hopefully avoid the mistakes of the past that held us back.
Now, I've recently found a new hero in my life. And that is a man who's probably well known to you here, Russell Ackoff, who is now sadly no longer with us but was the business professor at Wharton School. And I've really enjoyed reading his works. One of this things that he says in one of his books resonated with me; and particularly, I think, for Africa. And he said, all too often when a business or country has a problem and they realize they have a problem, they fix it or they try to fix it by doing what they're doing better. And it is better. Things are better. But it's still wrong. And you've got to appreciate there comes a time where you've actually got to do something different. And I think that's where we are in Africa today.
And so in the hope that we can indeed learn from our past, I have some points which I think are relevant to the future of our -- my great continent.
And one of the first things to do is something that has flowed from the economic problems of the world. And that is we need to guard against what is a sort of insidious siren song that is sung in the background today. And that comes as the great economies of the world battle to assert the necessary fiscal discipline to overcome the spiraling deficits. There is a sort of feeling that the world -- an open world economy is maybe not quite the best thing for everybody.
And I think that's something, speaking as an African from our continent, that I hope everybody will firmly reject. For without an open world economy, there is little chance that we in Africa will be able to grow at the rate required to provide employment and growth for our population. To my view, there's no doubt that globalization is a huge force for good and that international trade and flows of real investment across borders are drivers of growth and in no way bear any responsibility for the crisis we've come through.
Any move to greater protectionism would no doubt harm the developed world. And there's no doubt that if that were to happen; while the people who are protecting themselves might see some short-term gain, in the long-term they will find that they're bitten by that as well.
Emerging markets need access to wealthy trading partners such as the United States and Europe. And -- but, however, it's certainly no one-way ticket, because the developed world also needs the resources of Africa; and not necessarily only mineral resources -- agricultural resources as well. And so there's bound to be benefit for both sides if the world is open and accessible.
And I know that calling for an open and accessible world also means that we, the people of Africa, need to play our part as well, because we're not blameless in that process when one talks about free trade. Free trade in Africa is as important as free trade around the world. And that brings us back to the need for true leadership in the political sphere within the African continent. And those politicians will need to create an environment in which the private sector can flourish.
It seems to me that all too often in the commodity boom we've seen in the recent years, the revenue flows from those commodities have allowed fundamental flaws to be hidden. It comes back to Russell Ackoff's saying. But I think it would be dangerous to assume the commodity boom will be with us forever. So a proper, secure foundation for the future is what is needed. And if I may say so, when one looks at Botswana, a country in which De Beers is in partnership, producing diamonds in Debswana, is a remarkable example of a country that has used the windfall from those resources to build a country for the future and to the benefit of all Botswanans.
It's also -- there are other lessons to be learnt from the financial crisis. And one of them, I believe, particularly in Africa, is that we must do nothing to hinder the emergence of an effective fiscal institutions and bodies within our continent.
And it was great that last night, we were honoring the -- Donald Kaberuka, who's chairman of the African Development Bank. And that is an example of a development bank which got into all sorts of problems, but is now playing a really important role within Africa.
For without reliable banks and efficient credit markets, Africa, like other -- some other developing regions, will remain poverty-stricken and dependent on unrefined commodity exports and allowing those to hide, as we say, the flaws.
But to foster these fiscal assets, there has to be a sense of fair play and fair return within the banking sector, which hasn't, as we all know, always been the case. If we succeed in building a fair banking sector, private enterprise will follow. And we'll invest and we'll be prepared to take the risks of business, which is private -- the private sector's task.
However, the private sector also needs to think about itself and look at its methods of doing business. In Africa, I believe good corporate governance and social investment needs to be more than just a slogan.
Forgive me blowing the family trumpet for a moment, but my grandfather, way back in the '50s, for De Beers and Anglo American Corporation, both of which he was then chairman of, had a theme which was bashed into all of us who work for those great companies, and that was that doing business, you had to make money. That was the first step. You didn't make money, you went out of business.
But you had to do it in a way which made a long-term -- long-term's important -- contribution to the peoples, the regions and the countries where you operate. And I believe that's hugely important when you look to do business in Africa. If you don't do that, you will fail.
So business must act in sync with the world in which it lives, and not in its own little bubble of careless ambition. Investments must be seen as generational, long-term, and not driven by the impact they may have on the quarterly results reported by any company. Ethical capitalism has to be the right way forward, and with it, the countries of Africa will grow and prosper.
