Richard Wainwright on #WEF20, stakeholder capitalism and easy ‘energy crisis’ wins

Investors, both local and international are not holding back on their criticism of what they perceive to be the slow implementation of structural reforms to the economy. The Head of Investec bank South Africa, Richard Wainwright told Biznews at the WEF 2020 summit in Davos that there is no denial that South Africa is dealing with an energy crisis that is impacting all sectors of the economy, but he believes there are immediate steps that can be taken to start addressing it. Referring to stakeholder capitalism, which is the theme of Davos this year, Wainwright said he believed that South African corporates have always been aware of stakeholders unlike their American counterparts. – Linda van Tilburg

This coverage of the global conversation on change is brought to you by BrightRock. The first ever needs matched life insurance that changes as your life changes. I’m speaking to Richard Wainwright. He is the CEO of Investec in South Africa – the banking division. How is Davos this year?

It’s been great. It’s my second time here. I was here 4 years ago when the topic of the Fourth Industrial Revolution was first put on centre stage. So it was a very interesting time. The world’s in a slightly different place, different topics, different issues that we’re dealing with today. The Fourth Industrial Revolution is still there – not as prominent as previously – but it’s been interesting to see what I would call the dominance of the American representation on the back of Donald Trump. The issue of stakeholder capitalism which is what I’m really interested in and climate change and climate risk. So less talk about economics actually which is quite interesting. That tells me the world’s in quite a good place. Growth has slowed down a little bit but we still growing globally.

How do you see this concept – the buzzword here – stakeholder capitalism, how does that apply to Investec?

I think it’s something we as South African corporates have always done. Not to the extent that it’s going to change, but relative to our American counterparts. This is a very new issue for them. What’s become evident to me is South African company law and the responsibility of directors and the purpose of companies – which is based on British law and to some extent Dutch law – is to the company. For American directors it’s to the shareholder. Big difference. When you are only accountable to shareholders thats what’s going to drive you, as South African directors we are responsible for the company and all that it stands for. So I think stakeholders in the broader sense have always been something we’ve thought about, maybe not to the extent that we need to in the future and in particular report on. So I think the reporting of your carbon footprint, what you’re doing with staff, how you’re impacting communities etcetera, are going to become more of an issue going forward, but it’s a really big impact for the Americans. The American Business Roundtable adopted this – 183 CEOs signed up to change the purpose of an American corporate and ultimately the responsibility of directors. There’s a lot of skepticism as to whether it’s real – because you’ve got the politicians and government policy in America maybe not aligned with that – but certainly the panels that I’ve been going to where there have been a lot of American CEOs – big global firms – they seem very committed to this.

Initially we talked about sustainability and it was almost like something nice to have for a company not a “must have”. Do you think stakeholder capitalism will become the same “must have” instead of “nice to have”?

I think it’s going to transition that way. We’re in a transitionary period so let’s look at what shareholders are driving. We’re really talking about companies in the public markets. I attended a very interesting session on companies and private markets – but that’s whole other topic for discussion – you’ve got a big shareholder, one of the world’s largest institutions like BlackRock, its CEO came out issuing a letter saying they’re going to start taking climate change and stakeholder capitalism very seriously. I’m sure the mainstream investor base will start taking that up. We recently – at Investec – had Tanya de Santos, who runs a sustainability division, recently speak to a number of our stakeholders including shareholders. What was quite disappointing for me is that the mainstream shareholders, this was not a big issue for them and in fact some of them were open enough to admit they’re somewhat behind and were very interested in what we are doing. I think it will move into the mainstream. You’ve got a lot of activist shareholders – which we’ve seen in South Africa – who’ve come to some of the banks particularly around the financing of coal and coal-fired power plants, but I think it’s a transition that will change. I think the real owners of the money, which is the pension funds, the endowment companies, the insurance companies and their clients – which is us – will start putting pressure and demands on the mainstream asset managers. I think we’re ahead of the game. I think a lot of corporates in South Africa are going to step up. I think some of us might be slightly ahead of others but this is not going away.

You mentioned the word disappointment. Is there disappointment in growth at the moment in South Africa and the fact that Ramaphoria has not happened and that these structural reforms – that you are looking for in the South African economy – have not happened yet?

We are disappointed. There is not a client, there’s not a company that we speak to that is not disappointed, they’re waiting for these changes. We know the social impact of growing at less than 3 or 4% – or maybe 4 or 5% – growing at less than 1%. The social impact on that, on our communities, on our people, is massively negative so we are disappointed. We business people like to change things quickly – we did expect a lot more from our president when he first came into power. We understand the challenges that he’s got and we will criticise and support where we need to. We are disappointed. We want faster, and we need faster structural reforms. We think there are a lot of easy wins. I think South African corporate CEOs are much more outspoken today than we were historically. I think for probably hundreds of years the private sector was very quiet in criticising the public sector and today we play a much bigger role and have a bigger voice. It’s led by some brave people like Stephen Koseff and others who have been very brave in criticising – in a very constructive way – and giving real suggestions on how we can accelerate these structural reforms.

How is Investec affected by the problems with the state owned enterprises?

We’re affected if our clients get affected so loadshedding, the power crisis – and we should call it a power crisis, an energy crisis – for sectors of the economy it’s a crisis and it has an impact on how positive people feel. How investors, our boards feel about investing in the economy, so we are in a crisis. We’re very pleased with the changes that we’re seeing at Eskom. We’d like it to be accelerated. We’re gonna support them as much as we can and it’s not just support with money. Some of these state owned enterprises are over-indebted. We need to get rid of some of this debt . A positive step on SAA was going into business rescue – we see that as a positive thing – and I think it was a big matter for the government to allow that to happen so there’s a lot of positivity that comes out of that. Get it restructured, get it back on a profitable path with good management – maybe with an international shareholder – but SAA is small relative to Eskom. Eskom is the big elephant in the room and there’s no doubt in my mind it is holding back economic growth. The certainty of the supply of power is important to most businesses and it will hold us back. We have an energy crisis and we should deal with it as a crisis. That’s why I’m pleased our president is not here because I think he’s back home dealing with a crisis, hopefully. I think there are some easy wins. Listening to AndrĂ© de Ruyter he seems to be on the right path, we’re going to have to tighten our belts a little bit and deal with loadshedding and get the maintenance programs back on track on these power plants.

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