Investec CEO Stephen Koseff doesn’t do boring. The incredible global success of the company he helped create hasn’t changed the demeanour of the lad from the East Rand. He grumbles about the Davos food and misses his wife. But below the surface, there was a spring of optimism in his step when we chatted at the World Economic Forum annual meeting. Koseff, like fellow super entrepreneurs Brian Joffe of Bidvest, Discovery’s Adrian Gore and Massmart founder Mark Lamberti (plus numerous others), stepped up to the plate after the Nenegate shock in December 2015. The result, he says, is that cohesion between business, government and labour has never been greater. Koseff’s passion is education where his group is focusing its efforts and also supporting the broader strategy driven by former FirstRand CEO Sizwe Nxasana. When South Africans pull in the same direction, they are formidable. The Investec bossman believes it is starting to happen on the economic front. Hope springs. – Alec Hogg
Investec co-founder and Chief Executive, Stephen Koseff is a regular visitor to Davos. Is the food getting any better here?
No, I’m battling to find something to eat.
I remember watching you cruising around there with your wife a few years ago and you said, “Hey doll, where’s this decent graze?”
Yes, unfortunately, she wasn’t feeling well, so she couldn’t come this year. She would have looked after me, but I’m battling to eat here.
It’s strange hey, you’d think…
The only thing you can really eat are fruit or sandwiches, that’s it. I don’t want too much bread because it makes me fat.
Your brain no doubt, it gets fat at a meeting like this. There’s just so much.
There’s a lot of learning and I don’t arrange any bilateral meetings because I don’t use it as a networking operation, I use it as a place to learn and get ideas, learn what’s going on in the world, learn what the issues are in the world, what the issues various companies may face. This time it’s much more about the world in specific companies and the big challenges that are facing the world, the hollowing out of the middle class, inequality, how since the financial crisis, only the top three percent have benefited because of low interest rates and rising asset prices and now, how do we take the nick, how do we actually fix that problem by inclusive growth?
Stephen, I know you’re a positive person, you always look on the bright side, is there much to take out of this that would be able to divert this wave of negative news, which seems to be coming on us?
Yes, look I think I was in a number of sessions yesterday, one was, I think it was called ‘Rethinking Capitalism’ and I think what came out of that session was that actually Capitalism is the best system around, but we have to put a much more human face on it. That concept of it’s okay to do something very harsh because it’s business needs to fall away. I think we always, our marketing guy Raymond van Niekerk used to always talk about, “You don’t live off society, you live in it” and I think that’s very important as business to make sure that we take all stakeholders along and we support all stakeholders, not just the quarterly return to shareholders.
How do you do that?
I think shareholders have to accept lower returns. I think the worst thing in life was when they went to the CFA’s, they got obsessed with return on equity, they hammer us all the time about return on equity, but if you want to build sustainability and long-term growth into the equation, sometimes you have to forego some return on equity and you have to build your society, otherwise there won’t be a return on equity because the system will break down.
That’s what we’re hearing from all corporates, is we have to do a hell of a lot more on the social front, we have to do a hell of a lot more on what we do to help people who are displaced from technology, find new roles in life otherwise you end up with what you had in the US, people elected, a populous leader, we ended up with Brexit, a populous choice in the UK. Those are issues of the developed world, then you come to the developing world and you have a massive difference between the haves and the have-nots, and how are we going to improve the have-nots; is really through education, we have to uplift our game. Certainly, that is a South African issue and we have to have stable policy and a clear-cut vision that people subscribe to.
We’ve spoken about reduction though a lot in South Africa, how do you get involved, how do you help? How does Investec?
We run programmes called Pro Maths, Pro Science where one of our key social responsibility programmes is that we have, I think 4,000 to 5,000 kids at any point in time, who go from Friday to Sunday for extra maths and science lessons. These are mainly township kids who come from schools that do not have teachers that can teach them properly. They go from failing dismally to getting A’s and B’s. They can then go into a career in engineering, they can go into finance, go into actuarial science, and they can go into medicine. Everything that requires hard sciences, they then have at least a chance and it’s a lot of effort on their part, it’s Friday afternoon till Sunday.
Stephen, that’s a great story, I mean that really is, 4,000 to 5,000 kids, that’s a logistical exercise in itself.
Yes, well it’s a number of clusters, so we work with NGO’s it’s not just an Investec thing and at the end of the day it is something that we’re very proud of and it’s worked very well. We have kids who have come through that kind of programme over the years who are now making their way in life and now obviously we have to fix the basic education system in South Africa because you have very strong private schools and those old, what we used to call Model C schools that are essentially run by governing bodies and then you have the rest, and then you saw last week we didn’t even have enough places for kids.
