The current system of capitalism is broken, and for as long as inclusivity is a separate goal to business strategy, nothing is going to change.
“The most damning thing about capitalism is that we’ve placed shareholders above all other stakeholders, which means we meet the needs of shareholders at the expense of society.”
These words were spoken by Trudi Makhaya, the CEO of Makhaya Advisory, at the Trialogue CSI Conference in Bryanston, held on 24 and 25 May 2016. She was delivering a keynote address on “Inclusive Capitalism”, an ideal that companies should aspire to, to align their CSI activities with their business strategy.
She listed a number of factors that, taken together, paint a rather dismal picture of the current state of capitalism in South Africa:
- It is inherited from colonial and apartheid capitalism.
- When we have enjoyed growth, it has been jobless growth – employment has grown slower than the labour force.
- There exists a culture of exclusion and high barriers to entry.
- Corruption and crony capitalism prevents equitable progress.
- There is a lack of support for the entrepreneurial ecosystem – small is not beautiful.
“Of particular concern is the catastrophic rate of youth unemployment, compared to the rest of the world and even to other countries in sub-Saharan Africa,” said Makhaya. “A lot of people have dropped out of the labour market and are discouraged, and if we count those who are not actively seeking work, the unemployment rate drops from the quoted 26% to the much higher rate of 35%.”
She pointed out that this places South Africa far behind mature economies like the United Kingdom, while our costs of doing business are much higher than in China or other parts of the world. “For these reasons, a case can be made for more inclusive capitalism – because if the current system is too exclusionary, it threatens future profits.”
While there are many different definitions of what inclusive capitalism should look like, Makhaya summed it up as “pro-poor growth” – growth that reduces poverty, and “inclusive growth” – growth that is not associated with an increase in inequality. She said that, over the years, this has been approached by various corporate structures, including corporate social responsibility, sustainable development, the triple bottom line, the rise of the social enterprise, and now collaborative capitalism.
However, she pointed out that as long as businesses are focusing on these areas wearing their ‘inclusive hats’ – “let’s think about whether we are being inclusive” – and then approaching their business strategy wearing their ‘business hats’ – “let’s think about whether we are achieving our business objectives” – never the two shall meet.
She said that while a lot has been done to try to achieve a more inclusive economy internationally and in South Africa, most of this is in theory, and a great deal of work must yet be done to convert it into practice.
“We need to hold government and organisations accountable for their stated goals. If they talk about inclusive growth, they have to ensure that this happens.”
She concluded, “Our system of market capitalism wasn’t handed down to us on stone tablets. We wrote the rules, we broke them, we can fix them. It is up to us to ensure that we achieve a more inclusive capitalism.”
Click here to download the presentation.