Of the several declarations in President Cyril Rampahosa’s 2021 state of the nation address, one of the most striking was the acknowledgment of the role of the private sector in economic growth, job creation and the need for the government to work closely with business.
While the ruling party, with its alliance partners the SACP and Cosatu, get their heads around that, business also needs to be getting its act together. And Rebecca Henderson’s Reimagining Capitalism: How Business Can Save the World is just what the captains of industry need to guide them.
Given the long history of the struggle against apartheid, with an alliance forged in battle against a system that was associated with the super-exploitation of black workers, it is no wonder that an anticapitalist gene resides in the ANC’s DNA. At its most benign, this perspective found expression in a suspicion of even progressive initiatives by business, while at its extreme, it became associated with the messianic rhetoric of “radical economic transformation” and antiwhite monopoly capital.
Those from the private sector should not be surprised by such animosity and they need to come to terms with what gives rise to it. SA remains the world’s most unequal society. The upper echelons of society remain largely white and male while poverty and hunger are the lot of the majority. According to the National Income Dynamics Study — Covid Rapid Mobile Study (NIDS-CRAM) report of late 2020, “about 37% households ran out of money before the end of the month to buy food, twice as high as in 2016”.
Henderson crafts a number of lessons that have emerged from her experiences and presents what can only be seen as an agenda for truly deep and radical economic transformation.
Henderson’s book captures the zeitgeist of the times marked by debates especially within business circles and the financial press about the future of capitalism. The Financial Times, for example, ran a series of articles on that issue, while Paul Collier’s Future of Capitalism (2018) exemplified the various attempts at concrete measures for changing the economic system.
The US’ Business Roundtable, in its August 2019 statement signed by 181 CEOs, pointed out that all previous statements have “stated that corporations exist principally to serve their shareholders”. But in that year’s issue it stated “we urge leading investors to support companies that build long-term value by investing in their employees and communities”.
The Holy See also entered the fray by hosting a conference in November 2020 under the theme “Economy of Francesco”, in the town of Assisi in Italy. Inspired by St Francis of Assisi, as “the most credible promoter of an integral ecology, taking care of the good of all and, therefore, inclusive”, the conference focused on the environmental, social and economic themes “that characterise sustainability”. It was also catholic in its line-up of speakers, which included the likes of Muhammad Yunus, the Bangladeshi economist and social entrepreneur.
Henderson crafts a number of lessons that have emerged from her experiences and presents what can only be seen as an agenda for truly deep and radical economic transformation. She points out that the idea of business working in the interests of society is not a newfangled one, concocted by a bunch of do-gooders or tree-huggers. Before the reign of Milton Friedman and the Chicago School of economists, there were thinkers such as Edwin Gay, first dean of Harvard Business School (HBS) from 1908 to 1919, who said that the school’s purpose was to teach leaders to “make a decent profit, decently” while the 1981 statement of the Business Roundtable spoke of the “symbiotic relationship” between business and society.
Developments such as the oil crisis of the early 1970s, the environmental costs of the “unleashed animal spirits” and the rising inequality businesses were contributing to, led to a situation in which, as she puts it, “markets require adult supervision”. Arguing that the rise of crony capitalism in 1990s Russia is an example of Chicago economics in its purest form, she points out that developments such as the UN’s sustainable development goals are clear indicators of what needs to be done.
She presents many case studies of companies wanting to do the right thing: the challenge is in the how. Henderson identified five elements, in themselves well-known. Her value-add — to use a favoured management term — is how she sees these five elements interlocking and working together.
The first, “creating shared value” is lifted from the oblivion of management jargon by examples of highly effective turnarounds of defunct or staid firms and industries. Erik Osmundsen’s decisive decision-making requiring investment for Norway’s largest waste handling company while staring down threats from organised crime should find a place in the Nordic legends I enjoyed with my kids.
Shared value, with the building of a purpose-driven organisation, lie at the heart of some of the more successful case studies. She cites the example of Cadbury’s, led from 1861 by a pair of brothers guided by Quaker beliefs, as an example of an early purpose-driven company. Many anti-apartheid activists would recall the generous contributions received from this source in the 1980s.
“Rewiring finance” is her third element. While business leaders in SA are still contemplating the value of embracing the framework of environmental, social and governance (ESG) metrics, she points out that by 2018 more than $19-trillion or 20% of all total financial assets under management was invested using ESG-based information. This, coupled with linking up with impact investors, is fundamental for business to play a more progressive role in society.
I found the case of Nike, discussed under the “building co-operation” element, very exciting. Like many members of the public, it took me a while to recover from the old image of Nike as an exploiter of child labour to that of becoming an industry leader in ethical labour standards under the Sustainable Apparel Coalition. Much of the changes that Henderson identifies under this element are best tackled at industry level through self-regulation, though it often requires visionary leadership from management, labour leaders and the firm’s board.
The fifth element refers to the political, the importance of “rebuilding our institutions and fixing our governments”. From personal experience working for a PR company and more recently for the Banking Association, I can attest to the skittishness that business shows in getting involved in the political realm. But that has not stopped it from rising to the occasion as seen in some brave CEOs standing up to the threats of apartheid-era strongmen as well as taking to the streets in support of the fight against state capture.
More recently, during the Covid-19 pandemic, the private sector mobilised its vast resources around the Solidarity Fund, supported by thousands of individuals contributions. The banks worked closely in ensuring the smooth delivery of social grants as well as facilitating the payment of settlement money to workers who succeeded in various class action suits across Southern Africa. A joint approach involving government, business and labour is being hammered out for the rollout of the Covid-19 vaccine. Much more can be done by the private sector with its resources and expertise.
Her chapter on the role of government is particularly useful reading for those whose natural inclination is towards the public sector. She argues that the balance between tyrannical markets and tyrannical governments can be achieved through the voice of labour being represented in critical decision-making structures; through the maintenance of the rule of law; a free press; respect for minority rights and real democracy.
The tasks Henderson sets out for the business class are urgent and within its grasp. It requires a shift in the mindsets of the key social partners — labour, business and government — to ensure capitalism is not only reimagined but that market forces work truly in the interests of society.
• Abba Omar is the director operations at the Mapungubwe Institute.
Correction: February 18 2021
An earlier version of this article incorrectly referred to Thomas Friedman when it should have been Milton Friedman.
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