OPINION | Lessons from the East

This article aims to explore some triggers for the week of unrest in South Africa in July 2021, and, more importantly, examines preventative measures to avoid a reoccurrence of this type of national disaster.

I have read and listened to countless politicians, journalists, analysts, influencers, and a plethora of talking heads opining on the cause/s of the week of unrest in South Africa during July 2021. The stated causes and contributing factors were many, and a common theme in all the commentary seemed to point to the Zuma arrest as the spark that got the lawlessness going.

My background is in Operations, which can be described as the study of ‘what has to be done to reach a particular goal’; not the ‘where’ but rather the ‘how’. The final goal is also known as ‘the business strategy’, or the Grand Strategy. Operations strategy can be summarised as: ‘what must be done to get to the place identified in the Grand Strategy?’, not ‘where do we want to go?’. Where we want to go is the Grand Strategy!

Many years ago, I worked in Tanzania where I met a senior Chinese official who had come to Tanzania to review the Chinese contracts that were being undertaken there. The projects ranged from mining to civil engineering and socio-economic interventions. He was a trusted member of the ruling party and he gave the impression that he was well-versed in high-level economics, politics, and management, a person who should be listened to.

I asked him the question we had asked many times at our board level and that had resulted in much speculation, but I had never had the opportunity to get an answer from a senior government official. The question was: "Why do the Chinese mostly buy raw materials and not any products that have had value added to them?" Even when doing engineering projects, all the inputs were sourced from China.

His answer was quick and emphatic: “We have determined that the biggest threat to any regime is internal unrest, not external factors. War we can handle... the biggest cause of internal unrest is unemployment. That is why we try to get raw materials and not products that have had value added to them. The more value that has been added to the products means less employment for our people”. This they applied to both goods and services.

Prior to working in Tanzania, I worked with a Fortune 500 company that had manufacturing as its core focus. The company was looking for expansion, the home market was very over-traded and the potential for growth was limited. The board started to look for other places to invest.

Several areas were analysed: Europe, too much competition; Russia, not much affinity; India, democracy and bureaucracy get in the way, and so on. But there was one stand-out country: China. At that time China was lagging behind all its competition. The only thing that it had going for it was a large population with potential for growth, the very thing that all pundits had written off as a huge negative.

The company approached the Chinese government to get access to the market. The response was positive but with one condition: the products must be made in China. Not a problem as there was lots of cheap labour.

1. We duly bought in to a Chinese firm and redeveloped the factories to make them state-of-the-art modern installations.
2. We were then told that it would be very difficult to extend the work visas for our senior and technical staff. Chinese nationals would need to fill the positions, so we began a training intervention.
3. The last condition – a very strong suggestion – was that we should export 20% of our made-in-China goods.

Reflecting on the points above, China's operational strategy emerges clearly. The desired outcome or the ‘Grand Strategy’ was to get China up and running so that it could become a force to be reckoned with on the world stage; in fact, to become a world power.

Number 1 above brought in Foreign Direct Investment (FDI). FDI is a prerequisite for high growth rates, which was what China needed as the alternative to dragging themselves up by the bootstraps, a slow and potentially hazardous process. Getting the people working requires capital, lots of it and fast.

Number 2 had the planned result of improving the skills base that is required for a modern manufacturing country, which is where true wealth is created and prosperity for all becomes attainable. We taught the skills that we and other manufacturing factories needed. For every ex-pat that was going to go home we trained two or three locals as we did not know how well they would do. What transpired was that the additional people trained by us were released in the general population where they could then start their own companies.

The last request (Number 3) was easy to evaluate: what this export drive did was to ensure that the balance of payments would be in favour of China.

To translate this into an academic context: what the Chinese had achieved through the application of their operations strategy is what business and economics professors have been talking about for ages. They had realised the ‘Grand Strategy’, the required destination, a perfect outcome. No-one in their right mind would deny the success of this strategy: China is now a World Superpower, from a base dismissed as broken and useless not too long ago.

South Africa is at the same point where China was in the 1970s and 1980s:

• We need FDI.
• We need skills.
• We need a balance of payment surplus.

About the author:

Mike Mundy has worked as both an employee and a consultant for many organisations ranging from “Mom and Pop” outfits to Fortune 500 corporations, and always in Operations. He has also had a parallel career as a lecturer in local and international business schools for the last 22 years. Mike lectures on the Operations Management short course at Wits Plus.