You can also listen to this podcast on iono.fm here.

JEREMY MAGGS: In March this year, when presenting his results, this is what our guest told the investment community – and I quote – ‘This cannot continue, and more urgent and decisive leadership and action are required.’ He was referring to, among other problems, Transnet’s woes, load shedding and water infrastructure.

Welcome to FixSA here on Moneyweb. I’m Jeremy Maggs, and our guests have been asked in the past, and in coming weeks will be asked, how we can make things better in South Africa. How do we improve matters? How in the shortest space of time – because time is of the essence – can we become a competitive, successful and winning nation again?

Mike Brown is the outgoing chief executive officer of Nedbank. He’s been at the helm for 14 years. Just before he comes into the conversation, I asked one of his colleagues how he was perceived inside the company. This was the answer: ‘The quintessential banker; a thoughtful man; and a person who listens.’ So it’s our turn now to listen to him.

Mike Brown, welcome to FixSA. Are those three problems that I mentioned – Transnet, load shedding, water infrastructure – the things that really need fixing, or is there more to it than that?

MIKE BROWN: Jeremy, hi. There’s always much more to it than that. And in fact we’ve sort of said the centrality of things that need to be fixed are energy and load shedding, infrastructure around logistics and Transnet, crime and corruption. Then there are many others, be that water, be that education.

But if you really want to focus on the three that are currently the most important, I think most business people would go for energy, logistics, and crime and corruption.

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JEREMY MAGGS: Mike, how much frustration is this causing to the business community – before we start talking about solutions?

MIKE BROWN: It’s definitely causing a huge amount of frustration, both in how long it’s taking us to get material traction in fixing these issues, and then how that plays out in the economic impacts of all of them across our country, be that lower levels of GDP, be that low levels of tax-take in government, and higher fiscal deficits.

But in the round effectively all South Africans are becoming poorer as a consequence of these infrastructural failings.

JEREMY MAGGS: So we have so many problems on that radar screen. We need almost two radar screens in this country. How do we set priority when it comes to fixing things?

MIKE BROWN: Well, there are many ways to do that. I think first of all it requires a mindset that we can’t change yesterday, we can’t wish away the history and all of these issues that have got us to where we are today. But what we actually can change through leadership and working together is tomorrow.

In South Africa I think we are unbelievably good at looking back, blaming, diagnosing, coming up with solutions…

But we are unbelievably poor at joining together and looking forward as to how to implement those solutions. So my sense is that it all starts with that mindset.

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SA’s middle class is broke

JEREMY MAGGS: How do you change the mindset, Mike? What’s the catalyst?

MIKE BROWN: Well, I think it’s got to take all parties that can work towards a better future, joining hands and agreeing to work together wherever possible.

Now everybody’s got to stay in their own lanes, there’s no doubt about that…

But it does require in particular business, government, labour and civil society to work much more closely together to implement solutions, rather than to continually throw stones at each other.

JEREMY MAGGS: You raised an interesting point about ‘all stakeholders’ in this debate – myself included, because the media is part of it. You say it’s important for us to stay in our lanes. I couldn’t agree with you more, but I think there’s a tendency in this country sometimes for us to want to get into other people’s lanes and perhaps cut them off. How do you make sure – and it’s an interesting point that you raise – that we do stay in our specific lanes so, Mike, we can make the biggest and most positive contribution?

MIKE BROWN: Look, it isn’t a perfect science because increasingly in the modern world lanes between businesses and lanes between countries are blurred. But, for example, if you look at the initiatives that have been announced over the last few weeks, led by the Business for South Africa platform around business wanting to work in partnership with government on those three big issues of energy, logistics, and crime and corruption, I think business is very clear that it’s not our role to set policy in those environments…

But, absolutely we can help with the implementation of that policy to ensure that there are more effective outcomes for the benefit of all South Africans. So I suppose it’s around that mindset of thinking about where your lane is, but knowing that there will be some blurring from time to time.

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Government and private sector partnership is crucial – Silke

JEREMY MAGGS: That partnership that you talk about is also predicated, I imagine, on trust and a willingness to compromise to cede a little bit of ground if you have to. It’s something that we were very good at for a while in the past. I wonder if we’ve lost that.

MIKE BROWN: I think we have lost it. And it is something that we need to regain because when everybody staunchly stands their ground, particularly in a society like ours with so many extraordinarily large challenges and people getting poorer on a daily basis, that reality will just continue.

We keep looking backwards and blaming each other for what happened however many years ago in various areas in our country.

We really do have to focus on looking forward, because it is only tomorrow that we can change. We simply cannot change our history.

