This assignment identifies and discusses the major social and political trends expected to affect Spoornet the railway business unit of Transnet over the next 10 years.
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Group 3 - Wild West
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Management Environment
Tania H. Adendorff (mb20030085 )
Farouk Dawood (mb20029925 )
Craig Rosewarne (mb20030015 )
Lorna Skhosana (mb20030075 )
Michael O.Visser (mb20029495 )
0 November 2003
Synopsis
This assignment identifies and discusses the major social and political trends expected to affect Spoornet the railway business unit of Transnet over the next 10 years. This paper explores how the social and political changes in South Africa and countries in which Transnet operates, over the next 10 years is expected to influence the business environment. Several social issues are explored in this paper namely, the HIV/AIDS epidemic, access to drinking water and electricity, poverty, unemployment, education, population trends and social welfare. The Political issues include political history, countervailing power, compliant citizenry, local partnerships, black support and the nationalist identity, Based on this discussion the report recommends a number of steps that Spoornet should take to be sustainable, remain profitable and environmentally viable. These steps include the implementation of a comprehensive HIV/AIDS managed Care system as soon as possible, increase its social responsibility activities, rebuild its image around poor customer service, ensure good corporate governance, form local partnerships and embrace issues of employment equity, and black economic empowerment.
Table of Contents
Synopsis 3
Introduction 5
Background Spoornet 5
Social Trends 7
Introduction 7
HIV / AIDS 7
Access to water 8
Unemployment 10
Education Levels 11
Poverty 12
Race 13
Population trends 14
Political Trends 15
Political History 16
Repayment environment 18
Compliant citizenry 19
Politics 19
Black support 20
Nationalist Identity 21
Developments Affecting the Organisation 21
PESTLE 23
Political. 24
Economic 25
Social 25
Technology 25
Legal 26
Environment 26
The impact on the business. 26
Positive impacts. 26
Negative impacts 27
Recommendations and Conclusions 27
Social Issues 27
Politics 29
REFERNCES: 30
Introduction
Transnet the giant of the South African transport industry, is made of 9 business divisions namely, Freight dynamics, Metrorail, Petronet, National ports authority, South African ports operations, Propnet, Spoornet, Transtel and Transwerke. The total Transnet limited is worth about R72 billion in fixed assets, and has a workforce of approximately 80 000 employees. (Transnet Annual Report 2003)
Due to the size of the company, as well as the future expansion strategy, especially into Neighbouring African countries, the syndicate has chosen Spoornet for their analysis. (Http//; www.Transnet.co.za) The analysis focuses on the major social and political trends that are expected to affect the company in the next 10 years.
Background Spoornet
Spoornet is the world's biggest freight railway operator outside the United States. The company functions in 17 African countries at present and is expanding international interests. The countries include Swaziland, Mozambique, Zimbabwe, Tanzania, Sudan, Democratic Republic of Congo and Cameroon
Spoornet predicts that volumes transported by rail on the Maputo line will be tripled over the next 15 years. In 2003 Spoornet employed 34 662 employees compared to 34344 in 2002 (increase of 318)
This business unit is made out of six divisions. According to The group CEO, Mr. Mkwanazi, Transnet would spend R15bn over the next 15 years on additional Spoornet locomotives to increase its annual capacity from 185 million tons to 240 million tons. (Star, Business Report, 23 July 2003).
Spoornet has predicted that volumes transported by rail on the Maputo line will be tripled over the next 15 years.
Spoornet is comprised of the following business units:
. General Freight business - a combination of rail terminals and commercial business. This division is responsible for rail terminals and commercial business. As part of the largest of Spoornet's divisions, it accounted for 70 percent of Spoornet's income this year.(Spoornet Media Release, 26 August 2003)
2. COALlink - transports coal from Mpumalanga to Richards bay for exports. (Transnet annual report, 2003)
3. Coallink's operating profit, has improved from R1 533.7m to R1 678.06m, despite these difficult trading conditions. (Spoornet Media Release, 26 August 2003)
4. OREX - carries iron-ore to Saldanha bay from Sishen. Exchange rate fluctuations resulted in lower volumes of iron ore being transported in 2003.
5. Shosholoza Meyl - Inter-city passenger service within South Africa connecting clients to regional destinations. Per annum 3.5 million passengers are transported. Over 4 years this service has seen an 81% growth. This division supplies the commuters an inter-city passenger service within South Africa. (2003 Annual Report) Shosholoza Meyl's customer satisfaction ratings, on the other hand, improved from 73% to 78%, indicating an improvement in overall customer delivery.
