There are perhaps a number of things we can learn from the Marikana massacre. One of them is that we need substantial ethical improvements in South African business. Not just in South Africa, worldwide business needs to go on a campaign of breaking bad habits.
The Marikana massacre in August 2012 had the country in an uproar and resulted in a media frenzy. No doubts the events that took place during the Marikana strikes were shocking over and above the gunning down of more than 30 miners. The mining strikes that have plagued the industry since 2012 up until this year, 2014, were not only accompanied by shocking acts of violence, they have had a substantial negative impact on the South African economy. An article which appeared in the Voice of America estimated that the platinum strikes cost the platinum industry 9.2 billion Rand in lost revenue in the first few months of 2014 alone, this amount was taken in March of 2014, and approximately 16 billion Rand in 2012.
New light has now been shed on the cause of these costly strikes. It is now apparent that suspect lending practices were a contributing factor that led to the platinum strikes of 2012 to 2014. In an article which appeared in allAfrica, Saliem Fakir notes that attention should not only be focused on the Marikana massacre but should also be focused on these contributing factors which led to the strike. High debt led to higher wage demands, as wages simply could not keep up. This made workers desperate and provided the will to embark on the strike actions.
Saliem Fakir points out that the entire platinum belt has become the seen of a lending rush where hundreds of money-lenders are taking full advantage of the economic desperation of the miners and poorly enforced rules where they carry little liability for the irresponsible lending. The practice of providing unsecured loans, most often at the cap interest rate of 32.1% (or even higher in the case of illegal loan-sharks), to high-risk borrowers is rampant. In addition to the interest paid on the loan, borrowers have to pay for initiation fees and other service costs. This makes these unsecured loans one of the most expensive forms of borrowing on the market.
A disconcerting fact is that the practice of providing unsecured loans is rampant throughout some of the countries most reputable banks. African Bank Investments Limited (Abil), Capitec who like Abil have a huge unsecured loan portfolio, and even the “untouchable” banks, have all been downgraded by the ratings agency.
Currently there are approximately 21.7 million credit active consumers and each year the level of unsecured debt users is growing. The number of credit users which have impaired records, or accounts that are not in order, is about 9 million, of which 2.4 million are on Abil’s R60 billion loan book.
These disturbing facts about the unethical and suspect practices of South African money-lenders should not be taken lightly. They influence the developmental path and economic progress of all South Africans. High debt is not only bad for the economy but it is also bad for the entire social fabric of our country. This together with general social discontent over wages and inequality will give rise to more friction of the likes the platinum industry has suffered.
It is clear then that there needs to be a general shift towards more ethical business practice. The current state of South African money-lending is only one of the manifestations of a disturbing disregard for morality that has seemingly become the norm in business. Whilst www.whistleblowing.co.za has found that there has been a noticeable decline in unethical business practices in the private sector in South Africa, the behavior of South African money-lenders illustrates that we still have a long way to go.
This is an issue we have to take very seriously. We need to be completely committed to breaking bad habits that have crept into the operations of many if not most businesses. It seems that in order to make the required strides we actually require a paradigm shift. In order to make the ethical progress that is so desperately needed in our economy we need to change the way we understand business.
This change will involve jettisoning the view that businesses exist for the sole purpose of enriching the shareholder. If we view businesses as merely a tool for enriching the share-holder, it will be next to impossible to make ethical practice a norm. The question is a question of priorities. If enriching the shareholder is the priority of our businesses then ethical practice will always be a side issue, just a way of appearing to have conscience. The bottom line will always be profits, ethical practice will be a thin veneer painted over the top of organisations to make them look pretty.
We need to replace our understanding of businesses as a tool for enriching the shareholder with an understanding of businesses as the provider of essential services. Businesses should not be understood as money making machines. They should be understood as organisation which exist to service the needs of their customers. On either understanding businesses can be profitable. Only on the first understanding is profit a priority and only on the second understanding can businesses truly be ethical. Again it is a question of priorities. An organisation which exists to service the needs of its customers will prioritize the needs of its customers. This will make them fundamentally ethical. Only then will ethical business practices be more than a paint job to make businesses look prettier. By prioritizing the needs of the customer the organisation will become fundamentally ethical. Ethical business practice will form part of the fabric of the organisation.
This paradigm shift of which I am speaking is in fact a shift in intent. We need our businesses to mutate their intent to enrich the shareholder into the intent to provide an excellent service to their customers. When the intent of an organisation becomes benevolent in this sense we will have genuinely ethical business practices. And as we have seen there is a dire need to get ethical business practices to form the fabric of our economy.