Now, the sound economic policies that many African countries have adopted also need to be reinforced continually. And the key health and educational and infrastructural programs and expenditures that they're apparently doing need to be encouraged and maintained. For doing so will not only assist in creating the conditions for long-term and positive economic growth, but also allow the large, young, unemployed populations of -- which fill so many of Africa's countries, to join and to be part of the formal -- the economy.
For Africa to prosper, we must not abandon any of the market-related reforms, which have created and acted as key drivers for growth.
For the successful development of nations around the world, as I say, good governance, open markets and strong institutions are vital for development. And these factors need to be sold to the domestic populations within my continent by its leaders.
We need to build a coalition for growth within Africa between governments and private sector. And again, looking at the diamond business, if I can take an example from there of the Kimberley Process, which is a very unusual combination of governments, private sector and NGOs to give assurance about diamonds, I believe that is a good example of what we need in the developing world. We need a coalition between these unusual bodies. And with that, we will then be able to prosper indeed.
Now in Africa, we talk about how a pride of lions works and lives and prospers. As you all know, no doubt having watched lions on all the television shows, they work co-operatively to make sure they can secure food and live well. What we in Africa do is like to compare that with the Asian tigers, which are very solitary animals and do their own thing.
And for the pride to prosper, as I say, they have to work together, but they also have to be competitive. And competition is the life blood of economic growth. And growth, in turn, is the linchpin of social harmony and political stability. So it all comes together. And we in Africa need to be competitive, and we will then in turn be economically robust. We need to integrate with the global economy, and thereby reduce our economic vulnerability and increase growth.
I'm pleased to say the Brenthurst Foundation, which my son Jonathan is very closely involved with, has done a lot of work on competitiveness. And it is indeed an area which needs thought and debate. I believe if Africa indeed signs up for this growth and competitive philosophy, then Africans' lions will roar and will be heard round the world. And they will provide the interdependent network of jobs, security and the free passage of trade and economic growth which will assure our continent's future.
As the Spence Commission on Growth and Development points out in its report last year, fast sustainable growth is not a miracle. Rather, it is attainable for developing countries as long as you have the right mix of ingredients. The commission found that the countries need leaders who are committed to achieving growth, who can take advantage of the opportunities for the global economy. They also need to know about the levels of incentives and public investments that are necessary to attract the private sector to invest and take risk.
Critically, therefore, the long-term priorities of Africans' leaders should not change, but should be reinforced, even though the world is indeed uncertain, and goals associated with the promotion of competitiveness accelerated.
And this competitiveness requires political and macroeconomic stability, as well as social and environmental stability. And more important is what can -- countries can do together, including improving trade logistics and deeping integration. And I don't doubt that if we can do all of those things, Africa will grow and everything will be possible for our continent.
CLARKE: Great. So, Nicky -- can I call you Nicky?
OPPENHEIMER: I would be appalled if you did anything else.
CLARKE: All right. Well, you know that there was this article in The Wall Street Journal on Monday that spoke about the U.S.' need to catch up with the rest of the world in terms of investment into Africa. Do you think that the U.S. can catch up, or has there been a first-mover advantage or land-grab by China and others that would make it difficult for the U.S.?
OPPENHEIMER: I think the U.S. is behind the game, if I can call it that. Of course it can catch up. America is a country of entrepreneurship and great business leaders. But I think it's important that people here realize that America doesn't come without baggage. It's not very popular in Africa. And why is it not popular? It should be popular in Africa; it's done all the right things to be popular.
But I have a view that, you know, if you're the largest and most powerful country in the world, people don't look on you with great love. But they look on you with admiration, if you do the right thing. I think America needs to think, when it does business in Africa, as I say, in the long term -- business has to be generational in Africa, in the Africa context.
And the businesses have to do business in a way, if I may be so bold, to meet my grandfather's dictum to us all: You are only going to succeed if you do business which makes a fair and proper long-term contribution to the regions and the countries where you operate. You are behind China -- I'm not -- I don't believe that China, actually, meets my criteria. And my belief is that in time that will become a hindrance to them. So the opportunity is there. But one's got to think how you grasp it.
CLARKE: Let's talk about one of those particular opportunities, and that's Wal-Mart. In your remarks you referenced the fact that African governments have to do their part to facilitate inward investment into Africa. And we know that Wal-Mart's acquisition of Massmart was just approved after rather protracted discussions with government and labor. And so I'm curious to know your views on both how the South African government facilitated that inward investment, and does Wal-Mart meet the criteria you just established for that long-term thinking?
