South Africa: Opinion – Capitalism Has Gone Rogue. This Is One Way We Can Get a Grip On It.

As a society we must measure the success of our investments not only on the financial returns, but also on the wealth and opportunities they deliver for all

Slurry is a small village in South Africa’s North Western Province.

It is the most desperate place I have visited. Situated in the shadow of a huge cement factory, the village derives its name from the mixture of water, cement and chemical additives known as slurry.

Near the village’s dilapidated church, miniature mounds of earth tell a story that official statistics cannot: what infant mortality looks like in real life.

Visiting Slurry in 2008 confirmed a suspicion I had held for much of the 20 years I spent building financial service businesses but which I never formally articulated – capitalism has gone rogue, it isn’t working.

The version of capitalism evangelised by governments, relished by business leaders and taught on MBA courses – where capital and entrepreneurs coalesce to create bountiful wealth and opportunity for those wanting to work hard – was nowhere to be seen in Slurry.

Of the 400 people who called it home, only three worked at the cement factory. The employment opportunities for the remaining 397 were non-existent. It was clear the villagers had none of the tools required to do anything about their lack of food, education or medical services.

Slurry is, of course, everywhere.

For many, the Slurrys of this world are indicative of capitalism’s intrinsic propensity to fuel social injustice.

For others, including myself, it is more about an economic system that is dramatically failing to realise its potential to create wealth, develop new markets and provide opportunity – all those traits necessary for capitalism to secure the support and engagement of the very people on which its future survival depends.

Capitalism, as it stands, is failing to deliver on its own promise of a meritocratic ideal. Despite these failings, I believe global capital markets still offer the potential to achieve what centuries of philanthropy and state-led interventions have failed to do.

So why has philanthropy fallen short? The huge gap between the scale of problems like global poverty and hunger and the resources available to philanthropists has been as big as the gap between rich and poor itself.

In essence philanthropy, or charity, is seen as what we turn to when business-as-usual fails. In health terms, charity is the hospital required to fix what we break when business-as-usual fails.

What we desperately need is a model for Wellness – a model of capitalism that provides everyone with the basic tools and opportunity to succeed.

Three years after my visit to Slurry, I launched Alquity, a responsible investment fund manager, that remains true to capitalism because of – not in spite of – the fact it sets out to tackle inequality in the markets in which it operates. Alquity is based on the key tenant that ‘how we deploy our capital shapes our societies’.

Public recognition of capitalism’s current failings is driving movements such as the United Nations Sustainable Development Goals which are at the forefront of a global drive to build a more sustainable economy. And there is now a wall of money flooding its way into environment, social and responsible investments known as ESG. And this trend is set to continue with more than $30 trillion moving into the hands of socially aware millennials in the next three decades.

But established, legacy players moving into this space are bringing with them, their fixed assets and fixed mindsets which means they don’t deliver on the real impact.

The recent mainstream industry response has been a flurry of product launches and rampant greenwashing. As investors become more discerning of what ESG and Impact truly means it is heartening to see a growing band of firms that are truly investing with a balanced scorecard.