LLOYD BLANKFEIN . . . CAUTIOUSLY BULLISH ON S.A. P.26
MEGACITIES SHAPING OUR WORLD P.42 ROCKSTAR CEOs DO WE NEED THEM? P.34
R39.95 incl vat
Issue 12 • Second Quarter, 2015
CLAYTON CHRISTENSEN ON INVESTMENT FOR INNOVATION P.30
The S-Class CoupĂŠ. Welcome to the view from the top. A sight of beauty and triumph. The S-Class CoupĂŠ, with industry-first curve tilting technology, leans itself into bends for ultimate driving comfort. Unveil a vision of performance, poise, and unparalleled luxury that can only be described as breathtaking. Welcome to the view from the top. Visit www.mercedes-benz.co.za/s-coupe Vehicle specifications may vary for the South African market.
contents Issue 12 • Second Quarter, 2015
Issue 12 • Second Quarter, 2015
features
P.26
RISK TAKER SUPREME
Goldman Sachs Chairman and CEO Lloyd Blankfein talks about investment banking, the global financial crisis, and how risk managers need 'to see round corners'. LLOYD BLANKFEIN
. . . CAUTIOUSLY BULLISH ON S.A. P.26
P.42
ROCKSTAR CEOs DO WE NEED THEM? P.34
R39.95 incl vat
Issue 12 • Second Quarter, 2015
CLAYTON CHRISTENSEN ON INVESTMENT FOR INNOVATION P.30 MEGACITIES SHAPING OUR WORLD P.42
THE CITY AND THE GLOBAL ECONOMY James Sey examines some of the biggest concentrations of human beings on earth and their impact.
ON THE COVER Photo: Gareth Jacobs
P.30
WHY FINANCE IS KILLING INNOVATION James van den Heever listens to Harvard's Prof. Clayton Christensen explain why we need to change the way we invest.
GORDON INSTITUTE OF BUSINESS SCIENCE
P.22 ACUMEN IS ALSO AVAILABLE AS AN APP for your iPad or iPhone in the Apple App Store, as well as in the GooglePlay store for your android device.
SHOW SOME RESPECT Research by GIBS senior lecturer Kerry Chipp reveals the value of respect in low-income communities.
P.42
et cetera
P.02 Contents P.04 Contributors P.08 From the Editor P.10 Network
opinion
P.15 The Right Solutions in the
Right Place
GIBS Dean Professor Nicola Kleyn argues that South African business schools need to address South African business problems.
P.16 The Poisoned Chalice of Public
Sector Leadership
Trudi Makhaya says a developmental state cannot succeed without technocrats.
P.18 The Year of the Unaffordable
Freedom Charter
Ranjeni Munusamy warns that revolutionary rhetoric could prove too costly for SA's developmental state.
P.20 Nigeria: the Future of Africa? Richard Dowden believes Nigeria's recent peaceful handover of power could be a tipping point.
general management
p. 34 Bright Star or Death Star? James van den Heever examines the phenomenon of the rock star CEO. p. 40 Ethics at High Speed Can a truly fast business also be highly ethical, asks ethics expert Cynthia Schoeman.
P.76
P.52
p. 48 Digital Is Just A Platform Cara Bouwer picks up on the latest trends in digital media.
South Africa
p.52
Entrepreneur Yossi Hasson explains to Cara Bouwer how the Cloud has become a business enabler.
p. 56
An excerpt from Tanya Zack and Mark Lewis's new book about Johannesburg's waste recyclers.
How Big Data Courts the Cloud
Good Riddance
p. 63 Tyre recycling finds its feet Cara Bouwer explores one of SA's more promising environmental initiatives.
dynamic markets
p.66
Africa business expert Victor Kgomoeswana says the evidence of Africa's economic rise remains convincing.
Africa Still Rising
future
p.80
Ace trend-spotter Dion Chang warns that digital privacy may soon become the exclusive preserve of the rich.
renew
The Currency of Privacy
p.82 Travel Caroline Hurry with elephants in Thailand and Thorneybush
The Finer Things
p.84
Cheska Stark recommends nude sunnies from D&G for Her, and a Tumi work bag for Him.
p.88
Our motion maestros, Jacques Marais & Stephen Smith look at new trail shoes and the Range Rover Sport
p.90
Chris Gibbons joins Walter Isaacson on a journey through innovation in technology
Forward Motion
Books
p. 68 Doing Business In‌Ghana Until recently an African economic poster- child, Dianna Games thinks Ghana may be able to recover.
p.92 Techno Bites Aki Anastasiou on Samsung's new S6 and Apple's Watch
p. 72 Top Six things to Do
p.94 Wine John Maytham tastes a couple of goodies, including SA's most expensive white wine.
and See in Ghana
Don't miss Accra's beaches and historical sites.
entrepreneurship
p. 76 Designing. Growing. Succeeding. Sean Christie reveals the story behind one
of South Africa's most successful design houses.
p.95 Music Victor Dlamini visits The Orbit, Braamfontein's hot new live jazz venue.
Looking Backwards
p.96 Pass the Word on Passwords Mike Wills suggests that we may be overdoing passwords and security.
12742
MAKE
PROFESSIONAL BANKING HAPPEN With a banking experience from Nedbank that works as hard as you do and caters for both you and your family. Whether you are operating as a specialist in your field, quickly climbing the corporate ladder or simply looking for a professional banking experience that emphasises convenience, quality and flexibility, our Professional Banking package is the answer. With dedicated relationship bankers, tailored financing options and 24/7 service, we are making banking more professional for you and your family. This offering enables your financial aspirations, comes with the rewards and lifestyle benefits you deserve and is flexible to grow as your needs grow.
Contact us today on 0860 555 222 to arrange an appointment. Alternatively email us at professionals@nedbank.co.za. #ThingsThatReallyMatter
Nedbank Limited Reg No 1951/000009/06. Authorised financial services and registered credit provider (NCRCP16).
contributors
5
TANYA ZACK is an urban
DION CHANG is an
innovator, creative thinker and visionary. He is a sought-after trend analyst and, while his feet remain firmly planted on African soil, he uses a global perspective to source new ideas, gauge the zeitgeist and identify cutting-edge trends. He contributes to various print publications and online portals as a freelance journalist and social commentator.
RICHARD DOWDEN
is the director of the Royal African Society and a former Africa editor of The Economist and Independent. He is also author of the bestselling Africa: Altered States, Ordinary Miracles and has been writing about the continent since his first visit in 1971.
JAMES SEY is a strategic communications specialist and writer with a focus on the industrial, infrastructure and supply chain management sectors, within which he has written several books and many research reports. He is also an art writer and academic, and is currently a Research Associate in the Fine Art Faculty of the University of Johannesburg.
planner and a reflective practitioner who straddles the worlds of planning practice, policy and academia. With a Wits University PhD, her planning experience over 25 years in Johannesburg has included research, policy and the development of frameworks plans as well as participatory and activist planning in a scope of work that includes informal settlement upgrading, community participation processes, policy and research into ‘bad’ and ‘hijacked’ buildings in the inner city, and area-wide regeneration.
SEAN CHRISTIE is an award-winning South African features writer and essayist who has contributed articles to most of the country's mainstream news publications, mainly on land, environmental, foreign policy, literature and diaspora issues. He recently became the first person to walk the length of Johannesburg's Jukskei River and is writing a book about a community of Tanzanian stowaways who live under Cape Town's Nelson Mandela Boulevard.
DIANNA GAMES is chief
TRUDI MAKHAYA is
an economist, writer and business strategist. She was also Deputy Commissioner at the Competition Commission of South Africa and is the resident economic analyst at broadcast channel eNCA, and writes a column for Business Day. Trudi holds an MBA and MSc in Development Economics from Oxford University, where she studied as a Rhodes Scholar. She also holds degrees from Wits University, including an MCom in Economics and a BCom (Law).
executive of Africa @ Work, an African business advisory and consulting firm. She is a leading commentator on business issues, trends and developments and has travelled extensively around the continent over the past two decades, tracking business developments in Africa’s key markets. Dianna is also the Africa columnist at Business Day and Honorary CEO of the SA-Nigeria Chamber of Commerce.
MARK LEWIS Is a South
African photographer based in Johannesburg. In recent years he has worked as a documentary photographer throughout the continent for Newsweek magazine, Sunday Times magazine (U.K), Vogue (U.K and Italian), Brand Eins magazine (Germany). He has been a featured photographer on CBS 60 Minutes with a portfolio from the Shipbreaking Yards in Bangladesh. He most recently exhibited a new body of work “The Grande Hotel, Beira” at MOMO Gallery in Johannesburg.
6
contributors
editor Chris Gibbons Gibbonsc@gibs.co.za
VICTOR KGOMOESWANA is
author of Africa is Open for Business; anchor of Africa Business News – a weekly programme on CNBC Africa and anchor of PowerHour, Monday to Thursday, on PowerFM.
JAMES VAN DEN HEEVER writes for a
GORDON INSTITUTE OF BUSINESS SCIENCE
range of clients, including the Institute of Directors in Southern Africa, the Ethics Institute of South Africa, the South African Institute of Professional Accountants and Ernst & Young. He was formerly editor-in-chief of Systems Relationship Marketing, a custom publisher with blue-chip clients and editor of Computerweek. He also worked as a media liaison in the corporate world.
cover photography Gareth Jacobs layout and production Contact Media and Communications ( Pty) Ltd
CARA BOUWER is a
freelance journalist and editor. She’s been published in a variety of local titles including Business Day, Private Life, Destiny and Sawubona. She cut her teeth at Penta Publications in the early 1990s before moving on to Business Day where she made history by becoming the newspaper’s youngest sports editor and the first woman to hold this title on a national daily in South Africa. She later became the paper’s chief subeditor.
art director Quinten Tolken proofreader Angie Snyman publisher Sean Press Pressman@contactmedia.co.za Contact Media and Communications (Pty) Ltd 011 789 6339 advertising sales Damian Murphy Damian@contactmedia.co.za 082 888 1137
contributors Aki Anastasiou Cara Bouwer Dion Chang Sean Christie Victor Dlamini Richard Dowden Dianna Games Caroline Hurry Victor Kgomoeswana Mark Lewis Trudi Makhaya Jacques Marais John Maytham Cynthia Schoeman James Sey Stephen Smith Cheska Stark James van den Heever Mandy Walker Mike Wills Tanya Zack marketing director Howard Fox Foxh@gibs.co.za contact Acumen 26 Melville Road, Illovo, Johannesburg P O Box 787602, Sandton, South Africa, 2146 011 771 4000 Acumen@gibs.co.za
Brought to you by:
CYNTHIA SCHOEMAN is the MD of Ethics Monitoring & Management Services (Pty) Ltd and the author of Ethics Can (2014) and Ethics: Giving a Damn, Making a Difference (2012).
