Publications
Partners
The transformation imperative in no way excuses state capture. But for business to speak out and for its voice to be heard against the latter, it must also demonstrate – not just in words, but deeds – its commitment to lead transformation.
Business must deliver a strategy to fundamentally change the socioeconomic environment that has excluded individuals from previously disadvantaged groups.
Doing this will achieve genuine nation-building, and allow black people to experience the dividends of inclusive economic growth and attain true social cohesion.
Business must lead, not because it is good for business, but because it is the right thing to do.
The pain of remaining the same far outweighs the pain of change; transformation requires a fundamental break with the past.
On June 15, government presented to the world its revised Mining Charter.
Investors reacted and R50 billion was instantly wiped off JSE mining shares. That amount does not represent the full extent of the damage.
The cost of Mineral Resources Minister Mosebenzi Zwane’s obstinate and inexplicable approach to a revision of the Mining Charter will be in delayed, or cancelled, capital expenditure by mining companies.
It will lead to more job losses, beyond the 70 000 already lost over the past five years in the sector (and yet more jobs from businesses supplying the miners).
It will also mean forgone revenue and foreign earnings for South Africa, worsening the structural weaknesses in the economy, such as our current account.
Combine this with the credit downgrade that South Africa suffered a few months ago, government is entrenching the damage it has done to the economy over the past seven years and further impeding transformation’s progress.
With debt more expensive, companies that may have had plans to invest in mining activities are already being forced to review them.
Some will have lost funding they were negotiating with banks and, thanks to the new Mining Charter, the risk and uncertainty to their investment have deepened.
Fitch has already indicated that the charter is evidence of a change in government policy since the Cabinet reshuffle. The charter therefore will not only negatively affect real investment in mining, it will poison general investor sentiment towards South Africa.
This matters because, over the past 17 years, the Employment Equity Commission, The Jack Hammer Report and the Black Management Forum’s Transformation Barometer have demonstrated beyond any shadow of doubt that transformation is not only not progressing, but is going backwards.
While business has not yet done enough to make transformation part of its mandate for doing business, for government policy to sabotage investment and growth in this scenario is unconscionable.
Zwane says that investors should be pleased with the charter because it provides “certainty”.
While the minister is under no obligation to consult investors, or accept their recommendations, he does have an obligation to be honest with his stakeholders. This charter does not provide certainty for the investment community. It does the opposite.
South Africans will pay the price, as they have done over the past five years. We need foreign investment to achieve radical and meaningful transformation.
South Africa does not have the savings to achieve the rate of investment that will help create jobs, economic inclusion and take millions out of poverty, which should be the core aim of any radical transformation agenda.
But we also need the will of business.
Instead of challenging in court the “once empowered, always empowered” principle, business could rededicate itself to the genuine intent of charters and, instead of opposing the “mandatory auditing firms rotation”, it must embrace the opportunity to use black auditing firms whose partners write the same board exams as the others.
An opportunity exists in the insurance industry to use black construction companies and contractors to rebuild Knysna.
Black people must have a significant stake in this economy worthy of their considered protection of it.
Government plays a different role, and must foster the environment for businesses to flourish so that, as they transform, they grow.
Without the will to do this, they cannot give effect to the department of trade and industry’s statement that “no economy can grow by excluding any part of its people, and an economy that is not growing cannot integrate all of its citizens in a meaningful way”.
So, Zwane is not alone in talking about improving the conditions for investment and enacting policies that do the opposite.
Government has consistently claimed to want to attract investment, but has followed this up with decisions that very clearly serve the interests of a few to the detriment of the many.
For instance, aside from anything else, the 12-month timeline for companies to increase their BEE shareholding seems set to create fire-sale BEE transactions to cronies.
Even assuming there was nothing wrong with the charter’s new ownership requirements, the private sector would struggle to conclude the transactions in that timeframe.
More importantly, the department does not have the capacity to approve these potential transactions unless corners are cut and questionable deals are approved.
The damage to the economy of this kind of behaviour borders on criminal.
Over the past six years, South Africa has lost nearly 2 million jobs.
For the past two years, economic growth has failed to keep up with population growth.
Poor people have been getting poorer.
And now we have entered a recession.
Our economy is shrinking thanks, this time, to domestic policy.
Even if government somehow finds the political will to do the right thing, it will take many years, most likely a decade, to reverse the self-inflicted economic harm of the past six years.
There will be no radical economic transformation, certainly none that results in a better life for all. Those people who lost their jobs and those people who are outside the labour market will not benefit. At the current rate, government taxes will be lower because of the shrinking economy.
Lower taxes mean no increases in social grants; in fact, it probably means a reduction in social grants.
It will mean less money for education, healthcare and housing.
It will reverse the socioeconomic gains of democracy, and it will increase inequality and entrench poverty. Ten years ago, South Africa was doing well. There was still deep inequality, but poverty was diminishing.
Between 2002 and 2006, we created 3 million jobs and unemployment fell to 22%.
Today, it is above 27%.
A new black middle class was created – this was broad-based transformation.
People could buy houses, cars and send their children to good schools.
There were still many poor people, but we were moving forward.
Today, we are moving backwards.
How long we entrench poverty and reverse the gains of the first 15 years of democracy depends on how soon and how quickly we start doing the right things.
Changing this direction of travel requires leadership and for South Africans to pull together.
First, though, it requires that we stop scoring deliberate own goals either because of obstinate incompetence or other motives played out in the release of the revised Mining Charter.
We absolutely agree that we need a new vision for mining and we urge the stakeholders to sit at a table and figure things out.
If government wants mining to lead to radical economic transformation, let us begin by addressing the impediments to investment in mining because, without investment, it is just stuff in the ground.
The five priorities that Business Leadership SA believes will enable mining to grow and transform include:
. Entrenching good governance and ethical leadership in government, especially regarding the administration of mining laws.
Perhaps it is time to adopt an independent minerals commission to administer mining rights away from the political interference of the department of mineral resources (as per the Ghana example).
. Building a real, trust-based partnership between government, business and labour to drive a properly formulated growth and transformation strategy (including a realistic Mining Charter that promotes investment and transformation).
One key metric to aspire to is for South Africa to land in the first or second position in Africa in the Fraser Institute investment attractiveness index (we are currently ranked a dismal 13th in Africa).
. Providing policy and regulatory certainty that drive investment and transformation.
. Making a significant effort to modernise the industry to improve its competitiveness with regard, especially, to skills development and innovation.
. Ensuring globally competitive and reliable infrastructure and services.
Simultaneously, we can begin an honest discussion about what has gone wrong in respect of all of the social partners and how we can fix it.
We need a new vision for South African mining, not the radical economic destruction unleashed by government last week.
Mohale is the CEO designate of Business Leadership SA and Mabuza is its chairperson
Read Fin24's top stories trending on Twitter:
