By Isolde deVilliers*
Introduction
This is a work in progress flowing from a paper presented at the Seventh Annual International and Comparative Urban Law Conference held virtually in July 2021. The central concern in this piece is how law and governance produce urban space and urban spatial relations that remain. Unequal distribution of power marks all of these relations.[1]
The central argument I pose here is that conceptualizing these relations in corporate terms, as seen in the KING IV report, a corporate governance policy that includes municipalities in its sectoral supplements, will not dismantle, but rather further entrench existing power relations. I am concerned about the corporate language used to regulate governance in South African cities and rely on the work of radical geographer Doreen Massey to highlight the main issues this presents, namely a loss of a sense of the city as a public space and the reduced possibility for participation and appropriation of the city implied in a move from inhabitants to stakeholders.[2] Massey, in After Neoliberalism: The Kilburn Manifesto shows how vocabularies matter, just as she consistently showed through her work that geography matters.[3] The vocabulary of “customer, consumer, choice, markets and self-interest” she argues, “moulds both our conception of ourselves and our understanding of and relationship to the world.”[4] While this is by no means a novel argument, I propose that in the context of cities, a corporate characterisation of the roles, interactions and relationships construct and enforce new subjectivities around individual choice and self-interest.[5] In the current South African climate, where corruption, financial mismanagement, and financial distress are rife in municipal councils, there is an apparent common sense to their inclusion in the KING IV report. However, I agree with Massey that what underlies “these elements of our economic vocabulary (and there are many more) is the understanding that markets are natural: that as either external to society or inherent in ‘human nature’, they are a pre-given force.”[6]
To fully consider the reason why their inclusion seems so natural and generally welcomed, I also consider the possible positive implications of including municipal councils in a document on corporate governance, but argue that there is already sufficient regulatory mechanisms, legislative, and policy frameworks in place and that the issue is not a lack of regulation. Corporate and city power once coincided. Firms started in a city and exploited the labour of the city’s population, and the city grew and prospered with the success of its major firms. The agora was also a key component of the ancient city. The city and the corporate form are historically and presently intertwined and the inclusion of municipalities (city governments) in King IV necessitates me to closely and critically consider this relationship.
Context – Bloemfontein, Mangaung
Bloemfontein in the Mangaung metropolitan municipality in the Free State is the judicial capital city of South Africa. It can be described as an “overlooked city” because it is generally not a city that receives much attention in scholarly or literary work.[7] What follows is some historical background on the city to place recent events within a broader context. In the same week in which the Seventh Annual International and Comparative Urban Law Conference was held, South Africa was shaken by some of the worst violence it has seen in years. As is usually the case, those who are most vulnerable suffer the most. Small businesses, informal traders and spaza shops owned and run by immigrants bear the brunt of the violent looting. While larger shops and multinational franchises have insurance, these smaller businesses usually lose everything they have. [8]
Bloemfontein was established as a town in 1846. It started out serving the local farmers as a small trading post. As a capital city, it took on different forms: capital of the Orange Free State Republic (1848–1902), capital of the Orange River Colony (1902–1910) and capital of the Orange Free State Province (1910–1994). [9] The economy of Bloemfontein relies mainly on the provision of various government functions and the provision of services to the central region of South Africa.[10] Bloemfontein, with its severely fragmented spatial development (wide buffer strips between suburbs sectored according to race), represents the “ideal apartheid city.”[11] White and black suburbs were divided by industries and railway lines. In order to implement the Group Areas Act in the city, there was large-scale resettlement into Botshabelo from the Mangaung Township and also a small number of other resettlements. These spatial divisions are still evident and the relations remain.
