Finally, Anglo American struck back last week — briefing journalists and editors on the risk imbroglio between President Thabo Mbeki and its CEO, Tony Trahar.
It was a mild strike. The company downplayed its global reach and ambition, painting itself as more proudly South African than Venter trailers and boerewors.
The dispute had the most innocuous origins. In an interview with the Financial Times at the beginning of September, Trahar, ironically, insisted that there are good reasons to stay in South Africa.
He noted that Johannesburg remains a cost-effective base and then sparked all the trouble by adding, “I think the South African political risk issue is starting to diminish — although I am not saying it has gone”. And that catalysed the fiercest rebuke of business by Mbeki yet. Trahar’s comment inspired the president in that same week to ask what he called “questions that demand answers”.
Mbeki outlined South Africa’s 350-year history of conflict and excoriated Trahar and sections of South African business leadership for remaining cynical about the country and its prospects. He asked whether this political risk is what had made Anglo American decide to take its primary listing to London.
The story, as Anglo executives said, developed legs they didn’t expect. Analyst after analyst weighed in to turn what the corporation’s spin doctors tried to blow off as a spat into a national incident.Â
Many weighed in on Anglo’s side, but many who mattered more went in to bat for Mbeki. And the left, which had always criticised the listing, couldn’t resist a dig: “We told you so, you shouldn’t have let ’em go,” they chimed in.
Race, globalisation, the role and commitment of business, its relationship with government and the efficacy and honesty of political risk-assessment all came under the spotlight, making Anglo think again about its initial strategy of quiet diplomacy to address the issue.
Anglo told its audiences through this week’s series of briefings that they were surprised by the attack, in particular, by its tone.
The dispute takes Anglo a few steps back in its bid to reaffirm its commitment to South Africa.
Ever since it listed in London in 1999, the company has had to continually reassure the public that it is committed to the country and its cause. Its latest attempt was through the “You have got to love this place, we do” advertising campaign. The campaign, plus the company’s R30-million sponsorship of the 2010 Soccer World Cup, had earned it some goodwill — but that now appears to have been eroded.
This week, it outlined through a brief history of time the evolution it has undergone from being a conglomerate to a global mining player. Â The unbundling (which the African National Congress had pushed for) required a global presence and access to bigger capital markets. The listing was also the quid pro quo for the retention of foreign exchange controls.
The key message was that the company had left with an explicit nod from the government and that it had kept to its side of the bargain. Only a handful of executives had moved to London; it had “maintained its technical and substantial financial expertise in Johannesburg”; and it had substantially hiked social spending as evidence of commitment.
The briefing had the subtext of “Pardon, sir, but what are you on about?”
Peppered throughout the presentation was evidence of Trahar’s “proudly South African” credentials; the press pack was jam-packed with clippings from various interviews and presentations.
In addition, the company highlighted its commitment to black economic empowerment, now the centrepiece of South African economic policy. It had helped create three influential mining empowerment players: African Rainbow Minerals, Mvelaphanda Holdings and Eyesizwe Coal. It also said that two-thirds of its approved growth projects, or $4-billion of its $6-billion, are in South Africa.
Beyond the spin was an implicit understanding that the president was sending a message intended for ears beyond Anglo American. It was for all of business — and by taking on the biggest, the rest of the sector would have to sit up and take note.
That it took Anglo by surprise raises worrying questions about the honesty and robustness of discussions between the government and business. Mbeki’s presidency is noted for institutionalising regular pow-wows with business in the form of several working groups. They meet periodically, but it appears now that discussions never go beyond polite and mutually approving chit-chat. If anything must be fixed, then it is this. For what is the use of a kitchen Cabinet if participants are not able to speak honestly and openly? Both sides, it seems, are guilty of being mealy-mouthed: Trahar clearly has reservations and concerns.
So does Mbeki and, since the beginning of his second term, he has revealed an increasing impatience with an economic model that relies on private sector-generated growth to redistribute wealth.
Mbeki’s 2004 State of the Nation speech, the Budget and the later “Third Way” speech to Parliament have all pointed in the direction of a president becoming a free-market sceptic. That neither knows the other’s position suggests the need for better dialogue and more consensus-seeking. There is what an executive called a “politeness barrier” — clearly one that must be breached, for there are tough issues to discuss.
The question Anglo should have cleared with the president is how risk in South Africa compares to say, the past three decades. More importantly, Anglo should have stated how risk compares across the regions in which it operates.
Anglo executive Michael Spicer says it regards an absence of risk as being the knowledge that rules won’t change as time passes. At the moment, the biggest element of risk that looms over mining is the Royalty Bill. The industry is at loggerheads with the government as to whether royalties should be imposed on revenue or on profits, and at what levels these should be imposed.
At the briefing it was said that the event had escalated because there is no South African way of doing these things.
But there is such a way and it is in our ability to talk and talk — until a negotiated settlement is achieved. It was this, after all, which won freedom. Talk was the key element behind the signing of the Financial Sector Charter — a document that holds out hope for better levels of growth.
But what the Trahar-Mbeki debate has done is highlight that we are in danger of losing our appetite for talking and for co-determination.
It should not take debates and concerns underground for fear of a presidential slight-by-Internet — for that, too, will undercut what has made South Africa special: the ability to debate, openly and publicly.