Monday, June 12, 2017

Contract and conscience.

What happens when the social contract and laws cannot guarantee protection?











That memorable aphorism: “Man is born free, and everywhere he is in chains”, penned by the 18th century French philosopher Jean-Jacques Rousseau, relates to another creation of the Age of Enlightenment – the Social Contract. That concept has survived centuries and still remains the cornerstone of our understanding of the relationship between people and power; between citizens and government, and between the populace and the establishment.

At a practical level the social contract is enforced through institutions, laws and regulations, or, at a superordinate level, by a Constitution. Yet, there is a far larger dimension that goes beyond a contract and without which the social fabric would simply fall apart. It is that dimension which enables you to trust a stranger in a mall and a handshake on an agreement. It’s a dimension only marginally guaranteed in written law, and explains why even in a high crime country like South Africa, where criminals have an 80% chance of getting away with a reported crime, you have a much lower chance of being affected by a crime.

That dimension is conscience. It may be reinforced through values, religion, and enlightenment, but it is that intuitive, perhaps even instinctive thing that sparks an automated action overriding first thoughts and even feelings. Even psychopaths for the most part pay heed to it, albeit in a rehearsed way. As social beings, by far the majority of people do not want to poop on their stoep. And the more they do, the more laws, regulations and prescriptions pour out of parliament or from the Governance office of Mervyn King. But never will they come near to replacing the vital role of individual conscience, or self-accountability.

Even people accountable only to themselves mostly have it. But you could argue that those entrusted by others to have their interest at heart and to be the custodians of their welfare, have to be subjected to a much higher order of accountability than can be captured in a contract. They include business leaders who can no longer behave as if they are accountable only to shareholders.

As Serge Belamant of NET1 discovered when expressing a callous disregard for the problems of his biggest customer and millions of grant recipients; arguably acting purely on conventional business principles and shareholder interest. He not only unleashed a PR nightmare for himself and the company, but invited the pique of one of his biggest shareholders. And now his departure pay-out raises the critical question: can good governance be served when people are rewarded handsomely for non-compliance? (See Moneyweb article here.)

That applies to the unfortunate, much maligned figure of Brian Molefe, former retired/AWOL/fired GCEO of Eskom. For a moment he seemed to have done the right thing back in November of last year when he “stepped down in the interest of good governance.” Until, of course, it became clear that conscience can be considerably eased by a R30 million pay-out and then later that the stepping down was none such. He could have reinforced his “good governance” act if he refused the pay-out (or most of it) and any invitation to return, but now scuttles any interpretation of noble intent by running to the labour court.

The overriding role of conscience over contract was movingly championed by former Finance Minister Pravin Gordhan, when he spoke at the parliamentary enquiry into Eskom and accused some leaders of not only acting out of blatant self-gain, but simply not caring whether they were seen to be doing so. Few could not have been stirred by his appealing to their conscience, an appeal he has repeated since then.

There is a point at which a position held and influence it has on others, have to stand far above the incumbent’s interests or rights. So SOE minister Lynne Brown was at best expedient by defending Molefe on the basis of “innocent until proven guilty.” When a position itself is tarnished or brought into disrepute, then in the interest not of the incumbent but of the position itself, it simply has to be vacated by that incumbent. A subsequent enquiry can at best clear his or her name, and even ensure some compensation, but a return to that position cannot be automatic.

Such a protocol will ensure a very high regard for positions of authority and a no-nonsense approach to governance and accountability. We simply cannot deny that our tolerance of political and business leadership misbehaviour is extraordinarily high compared with many other countries. Without some form of uplifting the self-accountability expectations from positions of authority, and some real pain in non-compliance, the fight against corruption is going to be extremely difficult.

Zero tolerance and an appeal to the higher order of conscience over contract have to apply equally, if not more so to accusers, investigators and social prosecutors. There is a blatant and astonishing level of hypocrisy and expediency in much of what we are witnessing, including the inordinate, often one sided petty political correctness in public discussion and social media. In the end, it does little to create effective accountability and governance, and simply creates opportunities for deflection by those scrutinised and scrutinising.

