Implement transformation now and avoid being pushed to do so or being driven out of business

25th May 2017

Implement transformation now and avoid being pushed to do so or being driven out of business

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Companies with foresight should embrace and actively implement transformation now, and not wait for “radical economic transformation” to force them to do so or to push them out of business, argues Kaizer Nyatsumba

Radical economic transformation.

That is the current mantra within both the African National Congress (ANC) and among some within the national and provincial governments that it leads. That has been the case since President Jacob Zuma latched onto the concept and gave it heightened prominence during his State-of-the-Nation Address in Parliament in February.

Until then, that phrase belonged to Julius Malema’s Economic Freedom Fighters (EFF) which, from its inception, has consistently bemoaned the slowness – some say the lack – of thorough-going transformation in the country’s economy.

Generally given to populism and outmoded socialist thinking, the EFF has insisted on the implementation of the socialist policies captured in the ANC’s Freedom Charter upon its adoption in Kliptown, Johannesburg more than six decades ago.

Deeply aggrieved about the continuing racial inequity in the economy, the EFF has been steadfast in its determination to apply 1950s remedies to the challenges of our times, when the advocated economic policies – such as wholesale nationalisation – have been shown to have failed miserably wherever they have been tried.

Just as former Brazilian President Luis Inacio Lula da Silva was the object of much praise and adulation by former Cosatu General Secretary Zwelinzima Vavi, late Venezuelan President Hugo Chavez and late Cuban President-for-Life Fidel Castro was the professed role model for the EFF leader. Closer home, until recently EFF leaders regarded Zimbabwean President Robert Mugabe as the ultimate revolutionary, despite the terrible ruin to which Mugabe’s ZANU-PF and its policies reduced that country’s economy.

Given the immense antipathy between the ANC and the EFF, but especially the fact that EFF founder Julius Malema and his ardent supporters were ejected from the ANC for their articulation of the self-same populist policies that ran counter to the ANC’s established economic policies, it came as a major surprise to hear an embattled President Zuma coming out as strongly as he did in favour of “radical economic transformation” during his 2017 State-of-the-Nation Address.

Very much like a recent convert to a religion or a cause, since then he has aggressively championed “radical economic transformation” on every platform. Every major speech that he has made since then has been peppered with that rhetoric, and his loyal disciples have done the same.

Indeed, one of the reasons advanced by Zuma’s fawning supporters for the dismissal of former Finance Minister Pravin Gordhan was said to be his alleged lacklustre commitment to “radical economic transformation”. It was said that he was lukewarm towards the concept, the motive for whose sudden embrace he questioned, preferring, instead, to talk about “inclusive economic growth”, which was much closer to established ANC policy.

Until President Zuma’s sudden conversion to “radical economic transformation”, the ANC’s official policy on the economy, as adopted at the organisation’s last national conference in Bloemfontein in December 2014, emphasised the need to embark on the “second phase of South Africa’s transition”. That alluded to the fact that, important though it was, 27 April 1994 marked the first phase of our transition: political emancipation.

With poverty and inequality rife in the country and still defined along pre-1994 racial lines, there was a growing need for greater emphasis to be placed on levelling the economic playing field, with deliberate policies adopted by the Government to advance black South Africans who were previously excluded from the mainstream of the economy.

Whether called “the second phase of the transition” or “radical economic transformation”, this posture emphasises the need for more work to be done to ensure that black South Africans – Africans, coloureds and Indians – are brought into the mainstream of the economy. While some among our compatriots may not readily acknowledge it, the fact remains that it is vitally important that all South Africans feel that they have a real and meaningful stake in the country’s welfare.

The country’s future stability depends on just such a state. Our stability is seriously imperilled by the continuation of such gross levels of economic inequality. The insurance for our future lies in ensuring that everybody can truly feel that they have a stake in the economy.

Yes, as business leaders are often quick to point out, our urgent priority should be to grow our anaemic economy. A growing economy would stand a much better chance of bringing to the centre those currently on its periphery. That makes it even more imperative for the Government to manage the economy much better than it has done so far.

It means, among other things, that our political mandarins will have to ensure that suitably qualified and experienced individuals are appointed into key positions in the public and related sectors, which will be a radical departure from the current practice of appointing woefully ill-suited individuals purely on the basis of their political or factional affiliation.

However, addressing South Africa’s blatant economic inequalities cannot – and should not – wait until the required levels of economic growth have taken place. Were we to take that view, then these inequalities will be with us and our children for years to come.

Instead, everything possible should be done now, as much as possible, to address these challenges even as work is done to grow the economy. To stand a chance of success, that work must involve a real and meaningful partnership between Government, business and labour, and not the kind of partnership that is speedily and opportunistically cobbled together whenever our political mandarins are keen to make a statement at the World Economic Forum or on sundry investment roadshows.

That makes it vitally important for business in South Africa to understand that addressing these gaping inequalities is not just the responsibility of Government. Instead, the business community needs to appreciate that transformation is in its own best interests: not only will it lead to a growing middle class that will ensure a bigger market for their products and services, but transformation also unlocks opportunities for companies to do business with the public sector, State-owned enterprises and companies that are protective of their high BEE ratings.

There is an even greater need for companies in manufacturing, a sector which generally has been a laggard when it comes to transformation, to be at the forefront of such moves. Included in manufacturing is our own metals and engineering sector, which is of strategic importance to our economy.

Companies with foresight should embrace and actively implement transformation now, and not wait for “radical economic transformation” to force them to do so or to push them out of business. 

Written by Kaizer M. Nyatsumba, the Chief Executive Officer of the Steel and Engineering Industries Federation of Southern Africa (SEIFSA)