Ezra Ndwandwe's Blog

SAFETY VS. PRODUCTION TARGETS

There continues to be reports of work related fatalities such as the recent Impala Plant incident. Whilst this may be due to negligence, it can also be about the rush to meet production targets. When employees are put under pressure to deliver production targets on which their performance bonuses and their boss’ performance bonus are dependent, they sometimes tend to consciously or subconsciously compromise the quality of their safety standards. Of course in the hope that it will not result in an accident or they will not be caught.

I do not think that in many organizations safety is a way of life (i.e.) I don’t think it is practiced enough to an extent that it becomes an organizational culture. Whilst it is true that employees should be responsible for their own safety, it is kind of counter-productive to have incentive schemes that may indirectly lead to compromising safety. Sometimes I wonder about the safety merits (e.g.) NOSA and NOSHCAR awards. Whilst these are measures of safety practices, they can be staged to achieve the recognition.

Most companies with fatalities where one can clearly see that safety standards were compromised have achieved the NOSA/NOSHCAR grading. If leadership was to practice what it preaches regarding safety, then employees will be empowered enough to refuse to work in any place they deem unsafe. 

Secondly, production bonuses would have a heavy weighting on fatalities vs. outputs. Yes, you may have achieved your production targets but at what cost? This is not to say you will completely eliminate accidents but at least you should demonstrate that you have done everything humanly possible to minimize those that are driven by the desire to meet production targets for profit gains.

 

GOVERNMENT'S 2014 GOAL

If government was to meet its target of halving poverty by 2014, then it needs to think creatively about ways of absorbing the unemployed.
 
There is, indeed, a real and significant risk that the growth and employment gains of the past 10 years could be reversed. We have already seen up to 180 000 people losing their jobs in the formal sector and speculation is that up to 400 000 will lose their jobs this year alone.

The solution to achieving this otherwise ambitious goal of halving poverty by 2014 is to me through entrepreneurship. I don’t see government or even the financiers making moves towards making entrepreneurship attractive. There are simply not enough incentives to encourage people to venture into that space. And when you have taken the risk, the costs of running your business and unreliable cash flows are simply not encouraging. We need to encourage our people to be more self-reliant and self-sufficient by encouraging those that have the appetite to create local jobs as entrepreneurs to do just that. It does not help much that accessing funds is difficult and chances are it will be even more difficult to access funds after the recession. I personally don’t think we are doing enough from an incentive perspective (e.g.) in the form of tax breaks to encourage people to start and continue running their businesses. This noble dream of halving poverty can be achieved if only we can act promptly and effectively, otherwise the alternative would be to create a social state and perpetuate dependency on state grants.

In his Mandela lecture, Mohammed Yunus challenged South Africa to be the first country in Africa where, indeed, not a single person goes to bed on a hungry stomach. And SA has the apparatus to deliver on this challenge; we just need to apply our minds.

HANDLING RETRENCHMENTS

Proper communication is essential when it comes to retrenchments.
 
Business leaders must realise that retrenchments can be emotional and traumatic and require proper management. The retrenchment process, if badly handled, can have seriously bad consequences to the extent of demoralising and de-motivating those that are left behind. Needless to say, this will have an impact on productivity and employee loyalty. Because it can be traumatic, a unionised environment normally has the process well articulated - under the section of good governance or good conduct in the Labor Relations Act - which helps a great deal. Non-unionised, smaller companies which may be worst hit by recession and want to retrench must be open and honest about the retrenchment prospects as the first step. Infact, I would argue that when such prospects become clear, companies must, together with employees try to find ways and means to creatively avoid retrenchments without compromising business sustainability. If they fail to do so, then both parties must accept the reality of retrenchments and manage the process. Both parties must also agree that a retrenchment is the only way out to sustain the organization. 

It will be interesting to see which companies come up as best companies to work for and why. This year, my suspicion is that the survey will reflect how well or badly retrenchments were handled. This of course depends on whether or not companies would be keen to participate in such surveys.

IS AFRICA RESPONSIBLE FOR ITS ECONOMIC WOES?

Firstly, a significant part of the answer to that question is YES. Owing to our former rulers, Africa was ruled by dictators who - for the most part - were concerned about their well-being more than that of the economy.