JEREMY MAGGS: Mike, I took a little bet with myself after we’d done about three or four of these podcasts to see how soon my guests would raise the issue of leadership. You’ve raised it within the first five minutes of our conversation, so you’re kind of up there with everybody else.

Let’s go down that lane if we can for a little. Where is the leadership deficiency in this country and how do we promote, source, train and encourage better leadership in South Africa, because I absolutely agree with you. The moment we have that dynamic right, or at least part of the way right, things will start to look better. It would seem to me that we only have pockets of leadership; but it’s not a universal skill perhaps that we have, and one that we really need urgently.

MIKE BROWN: I think you’re right. South Africa, if you look back over our history, has produced some amazing leaders as a country, leaders who are inclusive leaders, who are forward-looking and leaders who are driven by what’s good for the people that they lead and not what is in their own personal interests. I think if we look backwards – it’s not particularly helpful, as I said earlier…

But we lost our way from 2010 to 2018, somewhere around about there, where we really did have a leadership vacuum around the long-term best interests of the people of South Africa, and we are struggling to regain that.

And in many I think state-owned enterprises what you see is that in that period as a consequence of the actions of leaders so many good people would’ve just chosen to go and work elsewhere. Now we are left with not only leadership challenges, but an operational vacuum where good people decided they didn’t want to be part of that. So there’s an enormous amount to rebuild.

Listen/read:
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SA’s leadership is missing in action

JEREMY MAGGS: I mentioned that you are exiting the organisation after some time, but you’ve sat on the apex of the triangle, so to speak. You have led a large significant listed organisation. What do you think makes a good leader?

MIKE BROWN: Well, the ‘bad news’ view is I’m still around for a while. All we’ve announced is the start of a process to find my successor, and I’m here until I hand over the baton.

JEREMY MAGGS: Point taken, Mike Brown! (Laughing)

MIKE BROWN: But I think leadership is in many ways situational. First and foremost, what a good leader needs to do is be honest, have integrity and at the same time have a very deep and realistic understanding of the current reality and be able to paint a picture and a vision of a much better future.

And then the role of the leader is quite simply to convince people to come [along] on that journey to a better future.

But to do that you have to be credible in being able to demonstrate that it’s not just in your interests to go down this journey, that this journey is in the best interests of all of the employees and clients of Nedbank for a Nedbank vision; or, if you take it to a country level, that this really is in the interests of all of our citizens, not just a certain grouping.

JEREMY MAGGS: And from your own experience, how have you managed to do that? How have you convinced groups of people to do something, particularly when there might have been naysayers?

MIKE BROWN: Well, I think first and foremost you need to have a really good team of people around you before you start trying to convince, in the case of Nedbank, 25 000 or 26 000 people. I’ve got an executive team of 12 or 13 people whose job is really to push and test, so that by the time we’re trying to convince the 25 000 , what we’ve come up with has got a lot of credibility among the top leadership group of the organisation.

Getting the right people

I think that’s really important because leaders can’t do stuff on their own. Leaders really deliver through other leaders, so getting the right people on the right seats on the bus – to use a Jim Collins phrase – I think is absolutely vital.

And then there is the human side of it all. I think people have to just see their leaders not, as many years ago, sort of all singing, all dancing, and everybody bows down to the leader.

I think it’s much more around human-centred leadership…

And walking the people journey of leadership, than the sort of ‘thou shalt’ command and control journey of leadership which in the modern era just doesn’t work.

JEREMY MAGGS: I don’t want to make this a conversation exclusively about leadership, because there are other aspects of fixing South Africa that I want to cover. But one more question, very quickly, about leadership. Is leadership, as I imagine, also predicated on making decisions swiftly, not becoming a victim of inertia – even if some of those decisions you make are not always 100% right?

MIKE BROWN: That absolutely correct. Decision making is data, knowledge, but it’s also a little bit of art as well. You can analyse things forever and it won’t materially change what the big decision is. Now, clearly you can’t make decisions too quickly because that’s also going to lead to a very poor outcome.

[But if you’ve got 10 decisions to make, best you make at least eight of them right and get 10……12:24 [two?] wrong, rather than stare at all 10 for a long time and not make any of them.]

JEREMY MAGGS: More broadly, Mike Brown, do you think there is a willing majority of people in South Africa who still want to fix things or – as load shedding has intensified, as things have become more difficult when it comes to the cost of living – that people have simply given up? Where do you think we sit on the spectrum there?

MIKE BROWN: I think we absolutely just simply cannot give up. We have to be realistic and know that we are a country of considerable challenges – some of them as a result of global challenges and how they play out in our world; but many, many of them are self-inflicted.

