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BUSINESS seldom has a moral conscience. Doing business is normally about making money, not about what is morally right.
One may deplore this, but it remains a fact of life.
Therefore, a news report published on Tuesday morning got me thinking. Public Protector Thuli Madonsela told a newspaper that when she recently visited London, foreign investors asked questions about the South African government’s commitment to the rule of law.
This was just after the government allowed President Omar al-Bashir of the Sudan to leave South Africa to evade arrest in accordance with the International Criminal Court’s (ICC's) order.
Madonsela said this was not the first time she had been questioned about South Africa’s commitment to the rule of law, “but it was not as focused as with the Al-Bashir matter”.
The fact is that South Africa signed the Rome Accord in 1998, establishing the ICC freely and without being coerced in any way. Our own constitution obliges the government to fulfil all obligations in international treaties which we signed.
The question is: will the government’s flagrant disregard of its own constitution damage the country internationally? More importantly, will it have any negative economic effects?
Generally, as observed in the first paragraph above, when investors decide on where to put their money they do not necessarily look for places where people have high moral standards. That is a bonus. They primarily look for places where they can make a profit.
Looking at a list makes for interesting reading. Countries may be divided into several categories.
In the first place, countries like South Korea, Indonesia, Iran in the time of the Shah, etc never had any shortage of investments from abroad. These were in the past iron dictatorships where human rights were trampled on. But, at the same time, they were careful to establish a dependable legal framework which gave investors an adequate amount of certainty that their investments – and of course their profits – would be safe.
In the second category one may find countries like Egypt, Pakistan and various Latin American states, where democracy alternated with military dictatorships. In addition, they (with the notable exception of Venezuela with its oil) are not richly endowed with natural resources, and so the political instability and lack of a stable legal framework were enough to keep investors away for the most part.
Huge profit potential outweighed all other factors
In the third place there are hopelessly unstable and corrupt countries like the Democratic Republic of Congo, Angola, Nigeria, etc. In spite of the huge cost engendered by graft and the ever-present threat of expropriation, they still attracted investors in certain mining sectors where the possibility of huge profits outweighed all other factors.
One need not elaborate about a fourth category, communist dictatorships. No businessman in his right mind would have put much money, for instance, into the former Soviet Union.
And then, of course, there are the stable democracies where the rule of law applies, and where investors know exactly what their prospects are. The bulk of all investments still go to these countries.
In other words, the rule of law is important. After all, it was the nascent rule of law in Europe which, already in the Middle Ages, made possible the development of capitalism and the free market system.
Unless there are very special circumstances, business and investment flourish in stable, relatively predictable situations with legal certainties, where there are adequate guarantees that you will not only get your investment back but also make a handsome profit. The rule of law provides such a situation.
Now consider the following by Ulrich Ladurner, foreign editor of the authoritative German weekly news magazine Die Zeit, regarding the Al-Bashir question. Ladurner writes that the South African government hitherto has mostly respected the rule of law.
'Immense damage' to SA's reputation
And then he concludes his article: “President Zuma’s about turn from the International Criminal Court is a watershed. The damage to South Africa’s reputation is immense.”
These words are fairly typical of the international reaction to the government aiding and abetting Al-Bashir to evade arrest.
During the earlier apartheid years, South Africa had no trouble attracting international investors. From the latter 1970s onwards, the international sanctions campaign introduced a hassle factor which deterred some.
Many people therefore expected South Africa to be deluged with money after 1994. It did not happen, as many investors were wary of the ANC and its communist background. They first wanted to see in which direction the ANC would move.
Under former president Nelson Mandela, things looked rosy. President Thabo Mbeki’s reign coincided with his northern counterpart President Robert Mugabe’s reign of terror, and many a prospective investor shrank back.
With Zuma moving in the same direction, and especially with him completely disregarding his own constitution and rule of law, we should not expect investors to suddenly flock to our shores.
It is not for nothing that Madonsela was, so to speak, swamped with questions about the government’s commitment to the rule of law.
Zuma may have curried favour with his equally corrupt African counterparts. But he has made a very poor impression on investors, those who could have created jobs and alleviated poverty.
* Leopold Scholtz is an independent political analyst who lives in Europe. Views expressed are his own.
