Froneman at Book Launch: Vested Interests Hold Back Vital Reforms
Speech by Neal Froneman at the Rich State, Poor State book launch.
It is a real privilege that Greg has asked me to join him on the launch of his latest book, “Rich State, Poor State”, and to address you this evening. I am deeply honoured and humbled.
What struck me most about the book is the remarkable range of reference sources that Greg has studied, the remarkable range of countries he has visited, and the remarkable group of people from all walks of like he has engaged with to draw powerful conclusions. It is a veritable world tour of developing economies that examines how policies adopted by their governments have resulted in some very different developmental and economic outcomes. The way he has linked the humanity of real people with the economic and political theory brings the numbers and hard statistics to life in a uniquely graphic way.
And out of the deep and comprehensive analysis of historical experience, Greg has successfully distilled key ingredients in the recipe for developing states to secure prosperity rather than continuing to exist in a state of poverty. Greg has taken it well beyond where most authors stop at explaining the past by extracting key learnings that can shape a brighter future. While it is important to understand where we have come from, the most important road is the one that lies ahead, and you can’t navigate it with eyes focused on the rear view mirror.
The overwhelming message that comes across is that enabling governments which create conditions for sustained competitiveness outperform those that follow a directive regulatory approach in terms of economic growth on a GDP per capita basis. And higher levels of economic activity are ultimately the sustainable way of meeting social development needs delivering the quality of life that society is aspiring to.
I would like to echo Greg’s words that say, “The mindset of government has to change from that of simply a regulator to a facilitator.” Although enabler could also be an appropriate word to use. In running our business, I am proud that I am often referred to as the Chief Enabling Officer as an expression of our leadership mantra. Leadership at Sibanye-Stillwater is more about taking barriers out of the way and making it easy for the members of our family, our employees, to perform their tasks. The relationship between government and business should follow these same principles with business liberated to deliver its potential.
There is a lot of literature reflecting that engaged employees working in pursuit of a meaningful purpose deliver superior results to those who are controlled and coerced into performing their work. And so it goes for business that is well prepared to work towards the national interest if given the opportunity to do so under favourable conditions. The recent pledge by over 100 business leaders to support government in addressing critical national challenges of electricity supply, transport and logistics, and crime and corruption is a powerful reflection of the goodwill that exists among business leaders.
Greg sums this up powerfully with his words that say, ”Finding a formula for better governance therefore asks what the appropriate role for the state should be in licensing and regulating business.”
Yet citizens across many of the countries studied appear to place confidence in leaders who manage to convince their supporters that they are protecting their interests with some short-term populist measures and paltry state handouts that may alleviate poverty while failing to create meaningful livelihoods. It really is time that those myths were exploded, and I believe that Rich State, Poor State will go a long way in achieving that goal.
As a supporter of a free market economy philosophy in which commercial incentives stimulate development and growth, I didn’t need much convincing that Greg’s book has serious object lessons for our political leaders on how to build a more prosperous state. Though he brings across in a compelling way the many factors that inhibit meaningful development of the social economy as powerful
elites strive to extract rent through entrenched patronage networks. As Greg notes, “South Africa moved quickly to change the system after the end of apartheid but only to the extent that it replaced one set of elites with another.”
It comes as no surprise that reform to a system that optimally serves the interests of the broader society is replete with challenges due to the powerful vested interests involved. To cite another couple of important quotes from Greg’s conclusions, “The problem in many African countries is that the political and administrative class is completely rotten, acting according to their own entrenched interests.” and “Africa’s patronage networks are designed to reward and, in the process, strengthen any grip on power.” Even in the more democratic countries, the accountability of leadership to serve and deliver on the interests of the people who elected them into power has been diluted.
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One of the key lessons that came across for me is the need to start the reform journey with some tangible and meaningful initiatives. As the benefits start to be seen, momentum will pick up and reform will start to embed into national culture. And we have recently launched that journey with business taking a major lead through the B4SA work with government on electricity, transport and logistics, and crime and corruption. These are the three key areas of state failure that are inhibiting economic competitiveness and the functioning of society. And they are areas where the private sector can make a meaningful impact provided government is prepared to make the space for business to contribute. We are starting to see some signs of progress through regulatory developments that are in the pipeline although there is still substantial resistance from those with vested interest in preserving the status quo under the guise of ideology. Reform is not an easy journey, though, like every marathon, it is one that starts with a single step until the momentum of the race steadily builds.
I hope this book will galvanise the thinking of those who already see the wisdom in political reform, providing powerful arguments through which they can support the cause. Equally important, it may start convincing the undecided who are exposed to empty rhetoric on a regular basis that reform is the right direction to move in. It may even contain powerful enough evidence and arguments to raise questions
among those who are committed to an ideology of strong state-led development, although that may prove challenging as many who belong to that segment are influenced by insincere agendas rather than true support for the ideology that they espouse.
There will no doubt be leaders with limited moral fibre or without a genuine commitment to serve the constituencies whose welfare they shape who dismiss the learnings of Rich State, Poor State as anti-revolutionary heresy. There is a real need to drown them out by exposing their flawed thinking and selfish agendas for what they are. And we should be under no illusions around the magnitude of vested interest that is at stake that is preserved by the current elites. It may be a long journey to realise the vision that Greg’s book articulates for a vibrant developing economy, although the grip on power is slowly and surely becoming more tenuous as society mobilises to hold political leadership accountable.
There is a real need for leaders with the maturity to focus on enduring sources of competitive advantage. While these leaders may not deliver the short-term populist measures that win votes at the next election, they are absolutely necessary to set the scene for a sustainably prosperous economy. This book aims to help these leaders make the difficult decisions and implement them. If it goes some way to convincing undecided voters that this is the brand of leadership they should support, it will play an enormous role in shaping a better future.