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Investec CEO Stephen Koseff has been honoured by his alumni, Wits University, with an Honorary Doctorate in Commerce. He is one of four South Africans who have received honorary doctorates in the second cluster of Wits University’s graduations for 2017. The others include musician Hugh Masekela, historian Professor Shula Marks andTelkom chairman Jabu Mabuza. In his honorary doctorate speech, Koseff outlines the importance of rooting out corruptionand ineptitude in South Africa while partnering more with business to boost economic growth. Koseff also delivered a talk to the ANC policy conference this week. One hopes this message will get through to those at the top of the country’s political leadership.
Vice Principal Professor Tawana Kupe, deputy vice chancellors, Member of the Wits Senior Executive Team, President of Convocation, the SRC President, academics parents and Graduates, it’s a great honour for me to accept this doctorate. I think it’s something that one doesn’t feel one really worked for and I have one of my best friends here, who is a medical doctor, and I know he worked hard to get his doctorate, but I just did my MBA and that’s where I stopped studying. So, I suppose I worked in community and business. Before I say a few words and give you a little bit of a speech, I’d like to thank my wife, Cheryl, my children and grandchildren, who unfortunately weren’t able to be with us today. I have my brother and my sister-in-law, one of my colleagues, Glynn Burger here and his wife, Beryl with me and one of my best friends, Dr Frankel and his wife, Melanie. I thank them for coming to attend with me.
Again, I’d also like to congratulate all the graduates. I looked at the list and some of you guys were very clever. Really, well done and I didn’t realise we had so many people who could come up with so many good ideas and write so many research reports. I hope they’re well used and good luck to you guys for your future careers. What I’m going to talk about is a little bit of a talk I gave at the ANC Economic Policy Conference, a bit varied from exactly what I said there, but there is a big topic about transformation in our society. So, I’ve entitled it “Growth and Transformation” because without growth you’ll never get transformation and I think the Professor also mentioned that in his opening address. I think we, once again, as a society find ourselves at a critical junction.
While we may dream of a better future for all South Africans and for the country we aspire to be, despite democratic freedom and social progress achieved since 1994, economically, we remain still one of the most unequal societies in the world; unemployment rate, 28%. If you go on the broad definition of 36% and then if you look at youth, 65%. This is a ticking time bomb that we urgently need to diffuse. I think, simultaneously again, the Professor mentioned this; we have to root out the scourge of corruption and inefficiency.
People sense a hopelessness and unfairness of the situation and the frustration of broken promises are boiling over, as shown in the continuous service delivery protests around our country. While many people feel despondent as we connect the dots of leaked emails, more evidence of corruption, attacks on our critical democracy, our democratic institutions, and the constitution, I think we cannot continue to watch our country falter. This is not government’s problem alone, this is also a societal issue, and one that business, which I would represent, has a very important role in addressing. It’s very important for us as a society to find common ground and put our differences aside. We have a lot of work to do and no time to waste. We see business as very much part of the solution.
The economy cannot grow without a strong private sector. In fact, if you look at employment in South Africa, there are 15.5-million people employed, just under 13-million are employed by the private sector including ourselves. You cannot grow without pro-business economic policies. I worry when I hear some players who make business the scapegoat for all the ills of our society, particularly slogans like “white monopoly, capital, fake news, alternate narratives”. They’re actually used as a ruse and a distraction to enable rent-seeking and looting. Business is not the enemy, it is the key to creating jobs and enabling transformation. It is for this reason that business, labour and government must partner to create the right kind of growth and achieve the desired outcomes.
Business Unity South Africa outlined where we need to get to, which is to create the deracialised, vibrant, diverse, and globally, I emphasise the word, “globally” competitive economy. It enables all South Africans to have the opportunity to participate in the economy and earn a sustainable livelihood. Some will call this inclusive growth, others prefer the term, “radical economic transformation”. It’s not a term that I really like, but I’ve attempted to redefine it because this means different things to different people. Ultimately, the task is for us to ensure accelerated inclusive growth, one that supports transformation and job creation. That’s what I believe is needed to uplift the majority of our people out of poverty. I think, as a society we need to build on our successes.
We have a strong and vibrant democracy, a free media, disciplined macroeconomic policy and independent judiciary and Central Bank (I hope after yesterday’s statement), which has done an admirable job in keeping inflation in check. We don’t have to look far to other societies where the Central Bank is being used as a money printing machine and inflation is reached a thousand percent, two thousand percent where it then debases the economy, pensions and everything and society ultimately collapses. These institutions need to be protected. Our country’s immune system is crucial in fighting the self-replicating virus of corruption, poor governance, and ineptitude.
