Publications
Partners
Missteps, miscalculations, screw-ups... Call them what you will, but in the world of business, blunders and howlers, boo-boos and gaffes are inevitable.
After all, we’re only human. Even the brightest of business leader gets it wrong from time to time, including Christo Wiese, who has lost a fortune in the Steinhoff debacle, and the owner of this fine publication, Koos Bekker, who could have netted R20bn more in personal wealth had he not sold some 11m Naspers shares several years ago.
Even that is small beer compared to other bungles. Take, for instance, record label Decca’s failure to sign The Beatles.
Or the oversight of Penguin and HarperCollins, the UK publishers, who passed over Harry Potter and the Philosopher’s Stone, the book that spoke for a generation of children, and a few adults, netting author JK Rowling and her publisher, the then little-known Bloomsbury, an absolute fortune.
PEPSICO
Whilst these horrors of misjudgement are unlikely to be repeated very often, there were a few pearlers in 2017 upon which to reflect.
Imagine, for instance, the sheer schadenfraude of Coca-Cola Corporation.
It had committed a cock-up of its own when, in 1985 following a series of blind tests, it was found that consumers seemed to prefer the sweeter taste of Pepsi.
Coca-Cola’s response was to launch New Coke, which turned into a marketing nightmare of note.
It was hardly on the same scale, but Pepsi this year retained the services of one Kendall Jenner – of Kardashian fame and a model in her own right – who in an advert for the soft drink was seen to diffuse a protest by offering a policeman a Pepsi.
The soft drinks firm pulled the advertisement having failed to recognise how trite the moment looked, especially in an era where everyone has a voice and a Twitter account, and – quite apparently – inexhaustible reserves of moral outrage.
Pepsi acknowledged it had “missed the mark”.
UNILEVER
The promotional powers of social media are obvious. Whereas it used to take companies weeks to figure out how well its marketing was going, it today takes a matter of seconds; especially when things go badly.
Closer to home, we had Unilever enrage some sensitive souls who thought one of its ads for Dove soap was racist.
Closer to home, we had Unilever enrage some sensitive souls who thought one of its ads for Dove soap was racist.
This is the one in which a black woman removes a brown shirt to be replaced by a white woman in a light-coloured shirt.
The outrage was taken up by the leader of Black First Land First, Andile Mngxitana, and extended to Parliament where the ad was condemned by arts and culture minister Nathi Mthethwa.
The outrage was taken up by the leader of Black First Land First, Andile Mngxitana, and extended to Parliament where the ad was condemned by arts and culture minister Nathi Mthethwa.
Some promised never to use Dove soap again.
ESKOM
Parliament is, of course, the spiritual home of the inglorious cock-up. It’s where, for instance, a special committee is picking over the barely comprehensible train-wreck that is Eskom.
There isn’t time or space to recount the sheer scale of abuse and wastage of money that is our power utility company.
Never mind 2017 or 2018, Eskom is the business disaster of our lifetime.
And as if to prove the government really should just govern and not do business, there is a score of other snafus in the making; specifically to do with any company that has the prefix “state-owned” in its name: Denel, the SABC, Alexkor and the national carrier, South African Airways (SAA), which has absorbed R29bn in state subsidies since 2012.
THE MINING CHARTER
SAA’s subsidies would not be enough to buy the Dubai-based Emirates airline, as claimed by Business Leadership South Africa’s Bonang Mohale earlier this year, but there is something about the combination of SAA and Dubai that has South Africans traipse solemnly to their nearest shebeen.
Take the case of mines minister Mosebenzi Zwane’s missing SAA flight from Zurich to Dubai as identified in the Public Protector’s State of Capture report in 2016 which, as it turned out, was just the beginning of his crimes against common decency.
The gravest yet is a redraft of the Mining Charter, published to widescale shock in June.
The Chamber of Mines was not involved in its negotiation and thought its empowerment targets to be impractical. What’s followed is a High Court suit and a further leakage of confidence in SA’s mining sector.
The Chamber of Mines was not involved in its negotiation and thought its empowerment targets to be impractical. What’s followed is a High Court suit and a further leakage of confidence in SA’s mining sector.