Disclaimer: Acumen is the official publication of the University of Pretoria’s Gordon Institute of Business Science (GIBS). All material is strictly copyright and all rights are reserved. No portion of this magazine may be reproduced externally, wholly or in part, in any form without the written consent of GIBS. The views and opinions expressed by the contributors to this publication are not necessarily the views and opinions of the publishers, GIBS or its associates. While every effort has been taken to ensure the completeness or accuracy of the published information, errors and omissions may occur. The publishers, GIBS and its associates cannot accept responsibility for any loss, damage or inconvenience that may arise from the unauthorised use of this publication.
Making sense of today’s financial complexities
DISCOVERY FINANCIAL PLANNING SUMMIT 19 MAY 2015 | SANDTON CONVENTION CENTRE
This is an opportunity you simply must not miss! Go to www.financialplanningsummit.co.za to secure your booking. Discovery is an authorised financial services provider.
GM_31687DIS_07/04/2015_V1
Over 1 500 financial advisers will convene at the Sandton Convention Centre for the 2015 Discovery Financial Planning Summit where local and international experts will share best practices on how to unpack today’s complex financial issues. Speakers include Minister of Finance, Nhlanhla Nene, Adrian Gore, CEO of Discovery Group, Jonathan Dixon, Deputy Executive Officer at the Financial Services Board – Insurance Division, Nazmeera Moola, Economist & Strategist at Investec Asset Management, and leading Canadian author and speaker, Nicolas Boothman.
8
editor’s note
A QUESTION OF LEADERSHIP Words Chris Gibbons
It’s the great paradox of modern times: the more of us that inhabit planet earth, the closer we live together in our megacities, and the more we are all connected via the Internet and its dazzling array of smart technologies, the less we seem to know and the more we crave not only answers but also real leadership.
GORDON INSTITUTE OF BUSINESS SCIENCE
Are we turning into ants, scurrying hither and thither, seemingly without purpose? Is this a side effect of living in these megacities? James Sey takes a closer look at these giant conurbations in the first of a two-part series for Acumen. In Part 1, he examines the phenomenon from a global perspective, starting with the biggest of the big – Tokyo, which contains no less than 38 million people. In Part 2, which will be in the next edition of Acumen, he’ll focus on South Africa’s own contender, the Johannesburg-Pretoria-Gauteng region. Already at 13 million people, and growing at a million people per year, if this is not a megacity, it very soon will be. We can’t be turning into ants, though, can we? That’s because entomologists tell us that although it may look like purposeless scurrying, ants are creatures that live and work in highly structured and directed communities. At an instinctive level, they know exactly what to do and how to do it. Their leader, if she can be called that, is the Queen ant, whose title derives from the fact that we humans used to turn to Kings and Queens for leadership. The mantle passed to politicians and it’s fair to say that it’s shared now with highly successful businessmen and women. That’s especially true in societies where politicians have proved to be fallible: most Americans, for example, would give Warren Buffet a higher rating than either George W Bush or Barack Obama.
No surprise, then, that a business school like GIBS would seek out the very best in business leadership for our students, alumni and broader community. To follow GE’s Jeff Immelt, who appeared on our campus, and in these pages in our last edition, was always going to be tough, but we think that Goldman Sachs CEO Lloyd Blankfein fits the bill. We’re also pleased to bring you another outstanding leader in the study of innovation, Harvard Business School’s Professor Clayton Christensen, who visited South Africa recently. But if we pursue and cherish talented, original and decisive leadership, do we also run the risk of over-inflating already large egos? In other words, do we want our leaders to be rock stars? James van den Heever examines that question in depth and also offers some suggestions as to how you, personally, might take a step or two down the road to a superstar’s dressing room. One critical aspect of modern leadership is an ability to behave ethically. It is not just that with our super-connected society there’s more risk of being found out, it is also that research demonstrates that ethical behaviour delivers superior returns to shareholders. Ethics expert Cynthia Schoeman asks if it's still possible to behave ethically when moving at the warp speed demanded by the modern world. Her conclusion is
DO WE WANT OUR LEADERS TO BE ROCK STARS?” fascinating: the faster we need to move, the more important a clear, rock-solid, ethical framework becomes. It’s there for us to grab onto, a bulwark against which to test difficult, high-speed decisions. In fact, a leader who insists on such an ethical framework becomes an enabler: with such a person at the helm of your corporate ship, you not only avoid the rocks of shattered reputation, but you will also be able to move a good deal faster than your less ethical competitors. By the same token, clearly articulated values and a firm ethical grounding may be just the things to help guide and lead us on a personal level and to navigate the complexities of modern megacity life
.
FCB10016786JB/E
HOW MUCH IS ENOUGH TO SEND YOUR KIDS TO A TOP SCHOOL & STILL INVEST IN A GAME FARM? How much is enough? An age-old question that needs a new answer. Old Mutual Wealth has it and it’s called Integrated Wealth Planning. It’s a wealth map that puts you and your goals at its core, helping you plan how much is enough for you – for now, for your life and for your legacy. Contact your Financial Adviser about your Old Mutual Wealth Integrated Wealth Plan.
Call 0860 WEALTH (932584) or go to www.howmuchisenough.co.za
ADVICE I INVESTMENTS I WEALTH
Old Mutual Wealth is brought to you through several Licensed Financial Services Providers in the Old Mutual Group who make up the elite service offering.
10
network
NETWORK Words Acumen Staffers
ASHER BOHBOT
EOH’s Bohbot Shares Business Insights at GIBS. DRIVERS
Choose what it is that drives your business and focus on that, Moroccan-born Asher Bohbot, CEO and founder of EOH Holdings, told a GIBS Forum earlier this year. “Human beings are one or twodimensional creatures and we do not factor a thousand variables into our brains when we do things. As such, if you want to drive your business, and you’re going to take something and hang everything on it, pick one or two or three things and focus on those. How often we go to presentations and hear someone say, ‘My focus areas are these 83 items.’ The person who says that is not wrong – there are 83 variables – but it’s impossible to deal with this level of complexity.”
GORDON INSTITUTE OF BUSINESS SCIENCE
As a result, “One player might choose to become obsessed with customer service. Another might be obsessed with cost and becoming the lowest cost operator. These are choices a business should make,” he believes. At EOH, one of South Africa’s fastest growing IT companies, Bohbot reveals that “we chose people.” That, he explains, is because “we have to believe that in all businesses, the people ‘game’ is more less the business ‘game’. But for people who don’t see it that way – fine, let them choose another driver. We chose people because it’s relevant to our business – it’s all we sell – knowledge, skills, knowhow, technology – all of it requires brains.” CULTURE
Organisational culture is also vitally important for Bohbot, who arrived in South Africa, via Israel, aged 27: “Culture is about defining what it is and then hammering it. From the time we are small kids, human beings learn through repetition. Hammer at it all the time,
Asher Bohbot, CEO and founder of EOH Holdings
but the most important thing is to live it. And keep the message going: I told you yesterday, I tell you today and I will tell you again tomorrow.”
attend to it. But for historical reasons, and reasons that are to do with ideology and go back to the apartheid era, it’s not easy to convey the message.”
ENTREPRENEUR
AFRICA & SOUTH AFRICA
Bohbot says he started EOH because he “was bored” in his previous job. But previous experience in that job gave him an invaluable edge over much smaller, less experienced start-ups: “I knew how a big business worked.”
EOH is expanding rapidly into Africa, which Bohbot believes has moved a long way and is growing much faster than South Africa. “They have all already been through what South Africa is going through, which is moving from ideology to pragmatism. They’ve tried many other systems – Marxism, mild socialism – but they just don’t work and they’ve arrived at the conclusion that market logic is what rules the world. It works.”
GOVERNMENT
“We live in a world where society and the economy are getting closer and closer – and it’s happening all over the world, not just in South Africa. In America, there’s a well-known saying, ‘It’s the economy, stupid!’ Well, it is ‘the economy, stupid!’ in South Africa too. We talk to many people in government, from President Zuma down, and repeat the same thoughts: it’s about the economy and we need to
But he’s convinced that even though there are difficulties, we spend too much time complaining. “Don’t judge. Accept it for what it is and act. Invest. Create. Do things. It’s reality – so ask yourself what options are available?"
network
11
CLAUDIO FERNÁNDEZ-ARÁOZ TALENT IS SCARCE!
“Globalisation will double the demand for talent in the coming years,” warns Claudio Fernández-Aráoz, senior adviser at global executive search firm Egon Zehnder. Speaking at a recent GIBS Forum, he explained that global demographic trends – chiefly, the ageing of populations – were also creating a shortage of young leaders in the 35-44 age bracket. This would not be a problem, he said, were it not for the fact that leadership pipelines were very thin. “Talent will be very hard to find,” he cautioned. Thus, a company’s number one priority “would be to defend whatever talent you already have,” said Fernández-Aráoz. He added that a further solution “is to become much better at developing people much faster. That requires two things: first, spotting the ‘high potentials’ who, by definition are going to go further, and second, proper development.” Fernández-Aráoz recently interviewed 800 senior executives who had experienced significant growth and asked them to identify the most beneficial parts of that process. The dominant finding, explained Fernández-Aráoz, were “job rotations and stretch assignments.” Claudio Fernández-Aráoz, senior adviser at global executive search firm Egon Zehnder
VISITING STUDENTS DISTINCTIONS FOR GIBS FACULTY Academics are rated not only on their excellence as teachers, but also on their ability to conduct original research and to have that research published in peer-reviewed journals. A number of GIBS faculty have continued the school’s distinguished tradition in this regard. AMONG THEM:
ENSURING THAT AFRICA KEEPS RISING: The Economic Integration Imperative, by Professor Adrian Saville and Dr Lyal White for the South African Journal of International Affairs. CORPORATE POLITICAL STRATEGY AND LIABILITY OF FOREIGNNESS: Similarities and differences between local and foreign firms in the South African Health Sector, by Professor Albert Wöcke and Terence Moodley for the International Business Review. A LITTLE RESPECT: CVP Development and the Low Income Consumer, by GIBS senior lecturer Kerry Chipp and Patricia Williams, for which Kerry won the “Best Paper” Award at a major conference in Dubai. AND THE CASE STUDY: Momentum and Metropolitan’s Merger: Authentic Transformational Leadership, by Dr Caren Scheepers, for Ivey Publishing, the publishing arm of the top-ranked Ivey Business School, Western University, Canada. Last, but by no means least, our Director of Research, Professor Helena Barnard, has contributed a chapter – Migrating EMNCs and the theory of the multinational – to a new book – Understanding Multinationals From Emerging Markets, Ed A Cuerto-Cazurra, R Ramamurti. Well done to all concerned! Visitors to GIBS from the Duke Fuqua School of Business (left to right) Mingfan Duan, Justina Kwong, Seinda Akil, Jim Medwick and Nicole Melwood
Mobile Penetration and Usage South Africa 2014 Not all mobile phones are created equal Smart
46%
Feature
29%
10%
Unsurprisingly those without cellphones are primarily out of work, LSM 1-6 people over the age of 50
10
%
39
46%
No Phone
of South Africans are accessing the Internet on their mobile phones.