While we are witnessing a sterling job by the 4-th estate in the Gupta e-mail revelations, the information explosion and chaotic state of media has aggravated the problem. I dealt with this in my recent Moneyweb article “Believe it or not” which need not be repeated, save to say that it is a proverbial Wild West out there, proliferated with intoxicated, trigger happy gunslingers; spreading more rumour and innuendo than fact.

All of this boils down a key essence, the very glue that holds societies together, and without which they descend into anarchy. That is trust – of outsiders in the country; of people in power, and of individuals in each other. 

As long as we continue to trust our neighbours, there is still hope. We saw the power of that manifest in mutual community support during the ravaging fires of the Southern Cape.

Monday, May 29, 2017

Grabbing land in La-la Land.

A groundswell of clearheaded action to counter populist hysteria in the land issue.












If there is one thing that the economic gods will not forgive, it is the consistent plundering of resources without value being added. It may take years, decades, or even centuries, but inexorable forces will manifest in imbalances, disconnects, shortages, discord and conflict.

Adding value means creating wealth and is the most fundamental justification for any commercial endeavour or use of resources. It means simply judging that endeavour on the tangible and measurable value it has it added to other’s lives; the extent to which it has served the community at large. In practice this means serving demand or customers. It is that condition that justifies and sustains jobs, profits, and taxes. (See article: “Customers create Jobs”).

Look around you: at global finance that has largely failed to flow to productive enterprise on the back of a speculative market system; feverish pursuit of short-term rental and capital gain; customer neglect; lack of inclusivity; paltry performances of state owned enterprises, and government failure to promote and support value-creation by free individuals and collectives. All of this can be traced back to one single thought: that these endeavours and ownership of assets exist primarily and perhaps even singularly for self-gain. It is that thought that makes a populist cry for redistribution of assets and wealth facile and tempting, yet severely flawed.

It cannot be allowed to happen in agriculture. Here the customer must be king, albeit even in pauper’s clothes. Nothing can justify a threat to the maximum production of best quality food at the lowest possible cost. This is critical in a country of malnourished millions, and the voices of those that champion the opposite simply have to be silenced.  

We cannot deny that it is an emotionally charged issue. Comments on my previous article on inclusivity latched on to a peripheral reference to land grabs and bore testimony to just how blinkered our thinking can become on all sides. Property ownership, especially farmland can do that. It evokes in many a sense of security and permanence; of an anchor; of self-sufficiency; of a nest and a nest egg; of power and control. Some feel the pull of a genetic nostalgia drawing them back to the days of distant forebears; before red- or khaki-coated colonialism and land-acts; bare feet on virgin soil absorbing nature’s energy; of wide open spaces and peace and serenity. It is in that romantic pool that political preachers punt their false gods and gospels and prospects of paradise. Even rational swimmers are drawn to it.

And then there is a reality, an inexorable force that will brook no resistance even at the cost of earth soaking up blood or widespread starvation. Urban property ownership may have the same context, but a very different texture. It is more easily dealt with by urban renewal and expanding home ownership (already one of the highest in the world) through transferring state-held title to tenants that number hundreds of thousands. Farmland is subject to another overwhelming force – the nutritional survival of our species. Hungry mouths are multiplying at a frightening pace. The space to accommodate billions of extra bodies is constantly shrinking and it is that very space that has to provide nourishment for the masses. They are the real issue and to cut through the prose: we need a lot more food from a lot less land to feed a lot more people. Every square fertile centimetre has to be used to extract maximum value.

In the absence of a credible land ownership audit, political mischief has ensured a vague and highly skewed picture of the extent to which land reform has already happened, including the fact that the government has bought some 4000 farms, which have not been transferred to claimants. But while politicians dance with the devil, some in a seductive waltz and others in an aggressive tango, it is simply inconceivable that they cannot foresee what will happen when the music stops. Given the Zimbabwe experience next door; our constitutional and judicial fortifications; our young but still strong democracy that is currently openly and dramatically clipping the wings of malevolence, and indeed even the underlying messages coming from both the ruling and many other parties; I simply cannot agree with the prophets of doom.

