Recipes for real business leadership in South Africa
- Mark Heywood
- 04 Sep 2017 11:53 (South Africa)
On 23 August 2017 a caravan of captains of industry (although not as many captains as one would have hoped) trekked across the Ben Schoeman highway from Sandton’s golden mile to Alex’s still dark city. The reason was for the low-key but high-promise launch of Business Leadership South Africa’s (BLSA) new Contract with South Africa and its accompanying Integrity Pledge.
As evidence that this was the beginning of business-unusual the event took place in a community hall on the banks of the filthy Jukskei river, once upon a time a picturesque stream, now an urban cesspool which every now and again rises to consume a hapless child. From its stage, Bongang Mohale, the newly minted CEO of BLSA, unveiled the contract.
Sadly, its contents – while well meaning – were more whimper than bang.
Let me put my cards on the table: I want BLSA’s Contract and Pledge to be a turning point in the way the corporate sector conceives of its broader role, including the conduct of business, in SA. The two documents are evidence that some influential leaders in the business sector are trying to find a conscience. They are trying to persuade themselves (as much as others) that the corporate sector is a stakeholder with a genuine national interest and not just a self-interest.
But as I left Alex it was with a sense of disappointment. I had expected more. The problem, I realised, is that the Contract and Pledge are full of rhetoric and short on detail; packed with promise and lacking in plan. This is not to doubt the bona-fides of Mabuza, Mohale and crew. The anemicity of the documents is perhaps indicative of the internal struggle progressive business leaders face in bringing their colleagues to the party.
Yet here is a real challenge and a real opportunity, a chance to set an example not just for SA, but potentially for the world. That is why the Contract and Pledge must be welcomed, encouraged and engaged with.
BLSA says it wants feedback and that it will “be working to build a national consensus around the responsibilities of business and that of other civic actors”. Here then are five provocations to challenge us to think about how this Contract could be helped to succeed:
1 (Un)Constitutional Business
Private business leaders need education about the Constitution and the vision it creates for SA.
In the face of state capture and corruption business seems suddenly to have discovered the Constitution, or rather the parts of it that it considers necessary for business. It has been won over by crucial chapter 9 institutions, like the Offices of the Public Protector and Auditor General, whose functioning require accountability and good governance.
But this is an incomplete understanding.
As much as obedience to the rule of law is at the heart of the Constitution so too is a reparatory programme that mandates that all sectors of society seek ways to advance social justice.
The Constitution requires government takes positive steps to continually narrow inequality. By contrast, it requires less of business – business must only not act in a way that obstructs (negatively infringes on) rights. But when you consider the role of business in polluting the environment, or complicity in tax evasion, that itself is a big ask, rarely considered and worthy of serious discussion.
However, even if there is not a positive legal obligation on the corporate sector to take measures to advance rights, there is certainly a moral one. So, just as every government department should – but doesn’t – consider the Constitutional injunction of advancing equality as it draws up its plans and budgets, so should every business.
Recognising this, and acting on it, is the real subscription to the new SA.
2 The inclusive economy: what are you talking about?
Part of corporate leadership should be to actively seek out inclusive models for profitability and sustainability. Look and you might just find.
The ‘inclusive economy’ is a new mantra. But what is an inclusive economy? To answer this question, the private business sector desperately needs new ideas. One looks in vain for the intellectuals and thinkers of modern South African business, the people capable of getting business out of a century-deep rut.
Inclusivity might mean BLSA itself including an independent civil society representative on its Board and making its business more transparent. Or it might mean a campaigner for affordable medicines on the board of a pharmaceutical company.
Inclusivity might mean a sustainable twinning programme between businesses’ located in Sandton and the people of Alexandra.
Inclusivity should be measurable and tangible. It can’t just be an aspiration.
3 Poverty, inequality and the market
Other than my studies under Karl Marx I have no economic training. But just as you don’t need to be a lawyer to understand law, you don’t need to be an economist to understand economics. These two ancient guilds continue to disguise the underlying simplicity of their trades in complexities of language.
Any lay economist can see that one of the greatest constraints to business is the lack of a meaningful domestic market. Put simply, based on the latest Stats SA figures, we could say that the 30-million people who live below the “upper poverty line” of R992 per month are too money/income poor to buy anything other than scraps and hand-me-downs.
Drive along the R511 past Diepsloot on any given weekend and see the sorry market for second-hand clothes if you doubt me.
