Showing profits to profit society

Perhaps now, more than ever before, businesses in South Africa that want to last need to give more thought to social enterprise, broad-based development and professional ethics.

Some analysts have pointed out that many companies, especially the larger ones, already invest in a range of development projects and social enterprises. They also say many professionals give consideration to business ethics and a swathe of legislation, both old and new, has to be adhered to.

However, other experts say the reality is that there is still not nearly enough action in these areas, given the political and historical context of the country.

As far as ethics goes, we have to look no further than the Competition Commission’s investigations into 70 cases of possible price-fixing or collusion in the construction industry to see that something is still seriously wrong. “Some R92 billion worth of contracts are under scrutiny,” according to Economic Development Minister Ebrahim Patel.

Some companies involved in bread production, steel and cars, to name a few, have also proved to have been involved in collusion over the years.

Universities in South Africa seem to be convinced of the need for debate around issues of ethics, responsible management and social enterprise, holding or hosting seminars and conferences on a regular basis.

Professor Danica Purg, president of IEDC-Bled School of Management and president of Ceeman, an international association of management development institutions, was in Cape Town last week for the Association of African Business Schools Conference on Responsible Management in Africa at UCT’s Graduate School of Business.

She told Cape Argus that around the world companies usually choose the shortest route to achieve their aims, neglecting longer term goals such as a lasting impact on society.

She said as in other countries such as China, there appeared to be a growing gap between the rich and poor in South Africa. “I think business has to give everybody something.”

Purg said big business had huge power and it was important to train younger managers and remind older managers, “to reflect on the future of their society and act responsibly”.

“They have to think of tomorrow and not just today. Ethics involve more than just making decisions at a personal level, they have to bring dilemmas into the open for discussion so the right decisions can be made.”

There is no doubt that, compared with some other regions, business in this country often operates almost as a separate entity, fairly disconnected from the society within which it functions, other than at the level of profit.

Professor Takehiko Ito, associate dean and professor at the Nagoya University of Commerce and Business in Nagoya, Japan, speaking at the University of Stellenbosch Business School’s latest Leader’s Angle session last month, said companies that want to survive for generations need an “entrenched philosophy” that incorporates the society within which they operate.

Ito, who has consulted to Toyota, Microsoft and IBM, said some of the Japanese ideals of ethical practices and long-term sustainability could be adopted by local businesses to increase their chances of survival in the long term. Japan has well over 3 000 companies that have been in operation for more than 200 years.

Ito said a truly sustainable business needed a large social element whereby the public could see tangible benefits from its activities. He said the most significant change Western organisations had to make to adopt this kind of philosophical outlook was to reduce the focus on the shareholder.

He said although the primary goal of every company was to turn a profit, the focus of business leadership should be far broader. “It is about finding a way to show a profit that also benefits society in order to create a renewable cycle of production.

“This way, society has a vested interest in supporting the company, which will in turn lead to healthy profit margins.”

Dr Mamphela Ramphele of Letsema Circle SA is known around the world for her stance on ethical issues. Speaking at the 4th Social Enterprise World Forum earlier this month in Joburg, she said social entrepreneurship was a way of reframing the job creation challenge in the country, where the overall level of unemployment is more than 25 percent.

“We should not be caught up in the definition of a social entrepreneur and its purpose. My view is that the intersection between enterprises that are commercially feasible and enterprises that are socially impactful in South Africa is almost 100 percent.

“As long as one does ethical business, employs a few people and addresses a need that South Africans have, then you are a social enterprise.”

She said social enterprise was particularly relevant in a country that did not yet have a strong SME sector or a strong ecosystem to support entrepreneurs.

South Africa’s total entrepreneurial activity (TEA) is only about a third of the level it should be and only 5.5 percent of the adult population is involved in start-ups or new firms, compared with 14 percent in other developing countries.

Ramphale believes this is largely due to the fact that people’s energy has been sapped by years of subjugation under apartheid, and many have forgotten how to help themselves.

She said making money was not just important in ensuring that entrepreneurs were rewarded, it was also necessary to ensure that it had an enduring social impact.

“Between pure charity and pure financial return, there is an unexplored space with tremendous opportunities for innovation, social impact and lasting change.”

Some academic institutions have taken this idea a step further and try to instill a sense of ethics in future professionals across a range of disciplines.

The University of Cape Town’s Centre for Higher Education Development now offers a programme allowing students to engage with global debates and reflect on issues of citizenship and social justice.

Global Citizenship: Leading for Social Justice programme co-ordinator Dr Janice McMillan said the course broadens the learning experience so that students can acquire knowledge that goes beyond the immediate requirements of their professional degree, or major discipline.

One of the course convenors, Professor Astrid von Kotze, said students looked at questions about development, agendas informing development, what the roles of citizens were or should be, as well as that of Africa in the context of a globalised world.

Thabo Ntsoko, who completed a BSc in geomatics at UCT last year and is a masters candidate, said the programme helped him understand the “dangers of power and inequality between me and those I seek to help due to background, race and gender”.

There are some signs that businesses, including those that do not have a great track record as far as ethics goes, are moving in the right direction.

The Institute of Waste Management of Southern Africa’s Health Care Waste Summit and Expo 2011, will be held in Joburg next month and will focus on matters of ethical behaviour and practice in the field.

President of the institute, Stan Jewaskiewitz, said: “While ethics play a huge role in any form of waste management, the debate around ethics in the medical waste environment is particularly important in order to achieve cohesion, integration and a proper set of standards that are clearly understood and which can be effectively applied.”

He said there could be far-reaching ramifications for not “doing the right thing, at the right time”.

This sentiment could hold for industry across the country. The time is right for a more inclusive economy where ethics and social responsibility are part of the fabric of doing business.

l Ryan Cresswell is the business editor of the Cape Argus.