Interview by Marshall Loeb; reporter associate Jane Furth

July 12, 1993.

A NEW ERA IS DAWNING in relations between the U.S. and South Africa. Full- scale trade and investment will soon resume, as Nelson Mandela calls for an end to all sanctions. Almost certainly, the charismatic leader of the African National Congress will become the first black President of his country after the first truly universal elections are held next spring. On the eve of his visit to the U.S. to receive the Liberty Medal, Mandela was vigorous and erect despite having spent 27 of his 74 years in South African prisons. He talked in Johannesburg with FORTUNE managing editor Marshall Loeb about the future he foresees for South Africa’s economy and the important role foreign business will play. Excerpts:

Q: What are your plans for the economy, and what kinds of foreign companies would you like to see come into or expand in the new South Africa?

A: We should look into two areas: the development of a manufacturing base and the development of an infrastructure in the country. Our economy has underperformed since 1975. Growth has been less than the growth of the population. Naturally we require foreign investment. I would not restrict it to any particular kind of company. What we are primarily interested in is development that creates opportunities for employment, because 48% of our people are unemployed. And we are therefore very keen for foreign companies to invest in such a way that there will be a creation of jobs for our people, a generation of wealth. All foreign companies that invest would be guaranteed against expropriation and nationalization. They will be able to recover their profits and dividends — all of them. We are guaranteeing every foreign company that invests in our country.

Would it be fair and accurate to have a headline in FORTUNE read: MANDELA WELCOMES FOREIGN INVESTMENT?

That is something I have gone out of my way to achieve. I have issued an express invitation to American businessmen to come and invest in our country. So that headline would be accurate. We have said that as soon as a transitional executive council is installed and as soon as a date of election has been fixed, then all financial sanctions should be lifted. We have already agreed on naming a transitional executive council and have set a tentative date for elections — April 27, 1994. Once that date is confirmed, we will make a call to lift sanctions.

There are about 160 U.S. states, counties, and cities that have restrictions on dealing with South Africa. How will you appeal to them?

We have already started a drive to get states and communities that have legislation to consider repealing it. Once the date is firm, we will go full steam ahead and urge them to lift those bans.

Should FORTUNE 500 companies start getting ready to invest in South Africa?

Oh, yes, the top companies are in the FORTUNE 500, and we would expect them to come in. I went to the U.S. toward the end of 1991 — to New York, Washington, Pittsburgh, and Atlanta. I invited businessmen in all these places to visit our country, to inspect investment opportunities, because I said a settlement is about to be achieved and we know that you need to do some research before investing. Now I am making that appeal again, and I do hope that by the time companies come it will not be a question of preparing for the future, but that the field will be open.

Many U.S. companies sold their operations to South African businesses. Do you want them to return?

Absolutely, that is what we are calling for. As far as we are concerned, the door is wide open. You must understand that part of the violence and instability in this country is due to the fact that there are no job opportunities for our people. Only 3% of those who finished school this year could find jobs in the formal sector. It is a serious situation, and it can be remedied only by massive investment in our country. That is why we are keen to review sanctions.

When the new government is elected, there are bound to be tremendous expectations on the part of people who have been dispossessed and deprived for so long. How can you meet those expectations?

We expect that the Western world will come forward and assist us. When Europe was devastated by the last World War, the Americans realized that they had a duty to help it recover. We are committed to democracy in this country, and in the interest of making democracy take root, we would expect Western democracies to help us with resources, to apply a form of Marshall Plan aid to enable us to meet these expectations. This is one of the things I hope to discuss with President Clinton when I visit Washington. The U.S. is the leader of the democratic world, and we would expect the Americans to lead in this regard. I will be meeting Mr. Clinton for the third time, and my earlier meetings suggest that he is a man who will not turn a deaf ear to this appeal.

You and your associates have spoken about pursuing an antitrust policy once in office. What would that consist of?

It is a matter of anxiety, or great concern, on our part that more than 86% of the shares on the Johannesburg Stock Exchange are owned and controlled by six conglomerates. We would like to prevent a situation where the market system is so severely curtailed. There should be competition. Our only interest is that there should be free competition, and you can’t have that when the market is dominated by one monopoly — or one group of companies — that is so strong that smaller enterprises do not stand a chance.