Not having a cellphone also skews towards nonmetro people
1 in 5 WhatsApp users do not use any
85
Only 1 in 10 operate their phone using a touch screen.
%
85% SMS
of 3 of these people % 2areoutaccessing social media on their mobile phones
So what are South Africans actually doing on their phones?
29%
Mobile social networkers are on:
Take photographs
10%
25
10%
Use Internet
to a social network and
%
Only 63% of people who use WhatsApp think that their phones can access the Internet.
21%
of South Africans belong
85%
other Internet-based feature on their phone.
Use touchscreen
29%
Download music
29
%
Social networking
91%
Make calls
Use an App Store
network
13
MTN PARTNERS WITH GIBS ON SPIRIT OF YOUTH
MTN Group has partnered with GIBS to roll out the Spirit of Youth (SOY) leadership development programme. The three-year partnership which commenced at the beginning of 2015 will see the development of over 1 000 students across three provinces. The SOY programme is a platform that aims to cultivate a generation of well-rounded leaders who will think more creatively about developing tangible and practical solutions to challenges facing South Africa. The programme, which has been running for the last ten years, is a forum in which 11th and 12th grade learners critically engage on relevant and topical issues that affect the country and the communities they reside in. Learners are selected on the basis of academic excellence, demonstrable leadership qualities and commitment to their communities. This year-long programme which caters for rural, urban, township and independent schools, currently serves 350 per year. The 2015 cohort started in February with learners attending classes that take place every Saturday and introduce a number of innovative techniques to facilitate peer-topeer learning on the most pivotal social and political topics facing our nation’s progress. In the Spirit of Youth programme, facilitated dialogue and experiential learning are the key tools used to support learners’ growth.
2015 Spirit of Youth opening day
BLOOMBERG MEDIA INITIATIVE OPENS APPLICATIONS
The Bloomberg Media Initiative Africa partners with key African universities to provide executive training for the advancement of financial journalism. Financial journalists and professionals interested in financial journalism can now apply to the Bloomberg Media Initiative Africa (BMIA) Executive Training Program 2015. The programme, which is funded by Bloomberg Philanthropies with additional support from the Ford Foundation, brings together the University of Pretoria’s Gordon Institute of Business Science (GIBS) and five other pre-eminent business and journalism schools in Africa, to offer applicants the opportunity to develop their skills and knowledge about financial reporting. Leading faculty from the Rhodes University’s School of Journalism and Media Studies in South Africa; the University of Lagos’s Department of Mass Communication and the Pan Atlantic University’s Lagos Business School in Nigeria; the University of
Nairobi’s School of Journalism and Mass Communication and Strathmore Business School in Kenya will develop and deliver this unique multi-disciplinary training programme that combines instruction in public policy, business, journalism, capital markets and data, with an emphasis on democratic values and professional integrity. Interested parties who possess a recognised tertiary qualification (degree or diploma) and have experience in journalism or a related field are encouraged to apply on Gibs.co.za/bmia or email Bmia@gibs.co.za for further information. The BMIA, which spans three years, is a $10 million commitment launched by Michael R Bloomberg in 2014 with the aim of building media capacity and advancing transparency, accountability and good governance in Africa. Speaking at the launch, Bloomberg commented that welltrained financial journalists could have an immeasurable impact in advancing economic and social growth
.
Make your
Continuing your personal and professional development With Fasset, you can benefit from our extensive knowledge and sector related expertise, enabling you to reach new career heights.
Gerhard Stols CA(SA) MCom (Tax)
BLACKMOON 15213
career boundless
Dean's Note
15
THE RIGHT SOLUTIONS IN THE RIGHT PLACE Words Professor Nicola Kleyn
The financial crisis of 2008 led to fingers being pointed at business for being greedy and self-serving. This is certainly not the first time calls for the purpose of business to expand well beyond serving its shareholders have been made. But the dial has been turned up and no sane corporate board member can rest assured that by delivering stellar financial performance they’ve served their mandate. The pressure on business to look beyond recommendations (such as those made by Milton Friedman) to focus only on delivering profit to shareholders has escalated since the 1980s. Various drivers, including the rise in concern about the environment and the development of the growing voices of non-shareholder stakeholders, have demanded that business look beyond its narrow constituencies of shareholders to define its purpose. In South Africa, no financial crisis was needed to provoke business to self-reflect. The unacceptable levels of poverty, inequality and unemployment provide a constant clarion call for business to continually question its role and purpose. Shareholders will continue to demand that business find attractive growth opportunities. At the same, time calls from South African government, civil society and labour for business to play a role in contributing to solving economic and social woes, have escalated. As business battles fluctuating currencies, a turbulent oil price and curtailed access to resources, notably energy, it must make key decisions about how to balance its time, energy and resources in making investments in countries which offer relatively higher growth opportunities against obligations to show its commitment to SA Inc. Assuming that business chooses not to exit South Africa quietly, but to exhibit
citizenship and respond to the calls to contribute, how does it engage socially and politically at the same time as it does the things that are also core to its success? The classic strategic questions of how to deliver value to chosen customers, inspire employees to do extraordinary things and innovate and leverage efficiencies, have not gone away. If anything, in a rapidly globalising business environment with hungry competitors and increasingly demanding customers, the demands have escalated. As South African companies consider their strategy choices, so too must business schools. The general role of a business school is easily defined. Its purpose is to generate and disseminate thought leadership about business. But who defines what thought leadership is? The business environment abounds with opportunities including dramatic advances in technology, growing demand in relatively unserved markets and the potential to partner across borders. At the same time operating models are threatened by volatile political and economic environments and hungry competitors. The role that business schools can play in contributing to individual and organisational performance is significant. Ironically though, many schools have stepped away from deep engagement with business to focus on generating research whose value is determined by academic peers in the form of journal editors and
reviewers. I’m not suggesting that there is no value to business in these publications, but the potential to confuse academic rigour with relevance is high. Business schools need to respond to the growing global calls to refocus their academic energies on solving the problems that business must address in order to take their rightful and responsible place in the modern world. So much for a global mandate, but what of South African business schools? Our business schools face choices about the extent to which they focus on solving normative problems that happen to present themselves in our context versus those that are of distinctive relevance to South African, and increasingly, managers across the continent. A significant amount of our management theory and pedagogical tools were not developed here. This doesn’t mean they’re not relevant. But what it does mean is that business schools can choose to play an important role in not only testing their relevance, but in generating and sharing thought leadership that addresses our business problems directly. Our problems are not unique. But at the same time we cannot make the same assumptions as a manager operating in a mature democracy with a sophisticated infrastructure. Per capita, the African continent has the smallest number of business schools in the world. As business schools, we have much work to do in assisting business to do both well and good
.
16
opinion
SPOT THE QUEST CANDIDATE
With over 4 decades of experience in the recruitment industry, we’ve had time to perfectly GORDON INSTITUTE OF BUSINESS SCIENCE
sharpen our staffing solution methodologies. Putting it bluntly, with over 100 000 profiled candidates at our fingerprints, a proud history of firsts, as well as local and international best practice recognition, we have all the tools necessary to select only the finest talent available. To find out how we can add value to your business, visit us at quest.co.za.
Field Marketing Master Service Provider (MSP) Outsourced Staffing Solutions Permanent Placement Solutions Recruitment Process Outsourcing (RPO) Specialised Staffing Projects
Follow us on www.quest.co.za
THE POISONED CHALICE OF PUBLIC SECTOR LEADERSHIP Words Trudi Makhaya
We have become a nation of scandal. Institutions at the centre of national life – the Post Office, SABC, SAA – have experienced episodes of dysfunction. Who, in their right mind, would take over the leadership of Eskom? This is what many people asked themselves, in public and in private, when Tshediso Matona was appointed as its CEO in September 2014. The same could be said for any senior official joining the SABC, SAA, SARS or some other crucial government institution. We are even afraid to present the counter-list of state-owned companies and government entities that are still functional, for the simple fear of jinxing them. In my previous column here I argued against the myth of corporate exceptionalism. In short, I took issue with the idea that the private sector is an oasis of efficiency and good governance, despite public boardroom meltdowns such as the ones seen at PPC, HCI or Accentuate. Yet as I write, countless public sector leaders are on suspension, including Matona himself just over six months into his tenure, along with three of his very senior colleagues. Jokes about the nation being ‘in suspension’ are not funny. But let this column not be construed as an attempt to defend the many public sector leaders who are on suspension at this moment. In many of these matters we are not in possession of the facts. This brings me to another myth that has all but become a self-fulfilling prophesy.
That the public sector is not for the talented and the competent. A developmental state without technocrats is an impossibility. That’s demonstrated by countries such as Singapore and South Korea, which have impeccable recruitment and talent management policies in the public sector. It should be difficult to land a place in the public service, and those who do should be left alone to lead their organisations according to agreed mandates. My conservative friends do not think much of the role of the state in the economy. But even they distinguish strength and size. They advocate for a small state, not a weak state. A weak state in a developing economy with a tough legacy to overcome is unambiguously bad. Some, like Solidarity, say the mess is mostly because of affirmative action. I had an official of that trade union on an online debate platform I chair. He pinned some of what has gone wrong at Eskom on the hard pursuit of transformation. That’s not a debate for this present column. Except to say that, in fact, too many accomplished black executives, established or emerging, are not in a rush to enjoy the perks of public services. They are running the other way. Unlike in the days when people such as Sizwe Nxasana and Brian Molefe were nurtured at Telkom and National Treasury, the public sector is no longer seen as a place to incubate black talent.