6. Luxrail: - Luxury rail service. The customer satisfaction ratings for The Blue Train jumped from 85% in 2002 to 92.4% in 2003
Spoornet International Joint Ventures - This section handles activities outside South Africa, non-core and joint venture activities within South Africa.
Social Trends
Introduction
According to the executive board of the United Nations Development Program (2001) the major issue in South Africa is the need to transform the society into a multiracial, equitable society. The government used the reconstruction and development campaign to address this issue initially and then supplemented it with GEAR (Growth Employment and redistribution strategy). The report states that the role of the government remains the improvement of wellbeing for all South Africans particularly the disadvantaged majority. The key activities being the reduction of poverty and inequality, promotion of economic growth, creation of employment and dealing with HIV/AIDS. According to the report millions of citizens have ongoing problems of ill health, stress, anxiety, violence, abuse and also work in hard and hazardous jobs for a very low income.
It is mentioned in the report that poverty is not only manifesting in a shortage of food, shelter and clothing but also through illness, stress, anxiety, disempowerment and hopelessness.
HIV / AIDS
Background
Barry Mason (Oct 2001), writes that the South African report shows the devastating impact of HIV/AIDS. The Medical research council report, called the Impact of HIV/AIDS Adult mortality claims that 4.7million in South Africa are infected with the virus. It also states that deaths caused by HIV/AIDS contributed 40% of total deaths. It is estimated that if no interventions are effectively introduce the proportion will rise to 66% in 2010 and that number of AIDS-related deaths in 2001 is 195 000. In the next 10 years life expectancy is expected to fall from 54 to 41 years.
The fact that the groups primarily affected are men and women in their 20s and men in their 30 who are in their productive years has major implications for the economy and business at large.
If the national HIV prevalence rate of 26.5 (antenatal survey report 2002) is applied in this age group to the 34 662 employees of Spoornet it is estimated that approximately 8600 employees will be infected with HIV AIDS. As with all other companies to manage this situation whilst maintaining expansion, skills will have to be retained and the disease has to be managed effectively in order for workers to remain productive for as long as possible.
As one of the largest employers in South Africa the impact of the HIV/AIDS epidemic in the region holds serious implications for the productivity, sustainability and expansion of Transnet. Applying the national HIV/AIDS prevalence rate of 26.5% to the 72 178 employees of Transnet means that any point in time it is estimated that 18 445 employees are infected. Using the same rate on the 20 000 employees without medical aid it is estimated that 5000 employees in this group is HIV positive. To provide efficient services and care for these individuals is in the interest of this large employer as well as the individuals.
In addition to providing care for these individuals, more importantly the company also needs to focus on prevention interventions, ensuring that those employees who are uninfected remain HIV negative.
According to Helen Jackson (2002) Policies based on human rights are needed to make sure that employers respond positively to HIV/AIDS at workplace and sectoral level. Work place policies and programmes are required to reduce infection rates, to support infected and affected employees, so that they can be healthy and productive with a view to ultimately ensure the viability of the company and industry as a whole (p323 AIDS Africa Continent in Crisis)
According to the 2003 Transnet annual report, Transnet has developed a comprehensive programme that integrates HIV/AIDS education, awareness, voluntary counselling and testing, treatment, healthcare, de-stigmatisation and care and support programme.
Access to water
This report quotes a 1998 study done by Johns Hopkins, saying that while Africa uses only about 4% of its renewable freshwater resources, water is fast becoming one of the most crucial natural resource concerns. Africa is one of the two regions in the world facing serious water shortages even though it has abundant freshwater resources in the form of large rivers and lakes (http://www.grida.no/geo2000/english/i61a.htm.)
The Johns Hopkins report further states that the demand for water is increasing rapidly in most countries due to population growth and economic development. At present, 14 ...
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Access to water
This report quotes a 1998 study done by Johns Hopkins, saying that while Africa uses only about 4% of its renewable freshwater resources, water is fast becoming one of the most crucial natural resource concerns. Africa is one of the two regions in the world facing serious water shortages even though it has abundant freshwater resources in the form of large rivers and lakes (http://www.grida.no/geo2000/english/i61a.htm.)
The Johns Hopkins report further states that the demand for water is increasing rapidly in most countries due to population growth and economic development. At present, 14 countries in Africa are subject to water stress or water scarcity, with Northern African countries facing the worst prospects. 11 more countries is expected to join this list in the next 25 years. (http://www.grida.no/geo2000/english/i61a.htm)
According to the Johns Hopkins report It has been estimated that by 2025 up to 16 per cent of Africa's population (230 million people) will be living in countries facing water scarcity, and 32 per cent (another 460 million) in water-stressed countries (Johns Hopkins 1998). Bryant (1994) is also quoted in this report stating that Africa's share of water on a per capita basis is estimated to have decreased by as much as 50 percent since 1950.
