Corporate SA's message to government: we're in crisis

Mark Lamberti, group CEO of logistics and motor vehicle giant Imperial Holdings and a director of Business Leadership South Africa, (BLSA) says the country is facing disaster but the right leadership could turn it around "quite quickly".

He says: "I think that developments in the next 18 months are going to be definitive for South Africa. We're facing binary situations here. There is no grey. Either do the right thing and turn South Africa around, or we're in for a terrible time."

This is the message communicated by business to government and the ANC in the most "candid and forthright" conversations he has ever heard between them before, he says.

"I have never heard conversations as candid and as forthright as have taken place in the past four weeks at the highest levels of government and of the ruling party. The message is unequivocal, and has been received and understood."

There is a general recognition by business, labour and government "that we're facing a crisis and that, unless we do something definitive around the issues of state capture, corruption, creating confidence and stimulating the economy, we are headed for disaster".

He believes South Africa has the leadership capacity to save the country. "Not the incumbents in government, but there are people in this country who could turn it around quite quickly."

He is more confident than he was two months ago of these people getting into government, because the shock of finance minister Pravin Gordhan's firing by President Jacob Zuma and theratings downgrade has removed any doubt about where South Africa is heading under present leadership.

"The architects of state capture are coming under more and more pressure. More and more people, regardless of ideological persuasion, are recognising that these people are destroying our country and have got to go. There are various forces closing in on these architects."

Lamberti believes it is the job of business leaders to use the voice their businesses give them to influence events.

"We have every right as a business to be outraged by state capture and corruption, every right to say that what is going on at Eskom is absolutely unacceptable ... We have every right to be outraged that school-leavers are illiterate and innumerate. Even people coming to us out of university we have to train from scratch sometimes."

It is not the job of business to choose the president or his cabinet, but it is also not the job of business to allow itself to be the butt of populist rhetoric. "It is our job to bring to the attention of the general public who have been seduced by white monopoly capital-type language that 84% of the people employed in this country are employed by the private sector, that the bulk of the taxes that support 17million people on social grants come from people who work in the private sector or from the taxes those businesses pay."

The notion that business is the enemy and cause of the country's problems is a "myth propagated by forces who just want to get their hands on the country's crown jewels", he says.

"We need to get the people of this country to understand what the social purpose of our businesses is.

"What happens if Imperial isn't there tomorrow morning? How much food doesn't get onto your table? How much fuel doesn't get to the filling stations? What happens if Standard Bank isn't there?"

An awkward fact is that "white monopoly capital-type" rhetoric and the need for expropriation without compensation is supported by the same anti-state-capture forces he and other business leaders are looking to for new political leadership.

Isn't it naive to believe that parties as ideologically divided as the SACP, EFF and DA could form a coherent post-2019 government?

"We at BLSA are interfacing with people to understand if there is common ground between capitalists, communists, workers and business around which we can coalesce.

"One has to distinguish between the politicking and the reality. People say things on public platforms and in a political mode that are not necessarily what they intend to do."

Lamberti, the founder of Massmart, was appointed CEO of Imperial in 2014. Since then he has been restructuring the group, selling underperforming or strategically misaligned local assets, most recently its insurance subsidiary, Regent, and buying businesses in Europe, the UK, Australia and Africa.

The percentage of its revenue from South Africa has fallen to 59% and will continue to decline, he says, while the percentage of its revenue from offshore is increasing.

Of the company's shareholders, 66% are now outside South Africa, meaning it has become in effect an internationally owned company. But Lamberti denies that all this adds up to a strategy of withdrawal from, or at least relying less on, South Africa.

Imperial is the largest player in the logistics and motor vehicle space in South Africa, he says. This, together with an economy of almost zero growth, makes local expansion difficult. "Also, competition authorities would stop us."

These are the factors that have prompted its move outside South Africa, he says. "We're not withdrawing from South Africa at all. We continue to hold or grow our market share in South Africa."

He says there is no pressure from his international shareholders to reduce the group's exposure to South Africa. "What they want to know is, do we have capabilities that can be deployed effectively in their interests elsewhere?" His shareholders are happy "as long as we can show them a cohesive strategy that's going to give growth". Is this likely to be coming from South Africa given its almost zero GDP growth and political uncertainty? "Yes and no," he says.

The company's restructuring will reduce complexity and costs over the next three years and grow profitability. By being more efficient, it could be a more aggressive price competitor and gain market share.

"We don't have any tailwinds from the economy, but good strategy is about creating capabilities that can outperform in good times and bad."

Nevertheless, he does have scenario planners, and they are telling him that the good times are going to be offshore, not in South Africa.

"We see Europe and developed markets picking up. South Africa will be fairly muted."

He believes the "junk story" is not finished, with a further downgrade likely in a month's time that could tip the country into recession. Then even the 0.6% and 0.8% growth rates being talked about for 2018 will come under pressure.

This low growth is "debilitating" for clients and employees, of which Imperial has 40000 in South Africa.

"There's a limit to how long you can stay enthused by focusing inwards."

Does he have a duty to his shareholders to reduce their exposure to this debilitating environment? "My duty is to try and influence events here in a more positive direction."

Business in the past allowed itself to be "co-opted by government, and nothing happened ... Attempts to work with government to try to fix things that were government's responsibility delivered disappointing results," he says.

"We've buried ourselves in work and said let's try and help here, but the underlying political will or organisational will was not there."

He says the attitude of business to government has hardened considerably. "The tone has changed. I've never heard more candid or outspoken views about where we are and whose fault it is. We are speaking with one voice."

In spite of South Africa's junk status, which he says could last for six or seven years - "the record of countries coming out of junk is not a good one" - the right politics could have an immediate positive effect.

"That is what we all hope for."

More immediately, the ball is in the court of ANC MPs. "They have an interesting choice right now," he says, referring to the no-confidence debate. "Back the president and run the risk of the ANC losing power in 2019, or don't back the president and have the ANC retain power."