After the Bell: Load shedding and the fallacy of the carrot and the stick

By Tim Cohen

8 Feb 2023

Since the stick is a variable motivator, some governments, when things are really desperate, resort to the carrot.

How do politicians in a democracy make things happen? It seems so obvious: politicians, supposedly representing their constituents (us), make rules in Parliament, otherwise known as laws, which determine the actions of the populace (us, again). But, you know, it never happens like that.

I often think one of the most deceptively revealing statements describing the complexity was issued by the president of post-war France, Charles de Gaulle, who asked, “How can you govern a country which has 246 varieties of cheese?”

Behind the notion of a rules-based society is the idea that people are innately disposed to obey the rules. You don’t have to be an anarchist to know this isn’t always the case. I suspect any and every parent knows instinctively that to get their sprogs to just damn well swallow some goop is not anywhere as simple as declaring that it shall be so. In some ways, societies are the same; rules have some adherence but generally, ruling a society is like herding cats.

So, since the stick is a variable motivator, some governments, when things are really desperate, resort to the carrot. And we saw a good example of that today when SA Revenue Service chief Edward Kieswetter suggested that he and the finance ministry had begun initial discussions on tax breaks for people or institutions that generate their own electricity.

In a way, it is natural that Kieswetter should be the one most open to the idea of this particular carrot. His job is to improve tax compliance and to increase the fiscal take for the government.

And at the moment two things are happening: First, rolling blackouts are decreasing economic activity. That in itself is likely to trigger lower tax revenue. And second, his compliant taxpayers are kinda grumpy because they have to use a more expensive power generation system than normal to keep their businesses going.

Kieswetter was really extraordinarily outspoken. He said South Africans were “gatvol” and he came extremely close to suggesting protest action. “It’s absolutely a fact that load shedding has a huge impact on economic activities and has crippled many companies,” he said.

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The amount that retailers are spending to keep their businesses open is almost incomprehensible. Pick n Pay reported it spent R360-million on diesel to run generators in the current financial year. Shoprite reported spending more: R560-million on diesel in just the last six months to January. If these huge companies are spending that much, how are smaller businesses managing to survive?

The effect, says Kieswetter, is more marked than simply a quantification of the increased costs might imply because, in times of crisis, companies and individuals pull into their shells. They become, he says, “ultra-conservative”, and the temptation to withhold taxes grows disproportionately.

There are, in fact, already accelerated depreciation allowances available for the installation of renewable energy plants. The allowances effectively translate into a 28% discount on the plant. But, he says, this is clearly not enough.

Anyway, we will have to watch this space to see what they come up with, if anything. But I do think there is one point to be made about the carrot and stick as a management technique: it sucks.

A long time ago, the business consultant and author Lisa Lai argued in an article in the Harvard Business Review that motivating employees was not about carrots and sticks. It’s not as though rewards and penalties do not have a place in business or politics, it’s just that when it comes to motivation, it’s more difficult.

Both the carrot and the stick rely on compliance. The carrot is a reward for compliance and the stick is a consequence for noncompliance. Lai’s point is that “motivation is less about employees doing great work and more about employees feeling great about their work”, she writes.

I think the same applies in politics; it’s not just about compliance, it’s about feeling good about complying. And that, as Kieswetter is discovering, is where the essence of the problem currently lies. DM/BM

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