Sunday 19 August 2012

Public order and private firms: Marikana shootings

For a blog exploring the intersection of private sector activity and public interests, last week's police-mineworker shootings in South Africa reflect key issues and dilemmas in their starkest -- and saddest -- form.

The widely reported police shooting of over 30 illegally striking workers near Marikana platinum mine northwest of Johannesburg -- unprecedented in the post-apartheid era, but sadly and eerily reminiscent of it -- is still resonating through South African society and politics.

Much has already been written and said; with funerals, trials, public inquiries and attempted mine-reopenings ahead, much is yet to be done and said, including at the level of national politics.

Yet since this is a blog called 'Private Sector - Public World', I feel obliged to offer some further insight. After all:

* The shootings -- and the week leading up to them -- illustrate the complex blurring, by no means limited to South Africa or indeed mining, between what is a labour relations issue (involving government-regulated processes, but in essence a matter between the employer and workers) and a public order one; between an issue managed simply by mining private security and a serious policing issue; between pay-related demands on one particular site and politics-related debates at a national level.

* This area of the country has seen mines develop at a far faster pace than the provision of related social infrastructure; much of what is provided for workers, families and hangers-on comes from the firms themselves. Well before the shootings, the Rustenberg area threw into sharp relief the duties and dilemmas of firms and governments in providing public goods -- in relation to a sector (platinum) highly vulnerable to significant global economic downturn.

[In the most recent post, I'd speculated whether a possible wider downturn across mining sectors would result in increasing frequency and intensity of protest action, as margins narrow (for firms) and expectations are dashed (for existing or want-to-be staff) -- see here].

The above factors suggest Marikana is a test case of what it means for a private firm to operate in the very centre of the spotlight of public concerns.

Yet it is not clear to me what one can sensibly add, in terms of the subject-matter of this blogsite, to the various media and commentator reflections to date on the Marikana shootings.

One risk to avoid is armchair / analyst arrogance. At the office during the last few weeks we've forced ourselves again to note how 'resolving' the Syria crisis is not simply a question of policymakers seeking analytical clarity and then acting accordingly: the issues are hard, hard, hard; events run of themselves, with multiple considerations and variables; we know far less about the future than we like to pretend.

So it is with my thoughts about Marikana for this blog ...

... For clients' purposes, we are obliged to offer what insight we can about what this means, for instance, for near- and longer-term ANC politics, or debates on mining sector transformation in South Africa (on which see past posts on nationalisation and resource nationalism, e.g here).

... For the purposes of this blog, is it enough to say that Marikana shows that, all analysis put aside, the issues arising for private firms operating in an inevitably (sometimes starkly) public world are sometimes just hard, hard, hard?

Admitting as much is not just an act of easy abdication of the role of analyst. It is a reminder of the difference between armchairs and hotseats.

Boardrooms need armchair analysts -- potentially valuable sources of dispassionate objectivity -- but the most visible and vital intersections of business and society will often occur at close range, move quickly, and -- yes -- be truly difficult.

Jo


Thursday 9 August 2012

Corporate diplomacy in Africa: austerity and downturn

The effects of the current era of budget austerity on the capacity of state foreign diplomatic services raises interesting questions and dilemmas about corporate diplomacy.

I here mean firms, mainly in the extractive industries, engaging directly with their host governments on major public policy, reform and governance issues -- traditionally the remit of bilateral diplomacy or aid bodies -- and acting (or being perceived) as 'ambassadors' for their home country.*

The issues are ones both for public policymakers and for corporate strategists.

They are by no means new issues, and the idea (or rather fact) of major corporations acting to some extent as foreign policy organs of their home state attracts controversy about the notion of 'private empire' or improper influence, and questions about the proper extent of private authority. It is a topic I covered extensively in doctoral work, but is also closer to the heart: I was born in a country (Zimbabwe) established by a private crown-chartered shareholder company in the late 19th century...

So while the issues are not new, two events in the last week in countries I follow prompted this post:

* Zambia Local mineworkers caused the death of a Chinese supervisor during minimum wage disputes. If only in symbolic terms, this is a significant development in a country where the role of Chinese firms and businesspeople has created diplomatic difficulties for Beijing, with Zambia being seen as something of a 'test case' on the 'China in Africa' debate.

* The Sudans Last week too, news of the intended resumption of South Sudan's oil production (a key sticking point in tense relations with Sudan) came a day after Hillary Clinton's inaugural visit there.

The latter is interesting because while public diplomacy (Clinton, Thabo Mbeki and others) might appear to have broken the oil deadlock, it is equally plausible that this resulted also from pressure from firms invested or interested in the sector. Now in the Sudans these are principally Chinese firms, and distinguishing between public and private -- sometimes hard enough, historically, with major global energy firms -- is often difficult if not untenable in such cases.

(Angola's state-owned oil conglomerate Sonangol is a prime, emerging and African example of the seamless and unsurprising fusion of foreign policy with commercial aims).

