South African businesses and foreign investors are not outside the obligations to advance the socio-economic transformation promise of the progressive South African Constitution. Business has a vested interest in an inclusive, stable and transformed economy and society as an indispensable anchor for sustainable value creation. The economy should be based on a common and shared societal vision of achieving a decent standard of life for all, which is key to productivity and competitiveness.
Over emphasis on short-term profits means long-term risk and disaster
It will be a strategic mistake on the part of business and foreign investors to focus solely on the short-term profit motive. Business has to do more to achieve a just and prosperous society for all. A short-term outlook fails to factor in risk and disaster in the long term, i.e. short-term profit motives should not trump universal human decency for all. If growth and prosperity are not linked to transformative and redistributive economic measures, with the support of business, then business will have lit an unstoppable fire of massive social upheavals that will surely uproot and upturn the order of things. As we saw in the aftermath of the July 2021 riots, the ongoing ruinous social instability will ultimately result in enormous costs to businesses, their employees and society as a whole.
There is already existing precedence where business contributes to a broader goal beyond the profit motive: corporate and other taxes, the statutory skills levy that generates more than R13 billion for skills development, voluntary business contributions to the Solidarity Fund during the COVID-19 pandemic, the voluntary media development and diversity levy that finances the Media Development Diversity Agency, corporate social investment (CSI) and other contributions.
The Constitution also grants the government significant powers to regulate business conduct to achieve constitutional objectives. And in terms of the Bill of Rights, businesses cannot act in a way that violates fundamental human rights. It is in the enlightened interest of business to meaningfully embrace and actively promote social justice and human rights for all.
Most of what business contributes is obligatory, stemming from legislation, including CSI. Despite all of these contributions from business, we still could not prevent the July 2021 riots or other manifestations of the deepening socio-economic crises engulfing our young democracy. Perhaps what business is currently contributing is inadequate to prevent risk and disaster.
It should be plain to any business strategist that what we have is unequal, unstable and unsustainable and that business can do much more to contribute to the constitutional promise of socio-economic transformation. This would be different from self-interested business players acting solely in their interests, such as we see in the recent collaboration between Business for South Africa (B4SA) and the government, where the main motive is less for the public good but the enhancement of maximum profit for business.
Without a drastic change in concretising business’s contribution to the socio-economic promise of the Constitution, the political elite and business will basically have a hot potato in their hands: pent-up, explosive frustrations and despair over mass impoverishment and growing inequality.
A low-wage regime chokes the economy
From a business perspective, even the very “market friendly” policies that business insists on require socio-political stability. After all, the socio-political instability in the dying years of apartheid is what forced business to initiate dialogue with the ANC. But there is another side to this: the behaviour and conduct of business can even undermine the very credibility required for socio-political stability. The current role of B4SA in holding the government’s hand and directing the affairs of the state (through the various task teams, work streams and other initiatives) risks credibility and, consequently, socio-political stability.
For some sections of business, the much-punted and hegemonic business-friendly policies include measures such as weakening labour rights, labour market flexibility, keeping wage increases to a minimum, fiscal and monetary austerity, cuts in public spending, including a reduction in the public sector wage bill, privatisation, liberalised trade, a flexible exchange rate, tax reductions for corporates and high-income earners, deregulation of business activities, continued liberalisation of capital controls, and minimising environmental protections. These policies will continue to shift income away from workers and poor people into the pockets of shareholders.
We have already seen the wage share of national income decline from close to 58% in 1993 to just above 50% in 2010. Such a shift reduces effective demand in the economy. Through this shift, the net effect is to have big business gaining control over an ever larger part of the national income at the expense of wages, which reach at least 4 million households compared to share dividends reaching only a few thousand shareholders. Without the demand for consumer goods that increases with better wages, the economy is structurally disabled from equitable and shared growth: if we maintain our low-wage regime, who will buy what is produced by the economy? It is thanks to the decisions of business that thirty years after the advent of democracy, South Africa has still not overcome the low-wage regime inherited from apartheid and colonialism.
The same logic applies to the limited view sections of business have when it comes to the National Health Insurance Act. Of course, the Act may have shortcomings. But it is about achieving equity in the distribution of financial, human and technical resources for health. This will help achieve a healthy nation. A growing and functional economy requires a healthy workforce. In business’s own interests, a working, effective, quality, and decommodified NHI makes business sense.
