ptg00157178It is a constant mantra of many South Africans that corporations in the country have failed to help with transformation and aiding the country. Martin van Staden has already aptly argued against the current obsession with the ‘Transformation’ narrative, so I will only be dealing with the latter as corporations have no responsibility (and should not have) to aid in the Transformation agenda.

Despite businesses being legally forced into the agenda of the national government, quite a few critics argue that companies have not done enough to aid in South Africa’s growth and prosperity. One Facebook commenter even argued that without the state, no progress would have been made since 1989.

This act of shifting the blame from the state to the private sector is a common tactic in any society, but one that must not go unchallenged. These critics claim that businesses, a) have a responsibility to uplift the country; and b) are not doing so.

To respond to (a):

A corporation has one responsibility and that is to deliver a profit to its shareholders. When a corporation strays from that goal, it fails to achieve it. One may argue that corporations should aid in social and environmental upliftment and I agree, but only so much that they achieve their primary goal.

If a corporation does stick to its original goals, it grows and succeeds. Depending on the nature of the corporation, it employs more people and develops better products. Both aid the people of a country, either workers or consumers (who are, in fact, the same).

Affirmative Action policies forced upon businesses by the state do not help in achieving their goal. It can also be argued quite strongly that they do not help at all and, in fact, harm the country. All that BEE and Affirmative Action have accomplished is creating another form of corporate competition, one that doesn’t truly benefit anyone but a few cronies in the state.

With regard to (b):

It should be obvious why the private sector is pulling out of South Africa. Business is about profit and sustaining the company. During the early days of the new South Africa, businesses were investing in the country and that was because they felt that they had a future under the new dispensation.

After the introduction of Black Economic Empowerment in 2001, business will have started to worry. The state was invading their sovereignty and determining the nature of employment. Even then, it wasn’t enough to lead to too much disinvestment.

Now things are different.

We still have BEE, but now that is compounded by increased regulations, labour laws, Business Licensing Bills and the constant threat of expropriation. Anyone with any sense and a knowledge of what is affecting South Africa wouldn’t blame corporations for disinvesting in South Africa. They have no responsibility to anything but their own success and survival and it is the state’s ignorance of that fact which has led to drastic unemployment and subpar services.

For the sake of summary, the following are a list (in no particular order) of factors contributing to a lack of investment by the private sector in South Africa:

  • Power Failures – a business, especially big industry, cannot function without power. This means that current businesses are shutting down or not producing while potential businesses are not being started.
  • Crime – the inability to solve our crime issue has led to especially small businesses not investing in physical property as it can easily be stolen. With armed robberies in malls being a constant threat, above that of petty theft and hijacking, businesses would much rather move to a less dangerous country.
  • Difficulty of Registration – for a country claiming to want to aid entrepreneurship, the government makes it quite hard to do so. The Business Licencing Bill, for one, makes it a pain to register and further detracts from much needed investors.
  • Union Strength – trade and worker unions do not have any interest in the poor. They only care about their members and would rather restrict employment than allow potential competition to Union members. Businesses have to bear the brunt of Union action, veritably shutting down production. Action such as this has already led to the near-destruction of South Africa’s mining industry.
  • Black Economic Empowerment/Affirmative Action – policies like these invade the sovereignty of business, forcing them to employ based on race rather than merit. Nobody likes being told what to do, and businesses are no different. BEE is an ill-thought out policy that only benefits a few oligarchs. It has detracted from businesses’ desire to employ as well as their general faith in the country.
  • State Competition – the state can easily compete with the private sector as it doesn’t rely on winning over consumers or delivering a product. The state relies on tax money, which they take from private businesses; this money is then used to prop up failing enterprises such as SAA, ESKOM, SANRAL and Telkom. Coupled with extreme public employment, private business cannot compete with a state which is cheating unsustainably to stay competitive.
  • Expropriation – with the EFF constantly calling for nationalisation and legislation demanding 50% black ownership of a business, it is no wonder than businesses don’t want to grow in South Africa. To make it personal, would you buy or renovate your house if there was a risk that you had to give any of it away to someone you don’t know? No, you would not. Then there’s no justification for allowing these threats of expropriation to go on.

There is absolutely no reason to blame the private sector for the failure of the government. The private sector would love to start employing (and uplifting their market) but legislation and threats make this too risky for them to proceed. If critics want to start improving this country, they need to stop blaming corporations and shift all their attention on the state which impedes them.

 

Nicholas Woode-Smith is co-founder of the Rational Standard and its Technical and Marketing Director. He is a student at the University of Cape Town, with majors in Politics, Philosophy and Economic History. He is the youngest council member of the Institute of Race Relations in history and the Regional Director of Southern Africa for African Students For Liberty. He also writes science fiction – prominently, the Warpmancer and Cape Zero series.