I am always surprised by the lack of respect people have for business. Even in my own trade there are colleagues who make a point of writing as aggressively as possible about profit, or capitalism or just plain business. They do this even while being paid their salaries from the proceeds of the hard work of customers, donors, managers and shareholders.
One of the most underappreciated things about running a company is that there always has to be enough cash in the bank to pay salaries. Every month. And pension contributions, and health plans. Imagine being an SA Breweries or a Sasol or a Tiger Brands. The responsibilities the leaders of these companies have are immense and yet it is all taken for granted. They pay huge taxes to keep the country on its feet yet political parties are happy to trash corporate premises without a moment’s thought. Commentators line up to do the same.
I’ve been earning a salary or regular income now for almost 44 years. I’ve never experienced a month-end when money did not drop into my account. I can’t imagine what it must be like to be on the payroll of the ANC where you simply don’t know if you’re going to be paid or not. Or the SABC, or municipalities around the country. Or companies that couldn’t stand up to lockdown.
Only now, as I begin to look at my pension and other investments with an eye to the future, do I fully appreciate the catastrophe that befell people in the Mirror Group when the newspaper magnate Robert Maxwell disappeared off his yacht near the Canary Islands in 1991. As a young reporter in Madrid at the time, it was just another exciting story.
But Maxwell had been paying his corporate debts with money from the pension funds of his employees. Thousands lost their pensions and I often wonder how they have survived since.
This view I have of hard-working business owners or big company executives is a bit romanticised, I know. But it is also real. Running a company and having other people depend on your judgment and focus must be immensely taxing. Most of the time. Obviously Maxwell was not the world’s first and only crook. I have watched, close-up, corporate and individual greed and the rules of the game slowly eat away at the newspaper industry in SA, leaving it in a difficult place today.
Nothing is more abused than the executive incentive scheme in big SA companies — CEOs are able to pay themselves over and over again, outside their salaries, simply by selling or buying assets, both of which trigger incentive payouts.
I once asked the chair of my board why I wasn’t on the share scheme. He looked at me as if I were mad. “Just do your job,” he advised. “I do,” I said, “but what about the managers on the scheme; are they doing more than their jobs?” He didn’t answer and I admit I was very grateful later on in my career when I was, eventually, included on a scheme. By that stage I had been through a divorce, which cost me most of my money, and it was a relief to claw some back.
But I also know there are thousands of people running small companies or family businesses who don’t have the security that I’ve always enjoyed. My dad was a building contractor in Mthatha in the 1960s. He brought tender documents home almost every night. He employed perhaps 20 people full time. They got paid on time. Their kids went to school and university.
We spent our evenings listening to the Goon Show and Just a Minute on the wireless while he pencilled in prices for bricks, nails and corrugated sheets, smoking all the while. In those days you couldn’t transport any of those things by road, not even a bag of nails. But the rail connection with East London worked perfectly. That connection no longer exists.
He got up early and was in bed by 8.30pm. And then he dared to dream. He built a five storey office block for what was then Volkskas, buying a large crane in the process. That worked but then he tendered to build a dam on the Buffalo River near King Williams Town, more then 200km away. He won the tender and the day arrived when he loaded up his trucks and hydraulic drills.
Within a week he was back home. And bankrupt. He had underestimated the amount of granite just under the layer of grass on a building site. He hadn’t priced it in. He lost his business.
I’ve been thinking about small businesses as President Cyril Ramaphosa and his trade, industry & competition minister, Ebrahim Patel, go about preparing the ground for a vision they have of reindustrialising SA by localising the manufacture of a range of goods that we currently import.
“There are huge opportunities that we can seize through effective partnerships, targeted deployment of resources and the right policies,” Ramaphosa told a joint sitting of parliament as he launched his economic recovery and reconstruction plan last week.
“SA currently imports around R1.1-trillion of goods, excluding oil, each year. If we were to manufacture just 10% of these goods locally, it is estimated that we could add 2 percentage points to our annual GDP.
“The rest of Africa currently imports R2.9-trillion worth of manufactured goods from outside the continent each year. If SA were to supply just 2% of those goods, it would add 1.2 percentage points to our annual GDP.
“And if we succeed in reaching our target of R1.2-trillion in new investment by 2023, it could add around 2.5% to our annual GDP. It is to realise this huge potential that the social partners have agreed to prioritise a range of consumer and industrial products for local procurement,” he announced.
Together with business and labour, the state will soon be publishing localisation targets for goods in areas like agro-processing, health care, basic consumer goods, industrial equipment, construction materials and transport rolling stock.
In order to do that though, they are first going to have to drive a lot of entrepreneurs, like my dad once was, out of business. They will be running companies that import and distribute goods from Honda generators to Gillette razorblades, Italian roof tiles to Pakistani karate belts into SA or which import, say, steel or aluminium sections and fabricate finished products for export on to other markets earning valuable foreign exchange in the process.
But as part of a reindustrialisation project, importing certain steel or chicken or textiles or sugar products is going to become a lot more expensive, in some cases prohibitively so. Once the government decides what it wants manufactured locally, imports of those products will be subject to heavy duties.
Importing companies could close and many thousands of jobs are at risk. So determined is Patel that his department is already slapping duties on imports of goods we don’t even make here.
On the other side of the coin, the state will decide what it wants manufactured here and the duties raised on imports will serve as a vital subsidy for local factories. That subsidy will be necessary because the SA market is small and local manufacture will be relatively expensive and potentially inflationary.
It is hard to argue against making more of the things we use locally but let us not be blind to the risks. One risk is that even at current rates of exchange, our dollar labour costs are high by international standards and our domestic market small and poor. The vast majority of our small businesses, old and established and new and still struggling, use imported goods of some kind and the whole import substitution proposal was last popular 50 years ago in the textbooks of the political Left.
It is important to distinguish Ramaphosa’s drive to use only local cement, bricks and steel for his infrastructure drive in all of this. It makes sense and we already make those products here. But infrastructure is only one of the legs of his recovery plan. The localisation plan is another, less convincing, leg.
Here we are going to interfere with the market without a clear idea of what the consequences will be, a little like my father tendering to build a dam without ever putting a spade into the (solid) ground below the grass. We’re going to kill old order jobs in the hope that we can grow new, new order ones.
What could possibly go wrong?
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