As a country, South Africa is still coming to terms with the scale of the damage inflicted during Jacob Zuma’s presidency. The incompetence and corruption that characterised that administration have had far-reaching consequences.
Speaking at the CoreShares ‘Think Index Investing’ Convention in Johannesburg last week, the CEO of Business Leadership South Africa, Bonang Mohale, delivered a blunt assessment of how much had gone wrong.
“We were lucky to emerge from those nine wasted years,” said Mohale, “because if our democracy was not robust, if our institutions did not hold, there is no country in the world that could have survived the type of systemic and systematic state capture that we were subjected to.
“That we have survived to tell the tale is testament to the wisdom of our forebears to give us the best constitution in the world.
“They put in place the institutions of democracy so that this is a country of laws, not a country of men.”
The damage, nevertheless, has been immense. By taking into account what has come out of the parallel commissions of inquiry, Mohale believes R1.5 trillion has been wasted or looted in the last four years.
In itself, that number is “quite frightening”. However, there have also been indirect costs that have not necessarily been as widely recognised.
“For example, Transnet had the opportunity to place an order for 1 064 locomotives,” Mohale noted. “We decided to give the contract to China South Rail, even though there are two companies in Springs [in Gauteng] that have manufactured all of the trains that are currently in operation.”
One of those companies is Union Carriage, which is now struggling under the prospect of having no work. That is a cost to the local economy, to jobs, and will potentially lead to a loss of scarce engineering skills.
There have also been impacts down the supply chain.
“We killed a company that was owned by Anglo American called Score Metals just in the middle of doing a BEE deal because its value depreciated by 90%,” Mohale pointed out. “It worked in the beneficiated steel market.”
This obviously works counter to the imperatives of developing local industry, particularly those businesses producing value-added products. It’s an indictment of how the ripples of state capture spread far beyond just the high-profile cases of corruption that have been revealed through the commissions of inquiry.
President Cyril Ramaphosa has recognised the immensity of the task of halting the theft and wastage of national resources. His efforts to clean up the South African Revenue Service, restore the strength of the National Prosecuting Authority and repair state-owned enterprises have been substantial.
However, Mohale is adamant that this cannot be left to government alone. Business must play a role, and encouragingly, the president is encouraging its input.
“On the Friday before the president announced his cabinet he met with us, so that the voice of business could be heard,” said Mohale. “We are not in the business of lobbying for individuals, but we are in the business of ensuring that broad principles are adhered to.”
The message that business presented to the president was that this is not the time for experimenting.
Economic management has to be a priority for his government.
“The focus in the last 25 years was on economic policy formation,” said Mohale. “But we are very poor on execution. All our problems and their solutions are known. It’s now the doing that’s important.”
Business, however, has to be willing to play its part. For Mohale, that means meaningful introspection about what the role of business should be. A blunt focus on maximising profits and financial returns for shareholders will not suffice.
“If we repeat that mantra in 2019 we will come unstuck,” Mohale said.
“We must really reimagine and redefine our purpose for our own development and enlightened self-interest.”
Business cannot survive independent of the society in which it operates. It is therefore imperative that it actively helps to shape and sustain the kind of society it needs in order to thrive.
“Business must be the one to say that we must pay our employees a decent living wage so that they can afford the goods and services that we produce,” Mohale said. “It’s not job creation. It’s the creation of the future market, because if you have a market, then you are in business.”
It is also imperative that business builds public trust in itself.
“To do that, we must be true to what we say,” Mohale argued. “Business must also do no harm – no harm to its own employees, no harm to the society, and no harm to the environment.”
Finally, business must give the country ethical leadership, which is vital for attracting and retaining foreign direct investment, driving economic growth and ensuring job creation.
“You can’t have the Steinhoffs, the Tongaats, the McKinseys, the SAPs – it taints business with a bad brush,” Mohale said.
Only through ethical leadership can business have the moral authority to take the country forward.
“Business really needs to lead on big issues – transformation, on getting us out of this fiscal crisis, on job creation, on growing the economy, and taking education seriously,” said Mohale. “It is understandable that business confidence is so low, but we are speaking to our members and saying: this is where we need to lead.”