Only shareholders can fully fight the scourge of graft
Just Share will provide a public resource for responsible investors, and act as a platform and catalyst for shareholder activism, writes Tracey Davies
This year, South Africans have been mesmerised by the complicity of giants of the private sector in corruption and state capture.
The disclosures about long-established and ostensibly reputable companies such as KPMG, McKinsey, Bell Pottinger and SAP have exposed a world of double-dealing and brazen dishonesty that has shocked many people. The assumption, it seems, had been that such global icons of capitalism existed primarily as a force for societal good.
However, while the corporate state capture disclosures may be extreme, these situations are far from the only ones in which the private sector operating in SA undermines efforts to transform society for the better.
The vast inequality that characterises SA underpins the country’s social and economic instability, and provides fertile ground for corruption. But many of SA’s biggest companies appear to operate in a universe entirely divorced from the realities of society, and act in ways worsening this inequality, rather than use their power and influence to reduce it.
NGOs working to improve social and environmental justice have repeatedly shown how severe the discrepancies are between what many of the JSE’s listed companies tell their shareholders, and the real effects of their operations on the lives of South Africans. However, this has seldom resulted in any action by those who invest in these companies.
The NGO Black Sash had been sounding warning bells about Net1/Cash Paymaster Services for years before the scandal "broke" in 2017; only when shareholders connected the corporate scandal with its government enablers was any action taken.
If the institutional investors who eventually brought pressure to bear on Net1’s board had genuinely been motivated by concern for the lives of the millions of people whom the company had been exploiting for years, they would have acted long before the precipitation of a national crisis by Social Development Minister Bathabile Dlamini.
As early as 2007 – five years before the Marikana massacre — the not-for-profit Bench Marks Foundation was releasing evidence-based research to show how working and living conditions on the platinum belt posed a risk to social stability. This research was ignored.
Companies, like governments, need strong regulation to ensure that self-interest does not result in the pursuit of personal gain at the expense of societal and environmental wellbeing.
The government has failed us in regulating the corporate sector — the huge social and environmental damage wrought by the mining industry is but one example of the consequences of this failure. But the investment industry has also failed us, by failing to exercise the significant powers it wields to rein in corporate opportunism, and ensure that the private sector comprises good corporate citizens.
Not one top shareholder of SA’s biggest emitter of greenhouse gases had a single question for the board at the AGM
"Responsible investing" is a term deployed freely by the investment industry, and the media is quick to amplify the significance of the smallest flicker of shareholder activism. But the extent to which the many commitments made by South African investors to be "responsible" have made any difference on the ground appears to be minimal.
SA is globally renowned for its corporate governance codes and responsible investment initiatives, but they have not resulted in any robust exercise of shareholder power. With a few exceptions, investors only engage with company management on environmental, social and governance issues "behind closed doors" — if they do so at all. Meaningful, public investor activism is almost non-existent.
Sasol’s annual general meeting (AGM) on November 17 was a prime example. Sasol’s executives earn tens of millions of rand a year, from operations that have enormous environmental and social impacts. Sasol is, after Eskom, SA’s biggest emitter of greenhouse gases.
And yet, not one of the company’s top shareholders – which comprise most of SA’s big institutional investors – had a single question for the board at the AGM.
This is why a group of civil society organisations have launched Just Share, a non-profit shareholder activism and responsible investment organisation that will promote the use of investor power for a fairer SA.
South African shareholders should be publicly interrogating the boards of listed companies on a vast array of issues that are crucial to the country’s chances of reducing inequality and avoiding the catastrophic consequences of climate change. These issues include: the failure of the mining industry to adhere to its legal obligations to improve the well-being of host communities; the widespread violation of environmental laws; the financing of new coal-fired power stations by big banks when the construction will ensure SA will be unable to meet its climate change obligations under the Paris Agreement; and the vast gulf between executive remuneration and what we are asked to believe is indeed a "living wage".
Just Share will provide a public resource for responsible investors, and act as a platform and catalyst for shareholder activism. Armchair outrage at government iniquity and ineptitude will not help to end the stupendous inequality, and all of its associated injustices, which characterises our society. It is time for South African shareholders to step up.
• Davies is an attorney and programme head: corporate accountability and transparency at the Centre for Environmental Rights — one of the organisations involved in establishing Just Share.