Escalating demand for increasingly scarce water resources is causing growing concern about future access to water, particularly where water resources are shared by two or more countries based on the Johns Hopkins report in 1998. (http://www.grida.no/geo2000/english/i61a.htm)
The report also mentions that raw Industrial wastes are still discharged without treatment into rivers and lakes in most African countries, causing a major and persistent health problems. Saltwater intrusion into surface and groundwater sources is also a major issue. A related problem is the high level of dental and skeletal fluorosis that occurs in several areas, particularly on Africa's east coast.
The United Nations development programme (UNDP) in 1997 stated that with repeated droughts and chronic water shortages in many areas, most countries and people already pay an extremely high price for water and for the lack of water. The poor, especially women and children, usually pay the highest price in cash terms to buy small amounts of water. They also expend more in calories carrying water from distant sources, suffer more in impaired health from contaminated or insufficient water, and also lose more in diminished livelihoods and even lost lives. (http://www.grida.no/geo2000/english/i61a.htm) More than 300 million people in Africa still lack reasonable access to safe water. Even more lack adequate sanitation In sub-Saharan Africa, only about 51 per cent of the population have access to safe water, and 45 per cent to sanitation based on the 1996 UNDP report. (http://www.grida.no/geo2000/english/i61a.htm)
Unemployment
According to Martin Westcott, managing director of PE Corporate Services the shortage of skills in South Africa is worsening and impacting on the plans for economic growth and the creation of jobs. There are shortages of senior, middle and supervisory managers, declining numbers of artisans and technical workers trained, and generally a decrease in the number of most professions. The issues responsible for the erosion of skills quoted in this article are the inevitable impact of apartheid, emigration of especially managers, crime, corruption and declining standards. Emigration is responsible for 13% of executive terminations 11% being under skilled staff. Annual cost is estimated at R200 000. (http://www.btimes.co.za/98/0322/survey/survey11.htm)
Many different rates of unemployment are available for South Africa so it is very important to consider the origin and the methodologies employed to arrive at these statistic. According an International labour organisation (ILO) in 1996 a comprehensive review was conducted which showed that unemployment is estimated at lower levels than usually indicated. Research shows that unemployment in South Africa is as much as a third lower than cited figures. Highlights of the research indicated that to ensure economic growth and social stability, challenges such as income inequality, reducing unemployment and improving industrial productivity need to be faced. It also warns that on should be careful of overestimating unemployment as it can cause interventions in the labour market that are counter productive.
Statistics are often outdated and the figure of 33% is an overestimation with the figure being closer to 20%. On the other hand other agencies have cited the figure as high as 46% http://www,ilo,org/public/english/bureau/inf/pr/1996/32.htm)
Despite the different figures of unemployment quoted it is generally estimated that unemployment is considered to be very high in South Africa. Table 1 is taken from an article by Kingdon G. and Knight J from http:www.csae.ox.ac.uk/reprogs/usam/default.html
Table 1. Unemployment rates in South Africa 1993-2002
Year
Source
Broad Definition
Narrow Definition
Sept 1993
SALDRU
31.2
3.0
Oct 1994
OHS
31.5
20.0
Oct 1996
OHS
35.6
21
Oct 1998
OHS
38.6
26.1
Sept 2000
LFS
36.9
25.8
Sept 2002
LFS
41.8
30.5
Source: http:www.csae.ox.ac.uk/reprogs/usam/default.html (Kingdon G. and Knight J)
According to Kingdon and Knight (2002) in a study, researchers controlled for school quality to explain the differences between black and white unemployment rates. The results showed that as a result of discrimination in the education sector, the education received by blacks was extremely inferior compared to white education. The fact that employers take into account quality of schooling when they recruit and when they pay employees explained the gap between white and black unemployment rates.
Education Levels
Census 1996 showed that 11% of 8.1 million children aged 7-15 were not attending school. This translates into 891,000 children in this age group.
Of the 16-25 age group 6% had no formal schooling and 13% had not completed primary school. Altogether 23% of South Africans aged 26+ had not attended school. The percentage for women was higher at 25% compared to men at 20%.
http://www.pmg.org.za/docs/2003/appendices/030911educbriefdoc.htm
In a statement by the Minister of Education on the 11 September 2003, he stated that over the last 4 years, the quality of the education system has improved. He also outlined the future plans and development expected in the education sector in the near future. The new funding formula for higher education is expected to facilitate National policy goals and objectives and to ensure that the outputs in terms of graduates and research are met. A policy regarding the subsidising of foreign students is also being devised making sure that students from the SADC region will continue to be treated in the same way as South African students, in terms of government subsidies.