There is at least some assurance that expropriation without compensation is not official government policy – most likely because they already own a number of dysfunctional farms and don’t quite know how to treat the R145bn farmers’ debt. But more fundamentally, they fully recognise the self-evident reality, reflected amongst others in this statement to Moneyweb’s SAFM Market Update, by Senzeni Zokwana, Minister of Agriculture, Forestry & Fisheries:

“We should present it (land reform) in a way that seeks to preserve the current commercial farming community, which produces the bulk of our food, and get black farmers to a level where they can become commercial farmers very soon.”

And there is another, even more pertinent force at play – a force that should silence the jaundiced and blinkered “talk-talk” sceptics. It is the undeniable fortitude, innovation, expertise and goodwill of the vast majority of South African farmers. Living in a farming area, I am fully aware of the many blemishes in the behaviour of a few; but also the reaching out and inclusive approach of many. Standard journalist practice would require a long list of what they are doing on a national scale: showing that the talk is indeed the walk. It’s not only beyond the scope of this article, but would discourage those who need it from going on their own journey of discovery to witness how this unsung resolute group are dealing with the many crushing variables as well as the challenge of transformation. Those who don’t take the journey have surely lost their relevance in debate, although sadly not their impact. It is reflected convincingly here and on the Nation in Conversation website, which is an agricultural sector initiative and formed part of the NAMPO harvest festival near Bothaville.

After doing that, then picture the NAMPO panels discussing the empowerment of a multitude of small black farmers and the need for land reform; while surrounded by monster farm machinery and mind blowing technological innovation. The marriage between those two is the challenge. The sector is meeting that head-on in many world ground-breaking ways.

Any discussion, debate or conflict around land reform that does not constantly and pertinently bring this into reckoning is one-sided and dangerously disingenuous. 

Sunday, May 21, 2017

Inclusivity: for the people and by the people.

Wresting the initiative from government to prevent reckless radicalisation.














During those widespread protest marches recently, I asked my son whether he was going to join one of them.
“It won’t make a difference,” he replied.
“But it will to you,” I said.

Few things are more powerful than a group of people actively and vigorously pursuing a noble cause. The outcome becomes a secondary issue. In that moment each gets to experience the fulfilment of embracing and being embraced by a community or group. It is the essence of inclusivity in a much broader and more relevant sense. While lofty, often purposeless debates and actions are formulated around structure, systems and policies; the real issue is missed – that it is about human behaviour. We are clearly in an era when the former have lost touch with the latter. That is the most pressing issue of our time.

Globally, inclusivity has been severely impeded by centralised political and economic power; technology increasingly replacing real human connection and productive effort, and a monetary and financial revolution that has deeply widened disparities in wealth and opportunities to the exclusion of many, especially the youth.

More intriguing is the extent to which inclusivity has begun to transcend and indeed overshadow traditional debate around left and right; capitalism and socialism, and other conflicting theories that have preoccupied humanity for centuries. Today it is about the “establishment” versus the “populace”: in itself an expression of whether people feel included or excluded, and ultimately questioning the legitimacy of power.

Governments’ role in enhancing inclusivity -- or perhaps more accurately: rolling back exclusivity -- is a key concern at ballot boxes and in the streets. It is a greater issue in South Africa than elsewhere. It’s a subject I covered in a previous article (see here) and still requires much unpacking. But it could be argued that government itself has been the biggest stumbling block to inclusivity through failures in service delivery, education and of course patronage, corruption and maladministration -- to name just a few. Its current rhetoric is a deflection of blame and indeed counter-inclusive. It has created some dysfunctional paradoxes in promoting inclusivity through implied dispossession or exclusion of certain groups.

Business too has to do some soul-searching. It is by nature the most inclusive activity in free and open societies. With some deplorable exceptions, it serves society as consumers and customers. On average, it pays about half of its income to outside suppliers, creating multiples of opportunities for others. The remainder represents its own added value, or wealth created, and on average 45% goes to labour, 25% to government in the form of company and employee personal income tax, and 30% to profits. Put differently, for every R15 shareholders get, R140 goes to the pockets of employees and government – a ratio of nearly 2½ to 1. (See Contribution Account here.)

