How to boom without the bust

Townships in the Philippines have an aspirational, even classy, ring to it. Not in South Africa. For miles, we’ve seen electrical cables that look like spider webs strung across tens of thousands of box-type corrugated iron dwellings that are arranged in tight rows, row after row. As much as 350,000 of those dwellings, we’ve been told, exist in Cape Town alone. The dwellings are not that ugly from afar, as they look uniform, and all in one space. Compare those with our informal settlements, I daresay the townships may even deceivingly look neat. They are no luxury, though. During summer, corrugated iron walls produce much heat, and in winter, the same walls do not insulate the home.

Humans live there. Blacks mostly, some colored (that is, of mixed ethnic origin). They work in the day and return to that nest in the evenings. We’ve encountered and conversed with them as much as we can. Whether they be waiters, receptionists, drivers, or security personnel, we have noticed something about these blue-collar workers: they are smart and intelligent. What a waste of talent, I thought. Evidence of a wide opportunity gap in a city that is one of the best the world has to offer humankind.

Cape Town is a modern city with good restaurants and breathtaking harbor and coastline, and home of the flat-topped Table Mountain, which is one of the Seven Wonders of the World. It’s only a few hours of scenic drive to nature reserves that feature wildlife, specifically Africa’s famed “big five,” as seen in the National Geographic Channel. No reason not to want to live in the city – unless you are black living in townships.

Nelson Mandela was able to end the apartheid, but the centuries of slavery, persecution and discrimination took its toll. The township system survived three decades after the end of the apartheid, with no expiration date in sight. Not even Mandela, heralded as a hero and icon, was able to bring quality jobs or quality opportunities for his people, nor pull them out of sub-par living conditions – not to mention that corruption of fellow black people in government made improvement of lives a slow and painful process.

When government falls short or fails – in any economy, in any part of the world – is it fair to make the burden fall on the shoulders of the private sector? What else can the private sector do, other than do what it does best, which is to grow? The private sector can achieve what we term internally as “good growth”.

Good growth is real – it generates wealth and improved living conditions for communities and does not simply transfer market share. It is lasting – it invests in future growth and values return over the long term at the expense of short-term share price increase or immediate dividends. It is inclusive – one which does not only benefit a few at the expense of many. And it is responsible – it doesn’t only measure profits from the business but the total impact of doing business.

Tax contribution, stable employment, environmental impact, community health, and giving communities technical skills all help build brand value and goodwill, reliable raw material resource, labor force, and market for the companies’ products.

Measuring and managing total impact not only strengthens decisions of business leaders; it’s also fun to do. If we take a hypothetical example of a top high-end restaurant chain that serves imported vegetables for its salads, a decision point can be to continue importing the vegetable varieties from the US (option 1) or grow these varieties locally (option 2). The traditional way of making a business decision is comparing total costs of importing vs. capital investment requirement and costs to grow locally.

In total impact measurement, one would also consider the widespread economic impact along the restaurant’s supply chain in option 2; the higher green gas emissions due to transportation demands in option 1 versus the increase in use of water resource in option 2 if water is scarce; higher use of technology in option 1 versus higher use of human resources in local production in option 2.

There is a science in assigning monetary values to societal, environmental, and economic impact (and a firm like PwC can help do that). But to my mind, if the profit impact is acceptable compared to the other positive impacts, I will charge it to the cost of my social license to do business.

Shareholders have collective power in a corporation. They can choose profit above all, or they can choose to bring quality opportunities, solve societal problems even.

I think responsibility to shareholders will shift towards total impact measurement and not simply dividends for good reason: decisions that are taken apparently against self-interest to achieve that inclusive “good growth” is an invaluable sustainability strategy. Besides, people do have a debt of gratitude.

To paraphrase a wise man: How to boom without the bust because you give them shelter from the heat of the sun, they will not leave you when the rain comes.

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Alexander Cabrera is the chairman of Integrity Initiative Inc., a non-profit organization that promotes common ethical and acceptable integrity standards. He is also the chairman and senior partner of Isla Lipana & Co./PwC Philippines. Email your comments and questions to [email protected]. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.