Secondly, the reason why there is so much corruption in African governments is the inability to understand that politics are not about riches. When you make a decision to be a politician, you make a decision to serve and to have influence more than to have money. Africa’s politicians want both money and influence. I don’t mean that politicians must be poor but politicians should not concern themselves about self enrichment. This is the reason why corruption is so rife.

Thirdly, I think Africa’s politicians are sadly visionless. I do not think many stop and ask themselves what their personal vision is and, of course, the vision of a legacy they want to leave behind. Even if that vision is not publicly announced because I don’t think that any president does that anyway, but for ones’ leadership to be effective one needs a compass of where one wants to go. It is through this personal vision that one will be able to identify areas of responsibility whether through a collective or as an individual. I don’t think that the likes of Obama are a law to themselves, they too have a party and a constituency to report to but they look set on a particular vision - be it to transform perceptions about the US or the lives of ordinary Americans.

WHAT CONSTITUTES A GOOD LEADER?

There are four characteristics that define a credible leader:
 
1. Consistency (leadership that knows no colour or is confined to any relationship)
2. Engaging (appreciating that leadership is not about you)
3. Decisive (take a stand. Good or bad)
4. Caring/Empathetic (appreciating that there are certain things that are beyond our control)

The subject of business leadership has been studied and written about a lot, yet it still eludes us in practice.

In contrast to the characteristics of a credible leader are styles of leadership that do not deliver results and are not sustainable. These include an Autocratic leadership style (i.e.) such leaders tend not to achieve much. Impressionist leadership style (i.e.) those that want to impress everyone, tend to not be respected.
 
Equally, inconsistent leaders are seen as poisonous and only perpetuate corporate politics. You can lead or deliver your mandate by deliberately dealing with issues in a decisive and non-personal way. Take a stand on issues- Don’t be a spineless leader who has no stand. Good or bad, take a stand. Business leadership is not about consensus or democracy. Yes it should be inclusive/considerate of others views but not negotiated.
 
Remember, the buck stops with you. If you have not delivered your mandate, your stakeholders will not hold a conference to ask why and then apportion blame- they will deal with you as they should.

SHOULD BUSINESSES BE WORRIED BY THE ANCYL'S CALL TO NATIONALISE MINES?

Yes and No
 
Yes. This is because we have come to know the ANCYL as prophets of things to come. They spoke about the recalling of President Mbeki and President Mbeki was recalled, they spoke about the dismissal of the SAA CEO and that happened and, more recently, they have been shouting about the transformation of the judiciary and that as I write this column has taken priority.
 
So we know that the ANCYL is militant and may indeed give an indication of things to come.

No, because I personally do not know the reasons or objectives of nationalization when, in fact, there is talk to privatize some of the state owned enterprises.
 
The government is yet to show its Best Operating Practice when it comes to business success. If anything right now, state owned enterprises seem to be unprofitable and heavily dependent on government for sustainability - we do not want that for our mines. Instead, what we should do is analyse in great detail the value chain of how our minerals are transformed to the final product and from that indentify areas where governments’ influence can be increased. In that way the government will remain in touch with the process including the beneficiation of our minerals which undoubtedly will lead to investments in technology, create skills for our people and of course create and retain jobs. This call might/will send out jitters to the market immaturely and may negatively affect Foreign Direct Investment in the mining sector.

HOW MUCH STRIKE ACTION HAS COST US

There is no doubt that the strike season costs our economy a lot of money in actual productivity costs.
 
The strikes continued to highlight the ideological divide between business-friendly policies of the ANC government and its alliances. Economists find it difficult to put a figure or costs in lost productivity but some estimate it may be as high as R3 billion. It is equally difficult to quantify the negative impact on investor confidence but one thing we know is that low productivity simply means strain on the business.

What suprises me though is that we know all of this for a fact, yet year after year, we have strikes that cost the economy billions of Rands. Strikes are bad for service delivery; you will remember that some people lost loved ones during the strike of emergency workers.
 
My question therefore: Is this the language better understood by employers? Or is this our way of life? So we should expect a strike season year after year?