The Chamber has described the business stasis in mining as “egregious”.
SASOL
Empowerment is a slippery fish at the best of times, as Sasol found this year when it launched Khanyisa – a BEE mechanism intended to replace the disastrous Inzalo scheme which, when launched in 2008, was described as unparalleled.
Unfortunately for Sasol’s BEE beneficiaries – many of them “moms and pops” – it was structured at a time when the oil price peaked at around $143 a barrel (versus around $58/barrel today).
In addition, the debt in the scheme was fixed in the anticipation interest rates were going to rise.
Unfortunately, interest rates fell, leaving the ‘beneficiaries’ paying more for their debt than they might have.
The Inzalo scheme matures in 2018 and is unlikely to deliver the wealth Sasol management once promised.
Is BEE solecism? Certainly the failure of Sasol’s Inzalo scheme is a failure for the whole of SA. Transferring wealth – quickly – is proving very difficult to achieve.
THE TUNA BOND
It’s not just us in SA. Mozambique this year defaulted on its so-called Tuna bond.
This was the spectacularly extravagant 2013 deal in which Mozambique’s state-owned fishing company, Ematum, raised $850m from Credit Suisse and VTB, a Russian bank, in order to buy a new fishing fleet.
To put this in perspective, the debt equalled about 6% of Mozambique’s GDP. Ematum then securitised the debt, chopping it up into bite-sized chunks and issuing it as unlisted securities, hence the sobriquet – the “Tuna Bond”.
Unfortunately, the bonds were also used to buy military hardware, the Mozambique government eventually admitted.
Worse, still, they proved unafforable as Ematum’s business model sank without trace. Failing to fish the necessary volumes meant Ematum reported a loss.
It also couldn’t afford to pay debt interest which was doubly troublesome as the Mozambique government had guaranteed the debt.
A $60m coupon payment due in January was unpaid. Another payment was missed in July.
Mozambique has since entered into negotiations with bond investors. It would be laughable if it weren’t so tragic.
Mozambique has since entered into negotiations with bond investors. It would be laughable if it weren’t so tragic.
DISNEY CORPORATION, UBER
Failing to show respect for another’s rights is a human as well as an ethical failure, but the procession of recent sexual crimes allegations is also proving disaster for business.
John Lasseter, the success behind animation studio Pixar and Disney’s animation chief, took six months’ leave recently following unspecified “missteps” to do with unwanted contact with numerous female colleagues over a period of years.
Given his role as a guiding force behind such motion picture gems as Toy Story, Frozen and Finding Nemo, it remains to be seen if this remains a personal disaster or one from which Disney Corporation will have to tussle.
A variation on the theme was the ouster in June of Travis Kalanick, CEO of Uber, following an investigation that concluded he had built a company culture that allowed female workers to be sexually harassed and encouraged employees to push legal limits.
It has since emerged that Uber was involved in a cover-up after a hacking attack saw it pay $100 000 in order to keep the names and profiles of 57m clients and employees secret.
PARADISE PAPERS
It’s not illegal, exactly, and even Britain’s Queen does it. So does Ivan Glasenberg, CEO of mining firm Glencore. This is to store money in offshore tax havens.
In so doing, however, the names mentioned in the recently leaked Paradise Papers join the ranks of money launderers, kleptocrats and politicians who take advantage of the lack of transparency in such tax havens in order to hide their illicit activities.
It didn’t help, in the case of Glencore, that the legal firm that had its confidential papers hacked – Appleby – had a special room set aside for the miner, and that papers showed it had allegedly lent money to firms associated with Dan Gertler, whose activities in the Democratic Republic of Congo have attracted the attention of the US authorities.
It’s hard to know who to trust these days when attorneys, blue label consultancies (McKinsey) and even auditors (KPMG) become compromised, even if just by association.
This is an edited version of an article that originally appeared in the 14 December – 17 January edition of finweek. Buy and download the magazine here.
This is an edited version of an article that originally appeared in the 14 December – 17 January edition of finweek. Buy and download the magazine here.