OPPENHEIMER: I think it's important to say that -- I mean, there was a lot of comment -- but the body that actually studied the Wal-Mart/Massmart was the competition board. So it wasn't actually the government. The government wasn't going to opine; the competition board opined at the end of the day.
And to the credit of South Africa -- you may have said that the unions took an extreme line, and the -- (inaudible) -- maybe went too far, but it was all -- the competition board is a public hearing, it was all done in an above-board open and transparent manner. And at the end of the day, I believe the competition board did the right thing. And that was to approve the deal, with some conditions which obviously Wal-Mart found livable-with.
I think Wal-Mart when it comes to South Africa, I hope will indeed follow that trait of saying, we're here for a long time. How do we create a presence which is acceptable? How do we deal with the unions and the government, both which you will have to do?
But I think the right answer came out. The process was overly long, and some of the -- some of the people who raised objections seemed to me to be rather pedantic. But at the end of the day, the competition board gave the right answer.
CLARKE: Good. In your remarks you also talked about the importance of leadership, and the importance of leadership among Africans in order to achieve this vision for the lions to roar. In 2006, the Mo Ibrahim Foundation made a very large announcement about the prizes that they would give for good governance. And as you know, only too well, the last two years they haven't been able to find an African leader to whom they could give this prize. What does that say about the potential to achieve the roaring lions?
OPPENHEIMER: First of all, I mean, to say about Mo Ibrahim, I think it's -- he's a great African success story. And it's fantastic that he created this prize. And I think it is a worry that he's looked through Africa and hasn't been able to find a leader who he thinks meets his criteria. And I think that's a worry for all of us.
On the other hand, as I say, I think there is no doubt that within Africa there's a huge amount of talent and entrepreneurship. I don't think Africa gets as much credit as it should have on the world stage. People tend to think of us as coming from the dark continent, where nothing good goes on. That's not true. A huge amount of, as I say, entrepreneurship goes on.
And certainly in South Africa, in the government, there are people of real talent. Like any political society, not all politicians have real talent. And some of them behave fairly strangely, as I've seen coming here to America. (Laughter.) But I mean, for example, if you take the current leadership of the IMF -- I personally would see Trevor Manuel, the ex-finance minister of South Africa, as a real credible, serious candidate.
I worry that he doesn't get the credit that he's due for somebody who joined the government -- a government which was of a left-wing persuasion, should I say, and who you might have expected to take a left-wing financial view on life. And yet he persuaded the ANC and led South Africa as it grew and as it was business-friendly.
So I think he has great attributes, but I'm not certain he, as I say, gets the credit. So more Africans need to get onto the stage, and to be seen, and to be judged for what they are.
CLARKE: OK. Talk for a moment about your joint venture in Botswana. We've talked a little bit about the U.S. need to catch up, we've talked a little bit about China and the fact that you don't think that China does it exactly the way you would do it, but many people look to Debswana as a model public/private partnership. What do you think were the conditions necessary for that partnership to flourish?
OPPENHEIMER: Commitment from both sides. I mean, as we say, this is a partnership in Botswana, which is in Debswana, a company owned 50 percent by the government of Botswana and 50 percent by De Beers. And obviously diamonds within Botswana is as important to it as oil was to Saudi Arabia.
And what the government there has been extraordinarily prudent and sensible, and it's used the flows of money that have come out of the diamond business to build road, schools, hospitals, universities and to develop the country. And I think, as you say, they are a great example of what one can do.
And what's a great thing about Botswana is it's relatively, because you can never be -- you can never use an absolute in these terms, uncorrupt -- if that's the right word -- incorrupt.
And just an interesting aside there, I was sitting like this with the past president, President Mogae, of Botswana and somebody from the floor said, why is Botswana not corrupt? And he gave the right answer. He said, you know, before diamonds were discovered in South Africa, Botswana was an extraordinarily poor country. The only export we had were people who we sent to South Africa to work, and he said, there was nothing to steal so there was no point in being corrupt. (Laughter.) And he said, then diamonds were discovered, and we became rich, but by then we got in the habit of being honest. (Laughter.) And I like that. (Chuckles.)
CLARKE: Let me press you some more about Botswana. It is an unusual partnership, and often the private sector is skeptical of government, and government is skeptical of the private sector. And so how do you work well with a partner like government that can often -- government everywhere can be overly administrative, slow to take action. How does a large, nimble organization such as yours work with government hand in hand?