Another important development is the Further Education and Training (FET) Band. It is expected to contribute extensively towards skills' development, employment and economic development. The 152 Technical Colleges will be replace by 50 FET colleges that will produce creative, reflective lifelong learners that can enter the labour market or pursue a learning career. According to the minister this initiative has placed the sector for delivery of skills on the cutting edge for skills development in South Africa. Advances in Information and Communication Technology have dramatically affected the learning and teaching processes. The introduction to ICT to institutions will create new possibilities in the next 10 years. In November 2001 the Department of Education in conjunction with the Department of Communications launched the strategy for Information and Communication Technology in Education. The goal of the strategy is to equip each student in general and further education with knowledge and skills to use ICT confidently by 2013.
Poverty
According to P. Pillay absolute poverty is declining in the South African economy. Based on a UNISA study it has been shown that this decrease has resulted in a halving of levels of inequality in SA. The Gini co-efficient however remains at 0.63 indicating that despite this progress South Africa remains a very unequal society. The economic poverty experienced by South Africa is worsened by the social poverty. Contributing to this is the large number of people moving to urban areas seeking to alleviate the economic poverty. This means that through the destruction of social structures poverty is deepened. He ascribes the decrease in poverty to government interventions and not to increasing economic prosperity.
He also states that to stimulate economic growth it is imperative to get the level and the quality of skills development right. He states that the evidence for this approach speaks for itself internationally based on the fact that development cannot occur without suitable investment the delivery of education and training. He argues that that in order to attract high levels of investment one needs to
Increase the skill level in the country. http://www.nedlac.org.za/research/seminars/sa_economic_futures_propect.htm
According to Orkin 1996 Census 26% of employed people were earning R500 of less per month. Low income levels in the SADC region are a serious obstacle to growth. Thus the majority of investment is linked to the extractive industries where growth does not depend on good levels of domestic income. Investors experience constraints to investing in South Africa. These need to be lifted. The constraints include commitment of privatisation, transaction costs, incentives and tax packages, market size, political stability, impact of HIV/AIDS on the labour force, constraints on skilled immigrants, the quality of infrastructure. They state that government needs to recognise sector differences in order to improve the investor environment. Perceptions are seen to be very important and when one is a low economy in Africa managing perceptions is vital. A significant component of managing perceptions is the extent to which government is open to discussion with possible investors. Research has shown that companies who talk to government are more inclined to investment than others.
(J Cargill and K. Heese 2002)
Steven Friedman (1998) maintains that economic policy has to be designed taking into account the socio-economic domestic environment and has to take cognisance of what will change people's behaviour in a manner that supports growth and development.
In South Africa perceptions are strongly influenced by race and are often played out in a variety of ways not supportive to economic growth. Ensuring that the impact of race on economic behaviour is addressed is crucial to securing a sustainable future.
Economic growth depends on people working together therefore agreement between the major economic role players are essential. For this to be successful the country has to take into account broader social variables (Friedman 200)
Race
To date race has been largely ignored in the economic development of this country. It is now recognised that this is an important feature that needs to be addressed in a direct manner, because the impact of racial disharmony on the economy and society is great and has resulted in the fragmentation of society (Friedman)
Population trends
According to an article by Orkin based on the 1996 Census the key findings were that there was 40.58 million people living in South Africa. More than 54% of people lived in urban areas. The 2001 Census showed 44.8 million people in South Africa.
Apart from the mortality rates due to HIV/AIDS another important population factor affecting business is the issue of migration. In his article Bukula (1995) called' Opportunities for micro enterprise "Bukula warns that in a transitional society it is important for people not to solely concentrate on perceived threats but also to grasp the new opportunities that are created in such transitions. He uses the example of using migration patterns positively as it provides an opportunity for micro - enterprises that can be established in informal settlements.
Reitzes(1998) states that an urgent exploration of the assumptions by policy-makers and citizens about cross border migrants is essential. Attitudes to foreigners demonstrate the perceptions of South Africans that the presence of these people is costly to the country and hold no benefits. Finding from a 1996 study show that the effects of immigrants are very complex and influenced by a range of factors ranging from immigration policy, country of origin, labour markets and the need of its economic sectors. The statement that foreigners take jobs from locals was also refuted by this study.
