Edition: December 2015 / Febraury 2016
Talking in tongues
The start of a constructive conversation requires agreement
on the meanings of terms. In SA, where the need is paramount,
they’re frustratingly elusive.
The words that we South Africans
commonly use convolute our own discourse.
As if it weren’t already sufficiently complex,
different meanings are intended and interpreted
by different users depending on circumstance
and audience. Clarity is reduced to confusion,
contention to cliché. Such is the consequence
of propagandistic heat, perverting a dialogue
supposedly intended to promote consensus.
Even so basic a term as transformation can have
good or bad connotations. Make your choice, from
where you sit, between SA being “transformed” from an apartheid to a non-racial society or to
one where demographic representation is an
institutionalised objective. The former contradicts
Allied to it is black economic empowerment itself. For illustration, focus on the ownership
aspects as they apply under the all-important
scorecards of the mining and financial sectors.
In dispute is whether a company, having
concluded a BEE transaction that elevates its points
to a required level, will retain this level once the
BEE beneficiaries sell their shares. To discriminate
or not to discriminate between shareholders?
To restrict them from selling is to restrict them
from realising their capital. To allow unrestricted
sales, should the “once empowered, always
empowered” principle not apply, would be to force
one BEE transaction after another.
With each transaction will necessarily
come further dilution of existing shareholders,
substantially including foreign investors and local
pension funds; no matter that SA is perpetually
in pursuit of foreign investment as well as better
retirement outcomes for members of pension funds.
No matter, either, that many millions in the latter
category are black.
The qualification to BEE is that schemes be broad-based, similarly lending itself to confusion.
Some BEE schemes are more broadly based than
others. Some beneficiaries fare much better than
others. Schemes rely on the subjectivity of selection
which is inherently inequitable.
Much as they dispense largesse, and foster
participation in the mainstream economy, they also stimulate inequalities between categories of
beneficiaries and between beneficiaries of any
scheme against the many millions of people who
aren’t beneficiaries of any scheme at all.
As fundamentally, take the evil triplets of inequality, unemployment and poverty. The
terms, implicitly resonating with moral opprobrium
and social dislocation, are highly emotive. In
reality, though, their levels are relative and their
computations argumentative e.g. whether inequality
includes the masses of unemployed and whether
poverty includes the impact of social grants.
In any market economy – let’s not go there for
purposes of present discussion – the triplets are
unavoidable. The question is therefore not on how
they can be eliminated but on how, step by step,
they might respectively be reduced to levels at
which SA can reasonably live.
Goals are obscured by rhetoric. Ditto timescales
and targets. All the while, the horizons of the
National Development Plan become increasingly
distant in much the same way that reconciliation has faded from the lexicon except in Mandela
tributes. The contradictions are between postures and policies, between what’s being understood and
what’s being shaped.
Equally, and specific to pension funds that
should be potent catalysts for transformational
change, are attempts to suffuse environmental,
social and governance (ESG) criteria into the
investment mainstream. Trustees, in the first line of
responsibility, are obliged by regulation merely to
consider these factors. Once considered, then what?
ESG goes to the heart of sustainability. This is
not a do-good flowery concept because it essentially
offers a means for investors to understand risk and,
going a little deeper, to help protect them from
downside. Yet it would be sanguine but fanciful to
believe that there are sufficient numbers of trustees
with much more than a conversational grasp of the
E, the S and/or the G – let alone the will or capacity
to interrogate them in investee companies – for
ESG’s theoretical thrust to gain practical traction.
With trustees befuddled, the monitoring function
is largely outsourced to the domain of asset managers
and consultants. They’re left to deal with ESG as
enthusiastically or perfunctorily as they choose or
as their clients demand, assuming they demand
anything beyond short-term financial performance.
Finally, there’s our much-lauded democracy.
On the one hand is the venerated Constitution.
On the other is an approach of winner-takes-all,
beginning with the way that the President is elected
(effectively by delegates to a party conference) and
continuing into ways that presidential powers are
exercised (notably in respect of checks and balances,
transparency and accountability e.g. in the manner
of state appointments and attitude to the Public
Now connect the dots of these randomlyselected
examples. They’re intended to integrate an
overarching concern to stimulate SA’s environment
for savings and investment, kicking off with a plea
to agree on what we’re talking about. Pressure
is heightened by the disfavour into which many
emerging markets have fallen.