Future MBAs, CAs, engineers and other professionals will look at what happened to those who came before them and opt to stay away from government and its agencies. And transformation aspirations aside, it’s hard to argue that droves of white youngsters are lining up to join the public sector. All past and future efforts to reform the public sector will come to naught if public service is seen as a place where talent, of any race, goes to be trashed. Yet there are costs to allowing the public service to slip to the bottom of the list of potential employers. Much of what is needed to deliver an enabling environment for the poor to thrive depends on a capable state. Even if the private sector is tapped into as a delivery mechanism, it needs clear direction and effective procurement to achieve public goals. The National Development Plan calls for the reform of the state. Some cool heads will be needed in the ruling party to help the country navigate this dangerous moment, lest it ends up with a hollow government that cannot serve even its own interests. And to paraphrase President Zuma’s words in a speech made at a local government summit: government is everybody’s business. No sector of society, including business, should shy away from insisting on a strong state with sound leadership of its organs and entities
.
18
opinion
THE YEAR OF THE UNAFFORDABLE FREEDOM CHARTER Words Ranjeni Munusamy
This year is the 60th anniversary of the adoption of the Freedom Charter, which in 1955 provided a vision for a democratic South Africa. Many of the core principles of the Freedom Charter are enshrined in the Constitution. But some clauses, such as “The people shall share in the country’s wealth” and “The land shall be shared among those who work it”, have proved to be a bridge too far for the ANC government.
GORDON INSTITUTE OF BUSINESS SCIENCE
With the Freedom Charter being the reference document for both the EFF and newly established United Front, which pulls together an assortment of leftist organisations, the ANC is seeking to reclaim the document and weave it into government’s programme of action. This is easier said than done. But both the ANC’s January 8 statement and President Jacob Zuma’s State of the Nation Address advocated the Freedom Charter as central in determining the year’s programme. Government’s programme of action, according to Zuma, was the rather elaborately themed: Year of the Freedom Charter and Unity in Action to Advance Economic Freedom. Creating the expectation that “the mineral wealth beneath the soil, the banks and monopoly industry shall be transferred to the ownership of the people as a whole” might provide appeasement for poverty stricken and restless communities but is a message disjointed from the economic reality. Reality bites when you have to put your money where your mouth is. This was the unfortunate task of Finance Minister Nhlanhla Nene in his maiden Budget. Nene adopted a pragmatic approach based on the current harsh economic conditions and limited resources, and resisted making a big splash with ambitious funding
programmes. He announced that the main budget non-interest expenditure ceiling would be reduced by R25 billion over the next two years. There would be revised spending plans across the whole of government, which Nene said would improve efficiency, reduce waste and improve composition of spending. The plan is to shake things up from inside the bureaucracy so it is not just about members of Cabinet losing their playthings, such as luxury vehicles and government credit cards. While Treasury’s tough messaging in the Budget was aimed at bracing the South African consumer to pay more for the upkeep and functioning of the state, as well as a rise in personal expenditure, it should also have served as a cautionary to the ANC and government to keep their big ambitions and big talk in check. In recent years, there has been somewhat of a disconnect between the political aspirations of the ruling party and what the National Treasury deems to be affordable. Last year, for example, the term “radical economic transformation” filtered into ANC parlance. There have been denials that this was in response to the EFF’s “economic freedom” crusade, on which Julius Malema’s party quite successfully campaigned its way into Parliament. The ANC clearly needed to fire up its own language to pacify the growing disenchantment at the bottom rungs of its constituency and promise more aggressive redistribution of wealth.
But the big talk had little reflection in last year’s Budget. Even though it was an election year, the 2014 Budget was moderate, leaning towards cost containment. There was no discernable evidence of “radical economic transformation”, by whatever malleable definition the ANC chooses to give it. Similarly, there was no reflection of the radical tenets of the Freedom Charter in this year’s Budget either, despite it supposedly defining the year’s agenda. At a time, when the ANC desperately needs to settle its economic policy contradictions, looking for answers in a 60 year-year-old document that, in parts, conflicts with the National Development Plan also adopted by government can hardly clear the fog. While it is in an increasingly competitive political environment, the ANC cannot continue to trumpet revolutionary rhetoric that will prove to be unattainable in the current economic climate. With the Treasury ringing the alarm bells that government’s delivery agenda is a risk, it is time for forward thinking.
.
The ANC needs to define one coherent economic policy trajectory and stick with it
20
opinion
NIGERIA: THE FUTURE OF AFRICA? Words Richard Dowden, London
Nigeria's recent peaceful handover of power could be a tipping point, not only for Africa's most populous nation, but also for the rest of the continent.
GORDON INSTITUTE OF BUSINESS SCIENCE
I have always been wary of the hype of the Africa Rising narrative. Much of it came from consultancies which only looked at the potential business numbers but ignored the non-economic factors that have always hampered African success. It seemed to me that until Congo, South Africa, Egypt and above all Nigeria took off at 9% or 10% growth rates, parts of Africa would chug along quite nicely but the whole continent would remain in the waiting room marked “potential”. Models of rising Africa were mostly small and medium-sized countries with little influence on their neighbours. The drivers of the change in Africa’s fortunes were China’s need for African raw materials, mobile phones and the new middle class. Governance was missing. Ethiopia is the only big country that has had a clear plan but its rigid central control system was not business friendly except for large companies supported by the political leadership. The Mo Ibrahim Prize for Leadership – given to a president who has been elected, ruled well and stood down – has not been awarded four times since it began
in 2009. All of the winners would have probably stepped down anyway without the incentive of the prize and none of them except the first, Joachim Chissano of Mozambique, could be described as a continent-wide leader. Meanwhile, more and more presidents such as Yoweri Museveni in Uganda and Paul Kagame, once regarded as role models, have become increasingly dictatorial and are trying to extend their presidencies. The doyen of African presidents, Robert Mugabe, who has ruled for nearly 35 years and is feted by many of his fellow presidents, is now the official representative of all African leaders as Chair of the African Union. Speaking to a British businessman recently he offered condolences on the death of his friend, Mrs Thatcher, and suggested that she had died young because she had given up power. Nigeria’s first ever change of government by election could be a tipping point not just for Nigeria but for the continent. President Goodluck Jonathan struck me as a man who had floated gently to the top by being a threat to nobody. He rose through good luck. He reminds me of Chance – the gardener who becomes US president – in Peter Sellers' 1979 film Being There.
In 2011, I got a strange invitation to give the inaugural Independence Day Lecture in Abuja. I later learned that President Jonathan had been shown the Nigeria chapter of my book, Africa: Altered States, Ordinary Miracles. That year, bombs in Abuja had forced the government to cancel the Independence Day parade so they settled for a lecture and I was asked to give it. Addressing the ministers, service chiefs, ambassadors and all Nigeria’s top civil servants on what Nigeria should do was one of the most terrifying experiences of my life. They did not sit politely listening. They reacted to almost every sentence and asked difficult questions. President Goodluck chaired it and sat smiling throughout. At the end he smiled even more, shook my hand and said goodbye. No follow up whatsoever. He will be remembered for two achievements as president. The first was to begin the privatisation of the electricity company. The National Electric Power Authority, NEPA, was known as Never Expect Power Always. He changed its name to Power Holding Company of Nigeria
opinion
21
THIS COULD BE A GAME CHANGER FOR THE WHOLE CONTINENT.” PHCN, known as Problem Has Changed Name. But at least the supply is beginning to get better. However, he failed to end the costly fuel subsidy. Nigeria produces more than two million barrels a day but does not have a functioning oil refinery. When he suddenly announced the end of the subsidy on imported fuel there were riots and he had to back down. His second achievement was to step down. He allowed a good election to take place and resigned when he lost it. It was the first time a government has changed through an election in Nigeria. But does this represent a profound and lasting change? While the new President Muhammadu Buhari is very keen to not be the general who mounted a coup in 1983 and had drug dealers shot on the beach at Lagos, he retains an austerity and toughness that are the opposites of the values of Nigeria’s ostentatious ruling class, the self-styled elites. Corruption and oil theft are the curses of Nigeria and it will take a monumental shift of attitude and practice to change that. It will mean getting the oil companies to behave better as well as taking on some of Nigeria’s richest and
most powerful crooks. A younger, weaker president could not do this but Buhari has been there before and shows every sign of ruling by the book. With popular support he could remove the Big Men who control the Nigerian system and constrain Nigeria’s immense human capacity and energy. His election may mark a shift in the power politics of Nigeria away from elite rule towards the recognition of the democratic will of the people and observance of the letter and spirit of the Constitution. This could be a game changer for the whole continent. Buhari has not played a continent-wide role so far but now is his chance. He can tell Africa’s former and serving military presidents that he too had once overthrown an elected government and had people shot and that they should not follow his example. Even more important is whether he can finally unlock Nigeria’s potential. The energy and creativity of Nigerians is legendary. Nigeria has almost every mineral including oil but at present much of it is stolen or spilled, enraging the peoples who live over it and try to
survive in their own land. It has millions of acres of fertile land and a population keen to get education and wealth. By creating a value-adding manufacturing base, Nigeria could begin to compete with Chinese manufactured imports. ECOWAS (Economic Community of West African States), the regional economic organisation, is all but moribund but under good Nigerian leadership could help the entire region lift off. The former general has become increasingly involved in continent-wide issues and, if Nigeria is to play a leading role in Africa, he needs to work with likeminded rulers. When Thabo Mbeki was president of South Africa and Olusegun Obasanjo was president of Nigeria, the continent’s two biggest economies had real leadership and – if they could agree – they could make things happen anywhere in Africa. But both were replaced by far less experienced and knowledgeable men, neither of whom can claim to speak for the continent. Buhari has been around long enough to know all the presidents and with the weight the Presidency of Africa's biggest economy, could he revive that leadership role?
.
22
dialogue
SHOW SOME RESPECT Words Kerry Chipp, in conversation with Chris Gibbons
GIBS senior lecturer Kerry Chipp has just won the Best Research Paper award at the Institute of Management Technology’s Emerging Markets Conference in Dubai. The paper, entitled A Little Respect: CVP Development and the Low Income Consumer, reveals the importance for this group of value in acquisition, or the value embedded in the experience of purchasing. YOU FOUND A HIGH LEVEL OF DISRESPECT AT THE BOTTOM OF THE PYRAMID – POOR PEOPLE BEING TREATED BADLY?
Yes, in the service encounter. There was a lot about rudeness, a lot about not being listened to. The people we interviewed used the word “listen” a lot – “no-one would listen to my story”, “no-one would give me time to understand me”, “I was shoved around”. What was quite interesting in a sad/funny way was they said “I got more attention from the store security guard than I got from store staff ”. Also, “I’m treated as a suspect”, “I’m not treated as somebody, the colour of whose money is the same as the next person”. HOW DO PEOPLE REACT TO BEING SHOWN DISRESPECT?
The literature suggests that low-income people would rather stay away, or boycott, than actually voice their dissatisfaction. But we found that they were very vocal and very willing to voice their discontent at the service provider. Which was unusual, because the literature says that shouldn’t happen.
