December 12, 2016

The real importance of transformation

South Africa cannot afford to forsake or lose sight of the transformation project, Leago Group’s Chairman, Thabo Owen Mokwena, told Karen Kühlcke in an exclusive interview.

The Director of the Centre for Public Entities (CPE) and owner of Leago Group, Thabo Owen Mokwena, is passionate about supporting economic transformation. He believes that transformation has been happening, but warns that we need to keep up the good work, especially in these trying economic times, if we want to create a sustainable economy for future generations.
In this issue he shares his sentiments, concerns and views on transformation in an exclusive interview with Service magazine.
Where is South Africa in terms of economic transformation and what should be at the core of it?
South Africa has achieved remarkable success since becoming a democracy in 1994. The provision of basic services such as water, electricity and housing has been accelerated at an astonishing pace. The basket of social grants distributed to the needy is far reaching. Furthermore, democratic and constitutional doctrines of our political system are hailed as some of the best. Today however, the economy is at the crossroads, plagued by a triple threat—weak economic growth, high unemployment and increasing inequality. The outlook for the economy has darkened over the past five years, raising concerns about our ability to adequately address the socio-economic needs and support economic development in future. Unfortunately, the current economic and political conundrum has a direct bearing on transformation. The pillars of transformation are largely economic upliftment, democratic governance, social harmony and services that meet basic human needs. Wealth distribution seems to be an elusive target and the new entrants of the black middle class and a few superrich black magnates are not an adequate answer to a society of high income inequality, unemployment and poverty. This is similar to what happened in George Orwell’s allegorical Animal Farm; they violated and changed the seven commandments and were ultimately left with one commandment: “All animals are equal, but some are more equal than others”. Clearly there are serious competing priorities pressurising fiscal allocations. The ever-growing social grants, education needs, infrastructure development and provision for basic services all require financing from the same pot. We collect R1.2-trillion in taxes, however this seems to be inadequate to address the to be inadequate to address the competing budgetary priorities. With the economy under-performing, there are pressures on the sources of revenue for the country. A more innovative balancing act is required to address the fiscal gap. Under these circumstances we default into borrowing and raising the public debt and this is a serious concern for me. Implicit in high levels of public debt is the understanding that the current generation is living at the expense of the young and of future generations. At the heart of the debate around development and economic growth lies a bigger a challenge regarding funding economic infrastructure in South Africa. The e-tolls saga is an example of challenges resulting from ill-conceived policy decisions on funding economic infrastructure. Any further delays in the policy paradigm and its subsequent funding mechanism will plunge the country into an era of prolonged social unrest. Consequently this will likely trigger a crisis that might invite opportunistic parasites. We therefore cannot afford to vacillate and by default, create a policy crisis. Given the constraints in the national fiscus, the user-pay principle creeps in and unfortunately this will hurt the poor. This principle is a ticking time bomb for South Africa. Paying tolls is another burden for the poor, who are already struggling to make ends meet. In Gauteng, the Gautrain is subsidised, but who is benefiting from that? Do the people of Soweto, Diepsloot and Soshanguve benefit? It is the already well-off who utilise this service. There is no doubt that significant interventions are required to generate higher growth, create jobs and address the challenges of poverty, inequality and unemployment. The anemic growth rate will not alleviate the pressing economic challenges. The private sector also has a role to play. It is important that funding for infrastructure development is distributed in a manner that does not promote further inequality, but stimulates economic opportunities.

