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How ethical behaviour can stimulate the South African economy


Claudelle Von Eck is the CEO of the Institute of Internal Auditors SA (IIA SA) and Chair of the Anti-Intimidation and Ethical Practices Forum

History teaches us that building a strong, inclusive economy relies on harnessing the basket full of policies, programmes, natural resources and human capital that play to a nation’s strengths. Part of this means having leaders who do more than inspire to build an ethical culture, but also display ethical courage.

I am an eternal optimist. Perhaps it is due to growing up in an environment that forced me to learn to persevere.

I vividly remember my terrified six-year-old self watching the intimidating army vehicles rolling into the township with the objective of squashing the protests at the “big kids’ school” across the road. I later understood what all the fuss was about. There was much passion then and a deep desire to save the soul of South Africa.

Today it is that same sense of purpose and perseverance that is needed within our collective to turn South Africa’s stagnant economy around.

Symptoms such as fraud and corruption are significant contributors to the current melee wherein the previously disadvantaged remain disadvantaged.

This week the Finance Minister, Malusi Gigaba, in his Medium-Term Budget Policy Statement, said South Africa would only achieve a growth of 0.7% this year (and despite a growth of over 2.3% in the last financial quarter, according to Statistics South Africa). History teaches us that building a strong, inclusive economy relies on harnessing the basket full of policies, programmes, natural resources and human capital that play to a nation’s strengths.

For examples of this, look no further than Germany and Japan post-World Wars, Rwanda after the genocide and even Liberia, 12 years ago, when Ellen Johnson Sirleaf took over as president and oversaw a growth rate of over 7% per annum until the global economic crisis hit.

Singapore is another great example of a country that was able to transform itself post-colonial rule. It utilised a number of measures to turn the country around, of which eradicating corruption and developing its human resources were key. These examples provide hope that recovery against the odds is possible.

At present both India and China are facing a severe economic downturn yet still show growth rates in excess of 6% per annum. And, in fact, despite this, China earlier this year announced an ambitious intercontinental transport infrastructure programme – costing hundreds of billions of dollars – that will see the movement of goods to key trade areas in the East and Europe amplified.

As a developing nation, South Africa post-1994 created great economic policies focused on growing the economy while eradicating poverty, inequality and unemployment. The changing needs of the country and the opening up of international trade borders as well as shifting geopolitical systems has necessitated changes to these policies. We thus moved from the Reconstruction and Development Programme (RDP) to the Growth, Employment and Redistribution Programme (Gear) and then on to the National Developmental Plan.

The first was to immediately correct the injustices of the apartheid programme by meeting the basic needs of the majority of South Africans while its successor was a broad-based policy directive opening the doors to the economy for the previously disenfranchised while keeping down national debt.

The NDP seems to be a mix of the two with a very specific blueprint for key sectors and a 2030 deadline. However, the albatross around the NDP has been that, in order for it to achieve its goals, the country requires a minimum 6% growth trajectory year-on-year. Gigaba alluded to this in his budget speech.

Current forces mitigate against this happening but the NDP remains a vital economic blueprint. One notable success, for example, has been the programme around our ocean economy. Recent statistics released revealed that since inception in 2014 around 40,000 jobs have been created while the sector contributed an estimated R34-billion to GDP.

But, like a motor vehicle engine, achieving all targets of the NDP requires all functioning parts to work together optimally to achieve a common goal. And one key area in which we as a society have not focused on post-democracy, particularly on economic issues, has been a lack of commitment to harnessing the good within us and acting in an ethical manner.

Just recently the Anti-Intimidation and Ethical Practices Forum (AEPF), which I chair, released the findings of its inaugural Ethical Practices Survey 2017.

The AEPF’s founding members represent professionals in the fields of internal audit, accounting, risk and fraud management, governance and ethics and is dedicated to encouraging whistle-blowing and the eradication of corruption and unethical business practices.

Professional South Africans from both the public and private sectors participated in the survey that provided great insight into their perceptions of ethics and governance in society and in the workplace.

The results were startling. Most significantly, only around a quarter agreed that doing the right thing is more important than financial success. For the public sector that number dropped to 19%.

This is an indicator of a society that is willing to compromise on values while only focusing on short-term gain. In the long run, corruption destroys organisations and societies.

Perhaps the reluctance to take ownership and personal accountability has resulted in the litany of scandals, wanton looting and lack of accountability we are daily witnesses to?

This is a time for ethical leaders to help steer us back to a time when we understood that we are all connected to the collective and that we need to ensure that our actions impact positively on the collective (read Ubuntu).

Yet, the AEPF survey shows that the leadership layer is not perceived to be as ethical as we need it to be. Less than a tenth of respondents agreed that leaders in the public sector are ethical, against two thirds agreeing that leaders in the private sector are ethical.

I have to wonder whether the respondents had taken ethical practices in the broader sense into consideration, rather than just focusing on fraud and corruption. And, if they didn’t, would the results have been worse? A narrow view of ethics excludes practices that increase inequality, perpetuate the repression of women and people of colour, harm the environment etc.

We therefore need leaders who do more than inspire to build an ethical culture. We need leaders who display ethical courage.

These statistics should have members of oversight bodies, such as directors and councillors, very concerned. For various reasons, there is a culture of turning a blind eye to corruption and corporate malfeasance.

This in turn has a massive impact on the economy. It not only chases away potential foreign investors but creates a perception that our financial and regulatory systems are weak.

Yet I believe that most people – and hard-working South Africans in particular – inherently want to do the right thing. Of the respondents, 78% agreed that it is their personal duty to report unethical behaviour.

I was pleased to see that this percentage increased to 91% when only looking at the responses from internal auditors who are members of the Institute of Internal Auditors SA.

Perhaps it is time to change our collective narrative. If we all paid our fair share in taxes without finding clever ways to circumvent the system then maybe there would be no R50.8-billion deficit.

If I choose to join the public sector then I should do so in the knowledge that I am not there to become rich, but rather to serve.

If I am contributing towards government’s R880-billion infrastructure programme I should know that I am there to effect positive change to actual lives. Using cheap cement for low-cost houses or building sub-standard roads, bridges and schools and overcharging for water pipes vital to the national grid should have no room in my business practices.

If I am a small business owner I should not sell my soul by paying facilitation fees or commissions to dodgy middlemen. This is known as bribery.

If I am an accountant, auditor or consultant I should not be afraid to call out wrongdoing. To do so otherwise means I will be swallowed up by an unethical system.

Being a “guardian of governance” is not solely the preserve of politicians or religious leaders. It is on all of us to lead with moral authority through our words and actions to reduce this ethical deficit.

And South Africa’s true economic potential can be unlocked by reversing the moral decay. Mervyn King recently said that members of oversight bodies must leave self-interest and self-concern behind and use their intellectual honesty.

This should resonate with all of us. The question we therefore need to ask ourselves, both as professionals and as South Africans, is how do we reclaim our roles as true guardians of governance? For once we find the answer, it is only then we shall truly achieve economic growth and prosperity. DM

Von Eck is the CEO of the Institute of Internal Auditors SA (IIA SA) and Chair of the Anti-Intimidation and Ethical Practices Forum


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