GORDON INSTITUTE OF BUSINESS SCIENCE
I’M NOT THEIR YOUNGER BROTHER OR SISTER . . .” ON WHAT BASIS WOULD A STORE STAFF MEMBER MAKE THE ASSUMPTION THAT I AM WORTHY OF DISRESPECT?
A lot of our interviewees spoke about stores in their local environment. In the township this would be a Spar, a Checkers or even a local spaza shop, staffed by people from the local area. They said they would get “treated like a little brother or a little sister”. Phrases like “Agh, you’re just a local kid”, regardless of their age, “you’re just from around here, you’re nothing special”. DOES THIS LACK OF RESPECT DAMAGE THE PRODUCT OR BRAND OR DOES IT JUST DAMAGE THE STORE WHERE IT’S EXPERIENCED?
Kerry Chipp
It damages the store because it’s distinguished on geography. It’s not Spar in general, it’s this local Spar around the corner. And when they were talking about Nike, and they went into a Nike shop, it doesn’t actually damage Nike, it’s the retailer of Nike.
23
dialogue
I’M TREATED AS A SUSPECT.” IS THIS ONE OF THE FACTORS IN CAPITEC’S SUCCESS?
Definitely. Their whole service environment is very open, very friendly. Related to that, FNB had a similar experience in India, where they didn’t actually understand the Indian system, which turned out to be to their benefit. They rolled out a brand lookand-feel and planned what they imagined a branch should be, but they didn’t know that Indian banks discriminate massively on caste. The lower your caste, the worse you are treated and the shabbier the offering to you. Even from the point of actually entering the premises: it’s degraded, shabby, dirty, because it’s for a lower caste. FNB had none of that history, put up their brand logo, defined their service experience in what to us would be a normal way, and had massive adoption by the lower castes: “They are treating us well, treating us like ordinary human beings. Where the other banks in India treat us like something found on the bottom of their shoe.” YOUR RESEARCH ALSO FOUND THAT POOR PEOPLE ARE PREPARED TO PAY A PREMIUM FOR RESPECT?
It’s about the experience. Generally, low-income consumers don’t actually have a lot of opportunity to participate in the consumption culture. But when they do, when they’ve got the money and are going to buy, it’s around “I can actually participate, so I will pay the premium”. Woolworths comes out very strongly, because this is where “I’m treated well, and I like being treated well”. In fact, the only retail brand that came across as getting it right was Woolworths, which really stood out. The interviewees said they loved Woolworths: “I was so proud of feeling like a respected person.” RESPECT IS VERY WIDELY USED WORD. DOES IT NEED CLOSER DEFINITION?
The essence of respect is being treated by others as you would wish to be treated. In a Kantian sense of how a man needs to be recognised as a man. There was a lot about being recognised for being a fully participating, equal member of society. WHAT ALERTED YOU AND YOUR COLLABORATOR, PATRICIA WILLIAMS, TO THE POSSIBILITY THAT THERE MIGHT BE SOMETHING WORTH INVESTIGATING HERE?
Patricia is very passionate about helping low-income people and does a lot of charity work. When we were looking at how to investigate this market, she said she felt that in a lot of instances such people are perceived as second-rate citizens. We were keen to use the critical incident technique to see in a consumption or retailing experience, what was your last memory, what stood out for you? We were shocked at how many of these memorable experiences centred around being treated like a second-rate
citizen, being shown disrespect; and they used the words “respect” and “disrespect”. “I feel like a respected person”, “I was appreciated”, “I wasn’t given any respect at all”, “Their tone to me was one of no respect.” “It’s push and shove”, “They need to treat people special, I’m a customer”. And the whole idea of the use of the word “customer” is, “I’m not their younger brother or sister, I’m a customer with paying money”. As if they’re saying, “I can participate, why are you not treating me like customers are supposed to be treated?” WHAT ARE THE KEY LESSONS HERE FOR MARKETERS – RETAILERS IN PARTICULAR?
How does your staff treat low-income consumers? These are consumers who see the staff as equal to them, but the staff doesn’t see it the same way. By whatever signals or signifiers, they pick up that this person doesn’t have much money. So, how does the staff treat people who have a low income? Or do they treat people the same? In a variation on the theme, I was talking with people from Kenya, who told me that they were treated badly by Sandton City service staff because they were foreign and their credit card was foreign. In those instances, the staff were providing the service but conveying disapproval through tone of voice and body language. Literally, how they take the credit card, how they handle their credit card. If you live in an environment where there is discrimination, how is your staff briefed on that? Are they given the tools to recognise what their own prejudices are and how to overcome them in a service environment? WHICH STORES ARE GETTING IT WRONG?
The Spars are quite vulnerable because they’re in the low-income areas. One respondent said, “You know, I felt that if they were not dealing with a black person, they wouldn’t do this to me. Because it’s in Alex, because it’s our community, then it doesn’t matter whether you’re a customer or not, they talk to you like they’re talking to their younger sister.” If your brand is in a largely lowincome area, those outlets are extremely vulnerable, especially if they’re staffed from that area. HOW DID YOU FEEL WHEN YOU HEARD YOU’D WON THE AWARD?
I was stunned actually. But what struck me were the conference delegates from emerging markets who really bought into this. They told me, “This is so true. Low-income consumers get treated badly, treated as second-rate citizens. This is endemic”
The full paper can be accessed here: Williams, E P, & Chipp, K (2015). A little respect: CVP development and the low income consumer. Proceedings of the 2015 Annual Conference of the Emerging Markets Conference Board, Dubai, 20-22 January.
.
advertorial
25
AFRICA: A CORNUCOPIA FOR SHORTTERM INSURERS Words Tafadza Ziteya (FIISA, AIRMSA) - Business Consultant: Corporate Property Gauteng, Lion of Africa Insurance
It has been called the “final frontier for the bold investor” and the “next growth market”, and companies across South Africa are looking at ways to expand their markets into it. I am, of course, referring to Africa, one of the fastest growing regions on the globe. The insurance industry is succumbing to its appeal, and not without reason. The relatively high GDP growth rates in the rest of Africa compared to South Africa offer tempting opportunities to insurers: there is a positive correlation between economic growth and insurance premium growth. According to the Swiss Re Sigma Report, premium growth between 2001- 2011 in subSaharan Africa (excluding South Africa) was 7.1%. A boom in the resource extractive industries on the continent has provided a fillip to the insurance industry. Growth in demand for oil and other minerals has seen a resource boom, strengthened by the discovery of new deposits such as oil in Tanzania and Ghana as well as gas in Mozambique. Not only has this created insurance demand for mining and resource extraction projects, but for downstream and upstream undertakings too. Accelerated infrastructural development in Africa, to support the resource extractive industries, has brought additional insurance requirements. The increased democratisation of the continent, combined with liberalisation of its economies, has opened the region to increasing investor interest. The scope for growth is highlighted by the low insurance penetration rates in African countries. Short-term premiums as a percentage of GDP is 2.5% for South Africa, but below 2% for most African countries. For two of Africa’s most populous countries – Nigeria (178.5 million people) and Egypt (83 million) – the non-life penetration rate is close to 0.5%.
While all Africa provides scope for a growing insurance sector, we are particularly interested in sub-Saharan Africa, given the historical and economic ties that we have with the region. The focus is on those countries with the highest potential for insurance growth and these are Angola, Ghana, Nigeria, Zambia, Cameroon, Chad, Senegal, Mozambique and Kenya. By contrast, North Africa has close ties with Europe, leaving less scope for South African companies to enter those markets. At this stage, SA short-term insurers are earning only some 8% to 10% of gross premiums from countries north of our borders, again emphasising the potential to increase. So the opportunities are there but, of course, it’s not all plain sailing. Insurers face considerable challenges as they expand northwards. Cultural and language differences create barriers for businesses and it is definitely advisable to make use of local knowledge. At Lion of Africa, we opt to partner with local businesses – notably local broking firms, given our distribution model – which helps to overcome those obstacles. Other hurdles to contend with include regulatory differences as well as some challenges in repatriating funds in certain instances. Despite this, Africa is still a dripping roast. Future growth will come from those countries with the greatest economic growth potential and specifically from industries with the greatest potential. The extractive industries remain in a long-term bull cycle while the infrastructure backlog implies decades of investment to come. Africa’s burgeoning middle class also offers scope for the shortterm insurance industry – from the growing retail sector with shopping mall developments to greater consumer expenditure and consequent pool of consumer goods – laying the scene for abundant opportunities
.
GORDON INSTITUTE OF BUSINESS SCIENCE
26
world
Lloyd Blankfein, Chairman & CEO, Goldman Sachs
world
27
RISK TAKER SUPREME Words Chris Gibbons
Intro
Lloyd Blankfein is Chairman and CEO of Goldman Sachs, arguably the world’s most profitable, most envied and most emulated investment bank. Of course, detractors would have us believe that they single-handedly caused the 2007-08 financial crisis. In her book, Chasing Goldman Sachs, former Wall Street Journal writer Suzanne McGee makes a compelling case that the root cause of the meltdown was not so much Goldman Sachs as so many other Wall Street banks trying to copy what Lloyd Blankfein and his team were up to. Goldman Sachs had tapped into an apparently matchless seam of fabulous profits; shareholders at the other institutions wanted their piece of the same action. As a result, these other banks took on intolerable levels of risk and folly, coming very badly second and nearly collapsing the global financial system. It’s one of a range of views and explanations, but whatever your personal opinion, in the dark days of September 2008, Blankfein was a central figure in global investment banking and he remains one today, at the helm of an immensely influential, $900 billion Wall Street institution. No surprise then that he was able to draw an audience to a recent GIBS Forum – his only public appearance on this trip to South Africa – that included some of the most distinguished figures in South African finance and banking, among them Rand Merchant Bank founder Laurie Dippenaar, JSE CEO Nicky Newton-King and Banking Association of SA MD Cas Coovadia. What did surprise was how funny and charming Blankfein can be, although the fact that he is cautiously bullish on South Africa’s economic prospects probably also helped.
INFRASTRUCTURE
Blankfein is abundantly clear on this issue: “The predicate has to be the infrastructure. How are you going to get people to go in and launch manufacturing and build their business when the power is going to go off, predictably, or worse, unpredictably. Almost by definition, infrastructure supports everybody … The power grid has to be sorted out.” He points to other elements of infrastructure here that also “have to be sorted out”. One is management: “You have to get good management in the biggest industries. There’s a lot of state ownership of very, very important companies that in
other countries would be public companies, that is, owned by shareholders and subject to market pressures, discipline and transparency. There’s good reason why countries at different stages of development would do that differently, but if there is no market discipline and no market transparency, that may not be entirely good either.” Education, says Blankfein, is also a form of infrastructure: “We make our decisions in some cases about where we locate – the operational parts of our business – based on where we can hire people. So we are beneficiaries of other peoples’ investment. We’re not educating people from the time they’re two years old, preschool, taking them through university and then hiring them. We find them already educated. We supplement that with the specific training that’s there for them to do the job at our companies.”