Disturbing the delicate composition of that activity could have disastrous consequences. But that does not mean that it should not seriously review racial imbalances, particularly in top management which is only 15% black, and largely attributable to executive exclusivity. (See here).

My criticism of business has always been that it does not fully understand, recognise, promote and act out its inclusive nature. It has defined itself narrowly as an exclusive servant of shareholder interest and, despite King IV prescriptions, expresses itself in a profit/cost rather than a wealth creation/distribution format. Its accounting is not inclusive. (See inclusive accounting here.) Too often this leads to misbehaviour, customer neglect, noncompetitive activities, and an absence of a moral compass.

It then also discourages Common purpose and Common fate principles and full involvement by all stakeholders, especially labour, in the destiny of an enterprise. The net result is a warped public image, broken hearts in the workplace and easy prey to business unfriendly rhetoric including that implied in radical economic transformation. (See article “The untold story” here.)

The people, however, hold ultimate power. Relying on systems, structures, policies and politics discourages and denies the overwhelming role that individual behaviour plays in inclusiveness. Economic growth itself is an unknown, and speaks to only one part of inclusivity: employment. It’s an important part, but ignores the fact that many of the employed still feel excluded and the number that could be rescued from unemployment is questionable. Inclusivity should not be viewed solely as an outcome of economic growth, but rather as a factor contributing to it.

One does not need a message from the pulpit to identify many areas where we can act more inclusively. It brings to mind Edmund Burke’s immortal aphorism: "The only thing necessary for the triumph of evil is for good men to do nothing."  But the message does not mean only confronting evil. It also means simply spreading good as a counter to evil.

Probably more threatening than standing by and doing nothing, is doing something and no-one knowing about it. That creates the darkness where evil flourishes and politicians play their dirty games. There are many, many activities in South Africa (government included) that simply belie the notion that inclusivity is not being actively pursued. Apart from thousands of individuals daily reaching out to others, there are corporate social responsibility projects; many social entrepreneur activities; very active NGO’S, NPO’s and charities; church activities; and private sector projects, that on balance have probably done far more than government itself – apart perhaps from the social grant. One that deserves mention is agriculture, where farming groups have done much to effectively empower people – arguably more than what could be achieved with land grabs. (See project list here.)

That more can, and should be done by all of us is an imperative, and a counter to coercion and autocracy. Inclusivity is a manifestation and embracing of our humanity. It is an embrace of empowerment and enablement. We cannot allow petty politics to contaminate it; ideologues to warp it; megalomaniacs to abuse it; academics to distort it; economists to disparage it and media to ignore it.

It is the ultimate human project. It’s when individual hearts become a collective shelter from despair. 

Tuesday, May 2, 2017

Bullhorns of discontent.

Threatening the unifying potential and benefits of a radical economic overhaul.















Radical economic transformation (RET) has been around for about half a decade although the need for it has been evident for decades more. This time it has come with a fanfare of bullhorns, town criers, aspirant emperors and empresses; and some hysteria in a clear strategic attempt to recapture political initiative; to unify a fractured ruling party and deflect attention from its beleaguered leader.   

The timing is unfortunate. Trust between government and the private sector has broken down and investment confidence is all but shattered. With full co-operation between the state and the private sector, RET could be a unifying force. Instead it is becoming divisive and polarising. It is creating consternation on the one hand and false expectations on the other; unleashing forces that could devour each other in a downward spiral that arguably has already begun with downgrades and investor flight -- until sober minds see through the mist of rhetorical mischief and conclude that it’s not new; it’s not unique and it need not be frightening. Indeed it could be an exciting and galvanising mission that makes South Africa a metaphorical Asian tiger instead of a Venezuela.

We are not exceptional. Blaming it on the past or racial imbalances is creating a false notion of solutions and deflecting effort from where it is most needed. The problems are much bigger and the world is itself facing radical economic transformation. Indeed it has already begun. So let’s tick the boxes in a severely redacted swoop of global concerns. They have all been documented broadly in Moneyweb and other news coverage, obviating the need for detailed substantiation.

