A message to members: We do not have to accept the state’s harmful ideology

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Two weeks ago, a leaked internal memo from Dis-Chem’s CEO revealed the dangerous extent to which businesses can internalise the state’s race-based ideology. That is a path toward ruin, which is why Sakeliga, with your support, is working towards a different business ethos.

What started as “nudging” and “voluntary” in the Employment Equity Act of the 1990s and the Broad-based Black Economic Empowerment Act of the early 2000s is now becoming established practice. Dis-Chem is only one of countless companies in South Africa who have submitted to this ideology. 

The letter of the law is also developing in a greatly concerning direction. Witness the increasing prevalence of BEE-based business licensing, the employment equity amendment bill with its ministerially prescribed race quotas, or how competition legislation is now all about subjecting mergers and acquisitions to “transformation” conditions.

All of these demand that businesses act as agents of the state and its race-based ideology. It pretends to be for the public welfare, but in fact serves sectional and elite interests at public expense.

Given the extensive state-failure and economic hardships these policies have created, one might have expected reform. Instead, the state is doubling down.

So, how to counter it?

The trouble with facing the state alone

Dis-Chem’s memo shows how difficult it is to resist harmful state ideology and interference on your own. Even successful, publicly traded companies with vast consumer support and substantial legal resources succumb to state pressure – many enthusiastically so!

Consider how Dis-Chem went above and beyond what legislation currently requires of it – an example of the ‘state departmentalisation’ of business. Firstly, the turn-over penalties and JSE-requirements Dis-Chem initially cited should it fail to sufficiently “transform” are likely based on arbitrary targets in some self-authored employment equity plan drawn up within the perverted incentive structure of a politically captured economy. Secondly, even when it backtracked under public pressure, it only did so by distancing itself from the tone of the CEO’s original memo, not its essence. In fact, the board’s follow-up letter implies that its reflection only extended to finding a way to implement the state’s race-based ideology in a less affronting manner, not to questioning its ethos.

At the same time, as businesspeople we understand that Dis-Chem and businesses all over the country have for years faced relentless pressure to prioritise racial ideology above doing business. We may not have folded to that pressure as pitifully as Dis-Chem has, but we have all had to navigate these hostile waters: From who we employ to who we partner with, buy from, and sell to. Even in our charitable giving, our businesses have been pressured to account for the state’s race-based prescriptions. Many of us – perhaps even most of us – have at times made compromises and ‘played the game’, just so that we could get on with doing business without being harassed by the state or compliance-driven private businesses.

But these compromises have come at a great price. Whenever any of us optimise for compliance with the state’s ideology, we do not optimise for value-creation, namely the production of economic goods for the benefit of our fellow man. Done at scale all across the country, this has been an economic disaster. Society has paid a tremendous price.

Today we have to admit: individual attempts to cope with or resist the state’s harmful prescripts have not turned the tide. Efforts suffered from a very common problem, namely that any one business acting alone always tends to be out-powered by the state. In extreme cases, like Dis-Chem, some businesses are even able to suppress all lessons from history and convince themselves that it is not only acceptable, but desirable and worthy of our support, for the state to prescribe race-obsessed economics.

Systemic reform requires co-ordination

While systemic reform in the face of state power is virtually impossible for any one business, doing so as part of a business community is not.

Sakeliga’s mission is to create such a business community: one which not only emboldens businesspeople to more forcefully resist harmful state policy in their own businesses, but also is independent and strong enough to act as a direct check and balance on state power.

Through your membership and support, you are contributing to this growing and independent business community – one with its own ethos.

In this ethos, business is done based on voluntary business considerations, instead of top-down racial prescriptions. In this ethos, we recognise that communities matter and that companies would do well to ensure good relationships with the communities in which they do business. But we reject that the state can determine for companies what their relationship with communities should be. We reject it, especially, when the state insists that all companies and communities should reflect the total image and ideology of the state itself.

An unprecedented legal strategy for business

In the months and years ahead, your support will enable Sakeliga to drive an unprecedented litigation strategy.

Like never before, business in this country will seek the judiciary’s intermediation and relief, in the form of a multitude of mutually reinforcing court cases brought by Sakeliga. One by one, our portfolio of cases will establish the best possible jurisprudence the courts have to offer, wherever the legislature or executive harm businesses’ ability to serve the common good.

The emerging realisation that things like state failure and BEE have something in common is fertile ground for judicial review. Recent, highly critical remarks by Chief Justice Raymond Zondo in his state capture report, on how transformation-based procurement comes at the expense of value-for-money based procurement, is an excellent example.

There will be set-backs along the way, but there are crucial victories to be had and we should seize on all of them.

A strategy that extends beyond litigation

As much as it holds promise, litigation also has its limits. State courts everywhere always have to contend with dominant ideological currents – they are, after all, part of the state. Normally, one should not ask more of the courts than they can be expected to give.

What complicates the matter in South Africa is the accelerating phenomenon of state failure, a process whereby organs of state implode to such an extent that they lose all executive capability. Nominally, they and their rules still exist, but in practice they have ceased to be of consequence. We are already seeing some of this in several local municipalities in South Africa, but there is much more to come. Since law cannot require the impossible, there is no use in imploring the court to order dead entities back to life.

The continued weakening of the state apparatus in coming years will leave vacuums of power and authority, but not for long. Again, as we have seen in failing local municipalities, these vacuums will be filled either by gangsters set on sectional interests or by strong, capable, and respectable organisations serving the common good.

The upside to state failure is that the state’s ability to enforce harmful policies, such as race-based prescriptions to businesses, is likely to decline. The downside is that if we do not out-organise the gangsters, they will end up in charge.

Sakeliga’s strategy therefore extends beyond litigation: to filling the economically relevant vacuums left by state failure with an array of alternative and independent economic institutions. We do not seek to restore order and prosperity by fighting constantly with the state. Rather, we aim to establish structures for commercial order and governance many times more conducive to flourishing business than failing state structures. We believe this requires a network of chambers of commerce, digital economic platforms, dispute resolution, international relations, co-ordinated security, and much more.

In the end, Sakeliga exists because we consider it the deepest duty of businesspeople to create a favourable environment for business in all communities in which we operate. The duty is ours, not the state’s or anyone else’s. We will fulfil it by becoming an ever stronger and more independent business community, with an ethos of creating value, and personal and social flourishing, through business.

Piet le Roux
CEO, Sakeliga