Welcome to our first missive for the new year, and indeed, the new decade! Happy New year to you all. We hope 2020 is a productive and prosperous one for you personally, and for our country as a whole. We so desperately need this year to herald the start of a return to ethical leadership – from both our government and our corporates.
The Center for Ethical Leadership in Seattle describes ethical leadership as “knowing your core values and having the courage to live them in all parts of your life in service of the common good.” It’s an elegant definition, and one which we all need to embody in everything we do. Because the consequences for not doing so are severe.
Despite great strides forward in exposing corruption, fraud and other unethical practices at both government and corporate levels, we as South Africans are still significantly challenged by the impact of poor leadership, bad choices and blatant greed.
We only have to look at the recent reintroduction of loadshedding to remind us that mismanagement and corruption don’t just affect the company concerned, but actually have the potential to bring an entire country to its knees.
Bearing The Load Of Loadshedding
The impact of regular loadshedding goes far deeper than the inconvenience of domestic households being without power for a couple of hours. Businesses across the country are reeling. We at JGL Forensics have recently relocated our offices to an area in Pretoria less affected by loadshedding than our previous premises, as the economic and productivity impact on our business was really starting to bite. Sadly, thousands of companies are not as fortunate as we and, unable to move, are forced to watch their very livelihoods come under threat as they struggle to weather this particularly brutal storm.
Experts estimate Stage 2 loadshedding costs our economy around R1 billion a day. Take it to Stage 4, and this jumps to about R4 billion every 24 hours. That’s more than the budget the government allocates to our national police service for an entire year!
Some more pessimistic (others might say “realistic”) analysts say the actual costs are even higher, pegging them at around R2.4 trillion at the end of 2019. That’s half South Africa’s annual GDP.
However you look at it, it’s catastrophic for our economy, which wasn’t exactly thriving before loadshedding was thrown into the mix.
This year MUST surely be the one that turns the situation around. Andre de Ruyter, Eskom’s new CEO appointed by President Ramaphosa towards the end of last year, is now at the helm. It’s a dead cert that no one envies the mammoth task resting on his shoulders – fixing the national power deficit and restructuring Eskom’s debts. But all eyes – and hopes – are pinned firmly on him, and we wait expectantly for signs of positive change.
Is South Africa Still An Attractive Investment?
South Africa undoubtedly has many assets to attract investors. It is comparatively (as far as Africa as a whole is concerned) politically stable. It has abundant natural resources, an important demography, and a seemingly transparent legal system. However, structural issues – unreliable electricity supply and logistical challenges – coupled with high levels of corruption, high crime rates and ambiguous government policies, are naturally worrying to potential investors.
The report released by SARS in December 2019 painted a rather depressing picture. Many businesses have shut up shop – affected by loadshedding and crime in particular. Many others have simply cut their losses and moved overseas. Attracting new business is absolutely essential for the recovery of our economy, yet the costs of doing so are high. The threat of a possible junk status in February is not helping the situation, and also has a negative impact on inflation, just for good measure.
So Where To Now?
South Africa has so much potential and so much to offer. We simply have no choice but to get our act together! We have to attract new investment, create jobs and stimulate our economic growth.
Our core message for 2020 – to government and the private sector – is to be more proactive in preventing these, and other challenges. We have to stop ignoring the very real pressures that individuals and companies are under, and the possible – indeed likely – impact of this on their behaviour and on the country.
Our middle class in particular is under exceptional pressure, and this is never a good thing. People under pressure don’t always think rationally. They start thinking about things they would, in different circumstances, never consider. This collective mindset then becomes a breeding ground for unethical, dishonest behaviour.
Being proactive is cheaper than being reactive. We have to be alert and put preventative measures in place. If it helps, let’s think of it as a Vitality Health Check. Knowing where the potential problems are means you’re prepared for their effect and can take the appropriate preventative action. It’s all about being aware of the risks and doing everything in our power to mitigate them.
We can no longer stand by and wait for someone else, for the mythical “they,” to do something. It’s time to take our country back one ethical practice at a time! Let’s encourage, support and protect the whistleblowers, or be one ourselves. Let’s lead by example, and encourage employees to immediately intercede if they notice managers violating company codes of conduct. And let’s make sure managers are held to the same standards as employees. There is so much we can do – let this be the year we do it!
Here’s hoping for 20/20 vision in 2020!
JGL Forensic Services is a multidisciplinary team of experienced forensic accounting and investigation professionals. We strongly believe in the rule of law and the scientific method as it applies to forensic accounting and investigation. Talk to us in confidence, and let’s work together to prevent corporate corruption and fraud.