#IGC2018: Business and the future of our nation

Bonang Mohale, CEO, Business Leadership South Africa

For the past 10 years we have experienced state capture on an alarming scale, while 90% of the students at Fort Hare University are dependent on NSFAS for tuition, accommodation and living costs. In December 2017 the ANC Conference deposed the previous administration which had, in 10 years, undone the good governance of late President Mandela, bringing the country to its knees. President Ramaphosa has a hard task ahead to bring the country back on track. He has enlisted stalwarts Trudi Makahaya, Mcebisi Jonas, Phumzile Langeni and Trevor Manuel to assist in reforming state-owned corporations like Eskom and SAA which were pillaged by the previous incumbents. He aims to raise $100bn in foreign direct investment which, he hopes, will be equalled by domestic direct investments. If he succeeds, our GDP of -2.2% for the first quarter of 2018 could end up as 2.5% or 3% GDP growth.

South Africa's challenges

The president faces a number of challenges requiring his early attention. He must eliminate state capture, for the estimate is that we have lost R100bn annually for the past 10 years, much of it finding its way to Dubai. Next is to reduce our excessively high debt level. Mandela inherited a technically bankrupt country but grew the economy four-fold in the following 10 years, bringing 100,000 black people into the middle class. Student numbers at institutions of learning stood at 500,000 in 1994, but rose to 1,200,000.

Eskom, the biggest utility company in the world, is presently encumbered with a debt of almost R500bn. Government has provided guarantees for R350bn, of which Eskom has already accessed R297bn. If Eskom goes down, the country goes down, but Eskom is only one of six state-owned enterprises now managed by Pravin Gordhan. The Department of Communications owns 14 state-owned enterprises, as does the Department of Transport. National Government owns another 372, but adding the provinces and local government, the figure rises to over 700.

Bringing state-owned enterprises in line

The third item requiring the president’s attention is to bring state-owned enterprises in line, as they are a burden to the country. Like un-rehabilitated addicts, they return to government annually, seeking a bail-out. SAA is a good example. Most state-owned companies have an employee excess of 33%, all receiving higher remuneration than is appropriate. Eskom currently employs 48,000 people, of which 80 are senior management. Previously, senior management numbered just 20. There has to be some serious culling whether COSATU likes it or no. Therein lies our survival. Another urgent task for the president must be jettisoning expensive projects such as the nuclear deal.

Eighty six companies I represent have formed a council, electing a 13-member board which meets 11 times per annum. They have earmarked two important functions. One is to assist the government in state building. They possess people capable of helping to repair our dysfunctional state-owned entities. In so-doing, they hope to grow the tax-morality of the country while ensuring that taxes are properly utilised to improve quality of life for the majority of our people. Secondly, they will remain alert to prevent any future state capture attempt.

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Ethical leadership

The idea that the business of business is business, no longer holds good. Civil society must become involved in keeping public servants accountable while also becoming involved in policy formulation. Ethical leadership is the foundation. Good leadership provides good policies which foster a better chance to attract and retain foreign direct investments (FDI). If the FDI is high, the economy grows and by 2030 we should be growing at 3.4% GDP, in order to absorb the 180,000 young graduates that enter the job market annually. Only when the economy is growing can we talk about redistribution of wealth. A growing economy brings jobs. Government has only two methods of collecting revenue via SARS: corporate tax, now about 28%, and PAYE, presently approaching 45%, both dependant on the economy.

To achieve the South Africa of Mandela’s dream, vital transformative legislation is required. Demographics must become more representative of the population. More women and black men should be in business leadership. Women are proving cleverer and more hard-working than their male counterparts. A company with a woman at the helm is more productive, effective and efficient, with contented employees. A woman not only transforms her company, but ensures her children are cared for, fed and educated, as well as her community. However, in 2014 women were paid only 73% of the salary paid to men, for equal work.

The Competition Commission should remedy economic concentration as 90% of the country’s wealth lies in the hands of 10% of the population. In 1994 the GINI index showed South Africa’s income inequality coefficient to be .54, but today it stands at .7. We have bypassed Brazil to become the most unequal country in the world.

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Land reform

Another important legislation is land expropriation without compensation. As businesses, we support land expropriation without compensation because the bigger agenda is land reform, not expropriation.

Land restitution: Where people were forcibly removed from farms, they need to be restored to their original position.

Land redistribution: The Mining and Petroleum Resources Act states that when mineral rights are awarded to a mining company, the surface rights are lost to the community and they are relocated without notice – in other words, expropriated without compensation. At least 15 such removals occurred by 1914. The apartheid government forced 90% of the populace onto 13% of the land; arid and with no mineral resources. Redistribution is necessary so we may all live in peace and harmony. Our Constitution guarantees us three rights, namely freedom of speech, freedom of association and freedom from hunger.

Land development: The Constitution states that ‘when conditions are fair and equitable, compensation can be down to zero’. Thus the current Constitution is adequate to deal with the issue of land reform. It is central to the struggle of the African people, so omitting to deal with it now would be irresponsible. It will not be a Zimbabwe-style land grab. It will be done in an orderly and constitutional manner, encouraging inclusive, socioeconomic growth. This way we can all enjoy the same dreams for our children: health, education and the ability to own a home in a pleasant suburb. We need to create a future for all of us together.

This speech was delivered by Bonang Mohale, CEO of Business Leadership South Africa, at the In Good Company 2018 Conference on 21 August 2018.