The founding values of the South African democracy include human dignity, the achievement of equality, the advancement of human rights and freedoms and respect for fundamental principles of democracy. In the pursuance thereof, the national government undertook a massive legislative overhaul, growth-orientated fiscal policies, accelerated service delivery programmes, black economic empowerment initiatives and skills and education programmes. Business has been an integral part of these processes and will continue to be an active partner in promoting sustainable growth and human development.

The National Business Initiative (NBI) was founded in 1995 as a voluntary vehicle for collective business action towards shared and sustainable development. Throughout the years, and as national priorities have evolved, the NBI as a coalition of 140 member companies has engaged in priority issues of the day such as economic development, crime prevention, schooling, further education and training, public private partnerships and more recently sustainable development.

In January 2007, the National Business Initiative stepped in as the Focal Point to the UN Global Compact in South Africa. The principles and objectives of the Compact fall largely in line with those of the NBI and mirrors the voluntary nature of NBI membership. The years 2000-2001 saw the first South African companies, such as committed NBI member companies Eskom and Sasol, sign up to the Global Compact. By the end of 2006, the number had grown to 17.

South African society is governed by a modern constitution – one with a strong social agenda and one of the few globally that provides for a clean and protected environment as a human right. Stemming from this, much of the country’s legislation – particularly its environmental legislation – is world class.

South Africa is also home of the King Code on Corporate Governance, a seminal piece of work on corporate governance internationally. Giving teeth to this voluntary code, the JSE Securities Exchange requires that listed companies comply with King II. This code mentions social and environmental performance as part of good corporate governance.

In 2005 the JSE also launched its Socially Responsible Investment (SRI) Index, which comprises over 50 companies that adhere to a set of Criteria. The Criteria were developed from a variety of source documents, including Ten Principles of the Global Compact. With this context in mind, it is surprising that only 17 companies have signed up to the Global Compact in South Africa. Or is this is the very reason more haven’t?

Policy, codes and regulation aside, is all well at home?

Anti-corruption. According to global watchdog Transparency International, South Africa is the second least corrupt country in Africa. It came in 51st place out of the 163 countries surveyed and ranks far above other major emerging markets Brazil, China, India and Mexico who all tied for 70th place. The 2006 index points to a strong correlation between corruption and poverty, with a concentration of impoverished states at the bottom of the ranking. But with a score of 4.5 out of 10 and widespread poverty, South Africa has a way to go yet.

Environment. On its environmental performance, the Yale University Environmental Law and Policy Centre’s 2006 Pilot Environmental Performance Index gives a good perspective. South Africa ranks well in Sub-Saharan Africa at 4th place, but much less so when compared to all the participating countries – at 76 out of 133. The report concludes that wealth and environmental governance are the key determinates of environmental performance. This indicates a divide between South African policy and practice. 

Human Rights & Labour. The country’s labour practices are well governed, in stark contrast to the apartheid era, where discrimination was rife, labour rights severely constrained and freedom of association and collective bargaining were illegal for long periods.

On the issue if child labour, national legislation determines that children under the age of 15 may not be employed, while children from 15-18 years of age may not be employed for age-inappropriate or high-risk work. Despite this, a study conducted by the National Child Labour Action Programme for South Africa in 2005 found that about one in every 31 children between the ages of 5 and 15 engaged in “economic” work for twelve or more hours a week. Unsurprisingly, the main reason cited was to provide financial support to their families. Though currently largely un-quantified, child-headed households due to HIV/Aids will increasingly feature as a cause of child labour. And while the study found that child labour was most likely in rural and commercial farming areas, suggesting that large and medium-sized enterprises are not directly responsible, a case can however be made for closer scrutiny of supply chains.

Since coming to office in 1994, the democratic government of South Africa has also made strong, legally binding commitments to uphold and promote gender equality. South Africa ranks 18th out of 115 countries surveyed in the World Economic Forum's 2006 Global Gender Gap Report, which measures progress made in narrowing the inequality gap between men and women. South Africa was ranked number one in Africa, scoring particularly well for political empowerment, with 41% of its Cabinet ministers and 33% of its members of Parliament being women.

But on the business side, only 46% of SA women were found to be employed compared to 79% of men, and earned on average less than half that of their male counterparts. Furthermore, the 2006 South African Women in Corporate Leadership census found that out of the 343 companies surveyed only seven had female CEOs, 15 had women chairing their boards, 11.5% had female directors and 16.8% had female executive managers.

The government has also undertaken a massive black economic empowerment (BEE) programme to redress social inequities as well as to realize the country’s growth potential. Criticism has been levelled at the government and business alike, that BEE has not been broad enough – that only an elite group of black business men and women have benefited from the strategy.

With due recognition of the significant challenges that South Africa faces, its regulatory environment and fiscal policy is robust. The same is however not true for all other African countries, many of which host South African operations.

Often referred to as the economic powerhouse of Africa, South Africa has significant business interests across the continent. For example electricity utility, Eskom, operates in over 20 African countries, is exploring opportunities in 10 others, and is to engage in a R24-billion cross-border infrastructure project. Another parastatal, Spoornet, owns and operates 80% percent of Africa's rail infrastructure. A government-sanctioned human rights code for SA parastatals operating in Africa is in the cards. Nine out of ten of the continent's largest non-financial transnational companies (ranked by foreign assets) in 2004 were from South Africa. Three of these are local Global Compact signatories.

Apart from its business interests in the continent, the country has political and social interests in the success of Africa. But more significantly in this context, global perceptions of individual African countries often operate on a continental scale – in this mindset: what Africa is, South Africa is too.

The Global Compact in SA

It is clear that there is a role for South African business to play in promoting human rights, labour standards, anti-corruption and environmental protection in both South Africa and Africa. The surveys cited in this article indicate that while South African companies are by and large leaders in Africa, much work needs to be done to live up to international best practice.

Public commitment to the Global Compact’s principles will contribute to the global positioning of South African companies as good corporate citizens subscribing to a common set of standards, affording them a global license to operate. As the sustainability mantra goes: business cannot succeed in a society that fails. And by offering companies a framework for reference in uncertain business environments, the GC can help participants move away from the possible perception of South African business as the modern-day colonialists of Africa.

The values of ethics and trust that underpin the ten principles, as well as the initiative’s multistakeholder model, often translate into opportunities for competitive advantage. The Global Compact serves as a useful space for critical dialogue, providing the opportunity for business to engage with stakeholders from other sectors. And importantly, taking a proactive stance on critical issues related to human rights, labour, environment and anti-corruption will help participants to manage risks and see opportunities before anyone else does – while at the same time helping to build a better society.

For more information on the Global Compact’s South African Network please contact Hermien van der Walt: vdwalt.hermien@nbi.org.za