The Directors Event - 2021

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REIMAGINING SOUTH AFRICA’S FUTURE The seventh annual Directors Event, billed the largest boardroom meeting in SA, was held on 11 June 2021 in partnership with BCX and in association with the Institute of Directors in South Africa. The event is an opportunity for leaders in the private and public sectors to come together to debate, brainstorm and recommend solutions to steer the country forward.

The recurring themes that emanated during the meeting and subsequent panel discussions were the need for accountable, transparent and bold leadership as the country plots a new course for its future; a call for better collaboration and co-operation between the public and private sectors; and the need for reform in re-imagining the future for SA. Welcoming delegates to the Director’s Event, Sunday Times editor S’thembiso Msomi pointed out that change has become our new normal and that to survive, requires us to adapt while thriving requires that we start to think differently.

He said a new course for the country needs to be plotted, one that leaves no one behind. The pandemic has highlighted the fragile links between the formal and informal sectors.

Whether it’s maintaining food security and sustainability, supporting tourism and hospitality, making it easier for international trade and foreign investment, ensuring a reliable and efficient energy grid, re-thinking education and skills development in a 4IR world or re-thinking and restructuring our over-stretched healthcare system, Msomi called for the public and private sectors to actively – and creatively – engage.

“Despite SA’s numerous challenges, we have a great deal to be optimistic about,” he said, adding that while our diversity brings challenges it also fuels innovation.

Jonas Bogoshi, CEO of BCX – the headline partner of the event – pointed out that the effects of the pandemic will continue to be felt for some time to come in SA. He was concerned, he said, about our readiness for the next pandemic, our ability to provide sufficient levels of healthcare, high levels of unemployment, and the impact that corruption has had on our collective psyche and moral fibre.

Tsakani Maluleke, the auditor-general (AG) of South Africa, during the delivery of the Chairman’s Report.

The pandemic has brought into sharp focus the impact of alarming inequality and growing unemployment against a backdrop of weak capabilities on the part of government.

“Our shared experiences over the past 14 months have highlighted the urgency with which we must work collectively and cohesively to design and implement solutions that are both effective and sustainable,” she urged, adding that at a minimum, those trusted with leadership positons meet their responsibilities.

The only way to inspire confidence, strengthen our democracy and deliver lasting value and benefits to citizens is for leaders to be accountable, responsible and practice effective oversight, she said.

To provide oversight is the primary role of the office of the AG. As the supreme audit institution of SA it is mandated by the constitution to strengthen the country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, in the process building public confidence.

The AG’s annual audit reports focus on three key areas: the reliable and credible performance information for predetermined objectives; fair representation and the absence of significant misstatements in financial statements; and compliance with key laws and regulations that relate to financial performance management.

Audit reports typically flag three kinds of problems in government spending, explained Maluleke: unauthorised expenditure which is classified as spending that goes over budget or was not used for its intended purpose; irregular expenditure which is spending that was incurred with

According to the 2021 Edelman Trust Barometer there is widespread mistrust of societal leaders. Business, however, is emerging as the only area where people still have trust and which still has competence and credibility. Increased trust in business leaders such as CEOs comes with certain expectations, said Bogoshi, adding that business leaders need to step in where government has struggled to solve societal problems. The call for CEOs to no longer just be accountable to shareholders but to society can no longer be ignored. For the sake of SA’s future their response can’t be timid or half-hearted but instead needs to be swift and determined.

CHAIRPERSON’S REPORT FOR 2020 There is an urgent need to strengthen SA’s democracy and build confidence. To achieve this requires that leaders are both conscious and conscientious in re-imagining their role to ensure that they are accountable and transparent, said

Tsakani Maluleke, the auditor-general (AG) of South Africa

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complying with the applicable legislation; and fruitless and wasteful expenditure which is classified as pointless spending that could have been avoided.

After several years of reporting no meaningful improvements in audit outcomes, ongoing irregular expenditure and lamenting the lack of consequence management, the powers of the AG were strengthened in 2019 when President Ramaphosa signed into law amendments to the Public Audit Act which enabled the AG to not only report on audit outcomes, but also to enforce accountability. In other words, explained Maluleke, the AG’s office can now step in when accounting officers from public institutions fail to enforce accountability.

This means that in addition to providing corrective recommendations aimed at addressing wrongdoing that significantly impacts on public resources and service delivery, the AG can take remedial action which is legally binding should the recommendation be ignored. It also has the power to issue a certificate of debt in the names of those charged with overseeing public resources should the remedial action not be complied with and can refer wrongdoing found during an audit for investigation by relevant public bodies such as the public protector, the Hawks, NPA and the police.

