Sustainable transformation does not limit economic growth, it supports it

Posted by Transcend
Tuesday, 15 July 2014  |  Comments

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By Dr Robin Woolley, Executive Director, Transcend Corporate Advisors

The original objectives of B-BBEE were formed from the late 1990’s to 2003, while the country, at a socio-political level, was driven by a Neoliberal model. There was an understanding that B-BBEE was predominantly focused on building and strengthening a middle class, rather than being a grass-roots poverty alleviation and access mechanism. This can be seen in the relatively low weighting given to socio-economic development.

 It was tacitly understood that business would focus on the barriers to entry for those economic actors that were about to become active, thus stimulating quick growth and increasing the tax base, which the government could then use to enable those participants that were further away (in time and capacity) from becoming economically active. Hence the underpinnings of sustainable transformation was economic growth. Globally, democracies in transition that have emerged for their citizens have all experienced strong growth as a requisite.

 It’s not about balancing growth to achieve the objectives of transformation. The default assumption is that transformation comes at a cost, but really sustainable transformation supports the growth of the economy in the way described above.The points below refer to five key principle changes reflected in the revised Codes of Good Practice (RCoGP) that need to be resolved and could all be tackled in a way that makes business sense:

  • We need to re-channel the focus on SED out of education (the informal elements of which will be captured in skills development) and into other barriers to economic access, such as heath, poverty alleviation and basic service delivery. The basic logic is  that if your employees currently and in the future are sick and dying young ,you will struggle to compete!
  • We need to refocus our skills efforts to include non-employees (unemployed people), such that our future skills pool is developed and equipped to become employed. We need to ensure that our learnership and artisianship processes are effectively used as work preparation and employee courtship processes, so that there is effective retention of our unemployed learners. The basic logic is if your employees current and future are unskilled you will struggle to compete!
  • We need to be recruiting and training employees in proportion to the Economically Active Population (E.A.P). The basic logic is if your employees don’t speak the language of your customers, you will struggle to compete!
  • We need to ensure that access to economic opportunity for small black-owned businesses is enhanced through supplier development. This will benefit both entrepreneurs and the jobs that are stimulated through this process. Malaysia utilised this to overcome the “twin economies” behaviour evident in their economy at the time. In South Africa, the same concept could apply, namely: bringing established business and small informal business into supply partnerships to stimulate growth and competitiveness and mutual benefit. This manifests as a black ownership, small business focus in this pillar, as 95% of businesses in the country are small enterprises with the bulk of these being black-owned.
  • We need to ensure, as far as is economically viable, that our supply chains are localised, to enhance value added supply and job creation and business sustainability. More suppliers competing means lower prices!

In an environment where we have a worsening state of inequality, it is vital for the country to revise its efforts and focus wholeheartedly on promoting social inclusivity, in an attempt to deal effectively with varying expectations in South Africa. I accept that often when business implements this objective poorly, there are real costs of “compliance”, its all In how you implement!

However, it is when we translate this national compact into a business context that difficulties emerge. We need to simultaneously promote and stimulate economic growth and at the same time promote inclusivity if we are to emerge as a country that effectively serves all its citizens. The RCoGP require a fundamental strategic review in order to align itself with both national and business objectives. Invasive surgery is never easy, but it is sometimes necessary.

Using the mining industry as an example, it is an interesting microcosm of our larger society, but with the emotive issue of our wealth historically built off the backs of black labour. In this regard it is not an easy market segment to align business, national and labour interests in a way that seems equitable to all parties. The basic issue is that unless both business and labour can compromise in the short term, unite under a shared vision of what is needed for a stronger future for all then we are faced with a structural change of business over time increasingly mechanising.

A mine has some parallels to a war, if the soldiers at the front line down tools or are not motivated to the best outcomes for all, then all the supply chain’s efforts to get to that point are all just sunk costs. In the same breath the soldiers are the vital ingredient in a war, they should be cherished, supported and rewarded for the hardships they face. Mines have traditionally to often fallen into the trap of viewing labour as a “commodity”.  

Strong leadership at business, labour and government levels is essential in the quest for sustainable transformation. Also required is an economic CODESA that re-assesses/re-defines the “rights” of stakeholders in strikes and creates a vision of how beneficiated mining in South for the next 20 years should behave. We also need a clear longer-term compact between labour and business to provide certainty for the next 10 years. We need negotiated increases over five year blocks. And business needs to start to treat transformation of both employees and their communities seriously and "stop ticking the boxes"

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