However, the Zambia example involved a mine privately run by Chinese nationals. Beijing is conscious that many Africans will attribute the conduct of expatriate Chinese nationals to some grand design, whereas it can by no means be assumed that Beijing has interest in or influence or control over everything Chinese nationals do or dig up in Africa. Still, the mine incident shows how -- for better or worse -- private actors' conduct can affect public diplomatic relations.

Of course many former actual ambassadors and foreign service officials work in government relations for multinationals (part of the blur in this area, probably inevitable, and not necessarily problematic) -- but many corporate employees act de facto as ambassadors either by design or by locals attributing them that status.

For many Western countries, the issue arises sharply in light of the effects of current austerity regimes on the capacity of foreign services. My colleague Tom Wales last week published an interesting brief on how, as their global footprint has broadened, Canadian mining industry executives have increasingly been playing the role of de facto Canadian ambassadors in developing countries (eg technical and governance advice) even as austerity is shrinking Canada's formal presence in many of these countries.

Here one potential 'for better' upside to austerity's effects on public diplomatic capacity is that governments such as Canada's can harness the strengths, resources and influence of major firms in support of objectives from conflict prevention to building governance capacity in host developing countries.

Arguably, it makes sense for public policymakers to look for ways both to 'civilise' the conduct abroad of firms associated with the country, and to encourage firms to contribute to foreign policy objectives such as building local regulatory capacity in resource-rich poorer countries.

However, aside from the public policy risks involved in any such 'outsourcing' are the risks for firms: twin events involving fatalities in Guinea this week are revealing:

* In the north-east, locals protested in effect against the operations of a foreign-owned mine, saying it had attracted criminality to the area.
* In the south-east, locals protested in effect in favour of a foreign-owned mine, albeit aggrieved that its opening date had been postponed and hoped-for jobs not realised.

As we probably now enter a downturn in global commodities demand, the latter situation is more likely to be common and may test firms' diplomatic capacities, especially where they lack formal diplomatic assistance, just as provision of social services by firms can create expectations that prove difficult to manage.

Jo

* I would partly distinguish 'corporate diplomacy' from 'corporate foreign policy' -- though clearly related: see previous post here.

I also do not mean 'private diplomacy' (ripe for its own blog post, the now-prevalent role of private individuals and outfits, such as the Centre for Humanitarian Dialogue in Geneva, in attempting to supplement governments, the UN and other bodies by engaging in conflict prevention / resolution mediation and influence, and other forms of so-called third track diplomacy. For one slightly out of date mapping of these bodies, see here).

PS - Days after this post my good friend Dr Jabin Jacob wrote this on whether Indian and Chinese oil firms might lead (and moderate) the way and ways of their governments: here.

Thursday 2 August 2012

Responsible investing and corporate form

How does the form that a business or investment vehicle takes affect the likelihood and effectiveness of it pursuing and achieving responsible investment goals?

Last week the Johannesburg Stock Exchange (JSE) held a discussion on trends in responsible investment. The JSE is acknowledged as a world leader in developing listing and reporting requirements that in principle promote better achievement on (or at least attention to) non-financial performance (social impact, carbon footprint, and so on).*

Ostensibly, the publicly-listed company (especially in a bourse like the JSE) is the vehicle most susceptible to formal regulation and reputational harm and most likely to pursue a responsible investment agenda. In a previous post on 'The Public Company as Public Good' I questioned whether onerous listing and reporting requirements might drive commercial people to choose alternative business vehicles and ventures that are harder to scrutinise.

However, it can't be assumed that unlisted firms are less effective at or prone to responsible or impact investment choices (any more than it can be assumed that state-owned firms are more susceptible to regulation on such things).

At work we've done a study on the growing interest of non-traditional investors ('High Net Worth Individuals' and 'Family Offices') in African growth opportunities. Such (by definition unlisted) investors are usually highly mobile and opportunistic. With such investors there is often a far greater interest in explicitly pursuing, alongside decent returns, worthy social agendas. The highly private investor may be very interested in a legacy of public good through their investment choices, and have far greater direct control of their vehicle than the CEO of a listed company.

Of course, at the opposite end of worthy publicly-listed firms are the ultimate private enterprise -- organised crime. The point to ponder is whether enough research has been done (alongside all the business school research on what drives pursuit of sustainability within corporate governance practice, and the relationship between corporate responsibility and financial performance), on how the form of incorporation of a business shapes its capacity to pursue a responsible investment agenda.

Jo

* The notion of stock exchanges are regulators of public interest goals is fairly well covered in the literature. For a primer, see Hall and Biersteker (eds) The Emergence of Private Authority in Global Governance (Cambridge, 2002). My very first post talked of the regulatory pluralism and its potential.

My previous post hinted at the idea that, taken on their own, reporting requirements may serve to distort strategic planning and implementation on responsible business issues -- in the same way that, in my experience of working in an international development agency, consciousness of reporting cycles sometimes obscured attention to achieving objectives, even if it also disciplined us towards those objectives too.