The violent protests of July 2021 were caused by the continuing vast inequalities, large numbers of unemployment, and desperation that still exist 27 years after formal Apartheid ended. The trigger for the events was the imprisonment of former president Jacob Zuma for contempt of court for his refusal to cooperate with the commission of inquiry into corruption during his term. While the violence was most pronounced in Durban and Johannesburg, a city such as Bloemfontein, for example, has not experienced any violent protests. The Mangaung Concerned Community group, who earlier this year arranged a shutdown to protest the lack of service delivery in the metro, made the following statement when the violent protests broke out elsewhere in the country:
The Mangaung Concerned Community (MCC) group says their constituents in Bloemfontein, Botshabelo, Thaba’ Nchu, Dewetsdorp, Wepener, and Soutpan will not be participating in the national shutdown calling for the immediate release of Zuma from jail because they are of the view that the province did not benefit from the duo’s leadership and instead was looted rampantly during Zuma and Magashule’s respective tenures as President and Premier, citing the asbestos housing scandal and the Vrede Dairy Project as such examples.[12]
The reason why it is important to sketch the background and context is to illustrate that the fact that these violent protests hit only certain cities is a remnant of historical apartheid and colonial spatial development. It also speaks of the persistent divisions and inequalities in the country and how they can be said to be spatial. The Mangaung Concerned Community statement specifically mentions examples of corruption in the municipality of the Mangaung metro. The widespread corruption in municipal councils is one of the reasons why municipal councils were included in the King IV report. The King reports in South Africa are issues from time to time by the Institute of Directors of Southern Africa. Strictly speaking, they are only enforceable policy for companies listed on the Johannesburg Stock Exchange, but it nonetheless gives guidance to various companies and also, in its latest format, to other sectors, such as municipalities.
King IV and Urban Governance
King IV determines that the foundation of all the King reports to date (from King I to King IV) is ethical and effective leadership. The document also argues that good governance underpins good leadership, which, is valuable in all organizations, and not only the private sector. Therefore, King IV continues, the principles of good governance are essential in public and private entities.[13] Whereas the link between private and public entities is only implicit in the previous King reports, the latest report makes the link explicit and specifically includes public sectors. To make the document, which is originally aimed at corporations, also applicable to public sector entities, the language has been adapted to speak of “organisations” and “governing bodies” rather than (just) “companies” and “boards of directors.” This shift in language is what interests me. I am particularly interested in whether a shift in language also signals a broader shift in South African legal culture.[14] While this is beyond the scope of the current paper, my preliminary finding is that corporate culture is setting into South African legal culture and is connected to how law students are trained at law schools and the increased corporatization of universities.[15] Most notably, King IV states that “the King Committee was requested by many entities outside the private sector to draft King IV in such a way as to make it more easily applicable to all organisations: public and private, large and small, for-profit and not-for-profit.”[16]
The sector supplements included in KingIV are for municipalities, non-profit organizations, retirement funds, small and medium enterprises, and state-owned entities and the municipal supplement applies to A, B, and C municipalities as defined in the Municipal Structures Act.[17] The King IV Report states that municipalities do not have shareholders in the traditional sense, but equates the community (inhabitants of the city) to the shareholders of the municipality.
The Local Government: Municipal Systems Act 32 of 2000 (Systems Act) provides in section 2(d) that a municipality has a separate legal personality.[18] Even though municipalities are juristic persons, they are unique entities and differ from private sector juristic persons in a few fundamental ways.[19] The benefits of corporate governance for municipalities, according to King IV, include democratic and accountable government for local communities, ensuring sustainable service provision to communities, promoting social and economic development, promoting a healthy environment, encouraging the involvement of communities, and community organisations in local government. King IV refers to section 153 of the Constitution and that municipalities are the foundation of democracy.[20] This all sounds quite good and rather public-minded, so what is the concern?
Stakeholders are defined as “[t]hose groups or individuals that can reasonably be expected to be significantly affected by an organization’s business activities, outputs or outcomes, or whose actions can reasonably be expected to significantly affect the ability of the organization to create value over time.”[21] The report distinguishes between internal and external stakeholders. It is this division that raises for me questions about the applicability of the stakeholder approach to the city and its inhabitants. Whereas internal stakeholders are always material, external stakeholders are not necessarily material, though they could be.
