IRMSA Risk Chat – ‘The Future of South Africa?’
September 3, 2018
Andre Roux from the Institute of Future Research (IFR) University of Stellenbosch spoke at the recent IRMSA Risklab conference on the ‘Future of South Africa’. Andre’s presentation was impressive in that it was full of facts, stats and examples which debunks many of one’s own perceptions and / or misconceptions. For example, it was a pleasant surprise to see a chart showing that the primary sector of the SA economy (minerals and resources) is far less dominant than one would think compared to the secondary and tertiary sectors such as services etc. South Africa has a far more diversified economy than one would think which is comforting given the demise of the mining sector.
Andre’s slide on ‘Why we tend to react and not pre-empt’ may explain why we see many organisations paying lip service to risk management rather than making risk management a proactive, real-time, leading-indicator business imperative. Andre mentioned the following reasons: 1) Ignorance / misconceptions, 2) Hubis / arrogance, 3) Greed, 4) Entitlement, 5) Tolerance (of crime, corruption, incompetence), 6) Despair / fatalism / disbelief.
If business leaders and public servants think and act like this, this kind of attitude is bound to spill over into the corporate culture resulting in a ‘who cares’ behaviour within the organisation. This behaviour is evident given the daily scandals involving arrogance (Steinhof), greed (state capture and rampant corruption as is evident at many public entities), incompetence (failure of the SEOs) and entitlement which is becoming an epidemic. Examples of increasing institutional entitlement and tolerance are evident when it comes to property rights, diversion of public funds, trust in politicians, irregular payments and bribes, judicial independence, wasteful government spending, transparency of government policy, business cost of crime and violence, organised crime, ethical behaviour of firms, strength of auditing and reporting, efficacy of corporate boards, strength of investor relations etc.
Many of us are numbed into a state of fatalism, disbelief and despair. Sadly, as Andre puts it, fatalism virtually guarantees failure so it is important to focus and look at some positive facts as well such as the fact that South Africa has an upper-middle income economy which is amongst the 30 largest in the world, has a widely respected and progressive legal framework, has a sophisticated and respected financial infrastructure, has a diversified economy, has a monetary policy where sanity generally prevails.
Andre mentions two key levers:
- Appropriate skills
- Selfless visionary leadership and institutional integrity.
Andre discussed two main scenarios being:
- The high road: competitive high tech skills together with institutional renaissance.
- The low road: inappropriate low level skills with institutional decay.
For more information, please see this link to Andre’s presentation from IRMSA’s RiskLab.
In an article recently written for the business day by Gavin Keeton from the economics department of Rhodes University titled ‘The dire state of Venezuela’s economy which sounds a warning to South Africa’. In this article, Gavin talks about the current hyperinflation in Venezuela as well as that which occurred in Zimbabwe a few years ago when reported inflation reached 231 million percent. ‘Hyperinflation occurs when governments ignore spending constraints and simply print more money to pay for their growing budget deficits. Such increased spending is initially motivated in that it will help the poor. In both Zimbabwe and Venezuela, this was accompanied by land seizures and in Venezuela, the massive oil industry was nationalised on the grounds that its revenue would now flow to the poor. Tragically in the subsequent economic collapses in both countries it has been the poor who have suffered the greatest hardships’. Gavin goes on to say ‘SA must reignite economic growth and living standards for the poor without delay by restoring confidence and improving public sector efficiency. If we do not, the siren calls for populists claiming to have easy solutions to our difficult problems will be hard to resist’
Questions we should perhaps ask ourselves as risk practitioners, business leaders and public servants?
- Do we have the courage to be counted and drive good corporate governance, ethics and effective risk management in our organisation?
- Given what we know about our organisation, have we identified the risk and strongly articulated the consequences of:
- poor corporate governance and ethics?
- apathy?
- not speaking out against populist politicking which we know from history will take us down a slippery slope to nowhere.
- Have we fostered a risk culture which is also about finding solutions and implementing countermeasures (controls) where possible?
- Does our risk culture allow for the identification of opportunities (often derived from a risk) in the good and the bad times?
- Are we adding value to our organisation with effective risk processes which act as an early warning system in order to mitigate or minimise potential damage?
“It is not power that corrupts but fear. Fear of losing power corrupts those who wield it and fear of the scourge of power corrupts those who are subject to it…” – Aung San Suu Kyi – Freedom from Fear
Further articles to see include:
https://barnowl.co.za/insights/not-on-my-watch-making-ethical-business-personal/
https://barnowl.co.za/insights/good-corporate-governance-alive-and-kicking/
https://barnowl.co.za/insights/counting-the-cost-of-poor-governance-and-reputational-risk/
https://barnowl.co.za/insights/reputational-risk-make-or-break/
https://barnowl.co.za/event/information-sharing/ (Why King IV is not another layer of regulation but creates add-on value. Presented by Michael Judin, partner in the Johannesburg based law firm, JUDIN COMBRINCK INC). (King IV is copyrighted to The Institute of Directors Southern Africa)