In the last cycle of audit reports, the AG identified 75 material irregularities valued at losses of R6.9 billion on aggregate. Citizens, said Maluleke, are impatient that oversight has been sacrificed for so long which is manifesting in a growing level of dissatisfaction in the form of service delivery protests. The AG’s office, she said, was determined not to abandon its responsibilities and would continue to focus on oversight to ensure elected office bearers were held accountable where public finances are concerned.

KEYNOTE ADDRESS

The Economist Intelligence Unit, he revealed, has forecasted that the recent and sharp rise in inflation in the US is short term in nature and that low interest rates will remain a feature over the near-to-medium term. “Nonetheless, the inflation outlook is an area to keep an eye on,” said Warren.

Pointing out that Sub-Saharan Africa will have the weakest recovery amongst the sub regions of the global economy, Warren said that faster and sustainable economic recovery will not be assured until - and unless - we tackle the virus with variants underscoring the reality that no-one is safe until we all are.

“No-one has a crystal ball: as leaders we deal with uncertainty, complexity, volatility, we consult stakeholders, distil risks and opportunities, develop scenarios, apply probabilities where appropriate and make calls with varying degrees of conviction and confidence,” he said, adding that the pandemic has reinforced the importance of doing the basics right, as well as addressing the hard things consistently.

Warren called on leaders to reflect on what is urgent or likely to be within their domains of influence and responsibility.

“What is the writing on your wall indicating; what should you be doing in the spaces you occupy and are charged with improving to address the most important issues at hand or with the potential to materialise?”

His message was that leaders should never take themselves too seriously – humility is a virtue, after all – but to take what they do seriously. “Let’s hold ourselves to a higher standard and expect in a constructive fashion no less from others including suppliers, staff, politicians and so on.”

In the expectation of further curved balls, he said what matters is not just what we do during a crisis but what we do before it. “I would argue the pre-crisis actions matter most,” he concluded.

Herman Warren, The Economist Corporate Network’s director for Africa, delivered the keynote address during which he said the Covid-19 pandemic shone a light on deficiencies and inequalities both within and across nations. In too many instances, those paying the heaviest price are the least capacitated to shoulder the burden, including hourly workers, those without the option to work remotely and those without access to adequate healthcare.

Middle income countries such as SA - home to 75% of the world’s population, 62% of the poor and just 33% of global GDP – have been particularly hard hit by the pandemic, he pointed out. In SA poor governance and decision making has resulted in a lack of adequate water and sanitation, insufficient power generation, lack of access to affordable ICT infrastructure and services, high unemployment and limited fiscal space to respond with the same largesse as wealthier nations.

The US, for example, has passed trillions of dollars in aid packages. Between March 2020 and March 2021 it passed $5 trillion in aid packages, equal to around 25% of GDP with a further $4 trillion proposed by the Biden administration as part of an effort to build back better. “These injections are raising concerns about inflation and the potential need to increase interest rates, which could scupper fragile recoveries and unsettle the global financial system,” said Warren.

Herman Warren, The Economist Corporate Network’s director for Africa

HOW TO DRIVE A HEALTHY ECONOMY DURING A PANDEMIC The Covid-19 pandemic and subsequent lockdown had a very negative impact on SA’s GDP. Certainly the lived experience for most South Africans doesn’t reflect much optimism, pointed out Bruce Whitfield, the moderator of the first panel discussion which focused on how to re-invigorate the economy amidst an ongoing pandemic.

Tourism was one of the worst hit sectors and continues to struggle without international visitors or conferences.

Despite the resumption of domestic travel, accommodation occupancy rates remain low which is not sustainable, revealed CEO of the Tourism Business Council, Tshifhiwa Tshivhengwa.

Tourism makes a valuable contribution to the economy with every 12 tourists to SA creating one job opportunity.

There is currently much work being done to get government to understand the role of tourism and sorting out legacy issues like e-visas. “For the tourism sector to grow requires the holistic support of government in order to remove constraints,” said Tshivhengwa.

The industry was encouraged by the announcement that 51% of South African Airways had been sold to a private consortium given the airlines role in providing international visitor’s access to SA. The agricultural sector, on the other hand, weathered the pandemic significantly more successfully. Certainly, said Wandile Sihlobo, chief economist at the Agricultural Business Chamber of South Africa, the sector is in a stronger position than it was five years ago thanks to favourable weather conditions and investments which have played to its advantage. However, although the sector expects further growth this year it won’t be an economic panacea. In the same way that the tourism sector requires a holistic response from government, so too does the agricultural sector, he said, adding that SA needs to decide on a national focus and concentrate on areas which have potential such as agro processing and expanding agricultural land space.

The agricultural sector continues to face challenges around inclusion, said Sihlobo, revealing that blended finance

instruments will accelerate inclusive growth. He said we need to be focusing attention on how much land is available on government’s balance sheet and ensuring that this land is not made available on a lease basis given that this removes the incentive to make land improvements. “This is not the road to economic growth,” he said.

