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Herman Mashaba on Budget 2015: What would Nene do if SA had real shareholders?

Powerful stuff in this Podcast from one of SA’s leading entrepreneurs, Herman Mashaba, who wonders what shareholders would do to a CEO who dropped his growth target 25% just five months after setting it. Mashaba believes it is time for straight talking by Business Leadership to expose “nightmare” BBBEE Legislation, dismantle labour inflexibility, and for engaging like adults on what is needed to lift SA out of its pathetic sub-2% economic growth rate. AH

This podcast was made possible by BrightRock, the company that introduced the first ever needs-matched, life insurance.  One of South Africa’s top entrepreneurs Herman Mashaba joins us to have a look back on Budget 2015.  Now, I know Herman that you follow these things closely because of your passion for job creation, for getting more people to have the opportunity of entering the workforce.  Was there anything in Budget 2015 that got you excited?

Well, unfortunately not Alec.  Fortunately, there were no real major shocks to the system but I think really, what one really gets concerned with this Budget is the fact that it is not really talking about how, as a country, we’re going to really kick-start economic development in our country.  With our high unemployment, and the underperformance of the economy, so I think those are the elements, for me, really that have come out.  The Minister’s not really saying much about it and I think it is obviously, of real major concern.  However, from a Government’s point of view, I think they are doing well in the collection of the revenue from the rich part.  What happens then?  It is well and good, and we can really talk about sharing this declining cake, but so far, what results are we going to get in a year’s time or so?  Those are the elements that are of real, major concern to me.

Not a lot of creativity.

Absolutely, and that’s why I said, it is well and good that the Government will be able to collect the revenue that they want to collect but then what happens a year down the line?  You can do a Budget for one year, but you can’t just really look at a country on a one-to-one year basis.  I think you’ve got to really look at in on a long-term, in terms of sustainability.

What would you have done?  I know you’ve now thrown your hat into the ring.  You said you would vote for the DA.  If the DA were to ever come to power and they said, ‘Mr. Mashaba, you have business experience, you come and drive employment in South Africa’.  How would you do it?

Well, the first thing that I would do is to really come out with major restructuring of our Labour Legislations.  I think that is the first thing that the Government, in this country has to do and, fortunate enough, we don’t have to really spend money in that regard.  You can imagine if you really come up with a drastic revision of the current Labour Laws, how you really kick-start small business development in the country?  With that small development, it will really steer the economy to another level.  That is really the first thing that I will do.

Obviously, you know the issue with Eskom.  It’s an issue that I think we need the Government to really do something about it.  It is so strategic and so crucial to the country’s development.  Thirdly, Alec, something that I’d really like is for all of us South Africans to start engaging in this as adults.  This race-based legislation that our country is pursuing is really toxic to this country’s future development.  At 21 years into our democracy, for us to really talk in terms of racial division of the country, is suicidal.  For as long as we are prepared to pursue racial policies, I can assure you the economy of this country is not going to be sympathetic to us.  I think for as long as we really don’t recognise the need for us to really start building one united nation, as South Africa, we will forever really pay a big price.

Herman, I had a fascinating discussion and it is going to be very interesting to get your take on this, with Jon Foster-Pedley, who is the Dean of the Henley Business School and he says ’71 percent of his MBA students are black and they, the examiners are international, and it’s blind’.  They don’t know where they come from.  He says that we do better as South Africans than virtually every other country in the world.  We have, he says, ‘one of the smartest groups of people on earth’.  The Labour Legislation, the BEE stuff is almost coming from an era of saying ‘we don’t want our people to have to compete, yet if we just let them compete…’  My goodness. 

Absolutely, I think for me, what hurts me most about this racial based legislation is that the biggest casualties, the biggest victims of this is our poor, black South Africans.  Those ones who are paying dearly for this, obviously I think BEE is benefitting a few of us, who are connected and the few of us who have got the resources to really invest in white companies but the damage it does to the economy, it’s massive.  It is irreparable, and I think the sooner we start really addressing these issues, in a manner that we can really build the nation.  The thing is it is not just really about empowering black people.  You can imagine what it does to race relations in this country.  We just cannot, going to one day have the ‘rainbow nation’ that Mandela really wanted, for as long as I think we discriminate against other members of our society.  I believe, very strongly that if we’re serious about the transformation of our country, let the Government allow South Africans to be one nation.  Allow the economy to operate, as long as there is a rule of law.  Can you imagine how much taxes will the Government collect, if you have the normal economical activities?  Then that money can really be used in building schools, building hospitals in the black areas, where you don’t really have those infrastructures.  That is how we are holding the economic development of this country by pursuing a legislation that is actually punishing the country, economically.

