One gets, of course, that business does – by its very nature – focus particularly on adding value to shareholders. This is really a quaint way to say that business will focus on making profits, above all else. This is an idea so embedded in the fabric of western society that it is pursued with virtually no other ideas to fall back on. It has been taught for the past forty years, as just one example, by Harvard Business School, as the only rational pursuit of business. It was also the ideological underpinning of monetary policy pursued by Milton Friedman, the great monetarist and principal idea-maker for U.S. and European policy since the late nineteen-seventies.
The King Report introduced to be sure some other aspects to the role of business – the so-called triple-bottom-line as one example – but these ideas had no teeth, and are kowtowed to only obliquely and as an afterthought.
But let there not be shame in this. There is nothing essentially wrong with the idea that business, conducted fairly and with oversight and under the guide of inde-pendent regulation, is good. The success of business enterprise creates employment, innovates, funds govern-ment, lessens the tax burden on individuals, and drags the masses to a better living standard. The fact that a very few individuals profit disproportionately is a small price to pay to see the poverty line drop through the population.
These are the cold, tough rules of free-market economics; and for South Africa to thrive, it needs to compete on the same playground as all other liberal-minded countries, or so the argument goes. Western nations took decades, if not centuries, to see the long-run benefits to society as a whole of free-market liberal economics, but, in the end, there is no question that it worked. The key is patience, and continued vigilance. In South Africa, the introduction of advanced institutions such as the Competition Commission to ensure that the playing field, or at least most of it, remains fair, stands as just one example of a truly positive institutional move in the right direction.
This is a nuanced argument, however. Many commentators would point out that to myopically allow the imposition of a liberal western free-market model in South Africa, as opposed to, for example, the Chinese state-driven controlled enterprise model, would be simply to continue with a kind of post-colonial economic imperialism. Certainly, this argument has been made. Undeniably, the manner in which business prospered over the past two decades in South Africa, despite the erosion of leadership in government and the failure of basic services, would tend to persuade one towards a conclusion that patience with western democratic political structures, may, in the end, prevail.
Ideally then, or so the capitalist argument goes, business in South Africa remained principally unencumbered from government intervention and takeover – in contrast to countries such as Russia or China – and that this is precisely why business is thriving. In fact, there are genuinely a plethora of success stories: innovative companies that offer life insurance to HIV-positive citizens; the growth and expansion of private hospital and private education businesses; countless NGOs and charities that have tremendous impact on impoverished regions; the explosion of construction on the Sandton skyline; world-class banking and media services – and the seemingly impossible profits made by some of our top-listed companies.
Of course, there have also been some very worrying signs: the end of the commodity boom has been the death-knell to a large portion of the mining sector. On the information technology front there has been very little innovation, and the country’s secondary industries, such as manufacturing, have been substantially eroded to the extent that we import the vast majority of our needs in manufactured items. Furthermore, despite the impressive efforts of the Competition Commission, there remains a high degree of anti-competitive behaviour – take collusion in the construction industry as just one example.
Perhaps one of the most telling points of economic data distortion – exemplifying these contrasts – is the comparison of the change in the value of the Johannesburg Stock Exchange (JSE) All Share Index versus the growth of the South African economy. These two realities are now completely decoupled from each other. The JSE marches on relentlessly – albeit slower in recent months – whilst the economy languishes.
The other compelling distortion is the value of the South African Rand, which seems to hover in suspended animation, despite the nosedive we have witnessed in the business and consumer confidence indices, which have hit thirty-year lows in July and August of 2017. Both distortions paint a picture in which the business world – increasingly offshore in its make-up – exists in an alternative reality to the real economy of South Africa.
Nevertheless, one could argue even in the face of these inequalities, that business will ultimately be the saviour of the South African story. There is simply too much to lose, with too many stakeholders who care too much about the future of this country. But, once again, one comes back to the original assumption that Sunter made – that most white-collar workers in this country continue to make – that business will, on balance, behave rationally and in good faith.
It is only now, in the face of inextricably compelling evidence of gross malfeasance at the highest most-revered levels of the corporate world, that we need to reject that assumption. There are many limbs to what one could call the body economic; these are our industries.
There is the mining industry; there is the banking industry; there is insurance, asset management, manufacturing, infrastructure; and then there are those firms that service these industries. These are the firms that ideally provide validity and invoke trust in the body economic itself – that give business its credentials. Any failure of credibility in those firms upon which the concept itself of trust is invoked – the audit firms, the management consulting firms, the newspaper industry – is far worse than the failure of an industrial firm. For this failure would undermine not only a company, or an industry, but the thin layer of faith, upon which all else depends.