I have had the opportunity over the past year or so to attend speeches and meet prominent South African business leaders. These people are all very good leaders and are genuinely impressive in their own right, based on what they have achieved. But there is always a contrast between what they are willing to say in public versus what they would say in private conversation when it comes to matters surrounding the political environment. In their speeches they vaguely mention that we face ‘challenges’ but that we should not be too concerned about our country’s immediate future. This is reassuring coming from these people in a sense, because people do have a tendency to become trapped in a spiral of pessimism. But when speaking to them in relative privacy at an event, where one can ask questions about specific matters, they do open up a bit and give more blunt opinions. I regret not asking one of these business leaders, “Why are you so confident and reassuring about South Africa’s prospects, when I’m sure that if I were to arrive at your company’s wealth division with R10m, they would most likely suggest I take it off shore?” We know that this must be the advice that many wealth managers are giving, since we’ve seen record outflows of wealth from South Africa.
From an article by Bruce Whitfield at EWN:
South Africa is nowhere near a Rubicon-style inflection point, just yet. But we are in trouble and headed down a slippery slope of economic self-destruction, unless we act speedily. But business is rudderless. Obsessed with complying with regulation, ticking boxes to justify doing business with a government it knows can cancel its contracts on a whim. Business in recent years has been cowed into submission.
We hear things like “business and government must work together to make South Africa a better and more equal place,” etc all the time. The problem is that currently this seems to mean that government comes up with all kinds of interventionist rules and regulations, which does nothing but hamper markets and make it more difficult to do business. Big business seems only too happy to comply for fear of not being politically correct or being accused of not taking ‘transformation’ or ‘sustainability’ seriously. Big business has the resources and knows how to comply with some of these complex regulations, but small businesses and young entrepreneurs don’t. Simply playing along may be the easy way out, but it is short sighted. Major South African companies are more than just entities with a profit motive. They are institutions. These institutions have a fiduciary responsibility towards not only their clients and shareholders, but also towards the market system that made them what they are to ensure that South Africa has a peaceful and prosperous long-term future. This means that sometimes companies should stand up to government. Currently, one gets the impression that everyone is out to make a quick buck, and that the current political environment is not conducive to the establishment of the next generation of great companies. One does not see where the next FNB, Sanlam or Remgro is going to come from if things stay as they are.
A few weeks ago, Pravin Gordhan delivered a very underwhelming budget speech, but most of the mainstream economists towed the line and called the budget ‘good’ and ‘sensible’. These are very smart people. Make no mistake: they do realise that the budget is not sufficient, and that a credit ratings downgrade is now inevitable.
Despite business appearing happy to ‘comply’ and ‘work with government’, we can tell what is actually being deliberated behind boardroom doors by watching how businesses vote with their feet. Many businesses are now frantically seeking to expand their offshore operations as a way of earning hard currency to hedge against economic difficulties at home.
One can only look at the shocking treatment of economist Chris Hart by his employer Standard Bank over a simple politically incorrect tweet. Are they this scared of challenging narratives? Did the directors of Standard Bank forget that they paid almost R6bn in taxes last year?
Why aren’t big businesses willing to support civil society groups and come up with initiatives to challenge a government that is damaging economic freedoms and jeopardizing everyone’s future?
Business has an inherent ability to organise and come up with solutions better than any government can. It’s time for them to do so.