In business, as in politics, leaders are often faced with a choice between prioritising profit or principle. Should they surrender values in exchange for rapid material (or electoral) gain? Or maintain their principles and integrity and trust that these will deliver better, more sustainable long-term outcomes.
While many politicians and businesspeople will fall into the trap of making a Faustian pact with questionable partners or repressive regimes in search of a quick fix, taking the easy path rarely leads to lasting success. Witness the recent controversies in our energy sector — notably the failed R200bn Karpowership deal — which highlight the value of ethical choices and strong democratic institutions in safeguarding the country’s future.
In March 2021, Karpowership, the South African holding company for the Turkish consortium Karadeniz Holdings, won a 20-year contract to supply electricity to South Africa in the form of gas-guzzling power ships to be moored in the ports of Saldanha, Coega, and Richards Bay. These hideous floating power plants, which operate in eight other African countries, were much more than just an aesthetic eyesore. The controversial contract was dogged by allegations of Karpowership deliberately circumventing environmental regulations, blatantly disregarding the impact on fishing communities and marine life, and accusations of corrupt political deal making. The resulting outcry reached such a fever pitch that just over two weeks ago the minister of electricity and energy, Kgosientsho Ramokgopa, announced that the Karpowership deal was finally dead in the water.
Stopping this grim deal from coming to fruition would never have been possible without the convergent pressure of civil society organisations, environmental groups, and the free press. A 2021 news article about the trail of corruption allegations that has followed this project around the world from port to port revealed that Karadeniz Holdings was “threatened with a $25m (R441m) fine over allegations of commission payments to people with ties to politicians in Lebanon”.
Stopping this grim deal from coming to fruition would never have been possible without the convergent pressure of civil society organisations, environmental groups, and the free press
Similarly, in Pakistan, Karadeniz faced “compelling accusations of paying bribes to clinch a deal worth over half-a-billion dollars”. Groups such as groundWork, the nonprofit environmental justice organisation, and the South Durban Community Environmental Alliance lodged appeals against the Karpowership contract, citing the inadequate environmental impact assessment provided by the company.
Just over a year ago, Karpowership cut off the supply of electricity to Bissau due to the government of Guinea-Bissau’s late payment, forcing hospitals and other essential services to work on emergency power stores for more than a day. Such are the wages of mortgaging one’s country to corrupt foreign interests for a quick fix.
The South African example demonstrates that in strong democracies supported by fair market competition and strong regulatory institutions, as well as vibrant and informed civil society organisations, such deals cannot be struck under cover of darkness. The systems of checks and balances provided by a strong judiciary, a competent political class, an independent media and a strong and open civil society can work together to counteract corruption risks, dodgy supply chains and unfair working conditions.
Unfortunately, the continued threats to democratic governance around the world place these essential checks and balances in jeopardy, leaving societies and economies open to outside manipulation. In resource-rich countries, in particular, citizens are vulnerable to what has been termed the “resource curse” — a poverty paradox wherein an abundance of natural resources in a country correlates with weaker democracy and poor socioeconomic outcomes for its people.
In the era of high demand for critical minerals necessary to power the global transition from high carbon emissions to renewable energy generation, the question of which systems of government will best deliver prosperity to the citizens of countries with rich mineral deposits is more relevant than ever. According to Transparency International, minerals including cobalt, nickel, lithium, and manganese are mined in countries that rank poorly in its 2023 Corruption Perceptions Index.
In 2022, an audit in the Democratic Republic of Congo found that $413m in tax advances and loans had disappeared from the country’s state-owned mining company. The DRC produces 70% of the world’s cobalt and is the world’s third largest producer of copper, yet according to the World Bank “an estimated 73.5% of Congolese people lived on less than $2.15 a day in 2024”.
The connection between democracy, accountability, transparency and strong institutional capacity is well established. According to the Brookings Institute, the “median annual per capita growth rate over the past decade for African countries that rank in the bottom third of the Freedom Index was just 0.53%”. By comparison, the countries in the top two tiers of democratic governance had a median annual per capita growth rate of 1.55%.
It might be tempting to write off the underhanded deal making and political back-scratching of the kind exemplified by Karadeniz and Karpowership as the work of questionable state and non-state organisations lacking legitimacy and gravitas. But we would do well to remember the lessons of the Zondo commission into state capture and the Nugent Commission of Inquiry into Sars: some of the world’s most respected multinational corporations, consulting firms and financial services institutions have been and will continue to be implicated in cynical profiteering under autocratic systems of government that do not prioritise the wellbeing and prosperity of their people.
It is time we reached a consensus that democratic government and strong public institutions are essential elements of private sector best practice — both within and across borders. The evidence overwhelmingly supports this hypothesis. Democracy is good for society and it is good business, too.
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