Stakeholder inclusivity is described as an approach where the legitimate and reasonable needs, interests, and expectations of all material stakeholders are taken into account. This approach, claims King IV, brings about a change in prioritization. Instead of the governing body giving priority to the providers of financial capital only, there is parity to all those involved in the creation of value. A stakeholder-centric approach stands in direct contrast with a shareholder-centric approach and is supposed to be more inclusive.[22]
At first glance, this looks like a positive change. In addition to these measures, if the argument is made that municipalities and companies are alike, then section 76 of the Companies Act, regulating the fiduciary duties of directors can also be made applicable to councilors.[23] This might look like a solution to some of South Africa’s dysfunctional and fatally indebted municipalities. The list of possible positives includes that the public and private divide is challenged by this conflation of the spaces and that counsellors and municipal employees can be held accountable in terms of South Africa’s company law. The disruptive potential lies however not for cities and how they are managed, but rather for company law. If the city can become the lens through which to consider the notion of stakeholders in company law, this presents the potential to think about roleplayers as co-constitutors, the company as an inoperative community, and surfaces all of the power relations and relational tensions between stakeholders.
The rich theoretical engagement with the city as a commons, as a community can radically alter the company law of South Africa. Here I have in mind the work of Iris Marion Young, in particular. Her Justice and the Politics of Difference, first published in 1990,[24] might seem dated, but her notion of city life as a normative ideal remains very relevant and especially poignant as a critique of the inclusion of cities into the corporate language of King IV and potential of this concept of community for company law. In this work, she “propose(s) to construct a normative ideal of city life as an alternative to both the ideal of community and the liberal individualism it criticizes as asocial.”[25] By city life, she means a form of social relations which she defines as “the being together of strangers.”[26] This fleeting solidarity can also be used to consider social entrepreneurship and social responsibility, and related power relations, in company law. Furthermore, Young’s work is important for its emphasis on difference and the right to differ, which are also integral to the right to the city.[27] This emphasis on the right to differ opens up the right to the city. It shifts the right to the city to the right of the city, where “the city” is the sum of the relations of inhabitants, legal persons, built environment, legal and governing frameworks over time. It changes the understanding of “the city” as the municipal council to that of those who exercise their right to appropriation and participation. The former conceptualisation of “the city” is evident in the citations of court cases where municipal councils are parties to the proceedings. In most of these cases, the court refers to the municipal council as “the city” and the inhabitants contesting the case as the applicants/plaintiffs/respondents/ defendants (depending on the nature of the case).[28]
Conclusion
What is written on the inclusion of municipalities in King IV is mostly in the field of auditing. During an informal show-of-hands survey done by Daniel de Lange at CIGFARO Audit and Risk Indaba, held in April 2019, he established that very few municipalities were aware of the application of King IV.[29] King IV came into operation in April 2017, so by the time of the indaba, municipalities would have reported on its application in the 2017/2018 financial year. The outcome of this survey, done amongst the 445 delegates present, comes as no surprise because there is already such an array of legislation applicable to urban governance structures. There are no patent lacunae that need to be filled by King IV. Even in respect of the conduct of urban governors, the Municipal Structures Amendment Act of 2021 now includes a thorough code of conduct for counselors.[30] These amendments commenced on 1 November 2021.[31] The code covers general conduct, voting, attendance, and sanctions for non-attendance of meetings, disclosure, and declaration of interests, personal gain, rewards, gifts and favours, municipal property, unauthorised disclosure of information, interference in administration, counsellors in arrears, breach of the code and investigations of the breach of the code of conduct, as well as the application of the code to traditional leaders (which is not directly relevant for urban governance). The King IV report is therefore not just pragmatically filling a lacuna in policy, but is doing political work, namely to shift the conception of what city managers and municipal councilors do to a business perspective and thereby impacting the right to the city in a reductive way. Given South Africa’s rife corruption in the public sector, an increased focus on the municipality as part of the market will only encourage the competitive “tender-preneurship” in local governments. I doubt that the right to the city can fully be exercised in a context where the homogenising effect of corporatization could quell the right to differ. Writing from the context of the Mangaung Metro, an urban context that developed as such mainly because of its central location and delivery of government services (with some decentralized industries during Apartheid) as opposed to other cities, such as Johannesburg and Cape Town, that developed due to business activity and corporate interest (mining, the JSE, importing, exporting, a half-way stop for the VOIC), the city-corporation relationality is harder to discern and therefore provides a critical vantage point from which to assess the inclusion of municipal councils (urban governance) in the King IV report.