Social Welfare
The department of social services provides a comprehensive grant programme to address social relief and distress. By definition social assistance means assistance in the form of grants or financial support provided by the government. Each of these grants has a set of criteria with which applicants must comply. When a person applies for social assistance, the most important factor is his/her financial position. The reason for this is that grants are only awarded if the applicant's financial resources are below a certain level. In determining whether an applicant qualifies for a grant, and if so, to what amount he/she would be entitled, the income and assets of the applicant and spouse or the foster child concerned are assessed. The grants include an Old-age grant, a Disability grant, a War veterans grant, a Care Dependency grant, a Foster Child grant, a Child Support grant; Grant in Aid and Social Relief of Distress.
AMOUNTS OF GRANTS AS AT 01 APRIL 2003
Grant Type
Amount
Old Age Grant
R700
Disability Grant
R700
War Veterans Grant
R718
Foster Child Grant
R500
Care Dependency Grant
R700
Child Support Grant
R160
Grant in Aid
R150
There are also other social issues such as electricity , and migration that also affect business that need to be kept in mind. According to Hilmi Toros(http://www.ipsnews.net/riomas10/2908_9.shtml ) 1.6 billion people do not have access to electricity and 2.4 billion are depending on primitive biomass for cooking and heating. Great investment is needed to supply power and even more so to make it sustainable to additional users, according to energy experts at the U.N. World Summit on Sustainable Development.
She quotes Robert Priddle, executive director of the International Energy Agency (IEA) as saying that in the absence of far reaching new policies, 1.4 billion will still have no electricity in 30 years' time.
Political Trends
According to Lindblom (1977) because public functions in the market system rest in the hands of the businessmen, it follows that jobs, prices, production, growth, the standard of living, and the economic security everyone all rest in their hands. Consequently, government officials cannot be indifferent to how well business performs its functions. Depression, inflation, or other economic distress can bring down a government. A major function of government, therefore, is to see to it that businessmen perform their duties.
- tax offsets to induce investment
- concessions may be necessary
- government to share their formal authority with corporate officials
- business simply needs inducements, hence a privileged position in government and politics, if it to do its job
Within the South African context business is more heavily taxed than before. For example companies are taxed at 30% and an additional 12% for STC.
Regulation of monopoly, industrial relations and now environmental pollution
Established business remains largely in white hands. Although the above situation is pertinent government has also made a concerted effort to form partnerships to understand and address the impact of the above issues on businesses. This is evident from the formation of NEDLAC, introduction of Black Empowerment programmes and the importance of good corporate governance.
As part of government's response to the political and economic challenges that has been referred to, a restructuring programme is currently embarked on were state assets are being disposed using black economic empowerment as one of the criteria of disposal / alienation. This process is currently taking place at Transnet, Eskom, Denel and Telkom. This process underpins the commitment of government to focus on social delivery and to nationalise the economically productive assets, giving business the chance to grow the economy.
No system exists where businessmen get all they ask for. The task of government is to find responses to the demands of businessmen sufficient to motivate them to perform the tasks delegated to them.
Sometimes government fails to respond to business demands even though penalties, which come in the form of slowed growth and unemployment, are severe. (Lindblom 1977)
Political History
South Africa's transition to democracy was the outcome of a lengthy process of pact making. Influential analysts have assumed that the pact - or pacts - have not only paved the way for democracy, but have also limited, or at least shaped, the nature of the policy which the pacts are producing.
The feasibility of bargaining between the ANC and the organisational expressions of minority society is strengthened by the fact that bargaining between the ANC and private interests, and between those interests themselves across racial and political divides, has become a significant element of social and political life.
Nedlac (National Economic Development and Labour Council) has also absorbed a host of forums dealing with socio-economic and development issues.
As the ANC presses for a constitution which would reduce minority parties to political spectators, given the probability of an enduring ANC majority, its ministers devote themselves to seeking a 'partnership" with business that would allow the latter to play a role in core government functions, such as crime prevention and the management and delivery of key public services.
The electoral competition is constrained not by the pact, but by social realities that will clearly persist whatever formal political rules apply.
The South African transition is indeed a pacted one. The pact-making process did not end with the founding election, but is likely to continue well into the future: Bargained compromise is the fulcrum on which society revolves.
Increasingly, however, the key pacts are likely to be made not by political parties but by government and private interests.
In an article in Synopsis it is said that the ANC's dominant victory has seemed to some to announce the end of black opposition. According to Xolela Mangcu (Aug 1999) this view ignores the historical pluralism of black politics and states that other political movements may well re-emerge to challenge the ANC, taking into account that Thabo Mbeki's detractors fear a black dictatorship and that ANC supporters may think that an opposition is not needed.
In an article, Steven Friedman (Aug 1999) argues that for efficient government operations, a system is needed to ensure accountability of the ruling party. Opposition parties are essential to ensure prevalence of countervailing power.
Outsiders, citizens groups, must have enough muscle to make government listen, even if they do not always do what they wish.
