WSM: Corporate sector warns of SA’s slide towards failed state status

The corporate sector of South Africa, often cautious and conservative, is sounding the alarm of an impending failed state. Frustrated by power outages, infrastructure failures, crime and corruption, and unemployment, black and white top executives from companies such as MTN, First Rand, Standard Bank, Nedbank, and Remgro have all given outspoken warnings. The business lobby is afraid of getting stroppy and potentially excluded from the banquet, and of provoking the displeasure of the governing elite, as was seared on the collective consciousness of South African business during apartheid. The country’s hopes of joining the world’s economies are slipping further out of reach by the day because of infrastructural decay, especially electricity and water supply, and transport networks. Read William Saunderson-Meyer’s article on the new outspokenness from our captains of industry below.

At last, big business starts to bark

By William Saunderson-Meyer

South Africa is in danger of becoming a failed state. Power outages, infrastructure failures, crime and corruption, and unemployment have pushed it to the brink.

That’s a prediction that’s been aired so often that it is in danger of becoming stale. What’s different now, however, is that it’s a refrain increasingly heard from within one of the most conservative and cautious segments of society, the corporate sector. And it’s coming from both black and white top executives.

In the past few weeks, there have been outspoken warnings from the top of MTN, First Rand, Standard Bank, Nedbank and Remgro. 

That’s significant. Business is innately cautious.

Admittedly, that’s not necessarily how it sees itself. Many business leaders, not content with the often dull and soulless task of making pots of money, think of themselves as dashing corporate pirates.

It’s a popular-culture image that the American entertainment industry — Wolf of Wall StreetMad Men and The Devil Wears Prada — has helped cement.

But in reality, these guys — and they mostly are guys — are often cautious, fearful Mommy’s boys. They’re always jostling to nuzzle up to the bountiful State’s big, gushing teat and equally quick to cower behind her skirts.

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For a South African example, think of MultiChoice’s petulant demands that those nasty big-boy international streaming services be curbed, so that its monopolistic DSTV subsidiary can continue to exploit its subscribers. The viewers that it has held hostage and milked for three decades with deteriorating service, high prices and paltry offerings.

An abundance of caution of course makes good business sense and — Boy Scout pledges about ESG and triple-bottom-lines notwithstanding — it is naïve of social activists to expect anything different.

It can be financial suicide for a business to offend the powers that be, especially in a developing economy such as ours, where the State has virtually unconstrained scope to bully the other actors.

In countries where public oversight of State largesse is poor, to get stroppy is potentially to be excluded from the banquet. Worse, the displeasure of the governing elite may be directed against maverick business leaders in more personal, petty and sometimes dangerous ways. 

That was seared upon the collective consciousness of South African business during the apartheid years. For almost 40 years, right through until the mid-1980s, the business lobby obligingly fetched ball and rolled over at the whim of the National Party.

It was only when sanctions and the debt standstill threatened to collapse the economy totally, that the occasional, timid woofs turned to barks.

In 1994 there was a changing of the guard but not in the rules of engagement. For the sake of both parties, a back-scratching accommodation had to be found.

The admirable imperatives of affirmative action and transformation were quickly hijacked. Corporate SA laid out its honey pots and the African National Congress elite feasted like kings.

Billionaires, like President Cyril Ramaphosa, were created in an instant. Not for them any of the slog of hacking at the capitalist coal face and the riches conveniently came without even needing to believe in the capitalist system. 

Although corporate interests, which are not invariably the same as the public interest, were lavishly rewarded by these newly greased empowerment palms, there was an implicit warning: don’t rock the boat. Or as the wise Buddha of Nkandla was fond of warning, “It’s very cold outside the ANC…”

Now, suddenly, there is a faint ripple of corporate panic that echoes their 1985 response to President PW Botha’s watershed failure to honour his promise “to cross the Rubicon” and dismantle apartheid.

Similarly, there is today frustration, anger and despair that Ramaphosa’s promised “New Dawn” has been shown to be nothing but a conjuring trick. The president, they belatedly realise, has neither the intention nor the ability to make good on his promises of curbing corruption — which is at the heart of virtually every aspect of the country’s threatening collapse — or of ending his party’s fixation on socialism.

