'The private sector in SA is often underrated," said one CEO, commenting on the remarkable story of the Solidarity Fund, a uniquely South African partnership set up by business in March as a rapid response initiative to support the government in dealing with the Covid crisis. The R3.1bn fund, which this week provided an update on its first six months, has come to the government's rescue by donating the $19.2m (about R320m) down payment needed for SA to join the global Covax initiative and ensure vaccines for 10% of the population. This isn't the first time it's come to SA's rescue. Crucially, in the early stages of the crisis, it went out globally to source and procure hundreds of millions of rands worth of personal protective equipment, ventilators and testing kits.
If the Solidarity Fund demonstrates how much power SA's private sector has for good, events this week reminded us how much potential it has for harm, to the country and to itself.
Doing business
ethically is
not just about
avoiding
corruption
First, global management consultancy McKinsey said it would pay back R650m it earned on improper contracts with Transnet and SAA involving Gupta-linked Regiments Capital - adding to the R1bn it repaid Eskom two years ago relating to contracts involving Gupta-linked Trillian. Then, on Friday, Switzerland-based multinational ABB agreed to pay Eskom back R1.56bn on a 2015 contract at Kusile, which was entered into improperly and corruptly.
The list of companies implicated in improper procurement contracts at Eskom in the state capture era is a long one and includes names such as Deloitte, which has already paid back the money, and PwC, which Eskom is still pursuing. But the roll call of big-name companies that allowed themselves to be embroiled in enabling state capture is even longer: Bain, KPMG, Gartner, SAP, Hogan Lovells, and more. In some cases it was corruption, pure and simple. But in most, the contracts were not technically corrupt or criminal. They served, however, to aid and abet corruption and capture.
And they reflected a pattern of doing business in the Zuma years in which some companies that should have known better turned a blind eye to the environment they were operating in, the clients they were serving, and the wrong they were facilitating, by default or by design. It was an environment in which doing business in dodgy ways, with people suspected or known to be dodgy, was permitted, even normal.
In that environment, companies should have been even more careful about who they did business with and to what end. Yet, in their quest for contracts they didn't apply the "smell test", they weren't rigorous about doing business responsibly in the way they should have been. It was a failure of the moral compass. And while companies can pay back the money, and some have paid a steep price in terms of reputation and lost clients, it's almost impossible to compensate SA for the harm done to its public institutions and trust in its private sector.
Nor have those risks in the environment gone away, even if we now have a leadership committed to combating corruption. Doing business ethically is not just about avoiding corruption: it's also about being responsible in relation to employees, suppliers and customers. As former JSE CEO Nicky Newton-King urges, investors and customers also need to hold companies accountable.
Many of the companies embroiled in enabling state capture have taken a long, hard look at their processes and made changes. So lessons of the state capture era have been learnt. But if business is to continue to be the private sector of the Solidarity Fund, not that on the stand at the Zondo or Nugent commissions, we need to hold onto those lessons.
• Joffe is contributing editor at Business Times.