OPPENHEIMER: You have to talk to them continually. And I mean, part of the problems with government is governments haven't changed in Botswana, the government haven't changed, but personnel in government change at regular intervals. And so you can find somebody who's the permanent secretary at the minister of mines and minerals and water affairs, who's your contact man, and you can talk to him about the diamond business, which is a sort of somewhat strange and obscure business. And just as you think he's got the message, he's moved to some other important place, and you get somebody newer. That doesn't help, but it's something you have to keep on doing.
And you find over time the country as a whole comes to understand the business, and it's not just -- you have to talk at all levels from the president to the ministers to the permanent secretaries to the lower bureaucrats. It's -- you know, it takes time. But it's a -- it's worth doing, and one should say there.
But at the time, I mean, as an example of how Botswana has come to understand the diamond business: At the time of the economic downturn in 2008-9, obviously demand for diamonds dropped dramatically because diamonds are bought with disposable income, and everybody (became ?) a lot poorer than they were in the past. And we went and talked to the Botswana government about this, and we came to the view that the right thing to do was to lower production to take us through these difficult times, and the Botswana government was absolutely happy to close its mines. And by "close," I don't mean shut down; I mean "not produce." They kept all their labor force on, they paid them salaries, they did maintenance and whatever, but actually no diamonds were produced for three months.
Now, the Botswana diamond mines are the lowest-cost diamond mines in the world. And if that was the copper business or anything like that, you could see a situation where somebody would say, with a short-term view: Ooh, this is a great opportunity to drive everybody else out of business; I'll go on pouring the stuff out and to hell with everybody else.
But they didn't take that view because they understood that the diamond business is an unusual and different business, and they were happy to do that -- in an election year -- and I think that is an indication of -- of how we together have come to learn about the diamond business, learn about each other, and interact with each other.
We'd like to turn the discussion to the audience and invite audience members to ask questions. Please wait for the microphone before you speak, and speak directly into the microphone loudly, please. And when you get the microphone, we'd like to ask you to stand up, state your name and your affiliation, and please keep your questions and your comments concise to allow as many possible members to ask questions as possible.
So I see in the back -- I think that's Mrs. Whitaker.
QUESTIONER: Thank you for your insightful comments -- Rosa Whitaker. What do you see as the future vertical integration in a diamond industry? Because clearly that's one strategy that would provide African countries with even more value -- additionality. Vertical integration -- and there's been some talk about establishing a fair trade system in the diamond industry in Africa, and what's your view? Is that feasible, or is that a pipe dream?
OPPENHEIMER: No, certainly, I mean, any country as we so -- as everybody says, beneficiation as it's called is something that applies not only to diamonds but to any mineral produced. One likes at the point of production to realize the maximum value, and diamond producers are no different. They would like to do that, and that's something we in De Beers absolutely understand and support.
The difficulty -- I mean, the tension there -- is the fact that diamonds are not a uniform product. You can get a diamond which is worth 10 cents; you can get a diamond of exactly the same size, which is worth a hundred dollars. Now, with a diamond of 10 cents, clearly the definitive thing about whether you can polish it and put it in a piece of jewelry is the cost of polishing, and there India and China have a huge competitive advantage. More expensive diamonds, where the cost of production is not so great, then the advantage is not so great.
And so a balance has to be found between those diamonds which can be economically beneficiated in that country of origin and those which can't. And I think that's something that is being worked out as we speak, and there will become a natural balance.
A fair trade is -- I mean, it's sort of, I mean, it's part of the Kimberley Process which goes some way to trying to do what you are suggesting. And that is give assurance to consumers that when they buy a diamond, they're buying a diamond which hasn't -- well, the Kimberley Process was brought into existence to deal with civil wars in West Africa, and so at the time -- and blood diamonds -- at the time the desire was so people would know that, if they bought a diamond, it wasn't a diamond which had bought a gun or a grenade for some rebel.
And I think people who buy diamonds -- and the world is becoming ever more transparent -- look for assurance because they invest in diamonds a huge amount of emotion, and they don't want to invest that emotion unless they feel that what they're buying is the real thing and something that has contributed properly. And I think that's right, and I think they should -- that's how they should behave.
CLARKE: The gentleman in the front.
QUESTIONER: I'm George Ward from the Institute for Defense Analyses. My question is about the African middle class.
A number of recent studies have claimed that the African middle class is growing, have cited this as a factor for stability on the continent and a very hopeful sign. Others have said actually that the -- those studies that say the middle class is growing have sort of doctored the figures by including too many people in the middle class and that in fact the African middle class is under an impressive amount of pressure because of the cost of basic commodities and food and so forth.
So my question's really twofold: First, what is your take on it? Secondly, what do you see as the role of the middle class and what are the things government and the private sector ought to be doing to foster this important force for stability?
