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The Big Read: Post-Gupta SA should regulate consulting, too

Nov 04 2018 08:49
Tehillah Niselow, Fin24

Consultants should be regulated like auditors and lawyers, says Isaac Shongwe, chairperson and founder of South Africa’s oldest black-owned consulting firm, Letsema Holdings.

Shongwe - whose business felt first-hand the damage wreaked by state capture - has issued his call following several scandals involving international consulting firms.

"The state [of the consulting industry] is chaos. There is blood on the floor.

"It begs the question: what happened?" Shongwe told Fin24 at Letsema’s offices this week in Melrose Arch, Johannesburg.

Feeling the fallout

If there is one person who personally experienced the fallout of the Guptas' hold on the state, it is Shongwe, a former Barloworld Logistics CEO and long-time strategy consultant.

Letsema, founded in 1996, cut its teeth with contracts from state logistics and freight company Transnet, with the firm becoming an expert in the sector.

Letsema was the local partner with international consulting company McKinsey’s successful 2012 bid with Transnet. The Financial Mail reported that the black-owned firm was frozen out in favour of Regiments Capital, and later replaced by Trillian Capital Partners, majority owned by Gupta associate Salim Essa.

Shongwe says Letsema "had to work hard to pivot into the private sector" after losing the Transnet contract, as 60% of their business had previously come from the state.

He says there were "opportunities" for him to follow in the footsteps of other, larger consulting companies such as McKinsey at Eskom and Transnet; and Bain & Co or Gartner at the South African Revenue Agency (SARS), but he took Letsema in a different direction.

Further down the road

Shongwe says Letsema would today be further down the road in achieving its vision of building a large, black-owned consultancy, were it not for state capture.

Letsema wasn’t the only business to suffer in the last ten years due to corruption, and some companies had to close their doors, he argues. He cites the example of Nkonki Inc., who in April announced the closure of its largest office in Sunninghill, after the Auditor General pulled the plug on state contracts following a buyout funded via Trillian.

However, he is starting to see a turnaround in recent months, with new contracts from government "all of a sudden". And he says despite tough times, his conscience is clear.

The veteran businessman says he asked himself if what happened at global consulting firms could have happened at Letsema, which employs 80 – 100 people. A business can’t control what the individual does, he admits, but he says the key is not to cover up corruption. "I have to take responsibility."

Shongwe, who obtained degrees from Wesleyan University in the US and Oxford University in the UK, on a Rhodes scholarship, was raised in Alexandra township by his grandmother, after his mother passed away at a young age.

His grandmother had to "hustle" and sell Ndebele beads to raise Shongwe and her other grandchildren. Whenever he faces temptation in business, he thinks about what she would say, fearing her disapproval from the grave.

Consultants remain relevant

Amid calls for the state to cut down on its hefty consulting bill and capacitate its own employees, Shongwe believes the industry must "re-position itself," but that it will always have a place in advising government.

"To say government shouldn’t be using consultants is ridiculous. You need people with certain knowledge," Shongwe says, adding that consultants must train state employees and transfer skills as part of their contract, so they don’t keep needing their services.

As one of several hats he wears, Shongwe also serves as the Deputy Chair of Wits University Council and Chairman of the Wits Business School. He speaks frankly about the role of tertiary institutions in shaping ethical graduates, saying he believes more should be done and there’s a debate at Wits about how to achieve this.

"Business schools need to do more than produce graduates who are obsessed with making as much money as possible," Shongwe says.

The walls of Shongwe’s plush office, adorned with art pieces, reflect the two worlds he straddles and tries to merge: a reconstruction of Alexandra, using scrap metal by popular artist Vusi Khumalo, alongside other famous artists such as Mary Sibande, who gained a reputation for reconstructing power relations in society.

He’s been called a socialist-capitalist before, he explains, for his views on the need for business to be a social catalyst in society. Maybe, he quips, a new term should be coined for businessmen like him. 

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