THE POWER GRID HAS TO BE SORTED OUT.” SOUTH AFRICA
The 30-year Goldman Sachs veteran says his firm has invested in South Africa and he is generally bullish on South Africa as an investment destination, although the important thing is to scale the investment “because it’s risky”. He is quick to add that “there is enormous potential” although he notes that “if you asked me the same thing about China, I’d give you the exact same answer.” “South Africa is not meeting the expectations of a lot of South Africans,” warns Blankfein, although, in the longer term “it has been a spectacular success. Who would have said 20 years ago, projecting out, to where South Africa is today? It was an economic revolution, and, more importantly, a social revolution.
28
world
THIS PERSON SEES AROUND CORNERS.” “There are aspects of the current situation in South Africa that are the same problems that people have all over,” says Blankfein, pointing to his own country, the United States. “Where are the jobs? Where is the distribution of the wealth that has been created in the most recent period of time? The failure of the society, in some cases the leadership, to drive a commitment to investing in infrastructure? Because the costs and the burden of that kind of investment are immediate but the benefits are in the future. That would be the conversation in the US – crumbling infrastructure – and it’s certainly the conversation here [in South Africa]. Those are the problems that everybody has.”
INVESTMENT BANKING
GORDON INSTITUTE OF BUSINESS SCIENCE
In the wake of the financial crisis, investment banks became Public Enemy Number One, targeted by an angry Congress on one side and the Occupy Wall Street movement on the other. Blankfein was asked if that perception had changed, and if integrity and trust had been restored? “A lot of changes have been made. The financial system enjoys a lot of rewards, the wealth creation that occurred. When the wealth creation model went into reverse, when wealth was destroyed in some ways and growth went negative instead of positive, if you had responsibility on the way up, you certainly had responsibility on the way down. It was compounded – and the reputational consequence of this was severe – that the people didn’t think that the people who enjoy it on the way up suffer enough on the way down. “When the system had been restored, some of the greatest beneficiaries of the stimulus that was delivered to the market were the banking system. It needed to be shored up – not because you wanted to benefit the bankers, but it had that effect. You were doing it to protect the financial system so that the growth engine could crank up again. When interest rates were lowered, an immediate consequence was to inflate asset prices. Who are the people in society who own the assets that were inflated? The people who were wealthy to begin with. There’s always a divide in society, but the perception of unfairness was very extreme and severe and that was a big disruption and a very big – and appropriately so – mark on the system. It created a lot of anger towards the beneficiaries of that model.”
But banks have shifted. Was there an acknowledgement of the need to change? “Some is acknowledgement, some have shifted, some is regulatory pressure, some have not shifted. Some of it is because reforms have been undertaken, some of it is because reforms have been imposed by regulation.”
WEALTH & REDISTRIBUTION
Blankfein grew up in public housing in New York, the son of a postal clerk and a receptionist, and went through Harvard University on scholarships, including Harvard Law School, where he earned a Doctorate in Laws, on what he calls “needs, rather than talent”. He believes that any economic system has to do two important things: “Create wealth and then distribute it.” “Distribution is not just a moral imperative. If you don’t distribute things fairly, the people on the wrong end of that distribution, or inequality, will throw a monkey-wrench and your production side won’t create the wealth. If you err too much on the distribution side, the people who are the creators will pack up and go somewhere else.” He cited South Africa at the time of democracy as a classic example, with “an overriding injunction” to redistribute wealth, but to do so in a way that did not provoke sufficient “anxiety” so that the wealth creators “packed up their marbles, went home and left a fairer distribution of nothing.”
HILLARY & LLOYD
Blankfein’s address was peppered with quips, witty asides, even a few self-deprecating remarks, a conversational mix spiced with quick grins and the occasional huge smile. He’s a natural communicator, and to have stayed at the top for so long – he became CEO of Goldman Sachs in 2006 – he must, perforce, be a gifted politician. He’s also known to be a supporter of the Democratic Party and Hillary Clinton in particular. Goldman Sachs was the biggest contributor to President Barack Obama’s first campaign in 2008. So would he accept the job of Treasury Secretary, if a future President Hillary were to call? Amid the laughter that followed the question, Blankfein put on his “Aww, shucks…” face: “No, yes, look… let me be frank… if
world
29
you’ve been doing something for a very long time, what’s driving you? What motivates you? At some point you want to do more for society and that means government. But realistically, you never say never. I think I’ll be at Goldman Sachs for a while. A call for me to serve in public office? You know something… if they asked me, I wouldn’t play hard to get.”
Professor Nicola Kleyn
“But what about the fact that Goldman Sachs calls the shots at Treasury anyway?” came the question – a reference to so many of its senior executives rising to positions of public prominence in US government? Blankfein’s predecessor as CEO, Henry Paulson was George W. Bush’s Treasury Secretary, and ex-Goldman Chairman Robert Rubin the same for Bill Clinton. “I don’t even call the shots in my own personal treasury,” Blankfein flashed back, drawing another big laugh.
LEARNING RISK MANAGEMENT
As might be expected, the world’s biggest and most successful investment bank is legendary for its risk management skills. Acumen asked Blankfein how it went about developing great, young risk managers? “Risk management skills is a very hard thing to come by. It’s very complicated – not just the maths, it’s how to talk to people and how to listen to them. We have an expression, when we complement somebody for their acumen, we say, ‘This person sees around corners.’ An ability to see what other people can’t see, being nervous, being paranoid.
. . . THE PERCEPTION OF UNFAIRNESS WAS VERY EXTREME AND SEVERE . . .” “You develop that by being in situations where you gain experience. For all the things that went wrong in 2007-08, for everybody, our risk management was pretty good. And you know something? It’s better now for having lived through the crisis. Going through a crisis is good. Being a good risk manager means having a great memory, but not too good a memory, because the same thing never happens again. Equivalent things happen. “We train people with a lot of sitting at other people’s elbows. A lot of giving people a little experience and then bigger and bigger and bigger jobs. Making them see a lot of different things as life goes on. We also tend to have a lot of ‘lifers’ in our company – I was a pretty good risk manager at the end, but I started life as a precious metals salesman.”
Lloyd Blankfein
Blankfein’s passion is reading historical biography. Seeing how others started off “awkward” or “wrong” but went on to “make a great mark” gives him hope, he says. His own final chapters are a long way from being written yet, but there’s no doubt that Lloyd Blankfein’s mark on both Goldman Sachs and global investment banking is already indelible
.
30
general management
WHY FINANCE IS KILLING INNOVATION Words James van den Heever
Intro
Harvard Business School Professor Clayton Christensen says we are investing in the wrong type of innovation. Based on his analysis, South Africa Inc. has to catch a quick wake-up. In 1959, wracked by advanced syphilis and weighing just 80 pounds, the anorexic 74-year-old Isak Dinesen (Karen Blixen) electrified audiences at the Young Men’s Hebrew Association Poetry Center in New York with bravura recitations of some of her stories. A contemporary cartoon in The New York Times Book Review has one beatnik asking another, “Did you catch Isak Dinesen at the Y?” Those who saw the performances felt they had been privileged to connect with the “wise, noble, and heroic survivor of the past – the master – they had been expecting”.1
GORDON INSTITUTE OF BUSINESS SCIENCE
. . . IT’S A SCENARIO THAT BREEDS REVOLUTIONS.” For those lucky enough to attend it, Accenture’s recent Innovation Conference in Johannesburg offered an equivalent opportunity to witness a very different kind of performance. A professor at the Harvard Business School, Clayton Christensen is recognised as a leading thinker on disruptive innovation. His analysis of the way in which new entrants into the lower end of the US steel market ultimately reshaped the industry remains a classic, and he has written widely on the subject; The Innovator’s Dilemma was named Best Business Book in 1997. (Visit Google to see his TED talk on disruptive innovation.) He was named the No. 1 Management Thinker in the world by Thinkers50 in 2011 and 2013. Despite illness and a stroke, Professor Christensen demonstrated the power of clear thinking to shed light on a complex subject. In its own way, it was business’s version of “Isak Dinesen at the Y”. 1
To quote her biographer, Judith Thurman, in Isak Dinesen. The life of Karen Blixen (London, 1982), p 421.
Harvard Business School Professor Clayton Christensen
Professor Christensen’s talk was focused on offering an explanation for why the American – and other – economies are failing to produce jobs. The phenomenon of jobless growth is something with which we in South Africa are sadly all too familiar. He argued that there has been a fundamental change in the way in which the US economy operates. This can be seen by looking at the nine recessions recorded since the end of World War II. The pattern for the first six was fairly constant: it took around six months after the economy bottomed out for companies to begin hiring again, and thus for prosperity to take hold. The subsequent three recessions (1991-2, 2001-02 and 2007-08) show a very different pattern, with the interval between hitting bottom and beginning to hire again growing to 15 months, then 39 months and then a staggering 70 months for the 2007-08 recession.
THE CURSE OF JOBLESS GROWTH It’s clearly a worrying phenomenon because it means, essentially, that economic growth is not being translated into prosperity. The results are playing out in an economy near you: in Greece, Russia
general management
and here in South Africa. We see them in the growing disconnect between the huge profits recorded by hedge funds and fund managers – hence Goldman Sachs being dubbed the “vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money”2 – and the growing plight of the blue-collar workers and even the middle class. Not to put too fine a point on it, it’s a scenario that breeds revolutions. So why aren’t economies creating growth? The reason, Christensen believes, is that we are simply investing in the wrong sort of innovation. In his view, there are three types of innovation: market-creating, sustaining and efficiency. The last two are hugely important in order to make good products better (sustaining innovation) and to reduce costs (efficiency innovation), but they do not create jobs. In fact, efficiency cuts jobs. “Nearly all growth is created by market-creating innovation,” he says. Examples would include South Korea’s Kia, Hyundai and Samsung which started with simple cheap products that opened 2
31
up new markets, and required new manufacturing capability, creating more jobs and, incidentally, expanding the market for improved products – a true virtuous cycle. For Samsung, it all began with an electric fan, an affordable piece of highly desirable technology in the sweltering humidity of a South Korean summer. Now it’s the electronics company to beat.