In the U.S., the telephone monopoly was broken up under pressure from the government. Would you envision that for the six big companies in South Africa?

We would hope that they will unbundle on their own. Although state intervention is something that is known throughout the world, we would like to avoid it except where it is absolutely necessary. Some form of intervention may be needed. For example, you have 85% of the population owning only 13% of the land, and a minority of 15% owning 87%. That is something that must be rectified, and state action may be necessary. We could do it without nationalization, without depriving individual owners of their land. There are vast tracts of barren land owned by the SADF ((South African Defense Forces)). That is absolutely unnecessary. We will be forming a democratic government that is committed to peace. We don’t need a large army or vast pieces of land. That land can then be made available for individual ownership by people who have been denied that opportunity. It can also be used to address the claims of people who were removed by force and to ensure that there is equitable distribution of land in the country.

What other steps can you take?

One thing we will certainly have to do is give people the capacity to take advantage of any schemes for land distribution. I will tell you how. The South African government was faced with a similar problem when it wanted to help Afrikaners compete against English companies. They created a land bank that gave loans on soft terms to aspirant Afrikaner farmers. Because capital was made available to them, they were able to acquire land and farm. We will have to consider a similar scheme.

Are there specific things American companies can do to help, such as selling franchises to black businessmen?

We will have to look into that. Any scheme that will empower blacks will be welcomed, but the exact details would have to be worked out. A big problem is that many of our people do not have the resources to establish businesses. That’s a problem our economists and financiers will have to sit down and address. I am not talking about ((only)) members of the ANC, I am talking about South Africans who have got the expertise, the skills to know just how to address this matter.

A number of American companies — Johnson & Johnson, Colgate-Palmolive, among others — stayed in South Africa despite the sanctions. Will there be any penalties against them?

Our whole position is that we should forget the past. Let us concern ourselves with the present and the future. Let us build a new South Africa, where there will be peace and mutual confidence among the various population groups. This is not the time for us to be thinking in terms of revenge, in terms of punishing anybody. We are saying let bygones be bygones.

What role do you see for international lending institutions?

We have been having discussions with the World Bank and the International Monetary Fund. I have the impression that they are willing to come in and help us as soon as we are able to invite them. And I take it that U.S. commercial banks are ready to come as soon as we give the signal that sanctions can be lifted.

Given the tremendous competition for investment in the world, why should any business invest in South Africa?

This country is rich in natural resources. We have a wide variety of precious metals, including gold. What has been neglected are the human resources — people who have been denied the opportunities for education and training. And once these resources have been developed, this place would be a mecca. South Africa can be a powerhouse for Africa, certainly for Africa south of the equator. Is the Western world interested in introducing democratic | values in Africa? It cannot be done with Africa in debt and its economy in shambles. South Africa can play a very important role in ensuring economic stability. That is why the West should have an interest in investing here.

Are you saying that the new South Africa will have 28 million black consumers who once were unable to buy almost anything?

Undoubtedly. There is a vast potential market, which just needs to be tapped.

Is there a role for joint ventures between South African and foreign companies?

Yes, we would welcome that.

Are there any sectors of the South African economy that you feel foreign companies should not invest in?

No. Our preoccupation is manufacturing and infrastructure, because these two areas will provide the most employment opportunities.

What do you mean by infrastructure?

We have many areas where there are no roads, where there are no schools, where there is no electricity, no running water. Infrastructure would also include ambitious housing schemes, because millions of our people are without accommodation. That is why the whole country is littered with what are called squatter camps, informal settlements.

How do you spread stock ownership among the people? Do you see companies distributing shares to employees?

I will not go into detail, but making shares available to everybody would be an important step in giving the people a stake in business. That is a move we will look at.

Have you any concluding comments on your dreams for the new South Africa and how business people can help?

We believe in a mixed economy, which is based on private enterprise and which would allow intervention by the state where it is suitable — where it is in the interest of the country and its people.

In the past you have been called a socialist. Now you seem to be moving to the center. Can you describe your position today?

I am neither a capitalist nor a socialist. I am a pragmatist. All that I want is that the living standards of our people be raised. Any strategy that will achieve that objective, I would support.