FirstRand chairman Laurie Dippenaar says he sometimes fears that “the line in the sand” between our democratic institutions (and the Constitution) and those who seek to subvert them “has already been crossed”.
Writing in the group’s annual report, published on Tuesday, Dippenaar cites a portion of the (excellent) speech delivered by Hollard chair Dr Adrian Enthoven at the annual Frederik Van Zyl Slabbert Honorary Lecture on August 4 that “particularly resonated” with him:
“There can be little doubt that, as in many of the State Owned Enterprises, there are some of our institutions that have been undermined and captured, and there are some that are under extreme duress. It is no coincidence that the targeted institutions are those that present either the greatest opportunity to wield patronage power and/or the greatest threat to patronage.
The principle tactics have included bullying, intimidation and manufacturing allegations of misconduct in order to either gain acquiescence or, failing that, the appointment of compliant individuals. This is not an outright attack on the institutions and the Constitution, but has the same effect.
We cannot stand by and allow this systematic raid on our institutions to succeed. The South African democratic project is not a project of a political party, or government or parliament.
It is our project. As citizens, we collectively own and are the ultimate custodians and guardians of our democracy. They must not be subverted on our watch. There needs to be a clear metaphorical “line in the sand” that cannot be crossed.”
Dippenaar is frank: “Our National Treasury is the richest prize yet for those who seek full state capture, and is also the key to unlocking the massive value sitting in our state-owned enterprises.”
“So it really is up to the citizens of this country to stand firm,” he argues. “We owe it to the generations that will come after us. And there is some light at the end of the tunnel. August’s municipal elections were a strong message that the general population is tired of the plunder, the non-delivery and the self-interest. This wasn’t a message based on race, income groups or political factions – it was a message from the collective, whose patience is running out.”
More broadly, Dippenaar makes the point that “Despite our incredibly volatile currency, which can decimate dollar returns overnight, our companies enjoy significant support, particularly when emerging markets get shocked, as investors take flight to quality.
“That’s why it’s so important that the government sends the correct signals to the world’s capital markets. These signals must be actions, not words, and they are critical to the country’s credibility.”
Not the first to stand up
Annual reports – especially those from large corporations and banks – are somewhat strange things. Most of the time, their contents is predictable and filled with clichés like “challenging operating environment,” “delivering for stakeholders” and “generating an acceptable return on capital”.
But there has been precedent for Dippenaar’s strong message in the South African context. For one, he’s used the platform in the past. His predecessor, Paul Harris, also did.
And, in 2012, then Nedbank chairman Reuel Khoza wrote pointedly in the Nedbank Group annual report: “we observe the emergence of a strange breed of leaders who are determined to undermine the rule of law and override the constitution. Our political leadership’s moral quotient is degenerating and we are fast losing the checks and balances that are necessary to prevent a recurrence of the past. This is not the accountable democracy for which generations suffered and fought.”
“We have a duty to build and develop this nation and to call to book the putative leaders who, due to sheer incapacity to deal with the complexity of 21st century governance and leadership, cannot lead,” said Khoza.
Khoza drew sustained and very sharp criticism about his comments the time. But, he pointed out last month that these were clear warnings about the country’s current leadership crisis.
In the FirstRand report, Dippenaar also comments broadly and in detail on the “generic frameworks and principles” related to the “circumstances banks [would] consider parting company with a customer”. Post Nengate, he says, there was an “unbelievable amount of misinformation swirling around”, given “government’s reaction to the termination of certain bank accounts”.
He points to the fact that “South African banks operate in a globally integrated system… If the South African banks do not comply with local and global regulations and do not take principles regarding reputational risk management seriously, foreign investment flows to the country will be significantly reduced. This will be disastrous for the country’s fiscal health which remains extremely reliant on these flows.”
“The South African banking sector scores very highly on every international governance index and should never ever compromise on this.”
‘Nenegate’, says Dippenaar, was a “black swan event” and the country “continues to live with the legacy of the President’s actions”. The market is “relying heavily” on Finance Minister – who, he notes further on, “is under attack from forces that seek to remove him” – to navigate us out of our “precarious position”.
FirstRand “also continues to navigate its way through this difficult scenario”.
“‘Nenegate’ was a body blow to the banking sector which saw billions wiped off valuations. The cost of capital has structurally moved higher, which makes it even harder to deliver economic value to our shareholders.
“A downgrade” – which Dippenaar argues still remains a “strong possibility” – “will definitely impede our ability to raise hard currency funding, which in turn will constrain our ability to grow in the rest of Africa region”.
* Hilton Tarrant works at immedia. He can still be contacted at email@example.com.
* He owns shares in FirstRand, first purchased in July 2011.
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