South Africa’s unique recent history has left NGOs under strength. But it has also made their relationships with business close and constructive
South Africa’s unique recent history has left NGOs under strength. But it has also made their relationships with business close and constructiveThe 15 years since the demise of apartheid have seen widespread legal reform that has given the country environmental, human rights, workplace safety and labour legislation comparable to that of many European countries. But while companies had been frequently challenged to keep up with it, the government’s enforcement capacity has more recently stagnated.
Nonkululeko Nyembezi-Heita, chief executive of ArcelorMittal, accepts the importance of corporate responsibility and she emphasises the need to integrate it into daily operations and decision-making. But she argues strongly for the need for companies to set measurable targets within their corporate responsibility programmes.
She adds: “It’s also true in South Africa that we have a tendency to overreach in some respects. Air quality targets, for example, are a big challenge for us … We need to be modest in our ambition – there is no sustainability without financial sustainability.”
The NGO sector has been slow to respond, because it too is constrained by a shortage of skills and technical capacity. The result is that public debate on sustainability issues is limited, genuine stakeholder activism rare and shareholder activism almost unknown. As a result, companies have had to set the agenda in areas that, elsewhere, civil society would do.
The demise of apartheid led to a fundamental restructuring of South Africa’s civil society, with many anti-apartheid activists from unions and NGOs joining the government. For a time, the end of “the cause” and the belief that government would forthwith be the principal drive of social development caused a virtual depopulation of the NGO sector.
Foreign donor funds dried up or went directly to the government. But as the failure of the public sector to deliver grew ever more clear – from about 2002-04 – civil society remobilised around one of the Mbeki administration’s greatest failures, the HIV/Aids pandemic.
In a country where more than 10% of the population are infected with HIV, it was an NGO – the Treatment Action Campaign – that eventually forced the government through the courts to comply with its own legislation. Ultimately it was left to business to work with NGOs, often in the face of government opposition, to provide the resources to promote Aids education and condom use.
In the face of initial trade union apathy, company health advisers such as Anglo American’s Dr Brian Brink, gradually brought voluntary counselling and testing programmes into the mainstream, along with the distribution of antiretroviral drugs. But traditional society has remained substantially in denial. Recently President Jacob Zuma’s polygamous and philandering habits have further undermined the credibility of the timid government efforts to contain the pandemic.
Missing the mark
While business moved quietly on the HIV pandemic, it was more vocal and unanimous in speaking out on human rights abuses in Zimbabwe and other African countries at a time when former president Thabo Mbeki sustained the Mugabe regime through an eccentric policy called “quiet diplomacy”. This stood in marked contrast to the clear voices of labour, business and civil society, which found common ground over issues such as Zimbabwe and Aids.
But until recently, business, perhaps sensitive to its associations with the apartheid system, has preferred to work quietly behind the scenes advising on economic policy through thinktanks such as the Centre for Development and Enterprise and Business Leadership SA. Other initiatives such as Business Against Crime have preferred to play a capacity-building and advisory role rather than lead on an issue.
What has developed is myriad small but growing partnerships with small grassroots NGOs, which business resources have supported and sustained. These include many local groups and individuals who have set out to address the shortfalls that government failure has left in their communities.
The result has been, according to research from business consultancy Trialogue, a gradual deepening of the NGO sector and a rebuilding of capacities. Business and NGOs frequently find themselves on the same side of issues. This prompted Business Leadership SA’s chairman, Bobby Godsell, to call for a “more visible and self-confident participation on the part of business” in national economic policy. In late 2009 the failure of key components of government policy and activity was highlighted by the governance crisis crippling the national airline and power utility.
Corruption is a constant concern, which threatens to undermine the country’s developmental progress. Paul Hoffman of the Institute for Accountability in Southern Africa says: “A culture of impunity has taken root in the public sector.”
Privately business leaders agree that the biggest problem is that the ruling party deploys its cronies – irrespective of qualifications – into all levels of the public administration where they consider themselves answerable to the ANC committee that deploys them and not the public, which they frequently treat with disdain.
Hoffman points out that the high court has branded this “illegal and unconstitutional”, but it continues unabated. The result is that the state’s ability to deliver continues to stagnate, leading communities to turn to companies to fill the gap. Stakeholder engagement is becoming less about a company’s environmental performance and more about where business can invest in hospitals, schools and employment.
But business has also not always practised what it preaches on corporate governance and ethics, as a number of successful recent convictions of major listed companies for anti-competitive behaviour in South Africa and abroad demonstrate. This is despite South Africa enjoying worldwide praise for its pioneering corporate governance code, developed by Mervyn King.
Who guards the guards?
Despite his good work, though, King has been frequently accused of what journalist Rob Rose calls practising “do as I say, and not as I do”. King has sat on the board of niche bank Brait for a number of years. In 2005 the bank temporarily established a governance structure not encouraged by his code, to allow for a change in chief executive. “Best practice” was later restored, King stressed.
More significantly King’s moral authority was challenged in 2007 over his relationship with furniture retailer JD Group, where as an independent director for 14 years he held share options and had received a salary. These explicitly clash with the recommendations of his code. Activist investors chose very publicly to abstain from the vote to re-elect King, citing his “inappropriate compensation”.