MAINTENANCE OF PRODUCTIVITY

One of the biggest challenges that organizations are faced with is improving or maintaining productivity levels especially in these difficult times where employees are faced with pressures of their own and possibilities of a retrenchment exercise.

It is true that organizations are going to survive this economic slump by maintaining or improving productivity levels. But what is productivity? Simply put, productivity is achieving your targets with less effort and less may be people, money, energy/electricity etc. 

If you were to visualize it; it would look like a mathematical fraction with your numerator being those things that you need to do more of and your denominator as those things you need to do less of. The challenge with many organizations who want to qualify or to improve their productivity is that many know that something has to change in the organization but many do not know what needs to change or more importantly, what it needs to change to. So what do they do? They embark on an organizational change management project which of course will not yield results and that is purely because of the foundation questions of what needs to change and to what it needs to change to were not answered.
 
Whether it’s change of leadership, shop-floor staff training or even changing how we do things in order to improve productivity, we need to be clear on what we want to achieve and how it will make us a more productive organisation.

FINANCE MINISTER'S BUDGET SPEECH

I think the minister used his budget statement to sensitise all of us (both government and the general public) on the economic challenges that lie ahead.

It is clear that there is a possible R60 billion revenue shortfall in the current financial year that will influence South Africa’s medium to long term economic plans.

The anticipated challenge which has come about as a result of a R9 billion shortfall in corporate taxes by collection deadline as well as both the low VAT and customs collections, necessitates a review of state departmental budgets by all ministers to find possible fat. Remember that the shortfall in revenue was estimated to be around R94 billion in February but it is clear that it will be between R144 billion and R154 billion in march 2010.

However, one must not despair too much as these are 1st quarter figures. The October budget statement may be completely different and I mean either worse or better. It is also important to note that albeit undesirable to do so, but the deficit can be covered by either domestic or foreign borrowing although this option will not be without negative consequences to the future finance and economic plans.

My view is that since we have such a huge deficit, a higher sub 6% inflation and a possible 2% economic contraction, we need to revisit our economic figures at least for the medium term and perhaps re-budget using 2% economic contraction as our base. I also think that even if the recession cycle was to turn this year, the GDP will be lower than anticipated at least for the next 3 to 4 years. So let’s plan as such. We will have to be creative in generating income as our tax base is shrinking.

SABMILLER AND NEW BEE DEAL

SABMiller has come up with a rather interesting BEE deal said to cost up to R6 billion in share value. Interesting that a deal of this magnitude can be cooked up in such depressed economic times but also that the deal will cost new BEE partners way less than a fraction, if that. Talk about financial genius.

My observation or opinion on this deal though is…

First it is important to mention that SABMiller has a 3 tier liquor license in South Africa (i.e.) license to farm ingredients or beer raw materials, license to manufacture/produce the beer and thirdly a license to warehouse and distribute the beer. It is through owning the third license (i.e.) warehousing and distributing the beer that SAB has managed not only to dominate but to literally own the market/retail space in SA.
 
Now this 'wow deal' is happening at retail level with ordinary South Africans. As mentioned in print media, there are no politicians or business heavyweights in this deal so for all-intents-and-purposes; this deal may be viewed as truly broad base. However, the trick about this deal is that by and large the new shareholders are themselves shebeen or tavern owners who stock and sell SAB products. Up to 40% in shares is available to shebeen and tavern owners. Not only will liquor retailers be able to participate but also entities that have applied and can provide evidence that a liquor license has been lodged will be eligible to participate.

Talk about killing current and future competition. Of course politicians don’t own Shebeens/Taverns (I’m open to a different view) and therefore selling shares to stockist to me seems like such a subtle manner to own them. These are golden handcuffs and add to that the fact that shareholders will only be able to sell their shares after 10yrs. How would you buy other liquor products if you know they will affect your share value? (e.g.) How can a Vodacom shareholder have an MTN cell phone contract? Even if the argument could be that other brewers may do the same if they wish, you will find that if you go to many taverns you will see that SAB products are dominating space whether it is a storeroom or a fridge. This is a tricky deal for the competitions’ commission. I’d like to see what they make of it. But what a way to fend off competition- Remember, Heineken is said to be preparing its plant to be up and running in 2010.