OPPENHEIMER: I think your first statement, that the middle class is growing throughout Africa -- and particularly where I live in southern Africa, if I can call it that -- South -- it's absolutely growing. But there is another pressure which is also growing as well.
And the two are, in a sense, in conflict. And that is the very substantial, extraordinary young population which is coming forward. And there are young people who are finding it very hard to find jobs. I mean, in South Africa, you know, the figures are very woolly but, I mean, they may talk of 25, 30 percent unemployed in that region.
And so those are people who are not seeing the benefits of growth. And those are the people who you've got to absorb into the economy. As I said, the middle class have a huge role to play. And as I said earlier, I think Africans are extraordinarily entrepreneurial. And if you give them the opportunity, there are people who will start small businesses; and small businesses will flourish. And they're traders; they have great talents.
But those people have got to create jobs. And so business -- so the governments -- what government has to do is create the environment in which jobs can be created. And if can talk for my own country, South Africa, I think that's something the government in South Africa struggles with. They're torn between on the one hand wanting a system of protecting the lower class -- I mean, the people who are in employment, making sure they're not exploited by their employees, which again is quite clearly the right thing to do. But you have to pitch that level at a point which creates -- which allows entrepreneurs to grow and create employment.
I believe in South Africa we've got it at the wrong level at the moment. And if the government there, as it says, wants to create jobs -- they talk of creating 500,000 to a million new jobs in South Africa -- that will only be possible if the labor laws are adjusted.
QUESTIONER: Witney Schneidman, Schneidman & Associates. Nicky, thank you very much for the great presentation. I'd like to ask you about Zimbabwe, a country which you know well; and to talk for a minute about a post-Mugabe Zimbabwe, not when we might get there, but what it might look like on the other side, and what should Zimbabwe's partners get ready to do most quickly to help that country get moving back on the road to its great potential?
OPPENHEIMER: Well, I think, as you know, I'm a -- I'm a great lover of Zimbabwe. As a family, we actually own a substantial tract of land in Zimbabwe, and still sort of own about half of it. (Laughter.) But I've always had a -- thought Zimbabwe always in the past had a great advantage in Africa, and that was that its population was extraordinarily well educated. And that's a very important thing. And the other advantage it had in the past was that it always fed itself; well, that it's lost temporarily. It's not something -- it's certainly something that can be reinstated again.
But post-Mugabe, I think Zimbabwe is a country which indeed will be a country of opportunity. And I think what the world will need to do is to look carefully, and to see where you can make investments. There will be huge need for infrastructure reconditioning establishment. And I can see a situation -- I hope I'm not wearing too rose-tinted spectacles -- where Zimbabwe once again is a shining light for Africa of an educated population, an entrepreneurial population.
Things are not good at the moment. But I think it's very close to the tipping point.
CLARKE: Right behind him.
QUESTIONER: I wonder if you would reflect for a moment on events in --
CLARKE: Can you state your name?
QUESTIONER: Oh, I'm sorry. I'm Dan O'Flaherty with the National Foreign Trade Council. I wonder if you'd reflect on the refraction of events in North Africa on sub-Saharan Africa, and the extent to which you see any opportunity for similar events taking place on the continent.
OPPENHEIMER: Well, let me -- let me actually give you a different reflection first of all, is, I think people south of the equator, if I can call it that, look in a degree of concern about what's happened in North Africa, where you've seen people -- ordinary people, who seem to have suddenly decided that we want a more normal life than we've had in the past. Now, that's much to be applauded.
But however, there is a factor flowing there which is -- sounds illogical, but it is there, and that is, particularly with what's going on in Libya, many people in Africa see that as the Americans, the Europeans, trying in some obscure way to recolonialize Africa. Now, as I say, it's completely illogical, completely wrong. But there is a sort of feeling there that Africa should resolve Africa's problems.
Now, the problem with that is Africa generally has resolved Africa's problems by not doing anything. And one's seen a situation up in the -- in North Africa, and as I say particularly Libya where there's a conflict, where people are finding this very difficult to handle.
But I think it's -- what one's seen in North Africa is a lesson for all, for the whole -- for everybody, and that is, that in today's world where you can send images down telephones -- not always, as I said, really the right sort of images you normally sent down telephones -- but images of the real world; you can see the world; the world can come into your room and you can see what it's like -- it's going to make it extraordinarily difficult for regimes to maintain dictatorship, for want of a better word, unless they're prepared to kill their own population. If they're prepared to do that, then they can most probably maintain the situation. But is that viable in the long run? I don't think so. I think what's happening in North Africa is a lesson for all of us, that you've got to engage -- the politicians have to engage their population. They have to be able to show to them that life is getting better and that they can -- and even if life's not actually getting better, that you can aspire to do things differently.