But we are also a country of absolutely extraordinarily talented people and considerable potential on multiple fronts.

I think, while many parts of our country may be failing, we are certainly nowhere near a failed state.

I’m certainly not giving up. And when we talk to all of the business leaders and our clients and customers they’re not giving up. They’re going to try wherever they can to roll up their sleeves and play their part in helping to create a South Africa that we are all proud of and that our children and grandchildren want to live in.

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JEREMY MAGGS: And tell me, Mike, where you are seeing glimpses of that, because there is a perception that maybe the divide of cooperation is too wide, that we can’t do it yet. Yet we will see little pockets of difference, little pockets of excellence, little pockets of progress. In your day-to-day operations are you seeing that among people that you deal with, maybe particularly with smaller businesses that are your clients?

MIKE BROWN: Yes, it’s just amazing what great entrepreneurs we have in our country. We would’ve looked back on an event like Covid as something that should have really decimated so many small businesses and it didn’t, because entrepreneurs found a way of being able to deal and work through that, the same as they have with load shedding.

I think it’s incredibly difficult for people to start up new businesses, but existing entrepreneurs have coped extremely well to bring it back to an industry level.

To talk a little bit about our industry, when we go and see foreign investors and big asset managers around the world, which we do at least twice a year, all of them recognise the South African financial services system, and that’s not just the banks. I’m talking about the other areas in the financial services, the stock exchange, the bond markets, etc, as being an absolute island of excellence inside the challenges that our country faces. And I’m sure there are many, many more.

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JEREMY MAGGS: So I’m going to take you into the room now, Mike, and you’re going to chair this meeting. The name of the meeting is ‘The FixSA Meeting’. You are chairing it. We’ve got a broad sense of what the problems are. As a manager how do you start the fix? What is on your list of priorities?

MIKE BROWN: Well, I’m not going to reinvent another list of things that need to be done, because that’s something that I think we’ve done too many times in our country.

JEREMY MAGGS: We are very good at making lists, aren’t we?

MIKE BROWN: We’re excellent at making lists. So I’m going to stick with exactly that short list of three that we’ve come up with from the Business for South Africa platform: energy, transport, and crime and corruption, knowing that that may well be the platform for others to follow, be that water, be that education and many of the other challenges that we face. But essentially what we are here to do is to try for each of those [to] agree on a sensible milestone outcome at a date in the future.

So, for example if it’s the energy issue, what do we think is a reasonable date for ending load shedding?

And then from today going forward what are those key milestones between now and then – that back to the boring business of tracking and monitoring delivery of milestones and correcting when you’re behind?

Read:
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JEREMY MAGGS: So problem solving if I’m hearing you correctly is about taking small bites of the proverbial elephant, so to speak, [it being] critical that you monitor and chart what is happening. How do you track it, what kind of milestones do you need to put in place, and what happens when we don’t reach those milestones? How do you self-correct?

MIKE BROWN: If you take a look at something like what Nico Energy is doing in the energy environment, there are milestones that are set, milestones around when various maintenance programmes will be finished to lift the energy availability factor, milestones around the timing of when the extraordinary amount of self-generation or commercial industrial generation that’s currently being built will actually hit the grid.

So I think all of those milestones exist, probably in more detail in energy and less detail in the other two work streams, and that will be the first order of business for those work streams.

But then, like any programme management office, you need a programme management office up and running; you’re going to miss some milestones, you’re going to beat some other milestones. And where you miss, what are those actions that you take to catch up that space?

Clearer communication

Perhaps more importantly I think what will be really key is to wrap some communication around that whole story because right now we do have a very negative narrative around our society, and I think it’s only by being able to demonstrate delivery of these milestones that people will say, okay, we see you’ve managed to hit milestone one, you’ve hit milestone two.

Okay, maybe you’ve missed milestone three. But as soon as you start hitting milestones, people start to believe the end point. Right now I think people don’t necessarily believe the end point, so we have to create little pebbles on the road to that end point.

JEREMY MAGGS: And with any project, whether big or small, there are always obstacles that are going to be thrown up and the challenge for good leadership is to overcome them.

Philosophically, how do you do that? How do you course-correct?

MIKE BROWN: I suppose most of that is in trying to understand what caused that particular challenge. Sometimes it’s an external issue and there’s very little you can do about that. You’ve just got to realise that you were predicting A, B, C, what’s going to happen externally, and [how] D, E, F actually played out. So even though you’re behind your original milestones, maybe you’re actually doing quite well in the revised environment you’re in.

But what you’ve also got to be clear on is that if you start missing milestones, and it’s entirely of your own doing, then you’ve got to start looking at whether you have the right people and those issues in execution.

