With last week’s announcement from BMW that they would be shelving plans for expansion of their manufacturing capacity in South Africa, concern is growing among chief executives over the country’s populist legislation. In particular, more and more people are expressing their doubts over labour legislation that is discouraging investment and job creation. In this interview, Alec Hogg talks to outspoken chief executive Herman Mashaba about the growing economic cost of draconian labour laws. Mashaba argues that such laws hurt the poor just as much as they hurt business and the long-term economic prospects of South Africa. – FD
To watch the video of our interview on CNBC Africa’s Power Lunch, click here.
GUGULETHU MFUPHI: Business leaders are becoming increasingly concerned and outspoken about populist legislation being imposed on commerce in South Africa. Herman Mashaba, who is the Chief Executive of Lephatsi Investments, joins us now for more.
ALEC HOGG: Well, we know when to pass the ball in the hospital park. Good to see you, Herman.
HERMAN MASHABA: Thank you very much – always a pleasure talking to you.
GUGULETHU MFUPHI: As we heard last week, and as mentioned earlier, there’s an increasing voice coming from the private sector. Significant leaders from the private sector, who have a lot of respect in the industry, speaking out about the populist legislation in the market. I understand that you’ve also had a few statements to make about this. What do you make of it?
HERMAN MASHABA: Well, I’m sure Alec is already aware that I’ve really been quite vocal about labour legislation for many years – for the last ten years. Actually, starting back from the days when Tito Mboweni was the Minister of Labour. At the time; I actually remember bouncing in his office, expressing my concern with this Draconian labour legislation that at the time they were discussing. And here it is – eight years later, as a country we’re sitting with one of the highest unemployment rates in the developed countries. So I think this is no longer just a theoretical matter. This is a life situation threatening the lives of our poor people, and also failing dismally at producing small businesses in this country. So it is no longer just really a theoretical situation. It is really a life-threatening matter that if we’re going to keep quiet about, we’re going to be really failing our political leadership. Because we have failed them in the past by giving them the impression that we were happy with the way things were developing. We are not happy. So I really think it’s high time for us to start serious engagement before the country collapses.
ALEC HOGG: How do we know all these things? We know the labour legislation is appalling. Why is nothing happening? Where are the blockages in this?
HERMAN MASHABA: You know, Alec, I wrote an article – actually two months ago – asking the very same question, and actually addressed it to Parliament; asking them what it is that is blinding them from realising the devastating effect of this Draconian labour legislation, and to my disappointment no-one ever has actually responded to me. Because when we launched this court case as a free market foundation against Section 32 of the Labour Relations Act, the only people who actually engaged me have been people coming from the labour organisation. And I have a lot of respect for labour organisations because they represent the interests of their members. But at the same time Parliament is not there only to represent the few employed labour organisations. They are there to represent South Africa, including the seven to eight million poor South Africans. Why are you ignoring them? For me it’s beyond understanding.
ALEC HOGG: Okay, but let’s look at it rationally now. There has to be a rational reason for this. Is it perhaps because there’s a perception that business is still White and labour is still Black and it’s a hangover from the Apartheid era that you don’t want to give or take? Is it that kind of issue?
GUGULETHU MFUPHI: Alec, why do we really have to cloud the status of poor people and bring race into the mix? Whether business is White or Black or any other colour… What are we talking about? We’re talking about almost eight million South Africans who are really quite desperate. And the people who can really get them out of this poverty, is the business community, and that business community has got absolutely nothing to do with the race. What we need to really look at, is what we as a country can do to trigger and steer economic activity and encourage Black and White South Africans to really drive those forces so that our people can be given an opportunity to work.
GUGULETHU MFUPHI: Looking at the labour cost and the impact of that on the capital costs of the company; we’ve recently seen BMW announcing that they’ve lost an export contract as well as production in South Africa due to the labour unrest. How does that impact businesses overall?
