What do we hope to do through an MBA process? We’re always delighted to see our graduates doing well. After all, the MBA is meant to be the prelude to managerial success, and we take pride in our contribution.
But what we try to do is much more than transfer a set of skills and know-ledge. We certainly hope that we impart some basic business sense. At the least, after debating short-selling of futures contracts and related issues, we trust our graduates would appreciate that the critical issue is not whether you can sell something you don’t own, but that you sell it high before you buy it low! A 1% profit margin is fine, if by that you mean you buy for R1 and sell for R2! But there are more significant issues than pure knowledge.
We expect graduates never to be involved in a Saldanha, MacMed, Regal Bank or Unifer debacle. In all the finance teaching we do, we only spend one session on “financial restructuring” (that is, swapping debt for equity). As I remark upfront to my class, the only time we ever want to see you involved in financial restructuring is when you’re earning fees as an adviser in creating the structure and not because you caused the need for the restructuring!
To prevent such disasters, we endeavour to encourage a strong sense of leadership values. There’s never been any question in my mind about the best type of financial reporting system. While we need to learn to love accountants, auditors and lawyers, it doesn’t surprise me that the Enrons and Xeroxes, CUCs and Worldcoms occur.
Auditors will never understand the business as well as managers. The audit process is little different to the ancient custom of having the king’s food-taster or cup-bearer taste the food or wine before the king does. We might detect some poisons before they do real damage, but we can’t tell whether the cook spat in the food. There’s no substitute for honest cooks, and nothing can replace integrity in leadership.
We also hope that the syndicate process has honed interpersonal skills and rubbed down some sharp edges. We do select bright but typically arrogant students — particularly on our MBA. Last month The Economist’s cover article focused on “Fallen idols” — Jack Welsh and others. Pedestals are fragile — it’s best we don’t climb them.
Finally, there’s one more quality I want to mention. It relates to vision. I love teaching the Mozal case to my class. Ideally, one ought to teach this case after first examining Iridium — the satellite grid system. Then Euro-Disney, followed by Petrozueta, the Venezuelan petrochemical plant. All of these large projects were financial disasters. Then the class is presented with Mozal!
Would you build an aluminium smelter in Mozambique, the world’s poorest country, with a gross domestic product smaller than the project’s $1,4-billion cost? Bearing in mind the fragile political system, which in 1996 had only recently emerged from 18 years of civil war? What if it required the bauxite to be shipped from Australia, and required an increase in the national electricity consumption by a factor of three? And what if roads, rail links and the port of Matola needed to be built? And what if the contract would require 10 000 workers, most of whom had never had a formal job? In a communist legal system?
Most students look at this and say it’s a “no brainer”. No ways! But, as we now know, Mozal went ahead, thanks to leaders with great vision. It was completed six months early, after treating 6 000 cases of malaria, but $100-million under budget. It is the world’s second-cheapest producer of aluminium and the recently approved $1-billion expansion is already ahead of schedule and under budget. The spin-offs to regional development from this project alone continue to be fabulous.
So, the real prize is to develop African business leaders who have the vision to create prosperity for Africa. We want them to be able to envision and bring about a Mozal and not a Mossgas, an Investec and not a Regal, a Sasol and not a Saldanha … and if I may be so bold, a Shilowa express and not a Transnet!
This is an excerpt from an address by Professor Mike Ward, director of the Wits Business School, at the school’s MBA graduation ceremony on June 11