Anglo CEO Cutifani speaks truth to power

AT THE launch of a report on SA’s cities a while ago, Deputy Finance Minister Mcebisi Jonas made the point that the private sector accounted for 80% or more of economic activity and investment in cities — and that the primary role city governments should be playing in economic development was to create an enabling environment for the private sector to invest.

It may seem an obvious point to business people, but it is not obvious in government, where the attitude towards the private sector is ambivalent, at best, and where a former activist such as Jonas, by his own admission, finds it hard to concede that the private sector needs to lead — while the public sector needs simply to enable.

Take the post-Cabinet lekgotla comments at the weekend by Economic Development Minister Ebrahim Patel, who promises that the government has a plan to deal with the job cuts in the private sector.

The state can do it, is Patel’s view, predictably — though it is unclear where he thinks every government department is going to find the money to create new jobs by hiring people to maintain infrastructure.

At a time when SA’s pathetic economic growth trajectory is its toughest challenge, Jonas’s view would ideally prevail over Patel’s dismissive view of the role of business.

But amid a host of regulatory interventions that do anything but create an enabling environment for private sector investment, it’s clear that it does not. It’s also clear just how much damage that’s doing to investment, jobs and growth.

All of which made Anglo American CEO Mark Cutifani’s long and thoughtful talk at the Gordon Institute of Business Science last week particularly interesting.

Cutifani is one of very few business people who has a knack of speaking truth to power about economic policy, in a way that the government might listen to. And he spoke as much about the public and private sectors and the relationship between them, as about his own sector, mining.

The best CEOs are politicians, and any CEO who can segue into talking about economic policy by way of recounting his conversations with China’s leadership has a political edge.

Cutifani talked about SA’s state development model and the challenges China faces as it moves from its state development model to one in which private businesses must play an increasingly important role. He used this to talk about the crucial role state-owned enterprises (SOEs) play in both economies — and to make some crisp and crucial points about SOEs in SA.

He said the ability of South African industries to compete globally was influenced by the effectiveness of our SOEs; that “pinch points” with SOEs were the cause of severe constraints; and, in essence, that much of the fault was in a state development model in SA that assumed state and private enterprises were almost independent of each other.

We needed to recognise their dependence on each other and the need for collaboration. We also needed to reflect on why 90% of our SOEs were losing money — and confront the effect of that on SA’s competitiveness and growth.

China has a very different model — it is much tougher on SOEs.

“In our system, a government that supports uncompetitive SOEs cannot criticise private enterprise for taking the necessary actions to survive in these tough times,” said Cutifani, alluding presumably to recent African National Congress criticism of the mining sector job cuts.

But he then made some forthright points about the need for the government to play its part in creating an attractive climate for private sector investment — starting with the firm reminder that if investors don’t see a worthwhile return, they won’t invest.

“If anyone thinks returns are a dirty word, please don’t expect investment to come to SA,” said Cutifani, and he spelt out what that means — particularly in the case of mining companies. When these companies don’t invest enough, the ugly results may be seen only five or 10 years later when it’s too late to stop mines closing. Unless the investment environment was turned around, we might not have a future, said Cutifani.

He appealed to the government to address a list of issues to foster an enabling environment for the mining sector. He urged the government to demonstrate a more strategic orientation towards mining, and to provide greater clarity on black economic empowerment ownership. He asked for more consistent and stable policies across departments, as well as action on energy, water and transport infrastructure. He asked for caution and commercial logic to prevail on issues such as strategic minerals and beneficiation and urged the government to think about SA’s competitiveness when amending mining legislation.

It’s a long list, and although the mining sector is subject to particularly heavy regulations, investment in other sectors is also being deterred by a state more bent on regulating the private sector than enabling it.

What Cutifani does so well is emphasise the need for business and the government to work together to do the right thing, and to speak the language of partnership.

The government talks public-private partnership too. What that means isn’t often clear, but it is at least worth trying to hold them to it.

Joffe is editor at large.