HERMAN MASHABA: Well, I saw an article last night where obviously some claims are made that BMW is using blackmail tactics. I think these are facts of life and I think if, as a country, we’re really going to ignore the sentiments – and genuine sentiments coming from the community – we will really do this to our detriment. I think it’s really unfortunate for us as a country to still, 20 years down the line in our democracy – regard business as the enemy of the people. One has to really look at it from a historical perspective. The other day, I addressed a group of South African’s, and said we’re making a terrible mistake, because we are under the impression when we are fighting the evil system of Apartheid – we are fighting business. We are fighting capitalism. In the meantime the truth is – we are fighting an evil system of Apartheid which really had nothing to do with capitalism. So I think we need to find a way, as a country, to really address this issue so that we understand the difference between business activity and Apartheid. So we still hang onto this, and that is the process. We have the poor South Africans really getting the brunt of this Draconian legislation.
ALEC HOGG: It’s actually scary. If you think about it; Apartheid was actually Socialist, but for a very small society. Herman, what about your own experiences? Because clearly you are passionate about this, you’re outspoken about it and you’ve been through the mill yourself in your own business.
HERMAN MASHABA: I think, Alec, let’s really look at my situation. You know how I’ve developed. In 2005 – eventually – with this Draconian labour legislation I had to actually outsource my manufacturer because, I think, you really look at it as business. How do you really deal with this complex labour legislation? And you can imagine; I wasn’t as small as most of the businesses who had already been taken out by this labour legislation over many years. So I strongly believe, as a country, if we continue along on this trajectory we can only really do this to the detriment of small businesses, which are responsible for the employment of our people. We know that for the last 20 years of our democracy big business has been growing/making money, but employing less people. They’re not doing this because they don’t want to employ people. They mechanise. They are using some of the best legal brains in terms of dealing with this complex labour legislation. But what about the small guy in Alexander or Soweto or Venda or KwaMashu for that matter, who needs to really employ people and be forced and be expected to comply the same as the big companies? Where do they get the resources and the capacity to do deal with this complex labour legislation? Honestly, I think we need to really find ways where our parliamentarians have to take responsibility for this.
GUGULETHU MFUPHI: So let’s touch on entrepreneurship. You started off as an entrepreneur yourself with Black Like Me. What can we do to help stimulate the SME sector in South Africa?
HERMAN MASHABA: We really need to appeal to our parliamentarians to take the responsibility to do away with certain labour legislations that are making it difficult for small business in particular to really survive.
GUGULETHU MFUPHI: Herman, some are saying that you’re putting too much on Parliament at the moment.
HERMAN MASHABA: Well, I think we’ve really been debating and looking at other side matters. The core of the matter in this country, as a free market foundation, we’ve ultimately decided to really go to our core. If it means we must go to the Constitutional Court then that this where this case is going, so that we can, as a country, debate this matter. I don’t really want to discuss side matters. We have already been discussing side matters for a long time. I really want to go to the core of what I believe has been instrumental in getting us where we are today.
ALEC HOGG: How do you get somebody who doesn’t want to listen to you, to change their mind?
HERMAN MASHABA: That is why I say we are left with no option than to go to the courts. I’m sure everyone in this country knows. You can really go back to investigate the last ten to 15 days how, every time I had an opportunity to be in a public platform – discuss the state of entrepreneurship in our country, and labour legislation has always been the number one factor which I believe has been responsible. More and more of our people are losing jobs and I don’t really believe we’ve got the time on our side, and the only option left, is our court. That’s what the courts are there for and we’re really going to explore this opportunity. The Constitutional Court will make the determination whether we are right or wrong. But I strongly believe as a South African, that there is something drastically wrong with our labour legislation. We just cannot make “two wrongs” and expect to get a “right”. Yes, I accept the fact that during Apartheid our people were exploited, but we replaced that evil system. We cannot replace it with another evil and expect to really get a different outcome. And now we’re sitting with unemployment which, if we don’t really do something – the whole situation will explode on us.
GUGULETHU MFUPHI: Sounds like a strong mind-shift change that needs to take place there.
ALEC HOGG: If you can’t fire, you can’t hire. That’s the reality of the world.
HERMAN MASHABA: Absolutely. And at the same time I don’t really believe that we can only leave it to the politicians to make the determination where I must work and who must employ me. I think; let us really start respecting our people, that they have the brains and the capacity to make those determinations on that one.