There is little incentive for it to take the opposition seriously, because there is no prospect that it could become the government.
Management and labour are trying to come to terms with one another in an attempt to de-politicise organised labour.
Race remains the most important identity, albeit not the only one. So no party can aspire to govern unless it wins substantial black support.
Cosatu has shown that it is possible to support the majority party (as most citizens do) and present differing perspectives.
Challenging corruption and mismanagement - civil society. Its major groups have the muscle to hold government to account. The key question will be whether those sympathetic to the ANC will wish to press for accountability, and whether those who are not will be hamstrung by their lack of credibility among the majority.
Repayment environment
Mary R Tomlinson (March 1999) states that a very big problem that is extremely difficult to manage in South Africa is the failure of many township residents to pay their rates and service charges and/or mortgage bond instalments.
She states that this major problem weakens the new democratic order and the financial system and that as long as urban consumers do not pay for services, the funding base of South Africa's major cities will remain weak. Through not meeting their financial commitments, citizens are breaking the promise on their part of the 'social contract', which is a pillar of any democratic society.
To address this problem, a joint effort by government and banks is required to sort out this problem, as there is a lack of policy skills and not capacity.
According to Friedman (1998) it has generally been thought that the breach between policy and implementation is as a result of the lack of capacity to implement capacity. He mentions that a top Provincial civil servant has suggested that the problem be in reality one of a serious lack of policy analysis skills.
Compliant citizenry
Caroline Kihato (1998) states that an Idasa survey and other indicators have dismissed the theory that democratically elected local government would be able to ensure a responsible citizenry: She states that, to create responsible citizenry, local democracy needs to be consolidated with mechanisms that provide a close and durable crossing point between local government and voters. It has been shown that improving delivery does not necessarily improve compliance.
Caroline Kihato (1996) suggests that Local partnerships may be the best way forward to address this problem.
Informal entrepreneurs who illegally tap into electricity and water supplies can be accommodated in a creative local partnership with local government rather than being cut off totally.
According to Shubane (1998) there have been many benefits with the political change in South Africa. However at the same time many negatives that needs to be addressed also accompanied the changes. For example, boycotts of services are still in place in many townships, and crime has been the most obvious manifestation. He states that crime figures may be understated and under-reported. In addition to these, corruption is also considered to be widespread.
He mentions that transitional States usually start the process of change with an eroded capacity as well as a legacy in which adherence with state laws and rules have not been internalised by many citizens.
An issue related to regulatory capacity that requires urgent attention is the weak police capacity to investigate crime, ensuring that suspects are brought to court and receive convictions at a reasonable rate. According to Shubane (1998-1909) White collar-crime, scams and cyber-crime are rising and worsened by the entry of foreign crime syndicates into South Africa. South Africa has become a haven for drugs. In addition, administrative capacity is poor and corruption in the Civil Service is widespread. (Shubane 1998)
Politics
The 1999 elections have diminished countervailing power, which is necessary for holding government accountable to the electorate. (Friedman 1999). Because there are sites of counterveiling power in South Africa this is not necessarily a major cause of concern. It is important that counterveiling power present inside and outside the government system. Meaning that inside the legislature there should be political groups to which those who govern are obligated to pay attention. On the outside, citizen's groups must have enough clout to make government listen. A worrying factor is that with a two thirds majority there may be no incentive for the ruling party to take the opposition seriously, as there is no prospect that they could become the government in the future (Friedman 1999).
Black support
According to Friedman (1999) race stays the most important identity to South Africans. This means that for any party to govern it needs to win substantial black support. The opposition parties that appeal to Black voters are the UDM and IFP, who could be the only parties to face up to the ANC.
The IFP's position remains narrow as a counterveiling, as it is the ANC's partner in government [Nationally] and in KwaZulu-Natal. The support for the IFP is concentrated not in one Province but only in part of the Province.
The UDM is in a better position to contend, but only on the condition that it substantially increases its support base. This possibility is viable in light of all the corruption and mismanagement emerging within the current government.
The influence of minority interest groups should not be disregarded as these do have power that can be expressed, through business, professional and ratepayers associations.
Minority parties do have power in geographic locations and religious affiliations; the ANC needs to engage directly with interest groups but should also pay attention to the needs of minority black-led parties.