So we have to fix that because that’s how we are going to get a growth economy, is if you have people educated appropriately. The other thing we need to do in our country is, you know we lost the vocational training for someone’s wisdom said, “You don’t need trade schools, you don’t need them, you know we don’t have enough nursing colleges”, I mean my understanding from this because I’m co-chair with Colin Coleman on this Youth Employment Service Programme, where we’re going to try and create 330,000 internships a year, one year paid internships funded by…
Slowly, slowly, 330,000?
Yes, it’s a big logistical issue, but we’re going to have to convince, because what we did was we took unemployment, there are 15 point something million people employed in South Africa, just under 16-million, there are 1.5-million of them in domestic households, there are 2.5-million employed by government, so there are 11.5-million employed by the private sector, we said three percent of that, it’s actually 2.8 percent on average. We’re going to try and get corporates to do internships for up to, between, I would say you’ve got to go low because 1.5 percent to maybe ten percent, depending on the type of firm you are, of your headcount in some form of internship, we work in the package with the Deputy President because there will be some incentives and it is spoken about quite a lot, but the logistics are quite tough and we’re also thinking about how we use it to enhance the township economy.
Cyril Ramaphosa spoke yesterday about it being launched in June. Is this the same thing?
In June, you know we’ve got to get our package right. So we’re saying hopefully, I said July, because it’s a tough task, but yes, maybe we’ll get it going a little bit earlier but to get the real momentum, to get everyone on board will take longer.
This is unprecedented.
Yes and if you can break the back of youth unemployment…
No, I mean unprecedented in business working this closely with government.
Well, I think the issue; the positive out of Nenegate was what they called the Presidential Task Team, which said, “Can business, labour, and government work together?” So we have labour on our committee and I’ve got Dennis George, head of FEDUSA, who sits next to me in the meetings and you would think me, Stephen Koseff, white monopoly capital, as we’re accused of being.
Don’t keep the myth going, Stephen, you call it…
I’m not keeping the myth going, I am what I am, okay.
Are you white monopoly capital then?
I’m a believer in the free market system, but I also have a strong social conscience and I think that business needs to play a much bigger role in helping uplift society, but we’re accused of being monopoly capital because we have one of the best financial structures in the world and what we’ve heard here over the last day or two was how positive people are on some of South Africa’s achievements.
We have many challenges, which we were talking about earlier is education, but when you talk about, when you look at the sophistication of our financial infrastructure, the strength of our institutions, Reserve Bank, National Treasury, but out in Africa, the biggest issue is they don’t have any energy or enough energy and now we’re talking about how they can fund this. They don’t have domestic capital markets where they can get the cash from the banking system or the institutions in domestic currency to fund projects. We did it with the Clean Energy Project, 4,000 megawatts committed and coming on stream. No country has been as successful as we have in that Clean Energy Policy Project because we had clear policy and private sector execution.
Although, now there’s a little bit of debate about what’s going to happen in the future. Eskom is sitting on its hands, certain parts of government don’t want it, and they’re promoting a very expensive nuclear programme. How do we get past that issue?
It works. Everywhere in the world they’re crying out to do these kinds of things. We’ve heard here, you know, how you have to use renewables. I was in a talk this morning on infrastructure development where they were talking about clean cities otherwise we won’t be able to breathe, so unless you go more renewable, battery, and those kinds of things and maybe that’s very much developed world, but we’ve got sun. I know the Deputy President spoke a little bit about nuclear. I guess it’s a question of degree, I don’t know why we need it at all when we’ve got sun. Okay, one of the problems with sun is we haven’t worked out how to store the energy that you can create, but we do have an existing infrastructure where you can store energy, so use sun to supplement it.
I’m not an expert on this, so maybe I’m talking the biggest load of rubbish, but we need, we have proven that private sector participation in projects of this nature has been very effective, it doesn’t cost the government anything. Yes, Eskom have to take the stuff onto the grid, but you know it has supplemented our energy supply. Remember a couple of years back before the World Cup, and then we had load shedding last year.
I heard the other day there was a little bit of load shedding, although the Deputy President said yesterday, “We haven’t had load shedding, but maybe that was just technical, not supply, so you can resolve massive problems. We have a capable corporate sector, that is again one of our strengths and if we partner effectively with government and labour, and we won’t always agree with labour, but job creation is very important, we know for our society, we can’t have 27 percent unemployed, no country has 27 percent unemployment. Okay, maybe Zimbabwe, I don’t know if people are employed there at all.
You can’t do it indefinitely.
We need to get that down to a rational sort of level and we need to get people working and that starts with education, but there is also policy and I was talking to some of the retailers, they can compete. The 89-million jobs that are going to leave China, low-skilled jobs, we need to create zones that can absorb some of that processing. I was talking to the retailers the other day and they were saying to me, they manufacture clothing, but the high-end stuff because they can compete, the low-end stuff they can’t compete because you’ve got to pay the global competitive wage, which is much lower than our minimum wage.
