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wealth

Reward innovation and waive incumbency

IN THE dark ages, circa 1997, I used to know people who would look askance at fellow taxi passengers who asked to disembark at Gross-vena, instead of Grow-vna, the way such people insisted it should be pronounced. It’s not a name you can easily ignore, as it features on both the Bryanston and Rosebank taxi routes. Being neither posh nor street, I was a little unsure on this matter, but the Grow-vna types seemed to have the upper hand.

This strange name pops up around other parts of Johannesburg and many South African cities. It would be a few years before I lived in England and the “right” pronunciation was confirmed. But I did wonder why the English chose the path of soft enunciation when it came to this particular name. The matter was finally settled for me when a man named Gerald Cavendish (another name that pops up everywhere in the South African landscape) Grosvenor, otherwise known as the Duke of Westminster, died last week in Britain.

The story begins with a Frenchman who settled in England during the 11th century as part of the Norman conquest. He was William the Conqueror’s chief huntsman — grand veneur — who was nicknamed Gros Veneur because of his size. It is this French etymology that has left many South Africans twisting their tongues as they go about navigating their cities. A small mercy is that the twang police are a spent force.

Gerald Cavendish Grosvenor’s life story is interesting for other reasons too, as it is a study on how great wealth reproduces itself, often from fairly accidental origins.

But back to le Gros Veneur, who was awarded land grabbed from the English. But what made this family’s wealth was the 17th-century marriage of a Grosvenor to a 12-year old heiress. This brought acres of what was then west London swampland into the family. Another boost to the family’s wealth came from an ancestor who acquired Welsh mineral and mining holdings.

Sections of the British media have marvelled at how this estate has survived many wars, recessions and self-inflicted disasters. But if you read closely, the story is all about appreciating land prices in London: Mayfair, Hyde Park, Belgravia and all those names familiar to South Africans for other reasons. It is also a story of elaborate governance structures set up to protect the assets should they fall into the hands of a playboy, as they once did.

Gerald Grosvenor established professional management and created a modern real estate company. That was wise, but hardly entrepreneurial flair.

“Make sure they have an ancestor who was a very close friend of William the Conqueror,” the recently departed duke once quipped to a journalist when asked for advice to young entrepreneurs, according to a report in the Financial Times. Funny. Or is it, in an era in which the super-wealthy supposedly believe in meritocracy? A 25-year-old man, by all accounts doing age-appropriate things in his nascent career, has now become a multibillionaire (and the Duke of Westminster). Not because he wrote brilliant code or made the world rethink how it manages property, but by sheer accident of birth.

This may seem a bit of an antiquated tale in today’s world, a glimpse into a world that’s fading. Yet in many countries today, including ours, great wealth is still acquired when the politically powerful award property, mineral and other rights and concessions to their allies. From then on, wealth comes to reflect a return on incumbency, instead of innovation.

Of course, the beneficiaries will do some things to enhance that initial endowment, but they will never open the doors for new entrants to contest their space. It is up to policy makers to create the environment in which the fruits of incumbency are redistributed and innovation thrives. Alas, governments often do quite the opposite of that.

• Makhaya is the CEO of Makhaya Advisory

This piece was first published in Business Day (16 August 2016)

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