Isolde deVilliers is a lecturer in the department of Mercantile Law at the University of the Free State, South Africa. Her research focuses on spatial justice from a feminist perspective and the ways in which aspects of law, business and commerce intersect with the spatiality of the overlooked city of Bloemfontein/Mangaung and surroundings.
References
[1] See generally Henri Lefebvre, The Production of Space (1991); see generally Doreen Massey, Space, Place, and Gender (1994).
[2] The right to the city understood as the right to appropriation and participation reads Lefebvre’s right to the city as a call to radically reconsider what it means to belong to a political community. See generally Mustafa Dikeç, Justice and the spatial imagination, 33 Env’t & Plan. A: Econ & Space 1785, 1785-1805 (2001); compare Mark Purcell, Citizenship and the right to the global city: reimagining the capitalist world order, 27 Int’l J. of Urb. & Reg’l Rsch. 564, 564-590 (2003) (on how this relates to a gendered understanding of the right to the city) with Tovi Fenster, The gendered tright to the city: Different formations of belonging in everyday life, 14 J. of Gender Stud. 217, 217-231 (2005).
[3] Johan Allen, Geography Matters! (1984) (a collaboration with between Massey and Johan Allen explicitly espousing this notion).
[4] Stuart Hall et. al., After Neo-Liberalism: The Killburn Manifesto 35 (2015).
[5] Id. at 26. (Massey raises these concerns connected to a personal experience of hers in a gallery. Massey’s ideas, expressed in this one chapter in the 2015 collection are echoed by Wendy Brown’s In the Ruins of Neoliberalism. Wendy Brown, In The Ruins Of Neoliberalism (2019).).
[6] See Hall Et. Al., supra note 4.
[7] See generally Hanna Rusczchyk, Erwin Nugraha, Isolde De Villiers I, Overlooked Cities (2021).
[8] For newspaper articles on the violent protests: see Jason Burke, South Africa’s Leaders Fear Fresh Wave of Violence by Zuma Loyalists, The Guardian (July 21, 2021), https://www.theguardian.com/world/2021/jul/17/south-africas-leaders-fear-fresh-wave-of-violence-by-zuma-loyalists; see also Chris Makhaye, Looters Remorseful as Daily Life Gets Tougher, Mail & Guardian (Sept. 8, 2021), https://mg.co.za/news/2021-09-08-looters-remorseful-as-daily-life-gets-tougher/. For scholarly engagement in its aftermath: see generally Trevor Ngwane, Mall Attacks and the Everyday Crisis of the Working Class in South Africa, 12 The Glob. Lab. J. (Special Issue) 312-24 (2021).; see also Simbarashe Tatsvarei Et. Al., Situational Analysis And Strategic Advisory On Farming And Food Security In South Africa In The Aftermath Of Widespread Public Violence And Looting In Kwazulu-Natal And Gauteng Between 10-14 July 2021 (2021), https://www.assaf.org.za/files/2021/SAGE%20Revised%20food%20security%20advisory%2030%20July%202021.pdf.
[9] Lochner Marais, Bloemfontein: three decades of urban change, in South African Urban Change Three Decades After Apartheid (Anthony Lemon, Ronnie Donaldson, Gustav Visser, eds., 2021).
[10] Id.
[11] Skip Krige, Bloemfontein, in Homes Apart: South Africa’s Segregated Cities (Anthony Lemon ed., 2021), quoted in Lochner Marais, Bloemfontein: three decades of urban change, in South African Urban Change Three Decades After Apartheid (Anthony Lemon, Ronnie Donaldson, Gustav Visser, eds., 2021).
[12] Olebogeng Motse, #MangaungShutdown Organizers Reject Pro-Zuma protests, OFM (July 13, 2021), https://www.ofm.co.za/article/centralsa/305970/-mangaungshutdown-organisers-reject-pro-zuma-protests.
[13] Inst. Of Dir. in S. Afr., King IV Report on Corporate Governance for South Africa 6 (2016).
