Leader.co.za - Management, Training and Career Advice for Business Leaders







31 OCTOBER 2008
We all have a job to do to make SA work

by Johann Rupert: Chairman of Richemont and Remgro.

Until about 150 years ago, standards of living were roughly the same all over the world. It didn’t really matter whether you lived in New York, London, Paris, Mexico City, Johannesburg, Cairo, Nairobi, Beijing, Tokyo or Manila — the standard of living was roughly the same.

In the past century, however, the standard of living in various countries has changed dramatically so that today we have developed nations and undeveloped nations.

Africa has gone backwards. It’s got nothing to do with us being African or black — forget this old racist line. The truth seems to be found in the choices made by societies as to the economic and social political systems under which they choose to live.

Winning nations have sound economic policies which encourage open-market systems and socio-political policies that include democracy, free speech, honesty and transparency in government actions and a strict adherence to, and respect for, the rule of law. In this regard it is important to note that free-market economics is a precondition to democracy: there are no democracies that do not have free-market economies.

Conversely, there are still free-market systems that are not true democracies. The Chinese have totally open market policies but they do not have a democracy. They understand that democracy will follow.

It’s clear that the majority of sub-Saharan nations have made the wrong choices. So have we, for many centuries, and the results speak for themselves.

However, since the end of apartheid, we’ve had a miraculously peaceful transition to a democracy. We’ve further experienced successes such as the remarkable improvement at the Revenue Service, the turnaround at the national Treasury and the excellent management of the currency by the governor of the Reserve Bank and his staff. Our economic policies have generally been sound.

I am a proponent for the abolition of exchange controls but I must agree with finance minister Trevor Manuel that we were saved by foreign exchange controls. Certainly some of my banker friends and fund managers would also have been seduced by the higher yields available in the sub-prime and other markets.

So for once, thank God for foreign exchange controls.

Our labour markets have not been as flexible as those of our competitors and this will become an issue.

We have a democracy but some of our fellow South Africans continuously threaten to resort to violence if they do not get their way. Freedom of speech is guaranteed under the constitution but any criticism of government policy is viewed as counter revolutionary, racist and is stifled by a hypersensitive leadership.

Honesty and transparency in government have been sadly lacking, very sadly. The perception is that corruption is not deliberately and efficiently combated.

The law of unintended consequences has also been at work in a number of areas.

Black economic empowerment is a good idea. In South Africa, there has been a real shift of economic power towards black South Africans and that is continuing apace. Too often, however, empowerment has resulted in the enrichment of the few rather than the many, leaving behind a vast army of uneducated unemployed.

This can only be addressed by a far more effective nationwide programme of skills training. There are no unemployed carpenters, stonemasons, electricians or plumbers in South Africa, or anywhere else for that matter.

The apprentice system needs to be reinstated and the basic educational system orientated towards economically useful skills. The Sectoral Education and Training Authorities are totally mismanaged and simply do not work. Anybody who has ever asked for a grant can vouch for this.

South Africa can only succeed economically and politically on the basis of a genuine partnership between black, white and brown, and not on the basis of white privilege or black advancement at the expense of any form of competence.

We all want employment equity to work. It’s not only the right thing and the moral thing, it’s also the smart thing. Between 1994 and 2007 the numbers of black graduates has increased dramatically. I think by 2008 well in excess of 60% of all graduates will be black. The situation will resolve itself.

Now we’ve all seen and experienced the disasters of this policy of advancement at the expense of competence. Look at the institutions where experienced managers were “encouraged” to leave — Eskom, the Land Bank, South African Airways.

The senior leadership of various parastatals and parts of the civil service has been empowered to a point at which, in some cases, they can no longer deliver the basic services required of them. There has to be a successful mixture of old and new management for any of these enterprises to prosper.

Land reform is another area in which policy so far has resulted mainly in confusion as the plethora of unresolved — and sometimes completely unfounded — land claims has resulted in new black as well as white commercial farmers being reluctant to reinvest in their farms. There has to be an effective programme of land transfer, subject to proper compensation and support for those acquiring the land.

But the department administering this programme is notoriously incompetent. This is a dangerous thing to do on a continent and in a country that’s facing food self-sufficiency problems.

The agricultural minister has to realise that she is for all practical purposes “the minister of food security and self-sufficiency”. When this realisation finally dawns upon her, she will hopefully change her attitude towards the already beleaguered agricultural sector.

If we want our children to escape another cycle of hunger we need the farming sector to be safe, happy and profitable.

The head of the World Bank, Bob Zoellick, said recently that the most fundamental prerequisite for sustainable development is an effective rule of law. Yet this is exactly what the head of the ANC Youth League and some others have been challenging, spooking overseas investors and undermining years of work to improve South Africa’s sovereign rating. Without foreign capital we will not be able to provide a better future for our children, for the children of this country.