It was not long ago that South Africa created a new middle class. The number of African black people with jobs increased from 5-million people to 12-million people from 1994 to 2015. The number of black professionals grew 176%, black managers 191%. As a result, many more people were able to participate in better lives and better schooling for their children. While as a society, we still have far too many poor people, at least we are starting to be able to aspire for more. By 2014, 70% of the university population was black African; another 12% was coloured and Indian. That’s a long way from where I was at this university where the whole university was just white. There has been progress and the current negative narrative should not be allowed to spoil the progress we have achieved thus far.
At the same time, we’re also facing what we call the Fourth Industrial Revolutions where innovations, robotics, and artificial intelligence will fundamentally change the workplace. We must equip our young people to compete in the changing global economy to avoid compound economic exclusion well into the future. I can give you an example. We own a share in Ethiopia in a brewery. We backed an entrepreneur and it’s a massive brewery. There are six people with white coats that work in this brewery and they’re all engineers. There are no labourers because everything is automated, but there are thousands of down screen jobs created. So, there may not create jobs in manufacturing as you’re used to, but you create thousands of peripheral jobs servicing the products that come out of those manufacturing entities.What is vitally important for us as a society is education, skills development, and competitiveness. We need to address structured impediments that cap our growth levels to grow at between 0% and 3% is never going to help us as a society. In fact, a country like India, for 50 years, grew between 0% and 4% and then never uplifted their people from poverty. From 1991 they changed their economic philosophy and as you can see, it is a country that now grows at over 8%, fastest growth rate in the world, lifting hundreds of millions of people from poverty. So, it is very important for us to actually find the right methodology that enables our society to grow.
Therefore, this clearly is not only a worry for mining and manufacturing workers, professionals are also being affected and certainly many professions will be aided and artificial intelligence will compete with some of the more laborious tasks that they currently deal with. I think there are a number of key service industries where South Africa can really make a difference: tourism, education, education tourism (the second biggest export in Australia is education tourism), healthcare, education healthcare, head offices for Africa. There are 5-million coding jobs coming out of India to Africa. South Africa needs to get its fair share of those jobs, but for that we need to train our people in the right skills.
As part of the CEO initiative, which is an initiative originally led by what we call the Presidential Task Team and the deputy president and , now the current minister of finance, we spend a significant amount of time thinking about these issues and working on initiatives together with National Treasury, the Department of Trade and Industry and Labour. The work’s team I coach is called the “Youth Employment Service” or the “Yes Programme”. We’ll soon launch a pilot for that programme. We aim to provide internships over a three-year period to a million youngsters who’ve never worked and let’s hope that we can get that moving.
I think this is just the start. If you read Jim Collins’ book, “Good to Great”, he uses the analogy of getting a flywheel turning. It’s very hard to start to push and that way we’re stuck at the moment, in South Africa, but once it’s moving, it starts creating its own momentum and moves faster and faster until it no longer needs any kind of push and you get breakthrough. This momentum ultimately will work in our favour as a society, as the flywheel becomes unstoppable. This is the momentum that South Africa needs to drive to create the growth in jobs. So, in fact, talk a little bit about myself for a moment because you did get a citation. I’m from a small town, Benoni, an industrial town. I joined Investec, there were eight people.
One of my colleagues with me, who has joined us, was the tenth employee and I think that when we started Investec, we didn’t realise that we could build Investec into what it is today. It was an implemental process; it’s taken 37 years, not 35 years if you work out the maths. I had to correct you on that one, but today we build a global specialist bank and asset manager, last year we made R11bn of profit before tax. When we started, our first year was R200 000 and we managed R2.5tn of third party funds. Of that R2.5tn, R1.7tn is managed for people who have nothing to do with South Africa, outside of South Africa. So, it is a truly global firm. We didn’t build it overnight, it took time, and I think that’s a message to people. If you want to build a business, if you want to build sustainable businesses, they take time.
