Business must repent for past role and start campaign to repair SA Imraan Valodia
Economy will continue to flounder without honest reflection and genuine commitment to tackle inequality
Somewhat unusually, I want at the outset to be clear on what this article is not. It is not a defence of those who have characterised the South African economy as being controlled by “white monopoly capital”. That agenda is clearly being used to loot our country and undermine the economic and social institutions that stand in their way.
The article is also not an unwarranted attack on the business community. Rather, it is a reflection on the challenges facing business in SA and an attempt to consider why it has been so easy for opportunistic looters to use the white monopoly capital characterisation to attack business, and how business should respond. It is important for us to recognise that, whatever its historical roots, business will have to play an instrumental role to grow our economy so we can realise the vision of the country that is captured in our Constitution.
Twenty-three years after SA became free, and despite a body of progressive labour legislation, significant social spending through the budget and periods of acceptable levels of economic growth, the vast majority of our people still have very little direct interest in our economy. Most of the workforce remains either unemployed or languishes in low-paid jobs. Almost half of those with a job earn less than R3,500 a month. In just the first quarter of 2017 another 48,000 jobs were lost, which means 200,000 or more people were left vulnerable.
For those who still have jobs, Statistics SA reported that total earning paid to employees declined by R19bn to R588bn in the year to March 2017.
Of course, the causes of our employment problems are complex and blame cannot be placed solely on business. In the formal higher end of the economy, earnings are much higher than R3,500. But it should be a great concern to all of us, including business, that our economic growth path delivers benefits to only half of our people and that average incomes are as low as they are.
Additionally, we are among the most unequal societies in the world. About 58% of income earned in SA accrues to the top decile of the population, which also owns up to 95% of all assets in the country. This pattern of earnings and ownership is a function of our history, but that is precisely the point: our society, including business, has to deal with the history of oppression and dispossession.
Business should be playing a key role in working with the government and other partners to deal with SA’s economic challenges. But can one say business has truly engaged with the challenges we face?
Business had a wonderful opportunity to start with a clean slate in 1994 and own up to how it abetted and benefited from the morally bankrupt system of apartheid. In his book Apartheid Guns and Money, Hennie van Vuuren eloquently captured not only how business underpinned the apartheid state, but also how dismally it failed at the Truth and Reconciliation Commission to come clean on its historical role in oppression.
Instead, it washed its hands of its history and lost an opportunity to play a leading role in bringing about fundamental cultural changes in the way business operates — through championing transformation, investing in the country, reducing the wage gap and providing support for innovation and the development of previously disadvantaged individuals and communities. All of these had to be forced on the business sector by legislation.
And what can we say about its performance since then? Let’s take two illustrative examples. First, the growing gap between the earnings of senior executives and workers. It has been reported that Shoprite CEO Whitey Basson earned R100m in 2016. It would take the average worker at Checkers about 290 years to earn what Basson earned in one year.
A recent Deloitte survey suggests that senior executives of JSE companies earn on average R69,000 a day and that the gap between executive pay and worker pay (the Earnings Gini) has increased from a factor of 50 to 500 – that is, the average senior executive earns 500 times what the average worker does.
Some executives and their lackeys try to justify such outrageous pay gaps. There is also some debate whether the earnings numbers and the Gini are correct. But whatever the numbers it is indisputable that the gaps are much too high and that they are growing.
Of course, “transferring” one executive’s pay to thousands of workers will result in only a marginal increase in workers’ pay, but it is not the amounts but the symbolism of the pay gap that matters. In essence, the unjustifiable pay increases some executives have awarded themselves represent a wider malaise in business – an inability to engage with the local context and an unwillingness to temper short-term gain in favour of the longer-term sustainability of the economy.
Second, we should consider the significant levels of collusion in the construction of our 2010 Soccer World Cup stadiums and other social infrastructure that was uncovered by the Competition Commission. Similarly, the more recent Gupta leaks suggest that some South African businesses, including top auditing and consulting firms, are not blameless. Indeed, the entire saga suggests that sections of our business community are deeply enmeshed in corruption and state capture.
Business has for the most part taken the approach of staying out of the socioeconomic sphere and focusing narrowly on the “business” side of business. It participates formally in institutions such as the National Economic Development and Labour Council (Nedlac), but with a few notable exceptions there is little serious implementation of the agreements that are reached.
The outrageous firing of finance ministers Nhlanhla Nene and Pravin Gordhan, and the associated credit rating downgrades, have thankfully forced business out of this narrow focus and highlighted the need for it to play a more substantive role in SA’s affairs. Under the leadership of Jabu Mabuza, Bonang Mohale, Maria Ramos, Sim Tshabalala, Sipho Pityana and others, we now have a business leadership that is able to transcend its history and move towards a more socially engaged role – a far cry from the days when white men from the Anglo American group spoke on behalf of business in SA. To build on this, business would do well to: Openly acknowledge the role business played during the apartheid era, and continued to play in some of the corrupt practices in postapartheid SA. Unless this is done, opportunists such as the Guptas will always be able to use concepts such as white monopoly capital to challenge those who lead business;
Begin addressing the challenge of inequality. Nobody believes our levels of inequality are sustainable, or that business can continue to operate for much longer in this manner. History has taught us that at some point, the poor will rise up in response to the corruption and exploitation. We would hope it does not come to that, or that the threat of people fighting back is not the motivating factor for change. We would hope that business uses the opportunity created by the political, economic and employment crises to seriously introspect, and that this introspection will give rise to honest conversations about our history and the role business played in excluding the majority of South Africans from having a decent future;
Develop an ethical code of conduct all of business has to abide by. This will have to be enforced by business itself, to call to account those of its members that continue to collude and cheat the fiscus of funds that are desperately needed in areas such as education and health;
Begin to tackle the wage gap and the large numbers of workers in SA who continue to earn extremely low wages;
Begin an honest and far-reaching programme to transform the racial, gender and class composition of business in SA. While there have been some serious attempts to transform business, any honest assessment of the postapartheid period would conclude this process has been too much about only a handful of black (and usually politically connected) individuals who have benefited from black economic empowerment deals.
It is important to note that the responsibility for transformation does not rest solely on the shoulders of business, and business is not exclusively to blame for the evils of our history and the disappointment of our present. But, as the grouping that has access to the levers of economic power, business does have a special responsibility. It must answer for its history, change its culture and work determinedly towards shifting away from the unsustainable course we are on.
If business takes that responsibility we surely have a real chance of changing the current trajectory and creating a progressive and inclusive economy. Plato said courage is a kind of salvation.