What do you think would happen if South Africa’s transformation agenda was to be derailed?
Abandoning the transformation project will have dire consequences for our country and our society. We are already witnessing the cracks in social harmony with incidents of racism cropping up from time to time. The ever-increasing unemployment rate, especially youth unemployment, is a sustainability threat to our society. The current demands for free education is the best example of the results of transformation forsaken. Free education is not a new demand, it dates back to the 1955 freedom charter. Education is the fundamental economic and social game-changer. Government must develop an implementation plan to meet the demand. The private sector is among the biggest beneficiaries of an educated workforce, therefore it must also increase its contribution towards free education. Middle- and upper-income parents should not renege their responsibilities, but should continue to pay the fees. Even the United States of America has a serious challenge around funding higher education. Young graduates are burdened with debts emanating from student loans. Equitable wealth distribution and bridging the income inequality is crucial for South Africa. Inequality and poverty breeds disorder in any society. South Africa cannot afford to forsake or lose sight of the transformation project. The unpalatable spirit of self-gratification is creeping in, with people looking to enrich themselves rather than transform communities. If this trend is not reversed it will pose unprecedented challenges and significantly derail transformation priorities.
What is the role of state owned entities?
State owned-entities (SOEs) around the world were created to deliver a type of service to citizens at a reasonable price. They provide a balance in the economy in the sense that they cater for services that cannot be supplied by the private sector. For example, if we look at Eskom; before 1994 it has been able to electrify over 95% of South African households.
However, if this service was under the control of private providers only the rich would have been enjoying the right to electricity and, when looking at a country like South Africa were inequality is so dominant, this would have been catastrophic, especially for the poor majority. Service delivery is important, however, it is important to note who is responsible for that particular service and what their motive is in providing such a service. South Africa is a water-scarce country. Imagine if water services were in the hands of private suppliers. The Government has been at work making sure that people have access to basic human needs, especially people in rural areas such as Limpopo, Eastern Cape and KwaZulu- Natal. However, there is still room for improvement in terms of how SOEs could provide efficient services to the masses, especially when looking at how some of the SOEs are being managed. The major state owned enterprises can also play a significant role through their infrastructure capital expenditure programmes by ameliorating this economic impasse. SOEs are expected to spend over R800 billion in the medium-term. The magnitude of this capital infrastructure expenditure by major SOEs is unprecedented and should therefore
be a catalyst for economic growth and job creation. It is a significant capital injection to support a re-industrialisation programme.

Where does our local government system fit in?
Our local government system is very new. It only came into existence in 2000. This was a complete overhaul of more 1 500 different municipalities across the country. The restructuring and transformation of local government resulted in a system of developmental local government. The key pillars of development local government are democracy and accountability, provision of basic services and local economic development. It is important that we don’t judge ourselves too harshly and that we allow time for the system to mature. It will take a bit longer to realise the benefits of this developmental local government.

Can you tell us more about the Leago Group?
Leago is a versatile company, which is emerging as an industrial giant. The company focuses on investments, engineering, lifestyles products and strategy advisory services. It is also positioning itself in the capital market space. The crown jewel of Leago is its reservoir of talent.
Can you give us some background on your career prior to becoming Chairman of Leago?
My growth and progression in life has been shaped by the family and communities within which I grew up. I have lived, experienced and strongly believe that, if you are successful, somebody along the line gave you help—meaning there was a great teacher somewhere in your life. I can count many people like Father Smangaliso Mkhatswa, our parish priest
at the time, who mentored and supported me and infused an everlasting inspiration of success earned through hard work. He exposed us to academia, intellectualism, scholarly and true wisdom. It was common knowledge that our church was also a political centre—a political school. It was never oblivious to the socio-economic and political conditions of its people. Of course, my family continues to play a catalytic role in shaping my outlook.

What makes a great recipe for success in terms of rising professionally?
Success is a product of the courage of conviction, tenacity, and a resolve to breaking new ground. You will not be successful if you are content with the conventional or seduced by the obvious. Success is also a very subjective matter. I recently watched a documentary on Bloomberg titled, “Big problems, big thinkers”. The likes of Warren Buffet, the Dalai Lama, Michael Bloomberg, economists and former presidents were interviewed and asked about their success. Most of them cited the simple things in life, such as a happy family, morals, ethics and integrity, love and selfless service for a greater good. They all claimed to shun wealth, fame and greed. This does not mean that people must not be wealthy, however the means by which you get there must be beyond reproach. For me, these are torch-bearers of how to be successful and what to do with success.
If you could leave a lasting legacy, what would you like it to be?
It would be to inspire our youth to always learn and strive for skills and knowledge.

What is the best advice you ever got on both a professional and personal level?
I was once fortunate enough to have a five minute chat with Mandela on the 12 February 1990, the day after he was released. I was in Standard 9 (Grade 11) at the time and he said to me: “Please go to school and come back to me when you finish your university degree.” I was motivated to study even harder. I could have not have failed a great man like Mandela. The then Deputy-President Phumzile Mlambo-Nqcuka also advised me to enhance my intrinsic value through education and knowledge: “Wealth you can lose, positions will come and go but knowledge is something that no one can take away from you, that’s your intrinsic value,” she said.
What is the best advice you have ever given?
I always encourage the youth to study and acquire knowledge. It will empower them with the mental agility to conquer and excel in a global village. I sincerely believe that knowledge and wisdom are supreme tools needed to navigate life as it unfolds. They empower you to make conscious and appropriate decisions in life. Armed with wisdom and knowledge you have a greater degree of presence of mind at most, if not all, times.

What was the best investment you have ever made?
I once made an investment in aviation, supplying the local market with helicopters that offered specialised offshore capabilities. The venture failed, but the experience gained, the thrill and the innovation was immeasurable.
What is your biggest no-no in business?
There is no place in business for brazen, unethical conduct.

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