At the same time JD was embroiled in what Herman le Roux of National Consumer Watch described as “the greatest scam in the retailing industry in South Africa’s history”. It emerged that JD had prevented its customers from buying items on hire purchase contracts. Worse, it had exposed thousands of mainly African customers to interest rate rises they could ill afford. JD has resolved this matter in an out-of-court settlement.
In addition, JD employees have revealed that the company potentially lent recklessly to clients who could not afford the repayments, subsequently illegally serving multiple orders on the defaulters to dock their salaries.
King has consistently refused to comment, but this issue goes to the very heart of what it means to be an independent director. The King code stresses the importance of looking out for the shareholders.
But King argues that independence “is a state of mind” and being a “responsible director means you are acting independently”. Now shareholder activist Theo Botha has added his critical voice. He notes that while delivering the newest, and third, incarnation of his code, King skipped two out of three meetings of the JD audit committee, which he chairs, and three out of five remuneration committee meetings. King, who has not contested that these are two of any company’s most important bodies, overseeing directors’ pay and the company accounts, cited scheduling conflicts with conferences at which he was due to promote his code.
Broadening the range
The National Business Initiative (NBI) is dedicated to dealing with a broader range of what South African business perceives to be its sustainability challenges, such as climate change, human capital and skills and small business development. NBI’s chief executive, André Fourie, says that over the past decade it has become less important how companies spend money and more important how it is earned.
And the NBI has successfully brought peer pressure among its members to develop understanding and policy positions on issues such as skills and education. More challenging, since many members are coal miners, is getting them to address climate change.
But the NBI’s message is getting through. Even construction group Murray & Roberts accepts: “We must seek to conserve rather than to consume. These are important challenges we face.”
The NBI has also been used as a fig leaf by its members. It depends upon its membership fees for its existence, but members such as Anglo Platinum have co-opted senior officials onto a sustainable development advisory board as an “independent stakeholder”. And Sasol included a page-long review of its sustainability practices by Fourie in its most recent sustainability report.
For most of South Africa’s small businesses, sustainability issues are barely on the agenda. Nonetheless there is a tradition – even among small companies – of giving generously to local causes, such as schools and sports events.
Carbon-neutral clothes
There is a small but growing number of small business players that have used their responsible business practices as real competitive advantage in landing some major foreign contracts. Thus Impahla Clothing, set up by William Hughes who lost his farm to Mugabe’s landgrab in neighbouring Zimbabwe, has become South Africa’s first certified carbon-neutral garment manufacturer.
With the help of sportswear multinational Puma, its main client, the Global Reporting Initiative and GTZ, Impahla Clothing underwent a concentrated process of learning. Hughes calls it “a process of formalising Impahla’s understanding of corporate responsibility”.
But the rewards as a strategic partner of Puma are obvious. Impahla has been able to grow its business despite the recession, including the sales and export of its non-branded items, in a sector that has been contracting for years.
Other smaller niche players such as Spier Wine Estate have used responsible business practices either as a competitive advantage or a means to retain skills. These have included a conversion to organic methods or development of progressive employment practices.
Along the way Spier, Impahla and others have discovered the value of detailed transparent sustainable development reporting that allows them to brand themselves to new stakeholders and customers. And the trend is catching on.
Michael Rea, a sustainability consultant who assists NGOs such as Cotlands, which cares for Aids orphans, says a growing number of organisations have seen the value of using GRI guidelines to communicate more effectively with existing and potential funders and members.
For now the number adopting GRI remains relatively small, but it is leaders such as these – reaping the benefits of more sustainable practice – that will bring along other companies.
Taking companies at their word: North West Eco Forum
South Africa is the largest producer of platinum group metals, which are used in numerous applications including catalytic converters. North West Eco Forum (NWEF) is an environmental NGO based in the platinum mining heartland around Rustenburg, where the smelters and refineries of the platinum producers are the region’s major sources of air pollution.
In its engagement with the platinum miners NWEF, which is headed by Chris de Bruyn, has proved to be almost unique in that it has been able to draw on groups of specialist technical skills when taking on the big companies.
This gives the group the ability to assess better the public documents, such as emission permit applications, put forward for public comment and consultation. De Bruyn also has frequently shamed the companies at public meetings when they have failed to live up to their public commitments on pollution or water usage.
Although de Bruyn has tended to be constructive in his engagement, he has resorted to using the media when “the gap between company commitments and reality on the ground just got too wide”. None of the mining executives like having their polluting smelter stacks on the cover of a newspaper.
The result, as many environmental and sustainable development managers in the platinum sector privately admit, has been to achieve a step-change among the industry majors to clean up their act.
Steve Bullock, sustainable development manager at Anglo Platinum, says the relationship at first was rather confrontational but is now extremely constructive. It undoubtedly benefits the people in and around Rustenburg and the company, he says.
Potential problems are identified by NWEF early in the planning phase for new operations and activities. “This enables Anglo Platinum to better plan and mitigate impacts in the area before they arise,” Bullock says.