·       Concentration of Economic power or monopoly capital. Large corporates domestically and globally have grown to the point where the negative impact of their power and influence now far outweighs the purported advantage of capital efficiency. The financial industry, banks and financial markets in particular have become a force that can virtually dictate the economic destiny of countries and the globe. With their influence on the state they have become “the establishment”, now under attack in many forms, including at the ballot box. (See Moneyweb Article here).

·       State capture. The above clearly leads to inordinate self-serving influence on the state in the form of oligarchs; family wealth; the elite; powerful vested interest lobbies; bribery and corruption. The news is full of it and as oligarchs go, the Guptas are a rather clumsy lot with the beneficiaries in Government being extraordinarily and dangerously naïve; compared to those that have existed in Russia, Ukraine, Latin America and many others. Such is the power of the “establishment” that it has recaptured Donald Trump who became president on an anti-establishment ticket and has now clearly flip-flopped.

And then there are
the Chaebols of South Korea, consisting of old family business empires such as Samsung, LG and Hyundai and controlling some 80% of economic activity with government involvement. Their success in making South Korea one of the most powerful of the Asian tigers was simple: a community and customer focus overriding profit and self-gain.

·       White monopoly capital. This PR concocted phantom has been unpacked many times, but whatever substance there may be it is simply and self-evidently one of the oldest ploys of political expediency: create an enemy, identify and personify it, and blame it for your self-created mess. There is some truth to disproportionate white involvement and ownership in the economy but it cannot be shown to be malevolent in intent, action and effect. Even if it were possible to simply change the “colour” of this “monopoly” overnight, there is no evidence that this will benefit the masses. Indeed, disrupting a fine balance between capital, skills and competitiveness could be devastating in a tough global environment.

·       Black Monopoly capital. If we define “capital” in the broadest sense of deployment of money in an economy, then one can argue that government at all levels is a much bigger player than any other single entity. (Mike Schüssler puts it at about 44% of Gross domestic product.) It is in itself a true monopoly and owns the only real uncompetitive monopolies in the form of state owned enterprises and their trillions of rand in assets; it has the biggest single investment arm through the PIC, and it can dictate and has dictated the rules of the game through regulation.

·       Radical Government transformation (RGT) is the elephant in the room. Radical economic transformation (RET) has to start with RGT first. Can anyone doubt that we would have been in a “radically” different position if government at all levels, did what it was mandated and paid to do: efficiently, effectively, prudently, and devoid of corruption, patronage and self-gain; compounded now by party discord impacting all arms of the state?

·       Inequality and unemployment. Remember the startling Credit Suisse findings amplified by OXFAM that the wealth of world’s richest 1% equals that of the remaining 99%?  Here’s some country comparisons.


















Not only do we rank well below those with the biggest disparities, but we are also below the United States. Of course that is arguably still unacceptable, and even more so when one looks at income disparities rather than the above assets gap. This is a metric minefield (see different measurements here) but it cannot be denied that South Africa has one of the highest income differentials in the world. That is largely a function of high unemployment. While the latter is of less concern in some countries, it certainly remains a key concern in many parts of the world – including the stagnant state of the middle class, and the job displacement threat of technology.

·       Inclusivity. All of the above can be captured in this one key issue. “Around the world, no bigger policy challenge preoccupies leaders than expanding social participation in the process and benefits of economic growth”World Economic Forum.

Radical economic transformation is nothing more, and nothing less than promoting inclusiveness and a response to the greatest global challenge of our time. Of course there are some circumstantial differences, but exceptionalising, politicising, radicalising and polarising them is suicidal and way beyond reckless. It needs a partnership of all interests. The principles of having a common purpose and sharing a common fate that I have advocated in companies (see here) can stand outside political and ideological rhetoric. It means holding hands in the good times and the bad. Those that rely solely on economic growth as a magic wand are too readily discounting some very ominous storm clouds gathering on the global horizon.

The real question is how flexible, united and prepared we will be when that storm breaks?