If business is to partner the government in promoting its socio-economic goals of job creation and economic growth, it wants a hand in writing the script. The government’s enthusiastic endorsement of the new unified business structures — the Chamber of Commerce and Industry South Africa (Chamsa) and Business Unity South Africa (Busa) — signals its desire for business to speak with one voice.
This is undoubtedly the most serious challenge for Chamsa and Busa, as both are comprised of different constituencies and interests.
Black business remains trapped at the lower end of the value chain, and believes the government must intervene to level the playing fields. White business is not opposed to this.
It recognises that its future depends on forging deeper ties with black business and bringing far more South Africans into the economic mainstream. The debate centres on the extent of this intervention, and for how long.
Big business argues that the labour environment is over-regulated and the costs of doing business are steadily rising.
Corporate tax rates may be competitive with those of other countries, but sneak taxes such as the payroll levy, black economic empowerment and high real interest rates reduce the returns on investment. This, more than any other factor, explains the low rate of foreign investment in South Africa.
Investors are happy to dance to the government’s tune provided the returns are sufficient to cover the costs and still provide a decent return.
The recently released Brenthurst Initiative, brainchild of the Oppenheimer family, argued that transformation and economic growth are not incompatible goals. It calls for reduced tax rates for companies with good transformation scorecards, thereby creating surpluses for reinvestment and further growth.
It forcefully makes the point that business is the goose that lays the golden egg and needs to operate in an environment of light regulation and policy certainty. If business is the country’s engine for job creation and economic growth, it wants to be rewarded with tax incentives for good conduct.
Brenthurst’s endorsement of state intervention for a finite period comes at a time when unbridled free markets are being thrust under the microscope. Nobel laureate Joseph Stiglitz points out that the Asian economic miracle was the result of direct state support for key industries, and Asia’s disdain for World Bank and International Monetary Fund policy prescriptions of rapid market liberalisation, reduced state spending and wholesale privatisation. Malaysia’s economic success was not hatched in Washington.
It pursued a growth-oriented policy in parallel with affirmative action, something South Africa wants to emulate.
The government recognises that in the absence of growth, transformation will have limited success. And if it is to work, business will have to drive it.
Steven Friedman of the Centre for Policy Studies points out that big businesses do not rely on organised chambers to represent their interests. They are big enough to wield a direct hotline to the government and are not shy about using this to lobby in private. Smaller businesses rely far more heavily on organised business to represent their interests.
A question to be answered is whether big business will continue to lobby in private, or will it throw its weight behind these new unified business structures?
The temptation to use the hotline rather than organised business channels may prove irresistible, and this may undermine the objectives of Chamsa and Busa.
A still unresolved question for many businesses is to what extent they should become involved in advancing the government’s socio-economic goals. This goes to the heart of corporate governance and raises potential conflicts between shareholders who pony up the capital and other stakeholders.
The King II code on corporate governance introduced the concept of triple bottom line reporting, embracing financial, social, safety, health and environmental issues. How far business should go towards meeting these social objectives is a moot point.
Mining groups such as Anglo American and Kumba have introduced anti-Aids and small business programmes in communities surrounding their mines.
There is an indirect commercial benefit to companies with strong social consciences, as research by McKinsey & Co and, more recently, Deutsche Bank shows: investors are prepared to pay more for companies with sound corporate governance practices.
Chairperson of the Institute of Directors Shepherd Shonhiwa points out that corporate governance standards have improved immeasurably since the publication of King 1 in 1994, but still more work needs to be done. He is keen to see an acceleration in boardroom transformation to drive employment equity and economic upliftment across a wider sphere.