INVESTING FOR THE LONG TERM
However, the challenge is that market-creating innovation is a long-term investment, whereas sustaining and efficiency innovation show quick returns. Now, here’s the really profound part of the analysis: thanks in part to the way business and finance are taught in the business schools, economists, analysts and business people are taught to measure performance by using a set of ratios, chief among them return on net assets (RONA) and internal rate of return (IRR). This, Christensen argues, means that the company’s performance is measured not as it once was by managers in whole units (how much was produced at what cost, and so on) but by the economist’s and analyst’s view which allows companies to be compared as short-term investments. CEOs are incentivised to
The quote comes from Matt Taibbi, The great American bubble machine, Rolling Stone 5 April 2010, available at Rollingstone.com/politics/news/the-great-american-bubble-machine-20100405.
32
general management
NEARLY ALL GROWTH IS CREATED BY MARKET-CREATING INNOVATION.” produce good financial returns, so they focus on efficiency and sustaining innovation rather than market-creating innovation. Such investments produce free cash flow which should, ideally, be invested into market-creating innovation but, increasingly, simply go back into the other two types. As a result, we are investing one-third of what we did in the 1950s in market-creating innovation, Christensen says. For example, Japan, once the poster child of market-creating innovation – think Honda motorbikes, Sony electronics, Canon printers – began using ratio-based performance measurement in the 1980s and since then has come up with precisely one: the Wii.
GORDON INSTITUTE OF BUSINESS SCIENCE
Another consequence of this new economy of money investing in money rather than production, capital is no longer the scarce commodity it once was – there’s so much of it that we can actually waste it (hence the rise of crowd-sourcing) and the cost of capital is practically zero. In some countries, in fact, it has a negative value. That in turn means that central banks have virtually no powers to influence economies since mechanisms like raising interest rates are meaningless. “We need to rethink finance in fundamental ways,” Christensen concludes. It seems a reasonable inference that the current and escalating disparity in wealth as described by Thomas Piketty could, in great measure, be ascribed to this “ratio-based” style of investing. Money flows to investors (i.e. those who already have it), while the numbers of wage-earning jobs declines. Recent research shows that 0.1% of American families hold 22% of the nation’s wealth, almost the same percentage as that held by the bottom 90% – not quite as bad as it was in 1929, but close.3 The drive to get America manufacturing again is a response to this state of affairs. Thus GE, arguably one of the US market’s bellwethers, is retooling to make stuff, rather than supply financial services. 3 4
(In practice, market-creating innovation, it could be argued, goes hand-in-hand with manufacturing.)
THE BAD NEWS FOR SOUTH AFRICA Having put forward his theory, Christensen spent some time talking about its implications. We should take one observation to heart: countries blessed with abundant natural resources have found it impossible to share their wealth with the mass of their citizens. He cited Venezuela (tipped by some to be 2015’s worst-performing economy), Mexico and Nigeria – perhaps not including South Africa out of politeness to his hosts. Resource economies do not create widespread prosperity because, in Christensen’s terms, they are heavily focused on efficiency and thus on shedding jobs – something that the recent strike in the platinum industry will hasten. Another point that for us to ponder. South Africa is the possessor of a highly sophisticated financial sector, one of the few areas in which we are world class – yet it is the fount of short-term, ratiobased investment. One could also add the fact that corporate South Africa seems to be sitting on a lot of cash – even though the exact extent of it and what it means could be argued several ways, there’s not much investment in market-creating innovation and thus in job creation.4 The figures say it all: according to Statistics South Africa, the manufacturing sector declined from 19% to 17% of the economy in 2012, while finance, real estate and business services – none of them creators of new markets or jobs – rose to 24%. To conclude on a positive note, Christensen pointed out the huge opportunities that continue to exist for those companies and countries that are willing to look at patterns not of consumption but of non-consumption, because they show where innovations should be sought, where the pent-up demand actually is
Emmanuel Saez and Gabriel Zucman, NBER working paper 20625 cited in The Economist Espresso, Monday 22 December 2014. Cees Bruggemans and Hugo Pienaar, Myths and misconceptions of SA’s corporate cash pile, BDlive, 29 April 2013, available at Bdlive.co.za/opinion/2013/04/29/myths-and-misconceptions-of-sas-corporate-cash-pile.
.
general management
BRIGHT STAR OR DEATH STAR?
Mick Jagger
PHOTOS: SHUTTERSTOCK IMAGES
34
Words James van den Heever
Just what is a rock star CEO, and would you want one running the company you work for, or are investing in? The tech industry is Ground Zero for rock star CEOs. Steve Jobs’ performances when unveiling Apple’s latest gadget have become legendary, along with the “reality distortion field” he was able to create. Microsoft’s Steve Ballmer tried so hard that videoclips of his stage antics went viral – not necessarily in a good way.
GORDON INSTITUTE OF BUSINESS SCIENCE
There may be more of them in technology, but every industry has its rock star CEOs – Jack Welch and Richard Branson are two that come to mind. An enjoyable parlour game is to debate who the real rock stars are over a glass of red wine, particularly the local ones. I mean, is Koos Bekker a rock star or just successful and rich? Michael Jordaan? Surely Sol? Playing that game, one thing becomes rapidly clear: while the concept seems easy to grasp, it’s actually quite slippery. So the first order of business should be an examination of what a rock star CEO actually is. Once that’s a little clearer, it’s easier to start working out whether you would actually want one to run your company… or want to be one yourself. It’s a question really that goes to the heart of what leadership is all about. Karl Hofmeyr, Professor of Leadership at GIBS, argues that the notion of a rock star CEO could imply two distinct types of leader. One is the charismatic, extrovert leader with a strong public persona; the other is the bigname, big-personality meteor who propels the company
Steve Jobs
general management
into uncharted waters and then crashes and burns. “Someone who isn’t there for the long term,” he says. There are, of course, other nuances one could use to distinguish the various types of rock star, but surely they all share a certain showmanship and a substantial dash of ego. The rock star likes to be, and thrives, in the limelight – the quintessential front man. The same could be said of CEOs as a group – even the most introverted has to perform for investors, employees and the board – but only a few pass what one writer calls “the Times Square test”:1 Would the CEO be recognised in the street, or even in a remote branch of his or her company? In the music world, this type of persona is electric, inspiring on stage, but off stage can be self-destructive. Smashed guitars and hotel rooms, substance abuse and other sins of the flesh can all land a rock star in the has-beens’ bin. In the corporate world, rock star CEOs can fall prey to similar behaviour patterns. They often need an entourage, and this can create a “two team” culture that actually stifles esprit de corps and also innovation, because ideas that don’t come from the star’s dressing room can be perceived as valueless. This type of extreme rock star behaviour soon alienates employees and attracts media attention.
L’ÉTAT, C’EST MOI
35
. . . A CERTAIN SHOWMANSHIP AND A SUBSTANTIAL DASH OF EGO.” the winner’s PR machine, which happened to have Shakespeare as one of its head writers.) The halo effect is hugely affected by first impressions, meaning that your mother was right all along about dressing for success. A related (though unpalatable) truth is that taller, better looking CEOs positively affect a company’s stock price. Researchers at Duke University found that good-looking CEOs seem more competent and seem able to negotiate better deals for shareholders, especially in M&As.3 Professor Adrian Saville, CEO of Cannon Asset Management and a GIBS faculty member, says that while it’s true that investors can be swayed by a CEO’s aura, the phenomenon is not restricted to CEOs. “Behavioural biases are everywhere, not just in the world of the CEO,” he points out, referring to wine-tasting experiments which clearly show that experts rate a wine higher when they know it is expensive.
A rock star CEO usually becomes closely associated with the company brand. This can be an advantage because it often attracts talent to the company, and such a person can be a powerful motivator because he or she inspires love or fear – perhaps both. “If the CEO can translate his or her rock star charisma into leadership and thus success for the company, then he or she can be a real plus for the company,” observes Hofmeyr.
JUST HOW IMPORTANT IS THE CEO?
This close association can have negative consequences, too, because such CEOs see the company’s results as a direct reflection of their own status – a form of narcissism that can lead to serious malpractice. Research has shown a clear correlation between how often a CEO uses the pronoun “I” and a company’s propensity to use dodgy accounting processes to inflate earnings. Narcissistic CEOs (like rock stars) crave external validation, and will engage in unethical behaviour to get it, concludes the researcher, Professor Alex Frino, Dean of the Macquarie Graduate School of Management.2
In fact, there’s a good argument to be made for the view that overemphasis on the CEO can be a curse. It can lead to deceitful accounting practices, as noted before; worse, the CEO and his or her team can actually start to believe that they have all the answers and fatally misread new situations.
Another element of the rock star CEO dynamic to consider is the so-called “halo effect”. It rests on the assumption that because a person is good at one thing – giving great speeches, for example – he or she is good at everything else. The reverse is also true: once you’re pegged as bad in one respect, you’re assumed to be bad all through. (Richard III continues to suffer from this “reverse halo”, despite evidence he was actually a fine king who was the victim of 1 2 3
An almost universally drawn corollary of the halo effect is that a company’s growth or failure is the direct result of the performance of its CEO, its people and culture. As Phil Rosenzweig argued in The Halo Effect (2007), this is pseudoscience: these are not the drivers of high performance but more the ways that high performance is described.
The story of Terry Leahy and Tesco is instructive. Leahy and his team turned Tesco into a global leader in grocery retail, responsible for many innovations that have become standard, such as loyalty cards and high-margin home branded products. Earnings grew sevenfold and Leahy gathered many awards over his 30-year tenure. But in due course, Leahy and his team seemed to buy into the view that they were somehow solely or largely responsible for Tesco’s success. Tesco’s international forays ranged from the notvery-successful to the frankly disastrous, and earnings figures were hugely exaggerated to keep the legend alive.