Cosatu has shown that presenting differing perspectives does not mean withdrawing support from the ruling party. In South Africa, the power of society to challenge corruption and mismanagement does not appear to be strong enough. It is still to be seen how much influence, those who do not owe it's assets to government have over policies. Many citizen remain out of reach of the government. These include those not paying for services, not reporting crimes and not paying taxes. Although these citizens may not be able to countervail, government still needs to get buy-in from them in order to deliver. In an important development President Mbeki's promise of African Renaissance and service delivery has joined the PAC and Azapo with the formation of a ANC/SACP/COSATU alliance. The question as to whether this alliance could last is an important one, as COSATU and other unions are divided regarding issues of privatisation and job losses. (Friedman 1999)
Nationalist Identity
The issue of breaking nationalist identity has been a difficult one for the IFP. The leader Mangosuthu Buthelezi does not have much time left in politics in comparison to Bantu Holomisa of the UDM, who is young and has placed the UDM clearly as opposition to the ANC.
Many critics argue that government has been too occupied with the wellbeing of criminals rather than the wellbeing of victims. Some say that embracing the human rights ethos encourages crime. For example, it is the view of the former chair of the Gauteng legislature's standing committee on safety and security, Obed Bapela, that, 'too much might have been given too soon' in the human rights area. (Friedman 1999)
Developments Affecting the Organisation
Based on the above exploration, the syndicate group has arrived at the following opinions for the next 10 years:
o The Syndicate predicts that the ANC will be in power, with a shift towards business friendly policies, with shift from the social issues and a drop in voter support.
. The syndicate sees the relationship of the Tri-partite alliance as being strong, with adequate support and representation on all sectors of government, business and society (NEDLAC, BMF, CIVIC organisations).
o The ANC has delivered on the social welfare programmes (grants, access to clean running water, provision of sanitation, housing, and education.
. The majority of the beneficiaries are mostly from the black and previously disadvantaged voters.
2. The socio-economic targets are still not achieved, and are still seen as symbols of the previous political objectives.
o The perception of the majority sees the ANC as the only political party to meet their needs & objectives.
. Due to the majority of blacks still living in poverty with high illiteracy levels, their position / situation makes them gullible to the election manifesto of the ANC.
2. The failure of the opposition parties to articulate the needs of the black majority and portraying the ANC as failing, counters the benefits that have emanated from the delivery of the ANC government.
o The emergence of an elite could shift the thinking from social to the needs of the empowered elite.
. The emergent elite, who mostly come from the ranks of the ANC and the Trade unions, now businessmen, is likely to influence government to look at policies that create business friendly legislation.
2. The government would probably have addressed the backlog of the social issues that are currently on the ANC election agenda.
o Weak alliance of opposition parties to challenge ANC dominance.
. Only opposition parties that appeal to the black majority are the UDM and the IFP, with the latter being a government partner at a National and Provincial level.
2. The DA & NP are mostly attractive to the white minority interest voters.
o Regionalism (co-operation between African states)
. The relationship of SA with their regional neighbours has created conditions for the ANC government, which is the sole shareholder of Transnet, to create growth opportunities for Spoornet in terms of the Framework agreements of the regional co-operation bodies, e.g. SADC, NEPAD and AU.
The benefits are derived from AGOA, the African Growth and Opportunity Act. The Act offers tangible incentives for African countries to continue their efforts to open their economies and build free markets. E.g. In the initiative between the Zambia, Zimbabwe and Mozambique, a proposal is to build a 300km-rail infrastructure, to bridge the countries with a rail line into what would be known as the Beira to Benguela corridor.
PESTLE
The syndicate used the PESTLE analysis to look at the effects of the political and social developments on Spoornet.
.1 External Environment
According to Michael Porter et al. (1997) six largely uncontrollable external forces influence an organisation's marketing activities (see Figure 1), namely
Figure 1 - External environment
Economic
Conditions
Political Ecology
External
Environment
Social and Technology
Cultural
Political and
Legal
"The external environment changes constantly. Furthermore most changes are beyond the control of individual firms. Firms must react to, or anticipate, market changes. Overall, changing market conditions create opportunities for some firms and pose threats to others. "Schnaars" 1998, p14.
Rail transport is the most viable mode of moving goods and people across the African continent. Air and sea transport is not economically viable in Africa. Economies based on agriculture, with little growth in the manufacturing, mining and services are heavily dependent on rail.
Political.
There is a co-operation agreement between the regional governments, as a response to the political conflicts that have affected the stability in the countries. The formation of the defunct AOU, with the formation of the African union and NEPAD was formed to instil a political agreement between the African states.
Economic
Economic growth is best achieved in countries were there is political stability. One of the aims of NEPAD is to help the political stability of countries, by encouraging economic stability and codes of conduct for all African countries that have subscribed to the African union.
The peer review mechanisms in the NEPAD framework have been designed to create a common political code of conduct. This will ensure that rogue governments and political coups are managed and eliminated. e.g Democratic Republic of the Congo, Zimbabwe, Burundi and Sudan.
