For South Africa to move forward, a new relationship of trust needs to be built among the business community, labour and government. This is the view of Old Mutual Emerging Markets chief executive Ralph Mupita.
“The problem that South Africa faces is that it is stuck in a position where it simply isn’t achieving the growth that it should be. The country is growing at a rate of less than 2%, but is quite capable of achieving growth of more than 5% — more in line with the growth rates being seen across the continent,” he said at a media briefing in Johannesburg last week.
The prime cause of this seeming inability of the country to accelerate its growth rate is, according to Mupita, the trust deficit that exists between government, labour and business. Exacerbating this is that each of these three groupings acts as if they are only responsible for themselves. The truth is — and this is something that all three groups need to realise — that all South Africans are all in the same boat and it’s going to be necessary for everyone to work together and make sacrifices if we are to set the country on the course for growth.
“There are structures for engagement between the various stakeholders but this engagement needs to be stepped up and hard choices made,” he said.
“We understand that South Africa is an unequal society, but when it comes to the negotiating table it is necessary for there to be a frank discussion about the connection between wages and productivity,” he said. Linking the two has been a sticking point during negotiations for many years but, if South Africa’s growth rate is to accelerate, this issue needs to be addressed.
At the same time, there is an equally important need for a discussion around the levels of executive remuneration, with a clear link between company performance and executive compensation, he said.
However, aside from getting all parts of society onto the same page, the need to accelerate the National Development Plan (NDP) is something that Mupita sees as critical for the future of the country.
“The NDP, while not perfect, is the best plan we have to take South Africa forward, but priorities need to be set to ensure that it assists in moving the country onto the correct growth path,” he said.
“We believe there are three core priorities for the national development plan. The first of these is the renewal of the energy system in South Africa. We need to open up energy contracts to the private sector and not just in the limited area of renewable energy as it is at the moment. We need to allow private organisations to build power stations that can contribute to base load electricity generation. Deploying private sector capital in this vital area can accelerate the deployment of new generation capacity with little or no risk to government.”
The second area where government should be looking to the private sector to contribute is the development of infrastructure. Old Mutual has been involved in this sector in the past and, while the returns are not as fast as other investments, they pay off both in real terms and in terms of supporting greater growth across the broader economy.
“Business should be allowed to contribute towards infrastructure delivery mobilising private capital to deliver infrastructure that can benefit the entire country.
“As Old Mutual we are the custodians of South Africa’s savings and as such we need to look at investing for the social good. In line with this we have in the past invested in toll roads, gas pipelines and, more recently, in renewable energy projects. This is in addition to the investments we make in building schools and assisting in the provision of housing for South Africans,” he said.
The third area under the NDP that should be prioritised is education. “We need people to come out of the education system ready for the future,” he said. “For this education needs to have a stronger focus on technology and schools need to provide quality education at an affordable cost.”
He pointed out that Old Mutual has spent more than R350-million over the past seven years to support education.
At the same time that South Africa is looking at resolving its own issues in order to stimulate growth, it cannot ignore its place on the rest of the continent, and more specifically in the Southern African Development Community (SADC) region. The only way for Africa — and by inference South Africa — to grow is through economic integration. He said that while there were already economic communities across the continent, they were not doing enough to drive intra-African trade and investment.
The company’s strong presence in Africa, with a long history in countries such as Kenya and Zimbabwe, give it a unique understanding of the different needs of the various countries and how other companies can leverage better connections between countries on the continent.
All of these issues tie into the four key values that Old Mutual stood by in its 170 years of operation. The first of these is a strong customer focus. Old Mutual was formed as an organisation owned by its policy holders and as such the client has always come first. The second core value of the company is innovation and in the modern era this means looking at ways to embrace both the web and mobile as possible methods for reaching existing and new clients. The third core value is social relevance, something that is increasingly important in South Africa and something that ties into the final value, a long-term view.
With a horizon that looks beyond the myopic view that seems to plague many companies nowadays — the desire to see not just South Africa but Africa succeed — Old Mutual looks set for the next 170 years.