from the editor
billionaire investor and philanthropist Warren Buffett likes to say, “Only when the tide goes out do you discover who’s been swimming naked.”
What he means is that it is easy to make money in the good times – it’s during the tough times that management’s real business acumen comes to light.
Well, the tide’s gone out, and there are a whole bunch of people running for cover. Looking at SA Inc., the obvious example would be Lonmin (see pages 13 and 30). The world’s third-largest platinum miner, which sits on some of the richest platinum deposits in the world, is asking for a shareholder bailout for the third time in just six years. Yes, low prices have a role to play, but how much of its troubles – labour, high-cost shafts, BEE ratings – are actually the result of poor management over the years?
Here I want to let current boss Ben Magara off the hook – by the time he, and most of the current team, joined, the damage to Lonmin was already done. It’s all the well-paid CEOs who came before Magara – particularly Ian Farmer and Brad Mills – who should be standing with their swimming trunks around their ankles.
MTN would be another obvious example. In the good times, no shareholder asked any tough questions about its operations in Nigeria, or its operations anywhere, for that matter. As long as it was printing money, nobody cared. That has all changed in the past two weeks after the Nigerian regulator imposed a record $5.2bn fine on the operator, a fine roughly equal to a quarter of its (now much diminished) market capitalisation at the time finweek went to press. So far, no detailed answers have been forthcoming.
On a national level, we have also messed up. When the times were good – and they were good for all commodity exporters – we should’ve focused on building other sectors of the economy to reduce our reliance on mining, and putting reserves away for a rainy day. What happened instead was a government spending frenzy that’s led our debt to nearly double as a proportion of GDP. Well, the tide is out, and there is no beach towel in sight.