In addition to this low-wage regime, with the sustained weakening of the state as a result of austerity, underfunding and privatisation, business actors have moved in to take over the state in a big way without any effective engagement by the state itself or by organised workers, let alone organised civil society or democratic representatives of communities. It is surely not good for governance and accountability when one sector of society has such a wide playing room within and through the state without being effectively engaged, without feeling uncomfortable, without feeling awkward through the organised power of workers and unemployed people. Business should not celebrate that it has such a free hand to reform the state in its own interest when those who are supposed to be its protagonists are significantly displaced as social actors who can engage in substantive and meaningful social dialogue. To celebrate and take advantage of this reality is short-sighted.
The punted business-friendly policies will not resolve the bigger social crises of unemployment, inequality and squalor facing South African society. Instead, they will give us the next version of the July 2021 riots. And we will see more and more xenophobic pogroms, criminalisation of business activities through protection mafias and unaccountable small business forums scrambling for their piece of the pie. Business does not need or want any of these obvious and guaranteed outcomes of the very policies it promotes.
The foregoing underlines what business and investors should be concerned with – how to contribute to a sustainable and long-term equitable transformation of the economy towards universal human development and environmental sustainability. It is not wise to continue with what appear to be business-friendly policies, and yet they are choking the economy. Inclusivity and empowerment of the majority must be the guiding principles.
The constitutional vision of a good society
Business proposals for inclusive growth in its post-Covid recovery plan is an example of business getting closer to contribution to the constitutional vision of a good society. The foundation for economic policies and even business commitments to society is the Constitution. However, business must still make good on the commitments therein.
For long, business and investors have not defined their interests and actions in terms of the social and economic transformation mandate of the Constitution. The Constitution enjoins the government to ensure a basic level of decent livelihoods for all. What we should think about first is to build an inclusive, equitable and sustainable society that ensures the “well-being of all”. Then, such a vision would inform economic decisions and policies, including those taken and advanced by business.
The end of formal apartheid and this very Constitution freed South African businesses and investors from the shame and structural limits of apartheid. The huge efforts of poor and working-class people to defeat apartheid enabled Naspers, South African Breweries, Anglo American, Discover, Investec, Old Mutual and other big businesses to become legitimate global business players without the shame of apartheid. This restored profitability, which was increasingly constrained by a structurally limited apartheid economy. For this strategic benefit from the end of formal apartheid, South African businesses and investors have not contributed their part of the 1994 bargain through sufficient, job-creating, redistributive and transformative investment and other measures for the wider social good. Business can and must do better and more to promote social solidarity.
Whilst the sun still shines somewhat, big business and the ultra-wealthy in our country should seriously ask themselves what redistributive measures it should voluntarily undertake in order to advance the constitutional promise of human well-being. It is significant in this regard that two of the new parties that emerged in the 2024 election and which were reported to have business support put forward proposals for a modest but meaningful wealth tax. Proposals like this need to be supported and taken forward as part of meaningful, substantive and transformative contributions to build a society of universal human well-being and the broader social good in line with the socio-economic transformation vision of the Constitution. This also means the transformation and restructuring of the economy, which is informed by the vision of universal well-being. In its own long-term interests, it is time for South African business to accept and embrace the socio-economic transformation required by the Constitution. The track record in this regard shows a business sector that sees itself above and outside the Constitution. How are ordinary poor and working people expected to embrace the Constitution when they see business as outside it?
As Sipho Pityana (a well-established businessman produced by the struggle against apartheid) aptly put it at the 2010 launch of the Council for the Advancement of the South African Constitution (CASAC): “The grinding poverty and alienation of the poor, the sense of hopelessness of those relying on social security or who fall outside of its protective net, must give us a sense of urgency to redress these inhumane conditions that afflict so many of our people. Poverty is an assault on the dignity of about 70 percent of our fellow citizens who are condemned to it…the pursuit of the dreams of the poor and the unemployed is a mandate from the supreme law of the land: the constitution… The business community also has to do more to demonstrate commitment to the future envisaged by our constitution… Business needs to emerge with programmes that are driven less by a desire to enhance profit and more by a commitment to claim its responsible corporate citizenship and the realisation of the vision of our constitution.”
In the same speech, Pityana quoted Professor Sandra Liebenberg, who had written that “Poverty is not only inconsistent with the foundational constitutional values of human dignity, freedom and equality, it is also a matter of profound concern for the nature and quality of democracy”. But South African business has fallen short. Now is the time for South African business to rise to the occasion and earnestly contribute to the broader social good in line with the redistributive and transformative vision of the South African Constitution.
Mazibuko Kanyiso Jara is the executive director of the Zabalaza Pathways Institute.
This post was originally published on here