We need to also agree with the unions and with government that you create zones where you can pay below the minimum wage, but at least you’re giving the people dignity of work and then what happens is the next generation of that family have dignity of work, get out of it, are able to be educated and become middle-class and you know there are lots of things we can do as a country to help grow and develop, but you need that collaboration between private sector and corporate sector. I never knew why government needed to own half the state-owned enterprises they own because they could use that cash much more effectively.
It looks like the last year has been a very good year in one respect. The political turbulence was extreme, but from seeing Team South Africa pulling together here in Davos and this collaboration that you’re talking about, on for instance, the youth employment scheme that is going to be kicking off pretty soon, some good came out of a pretty bad decision.
Yes, look I think the fact that we pulled together, the fact that we realised that people who mistrusted each other completely now have a degree of trust. I don’t think everyone trusts everyone yet, but there’s certainly much more trust in the system and trust is going to be the important thing. The fact that I can sit next to a chief unionist and we come from totally different perspectives in life and have common ground, tells you that when there is dialogue and you see the picture that you need to see clearly and you can work as partners and you’re giving a bit and they’re giving a bit, you can make a massive amount of progress in life.
That’s been an excellent development, but another development that has been encouraging to many South Africans is that business leaders like yourself have been speaking out against the wrongs in the economy. Just this morning Johann Rupert has now said the Public Protectors’ Report on Absa is pure fiction. You wouldn’t have heard that from a business leader a little while ago, what has emboldened the business community, do you think, to this degree?
I’m one who has always spoken out, but I think the fact that more people are speaking out is important. I’ve always said what I think and it is important for us to say what we think. I think sometimes people were scared they’d have a bad response from government, maybe they depend on government business, I don’t know, so we’ve been too cautious. I think that it is very important that we’re able to say what we think. We are living in a democracy and that it is important that people say what they think as long as it’s legitimate and well-founded and you know, we’re not negative about the country, we’re positive about the country.
When we go to the IMF every year, we do a positive presentation on South Africa, here’s the balance sheet, these are the positives, which is again, mostly the strength of the private sector and these are the challenges, and you know, you have to be truthful because people aren’t stupid. They come and they know. You can’t hide reality from people in life, but I do think that the better understanding that you build between business and government, that business is not just there just to rip the guts out of everything and they’re doing positive things and you can see, you know, we as business leadership, one of the challenges we’ve had is keeping too quiet. Now we’re saying we need to tell the people what we do as a common group. What we do on the social front, what we do on a job creation front, what we do on the education front, all these things are very important.
Well, the Pro Maths and Pro Science programme of yours that you’ve explained now, I’ve never heard of it before and I’m sure (I’m in the news business), so many people would be like me from that perspective.
We ran an ad of an individual who came from a township, had to endure a lot of hardship, but ended up qualifying as an engineer. It was on, maybe in the movie houses and all over the show, but we don’t talk enough about it perhaps.
A broader perspective is that business never tells us what it’s doing.
No, we don’t tell the stories and that’s what I think there’ll be much more focus on, talking about these things and I’ve just come out of a session where they talked about creating the right narrative, creating the positive narrative, and you know, not everything is about the negative and what we have to learn in our society is to look at the positives and then you get the flywheel turning in a positive way. If we keep on bringing ourselves down, we know what we’ve got to do, let’s acknowledge we’ve got to do it. The first way to solve a problem is acknowledge there is a problem. We have a big problem with education; we have a big problem with vocational training. We need to get together as business, as government and as labour to actually fix that problem.
Okay, elephant in the room, Zuma’s not here this year and last year Zuma and his accolades dominated the conversation and in years before that. What you’re talking about now is acceptable in a certain grouping in the ANC and not acceptable in another grouping. It’s almost like there’s one part of the ruling party that wants to collaborate with business and wants to work together and another part that sees business as the problem.
Look, you know I think that hopefully, the whole of South Africa will recognise that business is more the solution than the problem.
The whole world kind of does.
In that, even this so-called negative narrative that we’ve seen here is of inequality. We all acknowledge that to live with poverty, I mean 40 percent of the world was in poverty, I can’t remember how many years ago but today it’s ten percent if you look at it on a purchasing power parity basis, so a lot of the progress in the world has uplifted people from poverty. We still have a long way to go in South Africa to make sure that we uplift everyone from poverty.
We have a strong social grant programme, one of the best in the world, which is recognised as one of the best de-redistributions of wealth in the world to uplift people, but we need to be able to create jobs, we need to get rid of unemployment, we need to give people the dignity of work and I think that corporate collaboration with business, business collaboration with labour and government is the solution.
