After SA’s miraculous escape from its descent into corruption-induced chaos, we are once again “open for business”, as politicians and captains of industry like to say at gatherings such as Davos.
But what kind of business are they talking about? Will our corporate sector, especially the mining and financial industries, revert to behind-closed-doors lobbying and self-interested short-termism? Or will it view this second chance as an opportunity to become better corporate citizens?
BlackRock CEO Larry Fink wrote in his 2018 letter to CEOs about the increasing expectations across the globe for companies to be more than just creators of financial value: “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”
Much of our corporate sector is not taking these expectations seriously. SA faces catastrophic environmental threats, with devastating social implications: climate change, water scarcity, lethal air pollution and large-scale destruction of our natural heritage. Unfortunately President Cyril Ramaphosa did not mention climate change once in his state of the nation address.
This does not diminish the threat posed by these problems, but if they are not a priority for the government, there is a real danger that the private sector will continue to ignore them.
The mining industry continues to laud itself as our best hope for the future, without taking responsibility for the environmental devastation it has always left in its wake.
But when it comes to environmental and social issues, the mining industry is not the only corporate player in SA that is hopelessly behind the times.
Most of our big banks are still considering funding new privately owned coal-fired power plants, such as the proposed Thabametsi and Khanyisa plants in Limpopo and Mpumalanga. Two climate change impact assessments for the Thabametsi plant — one commissioned by the developer and one by the Department of Environmental Affairs — found that the climate change effects of the project will be severe.
Thabametsi will be one of the most greenhouse gas emission-intensive plants on Earth, and will deplete water resources in an already water-scarce region for at least 40 years.
But none of the proposed financiers appear to have asked any questions about climate change when the deal came to their desks. They claim they are obliged to rely on the outdated and inaccurate integrated resource plan for electricity 2010. They ignore the global move away from coal and the clear evidence that SA does not need any new coal-fired power stations. Not a single one of SA’s financial institutions has made any public commitment to end financing for new coal mining or new coal-fired power.
Similarly, asset managers have shown very little progress in responsible investment on environmental and social issues, despite a slew of codes and commitments to integrate environmental, social and governance factors into their investment decisions.
Almost every investment portfolio in SA will include shares in fossil fuel companies such as Sasol and Exxaro, but there is no public evidence that portfolio managers are asking hard questions about these companies’ contribution to climate change, or taking seriously the dangerously uncertain long-term prospects of fossil fuel companies, and the risk this poses to pension funds.
Instead, the business sector is full of admiration. The National Business Initiative praises Sasol and Exxaro for being “climate change leaders”.
In an apparently unironic move, the Department of Environmental Affairs and the National Business Initiative hosted an exhibition at COP23 in Paris in November 2017, showcasing “the world-class climate change mitigation and adaptation efforts undertaken by South African business”. The exhibition’s co-sponsors were Exxaro, Sasol and Eskom.
Asset managers usually blame asset owners, especially pension fund trustees, for failing to give them a proper mandate on these issues, and the accusation is not unfounded. While pension funds around the world are divesting from coal and insisting on better disclosure of environmental and social impacts, there appear to be no such moves afoot in SA.
If the terms of our country’s renewal are made as part of an elite pact between business and government, we will once again fail to achieve the just and equal society we claim to want.
Business leaders must show the courage that many in civil society, and some in the government, have shown — courage to take the first step, to speak out, to demand better of companies that disregard people and the environment, to say no to fossil fuels, and to look further than the next set of quarterly results.