Bank bosses and their national conversation responsibilities

Over the past week, a couple of statements were released that provided a prism into the complexity of economics, geopolitics and the tension points between political party interests and national interests.

Alan Pullinger – the CEO of FirstRand – came out and stated that South Africa’s ambivalent stance towards the Russian invasion of the Ukraine poses a major risk for South Africa’s financial sector and, by extension, its larger economy.

Read: FirstRand CEO slams SA’s ‘foolhardy’ ties with Russia

Pullinger’s remarks – traversing the domains of public policy and national interests – represent a notable departure from the script followed by business leaders in engaging with the state in recent years.

Sixteen years ago, when Paul Harris was the CEO of FirstRand, he championed an anti-crime media campaign that cost the bank R20 million and was canned at the last hour when it turned out that being called out publicly was not the type of thing the Thabo Mbeki administration was keen on.

Five years later when Reuel Khoza issued his critique on the dearth of political leadership in the country as part of his chairman’s insights in the Nedbank annual report, it unleashed a scathing response from the ANC. The party alleged that Khoza had no moral standing to talk about the inadequacy of political leadership when his own leadership record was – according to the ANC – patchy at best.

Khoza’s act of speaking out and Harris’s abandoned attempt at social mobilisation mirrored the actions of Chris Ball, who was in charge of Barclays (now FNB) during the days of the Botha government.

Ball made comments about the state of the nation that, as one would expect, drew the ire of the National Party.

The reluctance of business leaders to engage in difficult conversations with the state – at least in public – represent a reflection of the intersection of business interests and the fluid definition of social duty.

As businesses whose operations and influence overarch the entire economy as employers, taxpayers and the nation’s ambassadors in the global economy, financial institutions occupy a place of particular responsibility in the national discourse.

Decisions they take – operationally and strategically – have the capacity to alter the country’s economic pathway. In unleashing access to finance and fostering financial inclusion, these institutions can aid in enabling economic participation for millions of citizens.

Responsibility

In harnessing the world-best practices in creating their financial systems, these institutions have the ability to lead the country’s innovation drive. Their viability and stability is a matter of national importance that any responsible government takes seriously.

With this responsibility comes an elevated sense of clout that means that their collective voices are taken very seriously by society.

When they have a view that is ventilated publicly and doesn’t resonate with the political consensus of the day, the anxieties and possible backlash from politicians are easy to predict.

Additionally, the lucrative nature of government business creates a new complexity for the financial institutions that have to decide whether any comments will be seen as an extension of social duty or an unwarranted critique against their own client.

Greylisting

Pullinger’s comments came at a time when South Africa’s stature in the global financial ecosystem had been dented by the decision of the Financial Action Task Force (FATF) to add South Africa to the ‘grey list’ of countries whose ability to tackle money laundering, terrorist financing and illicit financial flows has some glaring loopholes.

Such a decision prompted the release of another statement last week – this time from President Cyril Ramaphosa.

Read:
SA must fix holes in terrorism financing, money laundering legislation by 2025
Greylisting should make South Africans see red
South Africa greylisted by FATF

In his weekly newsletter, Ramaphosa stated that the greylisting represented an opportunity for the country to “tighten its controls and improve the responses to organised crime”.

Ramaphosa further downplayed the impact of greylisting by stating that it would have a marginal impact on the financial sector as the strategic deficiencies do not relate to the financial sector.

This – according to the president – means the incremental cost of doing business with South Africa will not be severely impacted by the greylisting.

And in that case, Ramaphosa has a point. The main problems underpinning the greylisting and the anxieties expressed by Pullinger relate to the country’s political paralysis, which Ramaphosa himself is in prime position to address.

Relationships

The government’s fixation with not pissing off Russia is a political ideological position that makes little economic sense.

While South Africa proudly espouses its membership of Brics (Brazil, Russia India, China and South Africa) as a strategic alliance, the economics suggest that the fixation doesn’t provide much in the way of tangible benefits.

Read: How history may explain SA’s refusal to condemn Russia’s invasion of Ukraine

According to the United Nations Comtrade data, South Africa’s trade patterns with the US and the EU are multiples of its trade with Russia.

While the ANC’s historical alliances with the Russian state have played a key role in the country’s stance on the current conflict, the question of whether this is in the national interest is key.

One would like to believe that all sovereign countries have autonomy to decide how to engage in geopolitical issues.

The hard truth however is that relationships, alliances and dependencies define international relations.

Some alliances – like South Africa’s relationship with the United States – create massive risks once undermined.

African Growth and Opportunity Act

In 2025 the African Growth and Opportunity Act (Agoa) – an agreement that has enabled wide tariff-free access for South African businesses into the US market – will once again be under review.

Given the delicate and sometimes petty nature of trade negotiations, particularly between economic powerhouses and struggling economies, South Africa’s business case for continued access to the Agoa benefit will be a hard sell.

If South Africa loses access to Agoa, the consequences will be felt across the economy.

As Pullinger stated last week, the access the country enjoys to some international platforms and relationships is a matter of privilege rather than an inalienable right.

How South Africa’s leaders structure these critical engagements with the FATF and Agoa over the next couple of years will have implications that last longer than the hysteria of current conversations.

Listen/Read:
Enoch Godongwana and Hendrik du Toit talk about the FATF greylisting
Greylisted: What does this mean for SA’s banks?
Fixing SA begins with clear and decisive leadership – Sim Tshabalala

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