Business at crossroads. All paths lead to radical change

Transforming an unstable economy is essential; corporate SA must have its own vision of how this should occur

Amid the hubris, denialism and dreary mediocrity of many of the annual budget speeches recently in Parliament, Economic Development Minister Ebrahim Patel’s was a rare nugget offering a serious — “uncaptured” — glimpse of a different version of radical economic transformation from that peddled by the Gupta-sponsored, Bell Pottinger-crafted narrative that has so deformed public discourse.

It was a fine speech, but alongside the deluge of #guptaleaks, perhaps inevitably, it received little attention or media coverage. This is another aspect of state capture: the good stuff gets submerged beneath the polluted surface.

Noting that the Constitution was an “empowering framework … not a shoddy compromise, as some would have it”, Patel offered what he described as “solid, practical radical transformation”.

This included his intention to amend competition law to tackle the concentrated nature of large parts of the economy so as to “require the consideration of the concentration, ownership profile and structural impediments to entry or expansion in a market when that market is defined and assessed by the competition authorities in mergers or where anticompetitive conduct in that market is scrutinised in complaints referred to the Competition Tribunal for determination”.

Legislating market change is notoriously difficult to achieve. But Patel’s attack — based on competition law — on collusive and anti-competitive behaviour has yielded impressive results since 2009 and the competition authorities are effective and uncaptured.

Other reforms must be green-housed rapidly. And herein lies the challenge: as the era of President Jacob Zuma slides towards its inevitably ignominious end, SA needs to conjure the energy to ask two fundamental questions about the future: after Zuma, what then? How can the further calamity of the “missed scenario” be avoided?

The democratic state may not have the capacity to detox — to decapture itself from the poisonous clutches of the shadow state — and much will depend on who wins the ANC’s succession race and the extent to which the victor has a sufficiently decisive clean-up mandate. So these questions are directed at everyone, but mainly at the leadership of big business, which needs to plan for two main scenarios: one in which this high road is reached and the democratic state recovers, and one in which the state continues its messy slide towards failure and collapse, and the social contract between the government and the governed disintegrates.

This represents a pretty stark fork in the road. Part of SA’s overall resilience is the resilience of its economy and its entrepreneurial and managerial class. But this make-a-plan aptitude should not eclipse the need to tackle some very powerful underlying truths about the economy and social injustice.

For many in the corporate sector, politics has become impossibly confusing and uncertain. The concept of “radical economic transformation” is especially paralysing.

What is the right response to it: ignore it on the basis that those who advocate it are not to be trusted and are clearly dishonest and corrupt; hope it goes away because it sounds too scary; or, even more foggy-minded, hope it goes away when Zuma finally goes?

The last option is the least intelligent of the responses, because the one certainty in a sea of political uncertainty is that the clamour for radical economic transformation — regardless of from where the call comes or the motive that informs it — is not going to go away, anymore than the call for land reform.

Why? Because it should now be clear to anyone honest and intelligent enough to look beneath the surface of society that SA’s economic structure is unsustainable. Too much economic power and wealth is controlled and owned by too few. SA is too unequal; wealth and power is dangerously concentrated, which is why Patel’s competition law reforms are potentially valuable, illustrating that not all the calls for radical economic transformation should be dismissed out of hand.

There is a need to engage with the idea of a different sort of radical economic transformation. At a recent session with the senior management of an iconic South African company, it was put to me that “not all those calling for radical economic transformation have been captured or funded by the Guptas”.

This is quite right: the ANC has always had a nationalist as well as a social democratic/ socialist wing. Under Zuma, the delicate equilibrium has been lost and the party is dangerously divided and unstable as result.

Accordingly, the ANC is unlikely to be able to provide the principled, convincing and credible leadership necessary to convene a grand strategic deal-making process necessary to forge a new social compact that determines who must give up what in the national, long-term interest.

Hence, other stakeholders must prepare themselves to step up. The unions, certainly, despite their fractured state and the corporate sector, certainly; ideally, the two together, like in the 1990s, with the government alongside.

This may not yet be possible, even if Cyril Ramaphosa wins the ANC succession race. Instead, therefore, business should begin to think it through on its own what needs to change and why on key issues such as job creation; closing the equality gap; solving the big structural constraints in the economy, whether skills and basic education or labour market conditions such as the law relating to youth employment; and the ownership of and access to key assets such as capital and land.

What emerges from such a strategic thinking process must be truly radical in the political sense of the word — fundamental, even revolutionary change — and it must be economic, concerned with directly changing the control and ownership of the means of production and of capital resources, be they financial, human, ecological or natural.

Not to do this would be to “miss the scenario”. When Zuma goes there may be a brief hiatus. People may be lulled into thinking that it constitutes a return to business as usual.

But it was business as usual that created the conditions, not so much for Zuma but for the allure — as in many other places around the world — of populist panaceas such as Zuma’s version of “radical economic transformation”, which are likely to be entirely illusory because they are based on the soft sands of the rent-seeking conduct of a small number of corrupt people.

Here’s an example of a previous “missed scenario”: imagine that instead of quibbling about the relatively modest differences between the New Growth Path (NGP) and the National Development Plan (NDP) that emerged from the first Zuma administration, business had played the ball and not the man in the case of the NGP and said “yes, this is a plausible route to creating more jobs”? Perhaps, SA’s economy might in the six years since have created enough extra jobs to sustain people’s trust in the government and to deny the conditions that have created the populist call for “radical economic transformation”.

Patel was the architect of the NGP. Business didn’t trust him and his unionist background and preferred Trevor Manuel, steward of the NDP. Though they didn’t have to choose one over the other — as the two men would probably now concede, their policy blueprints had more in common than in substantive difference — they did. One opportunity for steering the economy in a different direction was missed.

So, regardless of what happens when Zuma goes and who succeeds him, business leadership needs to apply its mind to the question of how to develop a credible economic transformation strategy, built perhaps around the organising principle of “inclusive growth” that Pravin Gordhan set out in what proved to be his valedictory budget speech in February.

Business needs to think fast and act fast to build consensus around an alternative vision that offers the prospect of real socioeconomic change and to establish a process such as an “economic Codesa”, perhaps leading to an Economic Charter, that Gordhan also noted in his final budget speech, in which he called for business to take up the challenge.

Taking Gordhan’s call seriously by engaging in a profound self-reflection about what business can and should do differently, both individually and collectively, to transform SA’s socioeconomic trajectory would be one powerful way of avoiding the missed scenario and honouring Gordhan’s legacy.

Business as usual is simply not an option.