QUESTIONER: Barry Wood, moneyweb.com in South Africa. Mr. Oppenheimer, just to pick up on what you were saying about Trevor Manuel, the government in South Africa has not put his name forward. I mean, that's the reason that he's not a candidate, at least officially with the IMF; despite Mr. Gordhan, the finance minister's saying so.
But my really -- question is, if you look back on that delicate time in '94 that you refer to, what's the scorecard you give South Africa in terms of governance during this period? And do you worry about nationalization?
OPPENHEIMER: I think if you look from '94 to today, when you look at what the potential might have been, South Africa's done unbelievably well. And under -- with Trevor Manuel and -- as the minister of finance, I think from a fiscal point of view, we've done well, too.
At the moment, the government in South Africa is, to my mind, not leading as strongly as it should. It's not giving the leadership to the population at large. And that I think is of concern. And it's illustrated by some of the political debate we see in South Africa at the moment, which is sort of more internal to the ANC and less what's -- where's South Africa going. And that allows sort of strange things to come to the surface, like nationalization.
I think nationalization is a debate that any normal businessman is only too happy to have. I mean, I would be happy to sit down and debate with anybody about nationalization, because it's a no-brainer. And we've seen the examples round the world of how government running businesses have universally failed. And I believe that would be the -- if there were to be any reality to the debate about nationalization in South Africa, I think you only need look at the current parastatals in South Africa and think how well they're being run. So actually it's not something that worries me greatly.
Sorry. Just on the Trevor Manuel thing, I absolutely agree with you. I don't know why our government isn't up there trumpeting his name to the heavens.
QUESTIONER: My name is Deirdre LaPin. I'm with the University of Pennsylvania. We've talked this morning about how education, health and infrastructure are very largely preconditions for creating the kind of private sector growth which is necessary for Africa to expand economically. At the same time, there is the need to employ a large number of youth whose unemployment poses a tremendous risk to the continent.
Many have suggested that a works program, a public works program, created by government or perhaps government in association with private sector, would be one way of providing the health, education and infrastructure which is necessary for growth. What would be your view?
OPPENHEIMER: No, I think -- I mean, quite how one does such a thing -- I think that it's not foolish at all. And interestingly enough, South Africa as a country came through the 2008, '9 economic crisis of the world in much better shape than most, and why? Because we were building stadiums for the World Cup. And so huge numbers of people were employed in the construction industry doing that and upgrading roads and the airports and getting everything ready for the people who were coming to visit for us.
So there is something to that. And certainly I think that the fact of giving people employment and giving them some training, so that they have some skills, is really tremendously important.
QUESTIONER: Hi. Megan Curtis (sp) from the U.S. State Department. As you know, our secretary of state is headed out to Zambia this week to go to the AGOA Forum. And I wanted to ask you -- you know, we haven't seen quite the growth under AGOA that we had hoped to see, and I'm curious to know your opinion of what are the key constraints. Why haven't we seen that growth, particularly in sectors -- non-natural resource sectors? And what can we do to breathe new life into this agreement, which is facing expiration, particularly -- I think there's a -- in 2012, the expiration of the Multi-Fiber Agreement, which will have pretty substantial effects.
OPPENHEIMER: Yeah. Now, well, I should say James Suzman, who works with De Beers, who came with us to this thing, said somebody might say something -- and he said: For heaven's sake, don't say that's -- what's that? A fish? And -- (laughter) -- and all I can say is that the closest to get -- but where it somewhat like a fish, it's something that's extraordinarily difficult to wrap your hands round. (Laughter.) It sort of slips out all the time.
I think it's a hugely important bilateral agreement. And as you say, it hasn't, to my mind, delivered the benefits that it should have. One needs to analyze what -- why that is, but not give up on it. And I think one should be working really hard to try and make this work for Africa, and I think it would be for here as well.
QUESTIONER: Sean O'Brien (sp), O2 Group (sp). As one of those entrepreneurs that likes to cross the globe, one of the biggest issues I find consistently are government offset programs, and I've turned away many a deal because of the offset programs. I'd be curious to hear some of your criteria that you at when looking at government offset programs.