This week, Steve Phiri, the CEO of Royal Bafokeng Platinum, told an industry conference that South Africa was nearing the precipice of failed state status because of the government’s inability to ensure access to critical services. The country’s hopes of joining the world’s economies were “slipping further out of reach by the day” because of infrastructural decay, especially electricity and water supply, and transport networks.

The government was failing in its primary duty of keeping its citizens safe. “Organised crime is a problem affecting just about every industry in this country in one form or another, Phiri said. “We are destroying ourselves…” 

His comments echoed those, a fortnight ago, of Ralph Mupita, CEO of MTN, that we are in danger of being “a failed nation-state”. Mupita identified the “horsemen of the apocalypse”, as BusinessLIVE put it, to be power outages, failing logistics infrastructure, corruption, and unemployment.

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Professor Bonang Mohale, the chair of Bidvest Group as well as Business Unity SA, recently went further: “We are not a failing state but a failed state.” Inequality was widening, graduates were roaming the streets, public education had collapsed, public hospitals continued to fail the poor and the vulnerable, and lawlessness was an epidemic.

Electricity supply is the most immediately pressing. While the consensus is that the national power grid will not fail completely, it is a spectre that haunts CEOs. 

Standard Bank CEO Sim Tshabalala told Business Day in an interview that the bank’s scenario planners estimated the probability of total collapse to be low, such a meltdown would unleash “Armageddon”, sparking off social unrest and the implosion of municipal infrastructure.

Even Iain Williamson, CEO of Old Mutual, the most relentlessly and unconvincingly positive of our financial institutions, has warned that the failure to remedy load shedding will lead to crop failure, higher food prices and shortages of certain food products.

Business worries, too, about growing political risk. 

Remgro CEO Jannie Durand said last week that the South African government’s close alignment with Russia posed a “clear risk” to the country’s trade relations and export revenue.

Similarly, presenting his group’s annual results, First Rand CEO Alan Pullinger said that the ANC government’s increasingly cosy relationship with Russia posed a “catastrophic risk”. 

Not mincing his words, Pullinger said that politically the support of Russia was “foolhardy”, while economically, South Africa was “running out of time”. 

“Our government’s left-leaning and enthusiasm for China and Russia is being noticed by countries vehemently opposed to this war. Ironically, our country benefits far more from trade with and investment from the bloc comprising the US, the UK and Europe than these two countries combined,” said Pullinger.

While there was evidence that Ramaphosa’s structural reform plan, Operation Vulindlela, was working, and that the private sector was “eagerly” supporting it, “debilitating institutional strength and governance, declining rule of law, high levels of crime and corruption, and failing state-owned companies” didn’t foster the commitment of long-term capital by businesses.

Nedbank CEO Mike Brown, presenting the bank’s annual results earlier this month, warned of increasing business paralysis because of the infrastructural failures of the State. “The will of the political and public sector to make meaningful changes is uneven and actual delivery is poor. This cannot continue, and more urgent and decisive leadership and action are required.” 

While there are good reasons for corporate South Africa’s disillusionment, there is a harshness in tone to many of these comments that is in strong contrast to the corporate sector’s previous obsequiousness towards the ANC government.

In Rapport, Gerhard Papenfus, CEO of the employer organisation NEASA, recently argued that the ANC and big business had for years been in cahoots. Consequently, and frustratingly, those telling the truth and calling out things as they were, had not been tolerated. 

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“Only now is the talking starting,” says Papenfus. “Now that things are completely broken.”

The disaffection also has something of the air of the spurned lover about it. While Remgro’s Durand speaks euphemistically of there being a “trust deficit” in the relationship between Big Business and the ANC, the economist Thabi Leoka is more outspoken.

Corporate SA and the ANC, says Leoka in that same Rapport article, have since 1994 had a cosily symbiotic relationship that suited both parties very well. “Companies sponsored ANC conferences and ANC members served as the directors of [those same] companies. But now sentiments have soured and the business sector is saying, ‘This not the agreement we had,’.” 

In other words, the honeymoon is over. 

Follow WSM on Twitter @TheJaundicedEye

This article first appeared on Politicsweb, where William Saunderson Meyer’s column appears every week. Click here to sign up for Politicsweb’s free daily headline newsletter. 

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