JEREMY MAGGS: Well, let’s talk about that. You’ve pre-empted my next question. We are still sitting in this room and you’re still managing this process of fixing South Africa. In an ideal world, who would you call in to help you fix it?

MIKE BROWN: Well, I think in an ideal world you do need a mix of politicians, you need a strong public service being able to deliver and execute, and currently in South Africa I think you need the help of business. And that’s why we are setting up these platforms.

But if you stood back in a sort of more normal-functioning environment, that really should be being delivered within the government that we pay taxes for. But clearly we are in an environment where we need to work together to try and achieve those outcomes.

JEREMY MAGGS: You said at the very beginning of our conversation that you remain optimistic, that you’re not going to give up, you’re in it for the long haul. Where do you derive that optimism from?

MIKE BROWN: I think from multiple levels. Firstly I think to be a leader in any environment in the world, particularly one where there are always things happening everywhere that you didn’t expect, it’s very difficult to be a leader if you aren’t naturally inclined to optimism. You need to be realistic, but you have to be inclined to the optimism of what you can do differently tomorrow to fix the challenges of yesterday.

I think I’m naturally an optimist…

But then I stand back and look at the huge potential that our country has, be those the mineral resources that we’ve been endowed with, be those the financial markets that we have and the depth of liquidity in our domestic financial markets that are the envy of most emerging markets in the world; be that our agricultural endowment, the beauty of our country from a tourism point of view, the fact that we are a gateway into Africa. We have deep skills in this country around legal accounting – those things that businesses that want to access Africa as a gateway would need.

Broadly speaking, our corporate sector in South Africa is well managed. Every now and then there’ll be a hiccup, but that’s the nature of business. But broadly speaking I think we’ve got a very well-managed corporate environment, and [for] people who’ve travelled and looked all over the world this is an absolutely spectacularly beautiful place to live. So I get lots of optimism from all of those factors.

JEREMY MAGGS: I have two more questions for you, Mike Brown. The first one is that you’ve given us the sense of leadership, you’ve given us what needs to be fixed, you’ve given us a broad operating blueprint. So thank you very much for that.

At what point do we know, when we have fixed South Africa, what the end goal is and when we’ve reached it?

MIKE BROWN: I suppose it’s a bit like a business. You never reach your end goal. That’s the excitement of the future. There’s always a new leader who will emerge at some point in the cycle, who will point to the next mountain that everybody needs to climb. But right now in the short term I think it’s all about when do we have sufficiency of electricity supply, that we no longer have load shedding?

When do we have our logistics sector working such that we can actually export everything that we can produce through our ports and through rail without destroying our roads? And when do people in our country feel safe and not fear when they go to sleep at night? I think those would be fundamental. You can add to that I think an outcome which would be fiscal sustainability.

Right now, the economic challenges of those items that I’ve just spoken about really do put our long-term fiscal sustainability at risk.

In simple terms – I don’t think many South Africans realise this – our government has to borrow about R2 billion a day to balance the books. That’s because the economy’s not growing fast enough to produce enough taxes to pay for all the programmes that we implement as a country; so we need to borrow R2 billion a day now. We somewhere need to reduce that amount of borrowings and put our fiscal trajectory back on a sustainable stance.

So I would kind of put those out there and then, I’m sure, getting as a consequence of all of that to higher levels of economic growth so that we can in turn attract investment that reduces our unsustainable and terribly high unemployment levels, particularly among the youth.

Read:
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Youth unemployment is a national crisis

JEREMY MAGGS: And here’s the last one, Mike. I’ll take the slight admonishment from you in saying that you’re going to be around for a while. But having said that, at some point you are going to exit, you are going to retire.

So when you’re talking to young people, let’s say in 20/25 years’ time, what are you going to tell them about the early 2020s and, more importantly, what their role is as the so-called baton-holding generation – because at some point it’s up to the next generation.

MIKE BROWN: I sincerely hope that in 20 or 25 years’ time we look back and say that after an extraordinarily difficult period for South Africa – some of it external, dealing with Covid, dealing with the implications of wars in Europe and what that means for inflation and interest rates, dealing with the challenges that our country faced in the era of state capture – that the early 2020s was the time where we finally started to turn the corner to fix South Africa for the betterment of all its people.

And for you [the next generation] in 25 years’ time, you need to hold leaders accountable so that we never go back again to where we were in the run up to those early 2020s.

JEREMY MAGGS: Mike Brown, thank you very much for joining us.

My name’s Jeremy Maggs and thank you for listening to the FixSA podcast right here on Moneyweb.