Luckily the (Youth League leader) was slapped down and the rule of law was defended by President Kgalema Motlanthe, who’ll hopefully continue to do so.

The new leadership seems to be genuinely concerned with stamping out violent crime. They will be judged by results — what additional resources are directed to policing and how effectively they’re utilised.

All the evidence from every other country is that crime can be rolled back on the basis of a more active and visible police patrolling and not by any other means. We have to remove these criminals from our society.

Also, in our violent society, it does not help when members of the executive committee of the ANC say “we shall kill”. And others keep on singing Umshini Wam. Who exactly do they want to shoot with these machine guns?

The worst feature of the Mbeki regime was probably the paranoid reaction to any form of criticism, even from people like Nelson Mandela, Bishop Desmond Tutu and Helen Suzman, who can scarcely be regarded as enemies of the state, or of not wanting South Africa to succeed.

Like their predecessors, the nationalists, the ANC seems to mix the concept of a political party, the government and the state.

We live in a democracy, we’re guaranteed freedom of speech. If some of us disagree with some policies, it’s our right to do so. I believe it’s even an obligation to do so. Who speaks for the children?

A major test for the new regime will therefore be whether it’s prepared to listen to other points of view and accept some criticism as intended to be constructive.

We have so many problems that if the Treasury, the Revenue Service and the Reserve Bank had not been managed so well, I actually think we would have been another failed state.

And a note of caution to the politicians, it’s not only the position of the minister of finance or governor that are important to the markets. The integrity and reputation of these individuals matter more.

Treasury, I hear, is blamed for withholding disbursements, leading to “lack of delivery”.

You cannot blame Treasury and SARS for the lack of delivery. I wouldn’t allow any of the funds to go, knowing the levels of incompetence and corruption that exist in so many of these departments.

We all share, all of us, regardless of colour and beliefs, the dream of a country where we can live safely, be well educated, have houses, jobs, water and electricity and access to proper health services. Only this will give us and our children hope.

I believe if we work together we can solve these problems. There are decidedly new things on the horizon in Africa.

Many African economies actually appear to have turned the corner and moved into far steadier and faster growth. For the first time in 30 years we’re growing in line with the rest of the world. The average growth for sub-Saharan Africa was about 5.4% in 2005 and 2006.

Some of this was due to luck, but a lot of this positive outcome was due to the adoption of some of the ways of winning nations.

For us to succeed we really have to study and adopt these ways.

We need open and fearless debates about the issues at hand, without risking or being sneered at as being racist or counter- revolutionaries.

I’ve kept my word to Mamphela Ramphele, who said that whites should start speaking out a little bit without having the fear of being branded racists.

We can easily reach consensus on our goals. The methods and the priorities will need more debating.

No poverty alleviation, provision of adequate housing and so on can ever be achieved without a healthy, growing, private sector.

Without growth, it’s not going to happen, it’s never happened anywhere else on Earth.

Governments do not, and should not, create jobs. Trade unions protect existing jobs and when too powerful and rigid, actually destroy jobs. It’s the private sector that has to create the wealth and tax base that will create jobs and prosperity.

I sincerely believe there is enough goodwill and talent in this wonderful country to solve these problems.

We’ve been fortunate in having three good presidents in a row — president FW de Klerk, president Nelson Mandela and president Thabo Mbeki. I feel particularly sad for the latter, whom I like and respect.

It was, however, becoming very clear that he was not well served by those close to him. He was never told the unpalatable truth and sadly lost touch with his constituents. Even “Big Business with Government” meetings were orchestrated “powerpoint exchanges”. It was not frank dialogue. And whenever any of us wanted to speak out our fellow businessmen made sure that we were kept quiet.

So even the business leaders were very reluctant to criticise, preferring the lobbying route.

To President Motlanthe, Jacob Zuma, Zwelinzima Vavi and even ANC Youth League leader Julius Malema — we all have similar goals.

We want to eradicate injustice, poverty, crime and hunger while improving health and education services. And, by the way, we are going to have to do it on our own because the rest of the world’s got its own problems.

The ANC does not have sufficient resources to run this country [on its own]. Look at the sub-prime quality of many politicians, local councillors and executives at either government or semi-state institutions.

Let us rather join hands and create the society that we all dream about. The alternative is far too ghastly to contemplate.

We’re in the same boat, and, if somebody shoots a hole in the boat, especially with a machine gun, we will all drown.

We must really act today to secure a better future for tomorrow.

This is an edited version of an address given at the University of Pretoria this month
Useful resources:

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