Stephen, five years ago you would talk to a business leader excluding yourself perhaps and the comment would be, “No, we’re just in business, we’re not interested and we should not be involved in politics”. Now it appears as though business is getting involved where the real decisions are made.
No, I don’t think we want to be involved in politics. The politicians must do what they have to do, but I think they’ve got to create the right kind of framework and they have to create a business-friendly framework, so we can create growth economy. We are not going to be able to solve our problems without the economy growing. To grow at 0.6 percent is not going to solve anything. There will not be an ability to create jobs. We need to grow. The NDP talked about five percent. You know, unless we can start growing at that kind of pace and that means we need to grow in a number of sectors, we need to grow in low skill jobs because these people are not trained and therefore, they can’t get high skilled jobs, we clearly need to grow high skilled jobs, tourism is a massive opportunity for us.
There’s no better place in the world to visit than South Africa. Everyone who comes there loves it. I think healthcare tourism is a big opportunity for us; education tourism is a big opportunity for us. The second-biggest export in Australia is education tourism. Remember, they’re regarded as a mining economy, but education tourism is not far behind mining and you’re not going to create jobs in mining because it’s going to be automated, so understand that certain industries to be competitive are going to be automated and we need to create these other industries that can absorb, firstly our unskilled labour and secondly, grow and develop our people.
Stephen, aren’t you kind of missing the reality of what’s going on? Just this week there was a decision that all New Zealanders wanting to visit South Africa have to, in person; visit Wellington to get a visa, where there was no visa before as a point. As a second point, what’s going on in the universities? They’re hardly going to be world-class if they continue in this direction. I think everybody agrees with your sentiments, but on the ground the practicalities look different.
I think that’s the challenge for Home Affairs, is that they have done things over the last couple of years that were anti-tourism in some ways or other, I think they’ve improved it a little bit because they said the Indians and the Chinese can now do their biometric entry at the International Airport. I don’t know why they’re doing that to New Zealanders, it doesn’t make sense to me. Maybe it’s political, I’m not sure why, but it is a stupid thing to do. I can’t remember your other point, you had another point?
My other point was what’s happening at universities?
Yes, Sizwe Nxasana, the ex CEO of FNB, was asked by the Ministry of Higher Education to help solve the problem of how we fund education. I think the Fees Must Fall thing; you know I understand the need for poor people to get free education. I don’t see why Stephen Koseff, who is prepared to send his kids to a private school, should get free education university. People who are prepared to send their kids and pay for private schooling, who can afford it, should pay actually more and then there should be a bursary scheme that helps the middle and the poor and I think that some countries have very effective schemes where you can get free education, but you pay the money back the minute you start working, like Australia, you pay the money back. As you start working there’s a payroll deduction and it’s not that large that you actually feel the pain, but it’s there and you may pay it back over your whole life. If you stop working, you stop paying and that’s a very effective scheme, but that’s available to everybody that’s a middle class society.
Sizwe was coming up with a combination scheme that said poor people get a grant, middle get between a grant and a loan, and that we can use the private sector to help run NSFAS because NSFAS, which is a government bursary scheme, don’t even know who owes them money it’s so bad, so get the banks, outsource it to the banks. It’s like home Affairs is outsourcing the ID cards to us banks, so we’ve got Home Affairs people in our box okay. We’ll teach them a bit about the Investec culture and values and the sense of urgency. Our clients can come to Investec to get their ID book, so that I think is innovative. There are so many things we can do as partners that can help government if you break down and there’s Home Affairs, a typical example, if you break down some of those barriers.
That is the bright side of what one can witness here in Davos, is that Team South Africa is cohesive for the first time in many years.
I wasn’t here last year.
Well, in many years before that, but if it can be translated into the other 51 weeks of the year back home things might start looking pretty bright.
Yes, look I think we as corporates have been working closely with members of government and with labour as partners in the presidential task team to make a difference. We made very good progress last year, Brian Joffe and Adrian Gore already raised R1.5bn for their fund, I don’t think it’ll stop here. Now they’re going to work on how to use that money and the process. Apparently they have found a CEO who they’re going to appoint in the not too distant future and we’ve got to get the youth employment service thing up and running.
We defended the ratings, but unless we grow, we’re not going to defend those ratings for long, so we need to grow and I think what has supported, the ratings is, they say unprecedented building of relationships between business labour and government, so these are things we have to keep doing and change all these narratives that you know you monopolise capital, you do this, you do that. I mean there is a noise that comes from a side of our country that is going to do cause the opposite effect of creating jobs and we have to change that narrative and we have to get the other narrative out there.
Stephen Koseff is the Chief Executive of Investec and this podcast was brought to you by BrightRock.