OPPENHEIMER: Well, I -- as I say, in my business, I -- offset programs seem to come with mainly arms deals -- (chuckling) -- as far as I can see. And I'm not sure what business you're in, but as far as we're concerned -- (laughter) -- I don't think -- I don't think one goes -- one -- I'm not a believer in an offset program, per se. I am believer in businesses making a clear -- and living up to that -- commitment to do things in the countries where they operate.
And that may mean that your profits are not as high as they would have been if you didn't. But you're actually investing in the future, and that's particularly true in the mining business, where you're talking a very long-term deal and where you want to be for -- you know, if you have a decent mine, 40 years-plus.
And then you've got -- I mean, to do that, the people on the ground have got to like you, and they got to know that you're good, honest people with the best interests of the region and your employees at heart. And if you can do that, then they're your constituents. You, in a sense, I think, in -- by operating in a way which is constructive and helpful, you've got to make your employees your first constituency. They're the people who've got to the government and say: Hang, this new tax you're proposing is not sensible -- because if we the company goes, that doesn't have any traction, but if the voter goes, that has traction.
CLARKE: Take one in the back.
QUESTIONER: Thank you, Teresa. Jendayi Frazer, Council on Foreign Relations and Carnegie Mellon University. I'm wondering, Mr. Oppenheimer, if you could tell us what you think about the BEE in South Africa, Black Economic Empowerment, and particularly your company's experience with it. Is -- has it delivered the results that were expected? Does it need to be adjusted in some way? Thank you.
OPPENHEIMER: Yeah, absolutely. I think Black Economic Empowerment, the decision that all South Africans -- or black South Africans -- sorry -- should come to own a portion of all the different public companies in South Africa is completely understandable and absolutely right.
The way it was done -- has it achieved the objective that it -- was intended? The answer is clearly no. And what it has done -- rather than making people feel empowered, it has made a few people rich and actually made other people feel jealous about the people who were rich.
And I think this is understood by the government in South Africa, and actually if they -- I think they're working towards trying to find a different way to -- because the -- what they were intending, the intention is -- as I say, is absolutely right and the right thing to do. It's how you do it, and the way that they chose to do it, which they thought was right and seemed to be right, didn't have the impact it did have (sic).
I think we in De Beers had an interesting case there, because with our -- the deal for De Beers Consolidated Mines, our South African arm, what we did was that half of the empowerment we, in a sense, put into a trust for our employees, and I think that was much more sensible than giving it to individuals. And what's more, because of the racial distribution of our labor force, we were able to give it to all our employees regardless of color. And I think that was a sensible thing to do.
Sadly, with the world economy in 2008/'09, the deal itself doesn't look in very good shape. But in today's world where we're seeing diamonds coming back into favor and prices going up again, I think we'll find it will pay out.
And so (as you say ?), at the end of the day, the right thing, the wrong outcome; changes are needed.
CLARKE: I'm going to follow up on Jendayi's question because it's area of interest for me as well. This B-BBEE, which is now Broad-Based Black Economic Empowerment, has been a response to the problem that you've described, where it's enriched a few. Can you comment on how that concept has gone down?
OPPENHEIMER: Well, again, I mean, it's what -- does -- is it having the right impact? Is it resulting in broad-based improvements? And has it resulted in people feeling part of that broad base? Do they feel better for it? Do they feel that they're involved and excited about what's going on in the various businesses? I think it's a very difficult thing to achieve. And it's -- it -- I think it's something that requires continual review and adjustment. If you look at what happened in Malaysia, I think very much the same sort of view -- I mean, sort of things happened. It didn't sort of work, and then they had to sort of change it a bit. I think it needs continual review in this African context.
QUESTIONER: Molly Mitchell-Olds. I work for the State Department on the Kimberley Process. And you spoke about generational sort of investment in Africa. And then going back to the joint venture in Botswana, I'm wondering how you do that when we think ahead to sort of the Kimberlites running out of production in, I think it's 20-some years, and sort of how De Beers is going to engage with Botswana in working to sort of carry on the positive developments that have been happening and where you see that going.
OPPENHEIMER: That -- well -- (inaudible) -- any natural-resource business is a limited-life business. Every caret we take out of the ground is a caret less. I think -- and that's where I think the Botswana government has been sensible and prudent in using the money that has flowed from the diamond business to create facilities within Botswana. What they need to do is in the next step, I say, is create and attract businesses which are going to create alternative employment to the mining business. Luckily, they've got quite a long time to do that, but they need to be starting on that already. And so what the government there has got to do is -- very much is work on the environment which will attract people to come to Botswana. And that's not easy, because Botswana is a landlocked country. And how do you create that environment?