Other glimmers of hope have come from president Ramaphosa’s announcement that businesses are now permitted to generate and even sell-on electricity up to 100MW without a licence. In the face of a national grid which is collapsing this announcement is very welcome and will make a difference within the next 18 months, said Zwelakhe Gila, an energy specialist and co-founder of Chommie Co. However, it’s unfortunate that we had to hit the bottom before we made any progress on energy reform, he added. Load shedding is costing the economy around R500 million per stage and is halving our total production capabilities which is why the Independent Power Producer Programme and the ability for businesses to self-generate power is so important given that it will lessen the country’s reliance on Eskom.

The pandemic has accelerated the rate of change and taught important lessons. We need to use these lessons to ignite change and encourage a new way of doing things, said Professor Mills Soko, professor in International Business & Strategy at Wits Business School.

In particular it has highlighted the importance of leadership, he said, adding that we need to be pragmatic in terms of how we deal with problems and find new ways of doing things.

Although the changing structure of the economy has created new job opportunities, Soko questioned whether new entrants to the jobs market were equipped with the necessary skills to take advantage of these opportunities.

Pointing out that SA needs employment at scale, he said public-private partnerships and a local manufacturing capability will be crucial to SA’s economic recovery.

“We’ve witnessed a seismic change in the past 15 months.

Now we need a fundamental shift in policy thinking and bold and visionary leadership that can make big decisions and help us define the new normal,” he concluded.

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A SKILLS AND UNEMPLOYMENT CRISIS – CAN TECH TURN OUR FORTUNES AROUND?

Conceding that education systems have a responsibility to supply the world of work with relevant skills, he said the introduction of coding and robotics was government’s way of acknowledging the changing nature of work.

The second panel discussion, moderated by Nozipho Tshabalala, focused on SA’s skills and unemployment crisis and the extent to which technology can potentially turn our fortunes around.

He agreed with Bernstein that SA should import teaching skills where there are shortages – but only for a defined period of time. Government has prioritised budget allocations towards education and is busy reviewing mechanisms to ensure schools are better resourced. “There is no silver bullet and it won’t be a quick fix, but government is seriously committed to addressing the gaps,” he said.

The Covid-19 pandemic has rapidly accelerated the pace of digital transformation in SA. The dramatic shift into the online space has widened the disparity between the haves and the have-nots, noted Tshabalala, adding that Stats SA data

However, as Jansen was quick to point out, a government that can’t fix 2000 pit latrine toilets in the Eastern Cape is not going to be able to provide the platform to develop 4IR skills for learners. “Let’s be honest with each other: a school that still has pit latrines can’t even begin to think of 4IR,” said Jansen.

Public private partnerships will be required to provide these schools with basic infrastructure. He said SA was already importing teaching skills. “The best maths and science teachers in Soweto and Thoyandou, for example, are from Zimbabwe and India. Why do we only want them here for a defined period of time? Let’s keep them here and open our borders to get the best teachers here. The reality is that we’re not going to be able to rebuild South African schools in a short period of time. However, building a strong economy relies on a strong skills base.”

reveals that more than a third of those between the ages of 15 and 24 are not in education, training or employment of any sort and more than 20 million South Africans under the age of 35 are unemployed. Does a transition to a tech-driven future provide an opportunity?

SA has a fairly sophisticated economy on the one hand but only a small percentage of the population can access this sophisticated economy, pointed out Professor Jonathan Jansen, distinguished professor of Education at Stellenbosch University. “When lockdown hit only about 20% of schools could transition fairly seamlessly to online. The rest didn’t. Our research shows enormous learning losses have occurred.”

The elephant in the room, said Jansen, was how to create affordable access to quality education for the majority of learners because it is only once we have achieved that, that we will be able to transform the base of our economy through full participation in the opportunities that technology offers.

SA needs to fundamentally transform its economy, reduce inequality and become more efficient. Fixing a flawed basic education system and making it more relevant to the world of work is a key component of this transformation, said Ann Bernstein, CEO of the Centre for Development and Enterprise South Africa. We need to think fundamentally about reforming basic education to create a better performing system.

Technology, she argued, is not the solution so we should stop looking for short-cuts. If necessary we need to import the necessary teaching skills.

Seliki Tlhabane, chief director for MST and Curriculum Enhancement at the Department of Basic Education said the three basic skills – reading, writing and arithmetic – had been expanded to include life orientation but learners also need digital skills in order to be able to function effectively in society.

Riaz Moola, CEO of HyperionDev, has been closely involved in supporting universities to transition to online instruction.

The company is also assisting universities to launch costeffective and more accessible short courses.

Working and studying remotely has meant that people have become somewhat isolated. For younger people, it means that they need to be re-taught how to connect and collaborate with others and how to network, pointed out Vikela Rankin, the founder of Value Ed and Elevate. “Their sense of selfworth is not being heightened and they have higher levels of anxiety.”