Adrian Gore built Discovery, it didn’t take him a week; it took 20 years, Brian Joffe, Bidvest, 25 years, Stephen Saad on Aspen Pharmaceuticals. The former two were graduates of this university, the other two not, but you know, how long did he take? I can remember backing him in about 1998, so almost 20 years. It takes time to build success; it’s not a one-day game. I think much of our success in building came from the fact that there was an enabling environment, a supportive environment and funnily enough, I did a research of Portland Bank Failure in 1981. South African banks were ranked as, I think second safest in the world in the last World Economic Forum Global Competitors Report. I think you always have many obstacles on the way. You have to focus very much on your culture and your values and you do things in community.
I’ve lived through five financial crises, so you also need to build resilience and I think the Professor also said that you also need to have know-how and build know-how. Do things step-by-step; don’t take on too much leverage. These are things you can do. I think, for our society, one thing we need to avoid is being populous. I think there are challenges with capitalism. Capitalism has failed people, but there is no better alternative. We just need to make Capitalism a lot more people friendly and a lot more user friendly. When I did my MBA, the goal of the firm was to maximise profits. Now the goal of the firm is to meet the needs of all of the stakeholders, shareholders being one of them.
So, it’s no longer to maximise it, it’s to provide a decent return to shareholders but at the same time you need to look after other stakeholders, which will always be community, your own people and society at large. Therefore, we believe populace policies are politically expedient in the short-term. They have disastrous consequences in the long-term. Ricardo Hausmann, Professor Economist from Harvard, who was a Venezuelan cabinet minister, recently visited South Africa. He warned us not to make the same mistakes that they made in Venezuela.
Today Venezuela is a basket case. Inflation is 2000%. I don’t know what its unemployment rate is, but they have no goods in the shops, they have no medical supplies, skilled people are leaving Venezuela in droves. There are doctors cleaning toilets in Miami so that they can get out of Venezuela and that’s the only kind of work they can get, so we have to avoid this at all costs. Redistribution at the expense of growth always results in benefiting a few at the expense of majority and it is poor people who end up suffering the most from an ever-shrinking economy. South Africa can and must do a lot better than this. In his recent book, Brian Canter talks about getting South Africa growing, I think you should all try and read it. He points to numerous global studies which have found that countries with more economic freedom, exhibit high investment, economic growth and income.
You can look at Chile, Singapore, Hong Kong, South Korea, and even Mauritius, not so far from us, and see what they’ve achieved economically and how they’ve uplifted people from poverty and become developed countries. He’s not the only one talking about South Africa’s current model, which concentrates economic power in the earnings of the State. That is susceptible to corruption and allows for inefficiencies and poor service. I’ll just give you an example, compare Telkom, which was a state company (the State still own 40%). I think yesterday you awarded Jabu Mabuza with a doctorate. He’s the Chairman at Telkom. Telkom grew its profits quite strongly in the last year. He doesn’t rely on the State for any funding, not like SAA, which just had to have a bailout and is CEO and Chairman are both black South Africans and they are doing a brilliant job.
Because they have been governed by corporate boards responsible to shareholders and not a minister, you can see the difference in outcome compared to other state-owned enterprises. I think turning around investor confidence is critical to South Africa to return to prosperity. Our economy is completely integrated with the global economy and increasingly reliant on foreign capital. Foreign investors have substantial interest in South African business and also own more than 35% of South African Rand denominated debt. If they pull out or if the local currency is downgraded again, we’ll see massive outflows of funds. I think in light of this current malaise, there’s an urgent need for a new social fact that transcends ideologies and backgrounds.
We need to rebuild trust. Let’s not fall prey to the negative narratives that are designed to divert attention from the real issues. Instead, let’s rather reframe the challenges facing our country within the lens of shared values. We must unite under a common goal and tackle the problem with innovative thinking and bold and dramatic leadership. We must agree simultaneously to grow and transform our economy. We need a vision well beyond 2017 and 2019 which allows us to innovate and build new skills to meet current and future challenges. The National Development Plan did provide a framework, but we are very slow in implementing it. Together under the banner of common purpose there are no limits to what South Africa can achieve. It’s only by doing this that we can live up to the dreams initially sketched by Madiba to achieve the impossible.
As you’ve stated, the advent of South Africa’s democracy, it’s always impossible until it’s done. When I looked at the names, the type of graduates that we are, that you all are and the amount of graduates, you have a significant role to play in building the future of our society. I urge you to understand that populism is never going to work for us. Education and developing skills is going to work for us. You have built skills, you have developed skills, and you can help our society make a massive difference. Congratulations again and good luck in your futures, thank you.