STATE capture has hit South Africa like a ferocious hurricane. The storm – I can find no better way to characterise the magnitude – has swept away reputations of big international and local firms as well as some of their managers.

As if this sordid affair was not enough, we now are facing the repercussions of the corporate scandal at Steinhoff, a global company with German and South African roots. Billions of dollars in investor money have been lost.

It is commendable that some of the business leaders are learning fast from the scandals and have begun to reposition their business practices to comply with applicable rules. But it will take time and hard work to restore the confidence of clients and the public.

The most worrying thing about the allegations is the negative impact they have on the brand of our beloved country and its hard-won constitutional democratic system.

If there is one positive thing, though, that has come out of the scandals, it is the extent to which conscientious leaders in the business community, civil society and state institutions, locally and internationally, have become more alert than ever before. They have begun to appreciate the importance of respecting rules that guide business transactions.

Domestically and internationally, concerned leaders have been jolted into action. This heightened awareness about state capture, for example, has resulted in, among other things, the launching of several investigations spanning various jurisdictions in the US, Europe, Asia as well as South Africa.

The investigations are the clearest indication yet that respect for rules that govern business transactions should not be limited to the domestic economy. We may be acting locally, but our actions have global implications. And what one does in a small corner might have national and global significance.

There is hardly any business or government entity that doesn’t have laws and rules against which its conduct can be judged. As globalisation has advanced, so have the rules and conventions of doing business.

It is when these rules and conventions are subverted that scandal is formed. If the scandal is not tackled with necessary urgency at its formation, it graduates into a storm.

But I am confident that state capture, a consequence of a violation of a series of rules, will eventually be subdued thanks to our strong democratic culture and the global response that supports demands for good governance among domestic stakeholders.

Fortunately, it hasn’t brought the country to a standstill. We are too strong for those who thought they could capture the entire state. The world is doing business with us and it would like to do more.

Foreign governments and international companies are engaged in commercial diplomacy with us in the spirit of responsible and ethical business practices. Others want to learn from us. For example, the Netherlands recently invited South African coal mining stakeholders to exchange ideas on responsible coal supply-chains.

South Africa is one of the biggest coal exporters and it has a strong regulatory framework on sustainable mining, covering aspects such as safety and rehabilitation. The Netherlands is one of the biggest importers of our coal, thus contributing to our export earnings and job creation.

But as responsible buyers, Dutch companies, like their European counterparts, are interested in ensuring that our coal is indeed mined in a manner that is environmentally sustainable and that the rights of all stakeholders, including labour and local communities, are respected.

The Dutch government is supportive of the initiative by major European energy companies who are members of Bettercoal, a voluntary non-profit organisation that promotes continuous improvement of corporate responsibility in the coal supply-chain, focusing on mining itself.

The Bettercoal system encourages ethical sourcing of coal in a manner that is mutually beneficial. Mining companies that subject themselves to Bettercoal checks and assessments gain access to a market of huge European buyers.

Having satisfied themselves that they are buying coal from responsible mining companies, the importers gain international recognition for pioneering sound ethical business practices. In the end, everyone wins. But the major beneficiary is the domestic economy where the mining takes place and where jobs are created.

The system holds lessons on how business, in general, should be conducted and how customers can influence business behaviour. It puts ethical practices at the heart of the conduct of business – and rewards compliance. The voluntary nature of the system, both from the supplier and consumer perspectives, makes it even more compelling.

It strips unscrupulous companies of the perverse incentive to tick the box. It also mitigates against the chasing of profits regardless of the costs to the environment, community or labour.

Compliance with the rules governing business practices is better if it’s not done for compliance’s sake, but because it is the right thing to do. In an era that is often defined by headline-grabbing scandals like state capture and corporate failures, it is difficult to imagine noble business practices like these being the dominant features of international business transactions. The Bettercoal system demonstrates that it can be done in all sectors. We must work towards it.

View Article

Bayoglu is executive chairman of Canyon Coal, a South African mid-tier mining company affiliated to the Bettercoal Assessment Program that encourages responsible business practices.