Agreeing that digital offers a huge potential, he cautioned that access and scale will be a critical ingredient. “Rather than a brilliant teacher teaching 20 learners, they should be teaching 20 000 learners,” he said.

A technology driven world has the potential to create more jobs if we focus on creating the right skills, maintained Hope Lukoto, the chief human resource officer at BCX. The fourth industrial revolution (4IR) is happening regardless of SA’s readiness. Technology is becoming disruptive with digital permeating everything we do. A McKinsey study predicts that by 2030 as many of 14% of the global workforce will have to change jobs or acquire new skills.

“Given SA’s high rate of unemployment we can’t afford not to focus on technology. We have to get comfortable with technology and get fluent in it. At the same we need to start thinking differently about careers and jobs and focus more on outputs. Data science, for example can be applied throughout the value chain. Automation will not displace skills but will require different skills such as design thinking, innovation, curiosity, critical thinking and problem solving,” said Lukoto.

BETTER MANAGING OUR HEALTHCARE RESOURCES The final panel discussion, moderated by Andile Khumalo, put the focus on how we can better manage our healthcare resources in SA. There is no question that SA’s healthcare system is in a less than optimal state characterised by insufficient capacity, a shortage of healthcare skills and crumbling infrastructure. The pandemic has highlighted the disparities between the public and private healthcare sectors.

The immediate challenge for the healthcare system is to gain control of the Covid-19 pandemic which relies on citizens practicing the recommended safety guidelines such as social distancing, mask wearing and sanitising until they are vaccinated, said Dr Nicholas Crisp, deputy director general: National Health Insurance at the National Department of Health.

SA’s healthcare system is in a mess, he said, adding that the public and private split is not sustainable. “We need a massive revolution in the healthcare space so that resources are more equitably split,” he said, adding that government’s proposed National Health Insurance (NHI) Act, which aims to provide universal healthcare, will go some way towards pooling all available resources and undo some of the structural problems facing the sector.

Conceding that a few lessons have been learnt during the pandemic including the value of a digital planning system and how the procurement of medicines could potentially be restructured, he said the sharing of capacity and resources between the public and private sector has been encouraging.

The pandemic has highlighted the need for better management of the limited resources available in the healthcare sector, agreed Dr Memela Makiwane, chairperson of the Council for Medical Schemes, adding that one way to achieve this is stop the current fragmented approach to healthcare. For its part the Council for Medical Schemes is encouraging smaller medical schemes to consolidate in order to achieve economies of scale. This has resulted in 140 schemes consolidating into 76 schemes.

Despite ‘noise’ objecting to NHI, Makiwane said nobody was fundamentally opposed to NHI. He pointed to the UK as an example of a country which had successfully implemented universal healthcare coverage.

A lack of adequate planning, poor human resource management and failing infrastructure are just some of the challenges facing the healthcare sector currently. “The problem currently is not insufficient beds but rather a lack of experienced doctors and nurses,” said Dr Angelique Coetzee, chairperson of The South African Medical Association.

“We have nurses working in ICU’s or high care without sufficient experience – yet we have a moratorium on new appointments.”

Coetzee said trust between the public and private sectors needs to be restored, public hospital CEOs need to have the power to maintain infrastructure, and the sector should not be employing non healthcare professionals who don’t understand the environment into positions of responsibility. The problem, she said, is that the foundations of our healthcare system are flawed. “It’s time to start over and build back better,” she advised.

Simon Hlungwani, president of the Democratic Nursing Organisation of South Africa (DENOSA) agreed that human resources is one of the biggest challenges facing the healthcare sector. “We don’t need people who are not fit for purpose,” he argued.

Poor planning, he said, has resulted in insufficient healthcare providers being trained. The World Health Organisation recommends that developing nations increase their intake of doctors and nurses by 8-10%. SA, on the other hand, is reducing the number of nurses it is training and the shortage of nursing skills is being exacerbated by the pandemic and the vaccination rollout. Nurses undergo four years of training, followed by a year of community service, so it is vital that our future human resources needs are carefully considered as there is no quick fix. Despite this shortage, many nurses complete their training only to be told there is no budget to employ them. “Planning is poor and myopic and doesn’t consider the longer term,” said Hlungwani.

Going forward, he said, we need a more resilient healthcare system and one that is fit for purpose. To achieve that will require partnership and collaboration.

The panellists agreed that all citizens need to be encouraged to get registered for the vaccine and to get vaccinated.

“Vaccinating everybody is for the public good and is essential for our economic recovery because a healthy economy requires a healthy population,” said Hlungwani.

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C R E AT E . C O N N E C T. C O L L A B O R AT E

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We’ve embraced the digital events space and introduced a series of online events to create ongoing thought leadership opportunities for our partners.

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