Hi All

I have had, fairly recently, a chat with a senior member of COSATU in the Western Cape, whose identity I will not reveal as this was not in a public forum. He spoke of the need for greater government involvement in business. It begs the question, what is the government’s role in promoting sustainability and how should the private sector be partnering with government?

Certainly, government has a role in enforcing good corporate citizenship. It does so, primarily, vicariously through the requirements for adherence to the King Code on Corporate Governance as a JSE listing requirement. Legislation such as the National Environmental Management Act of 1998 go some way to enforcing minimum behavioural standards for the Environmental Bottom Line and a plethora of labour legislation and regulations force standards with regard to the Social Bottom line. As a colleague of mine once remarked though, government creates legislation in accordance with its own priorities and not the priorities of business. Interrogating that, one begins to wonder where the divergence lies. Is what is good for business not good for government? Surely, the fostering of a healthy business environment is a sine qua non for the effective governance of the country? It stands to reason that no social welfare can take place if no wealth is being generated. Zimbabwe stands grim as the best example of what happens to a country when a government ignores the need to allow the economy to thrive by systematically plundering it and wrecking its infrastructure.

Under Trevor Manual’s prudent hand, the South African Economy has, for many years, defied the pessimists and continued to thrive. Sound fiscal and monetary policy have been the driving forces behind our stability and prosperity as a nation. A black middle class has emerged and become established who want, as their white counterparts do, good education for their children, a safe area to live, free of crime and a strong economy that allows solid growth of the shares held in their pension funds. So what prevents the trickle down that capitalism is meant to bring?

A person may have a job and be able to send his/her child to school, but what is the quality of the education that this child will receive? Will the child be in an environment surrounded by gangsterism and drugs? Are the schools safe havens of learning? Usually not. With a health care system and education system in disarray, the chances of self improvement, or the improvement of the future possibilities of one’s children are in serious jeopardy.

So where do the obligations of government and business lie? Well, the first obligation of business is simply to stay in business and to generate sound returns to its shareholders. The first role of government is surely the welfare of the citizens of the country. Government has the obligation to ensure that our safety, education and health needs are provided for. The private sector provides the tax revenue for doing so. Finally, then, government needs to ensure that this revenue base does not stop growing. So that, instead of trying to reallocate the portions of the pie, more pie is baked. Correspondingly, business needs to partner government to assist in education and social welfare, bringing its skills and targeted CSI spending to social projects which will uplift the next generation of employees and customers. The priorities of government and business are not mutually exclusive and do coincide. But it will take some maturity to bring about the necessary collaboration. Business has been cowed and seems to have lost its voice.

In September 2004, Thabo Mbeki blasted Tony Trahar, CEO of Anglo American for his reference to “political risk” in South Africa. In fact, open dialogue on such matters might have allayed some of the fears. The irony is that Afro-pessimism, which has lead to flight of capital from Sout Africa may well have cost those involved dearly as the sub-prime crises ripped through the USA and the UK, leaving South Africa, relatively far less affected. It’s time for the private sector to find it’s voice and offer solutions and assistance but also to play a meaningful role in dialogue and debate - after all, this is a democracy. The sustainability of our economy demands it.

Kind regards

Paul Ellis-Smith

Tags: Business, Government, King III, Sustainability

This entry was posted on Thursday, October 15th, 2009 at 10:02 pm and is filed under Sustainability Blog. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.