So, here’s the question Messrs Capitalist: why make goods that only a fifth of the population can afford? Is it not a fact that because business is driven by profit not national interest it goes for the ‘upper upper’ market and continually lifts the prices of its good and services. By so doing it contributes to deepening inequality and further market-shrink.
In South Africa, need, demand and the market have become completely misaligned.
Here’s the vicious circle, that few corporate leaders seem to know how to get out of: Poverty inhibits consumption. The lack of consumers inhibits production and thus employment. The lack of jobs inhibits consumption (and does many other nasty things to people besides).
But can a real economist explain why businesses based on higher sales and smaller unit-returns are impossible? Making smaller profits from larger numbers of people must surely be good business. The success of South African companies like Aspen Pharmacare, which built its initial success through the production and sale to the government of generic anti-retrovirals, would seem to be a case in point (although what Aspen has done with that success is another matter).
The success of Capitec, and more recently Vumatel might also throw up a few discussion points.
This may sound a perverse proposition, but is it not it possible to make money from meeting the huge demand for human rights? For example, there’s an untapped market of at least 12-million people for low-cost nutritious food.
(As I write this I can hear my comrades on the left wailing, so let me make one thing clear. I am not advocating for the ruthless exploitation of unmet need – such as is happening in low-fee private schools – but for an ethical and inclusive approach to business, economy and government that seeks to advance the Constitution. Given the inherent bent of capitalism towards exploitation – it’s in its DNA – this approach requires a stronger state and more effective regulation, but shouldn’t that too be a consideration in business? It’s a fine line I know … But the status quo is not an option.)
4 Business and politics
Business has always pretended to be apolitical.
It’s time to state plainly that that’s crap and that business leaders should re-evaluate their relationship with society. Business should also look at its relationship with politics. Away with the back-hander. Away with secret funding of political parties. Instead seek a constructive relationship with trade unions and civil society partners that is not based on co-option.
This is something that appears to be happening in the United States as some businesses realise that the fight against President Trump cannot be left to civil society alone. According to one Alan Fleischmann, president of Laurel Strategies, an executive advisory firm in the US. “For a long time, corporate social responsibility was a buzzword marketing tool, walled off within an organisation… Now it has to be central for the CEO, part of their everyday responsibility and leadership.”
This brings me to a point of self-interest. In recent years the most reliable and risk-taking defenders of our Constitution have been a handful of civil society organisations, like SECTION2, Corruption Watch, the R2K Campaign to mention a few.
Civil society organisations’ pledge to social justice have saved the country hundreds of millions of rands. They have kept hope and the Constitution alive. Yet these organisations scramble for money. When will business see corporate investment in social justice – and not just in painting classrooms - as one of its obligations?
In a similar vein the corporate sector needs to re-assess its necessary but often wasteful and expensive CSI programmes. The call being made on business to step-up is not a call to pour more money into charity projects. Rather, it is to think about how the private sector’s managerial and distributive skills can aid public service delivery. Why can we get a can of sugar-loaded obesity-inducing Coke to any corner of the country but not an essential medicine or a school textbook? Surely business could play a role in unblocking bottlenecks that are preventing the realisation of rights.
Again I hear my friends shivering at the suggestion of public-private partnerships... Again I repeat, the status quo is not an option.
5 From political consensus to economic consensus
There is a need to debate and find consensus on the type of inclusive business and economy that our Constitution requires. The corporate sector needs to find practical and profitable ways to do business that narrows inequality and enhances rights.
Business is, of course, far from homogenous, which is precisely why we need business leadership.
Like it or not, business has an albatross around its neck that it will only shake off by doing business differently. Unless this happens skeptics and socialists will say that the Contract with South Africa and the Integrity pledge only exist because business is in a precarious position and faces a crisis of legitimacy.
Some might say go as far as saying that it took a crooked scheme concocted by a crooked company who contracted a crooked agency, Bell Pottinger, a brand-defender of global white monopoly capital, to prick business’ conscience; that it took the specter of racialised capital (WMC) to put it on the defensive about its ownership patterns and lack of transformation.
Yes, there’s no smoke without fire. But sometimes, as is the case now, fires are fanned to make it more difficult to see through the smoke.
That aside, it’s a fact the confidence-in-business index is very low. Capitalism has a serious credibility problem in South Africa and internationally. In the words of Thomas Picketty, in the introduction to Capital in the Twenty First Century: “Capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.”
In SA, that has been capital’s story both before and after 1994. Now BLSA has elected to follow a path of reform. DM