It reminds me, I was in Davos this year, listening to Doctor Kim, who is the Head of the World Bank, and he talks to, obviously people from all over the world, the leaders of all over the world and he said, ‘the communists actually get global capitalism much better than quasi socialists’.  The reason, he says is that they see, by using global capitalism correctly, in other word China, that you can uplift people so much more rapidly that you can give your or you can achieve those social ends by having economic growth, etcetera. 

I think, Alec, we can really still run Black Economic Empowerment by incentivising companies.  Not by punishing them.  I don’t know Alec, if you’ve really had sight of the latest codes, the BEE codes.  It is a total…the other day I attended a presentation and honestly, I said to my colleagues, ‘I really wish this was just one of those bad dreams’.  I said ‘it is unfortunate that it is reality’.  I really looked at those codes.  How on earth is any of the companies going to be able to comply?  It is impossible.  It is like, honestly trying to really run the Pass Laws in this country.  They must ask the National Party.  You come up with this legislative framework but you really make it impossible for your citizens of your country to comply.  I think the current BEE codes honestly they are making it totally impossible, honestly, with all the best intentions, and I work with companies in this country for the last ten to 15 years. There’s commitment to the transformation of the economy but please, let us not really make it impossible for business to actually break the laws.

How do you change the mindset?  Clearly, by confronting, by arguing directly that hasn’t had any or doesn’t seem to be having any impact, how does one allows those who, in your opinion anyway, are on the wrong path, to start switching to something that is more realistic? 

Alec, honestly I don’t know.  I think it is a question of all of us engaging and I always really all upon our other business community members, or leaders of business.  Let us really start engaging and engage as adults.  Let us not really go out there with cap in the hand as though we are the ones who have messed up.  I believe very strongly that we need to start engaging and engaging as fellow South Africans, who are really committed to the future economy of this country.  There is absolutely wrong with it.  Unlike really giving the wrong impression to the political leadership that we are having, knowing very well that we are not and I think, honestly as the captains of industry in this country, we’ve got to stop misleading and really misrepresenting ourselves to the political leadership.

What about the young people?  Are you getting a feeling from the young people that maybe in ten to 15 years’ time, it will be a completely different South Africa and a differently managed South Africa?  They’ll think differently to who’s in there now.

Young people are concerned whether, if we continue at this rate, will we have another country in ten to 15 years down the line?  If we continue at this rate, we will destroy this country and I think that is something that we can avoid.  Fortunately, enough, this country is still solid.  I strongly believe that South Africans will really come out with viable solutions in arresting this threat because without any doubt, we are really facing a huge threat.  When we pursue socialist type of policies and programs in the 21st Century, and I think we need to really get our political leadership to really understand that we need ‘market friendly’ policies, to really be able to just really reach the economic activity in the country.

Well, the numbers are certainly showing, Herman Mashaba is on the money there.  We’ve had two years of sub two percent growth.  The best we could hope for this year is two percent.

Just look at it, you know I’ve participated in a debate immediately after the mid-term review by the Minister, talking about what [inaudible: 10:29] to the gold.  Six months later, 25 percent revision.  Do you know how big a revision of 25 percent is, in a matter of six months?

Massive.

I mean, we’ve got to really look at it from that point of view that you can imagine you’re a chairman of a company, and your CEO presents a budget to you.  Then six months later, he gives you a 25 percent downward revision.  How would you really feel?  I think for us, as a country, we’re the shareholders.  Here our CEO’S are giving us a 25 percent reduction in the growth of our country.  It is not a small matter.  Even at two percent growth, we’re not going to be arrest.  There is no way that we can arrest the high unemployment rate that we are facing as a country.

New ideas required.  That’s Herman Mashaba, one of South Africa’s leading entrepreneurs and this podcast was made possible by BrightRock the company that introduced the first every needs-matched life insurance. 

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