Business should be braver

Ian Kilbride says corporates should be more political for reasons of opportunity and necessity

Why business should become more political

Pusillanimous, supine, flaccid and timid are reasonable descriptors of much of the business sector when dealing with politics and government. It is time for this to change. Of course, business is far from homogenous across its vast range of sectors, but all share a common interest in operating in a stable, predictable, balanced and well-governed policy environment. Currently, this is absent. This alone provides grounds for greater political engagement by business.

Becoming more political needs to be unpacked of course. This could manifest itself in a number of ways. Business could, for example, become more partisan in its private and public support for a favoured political party. After all, the current ruling party operates in a tripartite alliance with organised labour through COSATU and its SACP fellow travellers.

Why then should business not align itself publicly with a political party whose policies are avowedly business friendly, rather than socialist, populist and business destructive? Surely this is self-evident? Well, not quite, as the overarching fear shared by all major businesses in becoming more political is that of retribution, victimisation and marginalisation by government.

Yet today, business has less to fear from a government backlash than in the past. The historic carrot and stick applied by government in which lucrative tenders were awarded to party cronies and sycophants, while legitimate business was snubbed, is a model that has contributed to state failure. Moreover, currently, government simply has less largesse available to distribute though cadre deployment and tender honey pots. The cookie jar is emptying fast.

Government and business relations in South Africa operate in a spectrum ranging from cozy cooperation to conflict. But the power relationship between the two is shifting, not because business is becoming stronger, but rather due to state failure. Indeed, government has never needed the contribution of business more than the present to meet its stated developmental objectives. This all starts with tax collection.

Without the R345 billion raised through corporate tax and with government currently facing a fiscal cliff, state failure would be assured. This is axiomatic for any country, but the risk of state failure, defined as the inability of the state to meet basic service delivery needs, is escalating in South Africa, which in turn, creates a risk aversion environment for business.

There are more nuanced reasons for business to become more political and these relate to the process of policy formation. Simply put, business knows business best and demonstrably, government doesn’t. While the government is constitutionally mandated to make public policy, it often lacks the skills and experience to make good public policy.

Two key fundamentals of good public policy are whether it is implementable and secondly, whether it tackles effectively a societal need or addresses an identifiable problem. The current business operating environment is strewn with ill-conceived, restrictive and ultimately counterproductive government policy conceptualised by bureaucrats with little or no real-life business experience – policies that are neither implementable, nor address the need for a sustainable operating environment.

Indeed, the economic operating environment has deteriorated to the point where it now constitutes an existential threat to business and consequentially to the consumer. While it stretches credulity to expect government to suddenly adopt avowedly pro-business positions and policies, it is in its own electoral interest and that of the country more broadly that it adopts a ‘look-through’ approach to business policy, to consider the impact on citizens, consumers and its own voters of policies that destroy business confidence, curtail economic growth and repel local fixed and foreign direct investment.

Relatedly, in most opinion polling metrics, the government’s critical Achilles heel is identified as the country’s catastrophic unemployment levels, particularly among the youth. Unaddressed, the inexorable consequence of this socio-economic pathology will be an upsurge in violent protest and as we witnessed in KZN in July 2021, anarchy.

It is equally evident that not only has government’s entire repertoire of ‘job opportunity’ creation (whatever that means) failed dismally, current economic conditions dictate that its financial capacity to boost job creation is limited. Not only is cadre deployment being called out publicly for the self-serving practice it is, given the parlous state of the states’ finances, fiscal challenges and high cost of borrowing, government no longer has the capacity to mop up meaningful numbers of unemployed in the state sector.

Then there’s the matter of the looming general election in 2024, the ruling party’s precipitous decline in popular support and the potential for it to collapse below the key 50% electoral threshold. Beyond the tired rhetoric of national democratic revolution, promised renewal and a better life for all, the universal path to electoral success lies in economic growth, reduced unemployment and reliable basic service delivery. It is the private sector that can deliver all three, not government. So, the equation is at once profound and simple, release the private sector to do what it does best, if for no other reason than it is in the government’s interests to do so.

This shift in approach does not require or demand an outburst of shrill criticism of government by the private sector, however. Indeed, the recent very public labelling of government as “useless morons” by a high-profile vocal businessman may be entertaining and headline catching, but does nothing to take the country forward and achieve our shared developmental objectives.

Rather, it is time for government to recognise and appreciate businesses its vital role in pulling the country back from the edge. Equally, it is imperative that businesses behave as bold responsible corporate citizens who speak truth to power in the national interest.

Ian Kilbride

Chairman, Spirit Invest
Honorary Professor, Stellenbosch Business School