[14] My understanding of legal culture corresponds with that of Kalr Klare in his 1998 article Legal Cutlure and Transformative Constitutionalism. Karl Klare, Legal Culture and Transformative Constitutionalism, 14 S. Afr. J. On Hum. Rts. 146-187 (1998).
[15] Following the student protests in South Africa of 2015 and 2016, that called for access to free tersiary education, decolonizing of the curriculum and a re-imagining of the university space, scholars responded to show how their demands corresponded to a critique of the neoliberal university. See for example Karin van Marle, ‘Life is Not Simply Fact’: Aesthetics, Atmosphere and the Neoliberal University. Karin van Marle, ‘Life is not simply fact’: Aesthetics, Atmosphere and the Neoliberal University, 2019 Acta Academica 109-124.
[16] Institute Of Directors in South Africa, supra note 13, at 6.
[17] Municipal Structures Act 117 of 1998 §§ 2-4 (S. Afr.) (defined as category A, B or C municipality envisaged in § 155 (1) of the Constitution – where § 155(1) of the Cosntitution of the Republic of South Africa determines that a category A municipality is one that has exclusive municipal executive and legislative authority in its area, category B is one that shares municipal executive and legislative authority in its area with a category C municipality within whose area it falls and category C is one with municipal executive and legislative authority in an area that includes more than one municipality).
[18] The Local Government: Municipal Systems Act 32 of 2000 § 2(d) (S. Afr.).
[19] See generally Matthew Glasser & Johandri Wright, South African Municipalities in Financial Distress: What Can be Done?, 2020 L. Democracy & Dev. 413-441 (engaging with the wide-spread financial distress of South African municipalities. The distress is so extreme in some instances that some municipalities have collapsed completely, while others have been in reasonably good financial shape until the COVID-19 pandemic. National Treasury publishes data on municipalities).
[20] S. Afr. Const., (1996), at § 153: 153 (Developmental duties of municipalities.-A municipality must- (a) structure and manage its administration and budgeting and planning processes to give priority to the basic needs of the community, and to promote the social and economic development of the community; and
(b) participate in national and provincial development programmes).
[21] Institute Of Directors in South Africa, supra note 13, at 6.
[22] Irene-Marie Esser & Piet Delport, The protection of stakeholders: The South African social and ethics committee and the United Kingdom’s enlightened shareholder value approach: Part 1, 50 De Jure L. J.97-110 (2017); (“There are, generally, two schools of thought on the issue of whose interests must be granted primacy when directors manage companies. In the enlightened-shareholder-value approach, the primary role of the directors should be to promote the success of the company for the benefit of the shareholders as a whole and to generate maximum value for shareholders. The second school is that of plurism, which sees shareholders as one constituency among many and the interests of a number of groups are recognised. Thus, a company’s existence and success are seen as inextricably intertwined with the consideration of the interests of its employees and other potentially qualifying stakeholders in the business, such as suppliers and customers.”). See id. at 101. South Africa’s move from shareholder to stakeholder approach is not complete, instead, we still embrace an enlightened shareholder approach. King III already mentions an inclusive stakeholder value approach and social corporate responsibility. King IV goes further and refers (fleetingly) to Ubuntu to capture the corporation’s relational entanglement in society.
[23] Companies Act 71 of 2008 (S. Afr.).
[24] Iris Marion Young, Justice and the Politics of Difference (Princeton Univ. Press: Oxford and Princeton 2011).
[25] Id. at 237.
[26] Id.
[27] See generally Chris Butler, Henri Lefebvre: Spatial Politics, Everyday Life And The Right To The City (2012) (presenting a strong argument of the importance of the right to differ in the conceptualization of Lefebvre’s right to the city).
[28] See Schubart Park Residents’ Association and Others v City of Tshwane Metropolitan Municipality and Another 2013 (1) SA 323 (CC) at para. 2 (S. Afr.). (“In July 1999, the first respondent city took over Schubart Park.”) (own emphasis).
[29] See generally Daniel de Lange, Impact of King IV Corporate Governance Code on Municipalities, 19 Cigfaro J. (2019).
[30] Schedule 7 Municipal Structures Amendment Act 3 of 2021 (S.Afr.).
[31] Gazette 45305, 11 October 2021.