Social
The following factors have a serious impact on the initiative currently undertaken, as well as on future projects. As the rail industry is highly dependant on human resources, the following effects will need to be managed.
o The demand for water is increasing rapidly in most countries due to population growth and economic development.
o Most people and countries are poor
o Management of the HIV/ AIDS pandemic
o Rapid population growth
Technology
The technological developments in Africa are not geared for global trade. Information and communication technology has been identified by NEPAD as the targeted priority for human and economic development in Africa. In Spoornet's advance into Africa, the need for skilled and semi-skilled labour will have to be addressed.
Legal
The opening of borders and legislations governing various agreements and partnerships will impact directly on the capabilities of Spoornet's expansion program. Africa has a history of defining policies and not having the capacity of governing due to the instability and conflict in African countries. The problem is further compounded by American and European countries that rape the continent of it's valuable natural resources.
Environment
The following all affect business at large:
* Water-pollution
* Air-pollution
* Forestry
* Preservation of natural habitats (wild-life )
* Green-peace (protecting the resources of the sea)
* Anti-pollution acts
* Oil spills
* Natural disasters
* Hunger / starvation
* Below the breadline
o According the annual report, China's control over the Korean market, Japan, Hong Kong and Taiwan resulted in the reduction of South African exports from 11.3 million in 1999 to 3.3 million in 2002. This division is responsible for the transportation of coal inland as well as through the export terminals. This is especially evident from Mpumalanga to Richards Bay for exports.
The impact on the business.
Positive impacts.
o Through the regional agreements the political environment will result in the smooth growth of business into the neighbouring countries, especially countries that are affiliated to the African Union and SADC.
o This economic growth will reduce the economic burdens of the country, e.g. illegal emigrants, unemployment and others.
o The government of South Africa will provide investments and infrastructure to support their neighbouring countries as the leading economy in the southern region, as part of their social responsibility in those countries.
o The social ills affecting the region can create an opportunity for the SA government to use the expertise of Spoornet to assist the regional economies through co-operative partnerships to improve and rebuild their economic infrastructure.
o The opening of the Beira to Benguela rail project will create trade opportunities in these countries through transporting of products and people in this region.
o The opening of the borders has removed the legal boundaries between the regional countries. This will create opportunities for cross border trading without the inconveniences of checks and delays at the customs.
Negative impacts
o Governments of neighbouring countries will need to demonstrate the ability to protect the infrastructure
Recommendations and Conclusions
Social Issues
. It is recommended that Spoornet puts in place an effective and efficient managed care system for HIV/AIDS infected employees. This programme should focus on increasing knowledge, skills and awareness as well as provide continued care and support. Training, education and awareness programmes should be implemented once the infrastructure is in place to ensure prevention.
2. It is important that as part of its social responsibility programme, Spoornet addresses the water and electricity shortages that it encounters with expansion to areas that are poorly resourced. This should include the education of especially women and children on water conservation and sanitation.
3. The high unemployment rate provides and opportunity for the company to utilise local labour in their areas of expansion and minimum wage requirement. This is also related to skills development, education and training. Given the lack of skills in South Africa it is important that the company develops skills in their existing work force as well as participates in social programmes to improve skills.
4. To address the wider issues of poverty including social welfare Spoornet should create employment as well as form partnerships with government, non-governmental organisation and academic institutions as part of its social responsibility programmes.
Political Issues
History
. Transnet must rebuild the image around poor service and customer management relationships. This will ensure that the company operates on business principles, and meet the objectives of the shareholder, which are in line with the agreements reached at the AU, NEPAD and SADC countries.
Countervailing power
2. The focus for Spoornet should be based on the rules governing all businesses. This will ensure that the company is apolitical and party neutral, but rather governed by the company law.
Normalising repayment environment
Transnet needs to formulate solid strategies to ensure collaboration with other role players in especially the housing industry, to develop strategies of dealing with the current problem. This is due to the current default on their mortgage book by their ex-employees. The syndicate endorses the lending criterion that covers collateral and affordability studies to prospective loan applicants as part of the interventions to normalise the repayment environment.
Compliant citizenry
Spoornet needs to create awareness to the public about the effects of vandalism, stealing of electrical wires, free rides and how these affect the delivery of social services to the communities through the proceeds that are received y the shareholder, which is government. Also how government recovers the damages from the taxpayer.
Local partnership
Transnet must focus on building and maintaining viable business relationships with credible business partners and the communities in which they operate.
Politics
Transnet must support and embrace the South African constitution, on issues of black economic empowerment, employment equity, restructuring of state owned assets and promotion of the corporate governance recommendations. The embracing of these imperatives will contribute positively to nation building.
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