But if you look at Dubai -- and who knows whether Dubai will be successful or failure in the long-term run -- what they've done is much the same thing in a different sense. They went out to create an environment where people would want to come there. And they've by and large been successful, and they have lots of different businesses there now. They are -- they have the advantage of being a trading -- (inaudible) -- between Europe and the East, if I can put it like that. But a huge amount of work needs to be done.
De Beers for itself -- we're a company which is 120-something years old, which is very unusual for companies. And we certainly intend to be around for another hundred years. What it will mean is a hundred-years time, De Beers is not going to be -- necessarily be in the mining business. And so just as Botswana has got to prepare itself for the time when diamond mines in Botswana are no longer producing diamonds, so De Beers over the next hundred years has got to prepare itself for what it will be doing at that time. I hope to be looking down from the rafters and seeing what's going on. (Soft laughter.)
QUESTIONER: Hello. Elizabeth Becker. I'm a writer. I'd like to ask you about the national parks, the wildlife parks of Africa, the other great resource you have. And it seems that with all the pressure to extract resources, with the plantations being planted, that there seems to be a risk that they're going to diminish; the governments aren't putting the resources in to keep them. What are you as a private sector person and a philanthropist doing and recommending to keep those alive?
OPPENHEIMER: Yeah. No, I think the private sector parks -- I mean, not the private sector -- the parks throughout southern Africa and Africa as a whole are absolutely vital. And if I -- I mean, if I can give a puff to South Africa again, South Africa, in my view, is way ahead of the game of anywhere else with its national parks. There is always a danger of people wanting to encroach on the parks to extract natural resources. It's something we see in South Africa. We see it in the Kruger Park where people are talking about coal mines. And it's incumbent on the -- on the country as a whole to rise up and resist that.
And funnily enough, I think in the South African context, there's a pretty strong support for resisting the attempts of the mining companies to say that, you know, we should get into the park and put in a big coal mine or big manganese mine.
There -- I mean, obviously -- the other area, I mean, where there's a strong debate in South Africa at the moment is gas from -- what's it called -- somebody help me -- the --
OPPENHEIMER: Yeah, fracking of -- and shale, and doing that. And there's a very considerable groundswell of concern about that in South Africa, as there seems to be in many parts of the world, a concern I should hasten to add -- say that I share, because I don't think we quite know what it all means.
But people -- I mean, again, it requires the voters to actually be prepared to be mobilized to defend their parks against the potential rather narrow interests of some politicians. And I have every -- I mean, I'm confident in southern Africa that with the support of the world -- because, I mean, everybody in the world now knows about wild animals -- as I say, they see them on the television all the time and know what -- how special they are. I think this is something that is actually more important than almost anything and certainly more important than minerals.
CLARKE: We have time for one final question. And before we take that question, I'd like to remind everybody that this meeting has been on the record. Final questions? (Off mic) -- in the back there?
OPPENHEIMER: Have to -- have to make a wisdom of Solomon here. (Chuckles.)
QUESTIONER: I was -- I was on and off. Scott Taylor, Georgetown University. I have a question about branding, actually, and it was inspired by one of the initial comments that you made about being proudly -- a proud South African.
In the 1990s, it seemed that the trend was for -- particularly for South African corporations to -- as they ventured out of South Africa to de-Africanize, to minimize that African identity. And I wonder if now -- if you've seen an evolution in the past decade or so in that African identity of African corporations and whether they're coming back to Africa. Is Africa being rebranded, and what are the implications of that?
OPPENHEIMER: Well, as I say, I'm a great believer in maintaining your (last ?) and if you're out of Africa, you're from Africa. And actually, Africa lays a great hold on you, and it's practically, in my view, impossible to escape. The number of South Africans I find who've gone out into the world and they've established themselves and doing really good business and living a good life wherever -- and, you know, if you sit and talk about home, they get all sort of misty-eyed and concerned.
I think there are big opportunities in Africa, and I think companies -- it -- to be an African company gives you an advantage in Africa. And I believe that's going to be hugely important. And certainly we in De Beers -- I mean, we -- our minds are all in southern Africa, other than (two ?) in Canada. And -- but we believe -- we believe we're African, and we think that's to our advantage; and not only to our advantage, makes us feel good.
CLARKE: Before we conclude today's program, the council's asked me to announce the upcoming program on Monday, June 13, with Senator Jim Webb. And for more information about that, please refer to the insert in the back of your program.
Mr. Oppenheimer, Nicky, thank you very much. (Applause.)
OPPENHEIMER: Thank you.
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