Edition: December 2015 / Febraury 2016
Editorials

FIRST WORD

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 the latter.

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 Protector).

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.

Allan Greenblo,
Editorial Director