Sindhuja Nandiraju, ’Rockstar’ CEO, available at Mbaskool.com/business-articles/human-resource/4441-rockstar-ceo.html. Patrick Durkin, Narcissistic CEOs should reflect on performance, The Australian Financial Review, available at Afr.com/p/narcissistic_ceos_should_reflect_dUGaGgVgbDwfS67U6ccjDN. See Kiran Moodley, Want better returns? Hire a good-looking CEO, available at Finance.yahoo.com/news/want-better-returns-hire-good-060859737.html.
general management
PHOTOS: SHUTTERSTOCK IMAGES
36
Jack Welch
The unfortunate who took over from Leahy, Dave Lewis, found himself having to slash the dividend by 75% and restate profit figures to the tune of £250 million in his first months in the top job.4
GORDON INSTITUTE OF BUSINESS SCIENCE
In the light of Rosenzweig’s insight, one is forced to conclude that a company’s success or failure is due only partly to the brilliance of its rock star CEO, its fantastic culture and gifted executives – external factors are at least as important. It might even be that the longer the rock star CEO holds the job, the worse the mess he or she leaves behind. One might also point to the pronounced shift in GE’s strategy under its new CEO, Jeffrey Immelt, who is betting big on supplying emerging markets with what they want – from rolling stock to nuclear power stations. It’s a return to GE’s roots and a departure from Jack Welch’s move away from making things to supplying financial services. While his strategy swelled GE’s coffers, with hindsight, it could be argued that Welch wasn’t so much a visionary as someone who correctly identified a new trend, namely that services were the coming thing and manufacturing was outdated.5
IT’S ALL ABOUT THE PEOPLE
But whatever his shortcomings, Welch was also a rock star CEO who displayed some positive characteristics we should note. He was always careful – and he acted out of conviction, not anything more sinister, as far as one can tell – to give due credit to his team, and his focus on hiring and then empowering the right people is legendary. Karl Hofmeyr makes the point that rock stars always rely on their bands, and arguably one of the reasons behind Mick Jagger’s sustained success is that the band is also a rock star. Welch may have been the face of GE, but by his own admission he spent an inordinate time on building the GE team; back at Apple, Jobs had to have his Wozniak, and later, Jony Ive. 4 5
Welch also believed strongly in GE itself, and it’s often observed that the best CEOs are personally humble but hugely ambitious for their companies. Returning to the original question, one might conclude that a certain amount of rock star quality can help a CEO be more effective, both as a spokesperson for the company and as a inspirer of the troops. However, and more important, that star quality will quickly wear thin if it’s not underpinned by solid achievement – and achievement will confer some of the rock star’s glamour on the most uncharismatic of CEOs. In the end, though, while the CEO is clearly important, he or she is just part of the magic recipe and boards should be very careful about the criteria on which they make CEO appointments. A trophy CEO, especially one from another industry, is unlikely to be what an ailing company needs. “If a rock star CEO can inspire and motivate employees, then he or she can be a positive asset to the company,” Hofmeyr argues. “But there is no one kind of leader, and the context is all important. And many unsung heroes play a role in a company’s success – leaders have to acknowledge that or they will not be able to achieve sustained success.” To a degree, every CEO has to play out part of his or her role in the limelight – on roadshows, at investor briefings, at board meetings, at town halls. Good looks and charisma are an obvious benefit, but that’s true in any walk of life. In the end, though, as Heidrick and Struggles’ Johann Redelinghuys says, it’s performance that counts, and performance is based on the ability to develop smart strategies and inspire smart people to execute them. As important, like real rock stars, rock star CEOs have to be able to reinvent themselves as their industries change. Without it, they risk ending up just as one-hit wonders
Steve Hohnson, Curse of the rock star CEO, Australian Financial Review, 21 October 2014, available at Afr.com/p/personal_finance/portfolio/curse_of_the_rock_star_ceo_tzNhX3hTdypzs99fb2dKsL. Rana Foroohar, GE makes a big bet on manufacturing, Time, 20 November 2014, available at Time.com/3596974/ge-makes-a-big-bet-on-manufacturing/.
.
general management
37
HOW TO BE A ROCK STAR CEO FIRST DEFINE WHAT YOU MEAN BY ‘ROCK STAR’
“There are more tears shed over answered prayers than over unanswered prayers.” Translated into management jargon, St Theresa of Avila is cautioning us to be careful about the goals we set ourselves. MORE SPECIFICALLY, WHAT KIND OF CEO DO YOU WANT TO BE? ROCK STAR, OR ROCK STAR AND ALSO LEGEND?
The continuum would seem to extend from the moody, mercurial, ego-driven genius to the consummate professional who combines acuity with flair, and is in for the long haul. The Who with their spectacular but ultimately uneven and relatively short-term trajectory contrasted with the sustained achievement of the Rolling Stones or Pink Floyd – plenty of fireworks and rotating pelvises, to be sure, but in the end an enduring commitment to the product and building a functioning team. It’s the latter recipe that creates the legends.
PHOTOS: SHUTTERSTOCK IMAGES
As we’ve seen, some of the characteristics of the rock star can be useful to the CEO or aspirant CEO. It all starts with good looks and charisma. Of course you can’t fight your genes, but grooming (both physical and attitudinal) can certainly help. CEOs are going to be in the spotlight so they need training on how to present themselves and deal with the media, Redelinghuys believes. At the same time, he adds, being a leader is innately a high-pressure job so many CEOs are taking advantage of life coaches to help them navigate a pressurised, highly public life. In other words, perhaps, a certain professionalism is a prerequisite for becoming a rock star CEO who is also a legend. It’s also important for aspirant CEOs to get themselves noticed by those in a position to help them realise their ambitions – executives, directors and, of course, head-hunters. “Get some successful projects under your belt and a track record of delivering the goods,” Redelinghuys advises. Richard Branson
In that regard, aspirant CEOs should remember that getting the top job ultimately requires getting the nod from the board nomination committee. “Boards are very interested in managing risk,” Redelinghuys says, adding that a track record is more important than a well-massaged CV. “CVs are thoroughly checked these days, so the underlying record is more important than the dressing.” Another important consideration is the style of the business community. US business is definitely more open to the flamboyant type of CEO – Donald Trump wouldn’t go down too well in the United Kingdom, or South Africa for that matter. On the whole, the local business scene leans more towards the understated British way of doing things.
Donald Trump
Rock stars wanting to make the transition to legend need to make sure they are adept at finding the best band members and getting the best out of them; rock star CEOs must do the same. It’s thus important for aspirants to invest time in their peoplemanagement skills early on. “Learn how to inspire loyalty by rewarding it,” Saville advises. “In the end, a CEO who creates opportunities for employees and wealth for shareholders will be seen as a rock star.”
40
general management
ETHICS AT HIGH SPEED Words Cynthia Schoeman
Does speed encourage cutting corners? The need for speed in business is widely recognised, both in terms of the driving factors, such as increasing technological advances, and in terms of the benefits, such as staying ahead of competitors. A question posed by this focus on speed is whether organisations can operate at increasingly high speeds and be ethical at the same time? An obvious trap is that the need for speed can prompt organisations and employees to cut corners. This could take many forms. If the issuing of a necessary business permit or licence is very slow, it could lead to the permit being “bought” to short-circuit the process. Customs officials also know that speed is a crucial factor for trucks transporting fresh produce or perishables across a border. This can lead to a “price” being paid to avoid a delay that would ruin the goods.
GORDON INSTITUTE OF BUSINESS SCIENCE
The manufacture of the Ford Pinto provides a more extreme example of the consequences of a desire for speed. In the 1970s Ford President Lee Iacocca’s goal of a compact car that weighed less than 2 000 pounds and was priced at less than $2 000 resulted in the production of the Ford Pinto. During the period of only 22 months from concept to production, Ford had been aware of the design defects. However, under competitive pressure from other small car manufacturers, the company was not open to any delay in production and therefore did not change the design, deciding instead that it would be cheaper to pay off possible lawsuits. The defect? In a rear-end accident the car could leak fuel and burst into flames. Figures vary as regards the number of deaths, but it is conservatively estimated at 27. Another pertinent example of the consequences of the need for speed centres on journalism, especially online journalism. The pressure to be the first to publish, to put out news at greater and greater speeds, to keep news updated, and to meet the public’s increasing demand to access news as it happens poses huge threats to the accuracy and veracity of reporting. Corrections can be – and are – made after the event. But given the ability of online news to reach millions of people almost instantaneously, it is often not possible to adequately correct the facts when they are being shared across a proliferation of other news outlets: individual blogs, radio, television, websites and web broadcasts. It amounts to a case of having let the genie out of the bottle and not being able to get it back in again.
TOO TIME-CONSUMING TO BE ETHICAL?
Speed and ethics can also combine negatively when tasks are particularly time-consuming. This can have disastrous
RULES AND COMPLIANCE ALONE ARE NOT SUFFICIENT. . .”
Cynthia Schoeman
consequences when it leads to short cuts in areas such as safety or quality. A high-profile example was the BP Deepwater Horizon oil spill in 2010. The US federal investigators’ report into the cause of the explosion aboard the Deepwater Horizon drilling rig found that BP had run behind schedule and tens of millions of dollars over budget in trying to complete the Macondo well in the Gulf of Mexico. More importantly, the report also found that BP had taken many shortcuts that contributed to the disastrous blowout and oil spill, which claimed eleven lives and is considered the largest marine oil spill in the history of the petroleum industry. In the field of workplace ethics, the risks associated with timeconsuming tasks can apply to the compliance function. The increasing demand to be compliant with a multitude of laws and regulations is making compliance an onerous task in many countries. Compliance officers are battling to balance the many duties of the function, including establishing standards for business conduct, ensuring compliance with anti-bribery and
general management
41
. . . SIMPLICITY MAKES YOU FAST.” corruption requirements, tracking and analysing regulatory developments, board reporting, amending policies and procedures, and liaising with internal stakeholders and control functions. Two 2013 surveys provide interesting insights into the consequent pressures. Thomson Reuters Governance, Risk and Compliance surveyed more than 800 compliance practitioners from financial services firms in 62 countries between November 2012 and January 2013, to canvass their views on the costs of compliance and the greatest challenges they expected to face during the year ahead. The survey, the Cost of Compliance Survey 2013, confirmed that compliance requirements have increased, as has scrutiny from regulators and consumers. As regards on-going increases, 43% of the respondents said that they expect the amount of regulatory information published by regulators to be significantly more over the following 12 months. While it may be assumed that regulation in the financial services sector is more demanding than in other industries, the Deloitte and Compliance Week Compliance Trends Survey 2013 confirms the same pressure amongst American compliance executive across many industries. The survey also found that the majority of companies still run compliance with relatively tight budgets and staffing. The time-consuming nature of compliance can be used to justify a “tick box” approach to the subject, which is clearly not ideal, not least from a risk perspective. However, the far greater problem that can arise is that compliance comes to be seen as the totality of the organisation’s ethical focus and ethics initiatives – that companies decide that no more time, funds or resources can be allocated to anything else beyond compliance. This risk is enhanced by the reality that compliance is almost always obligatory (for example, relative to legislation) while much of ethics can be considered voluntary. The unsatisfactory consequence of a choice in favour of compliance instead of broad-based ethics would be to restrict the company’s ethics to only one facet: the rule-based side of ethics. However, to be an ethical organisation and create an ethical culture requires an equal focus on fostering value-based behaviours, which are much more sustainable and contribute
significantly to an ethical culture. Rules and compliance alone are not sufficient to achieve an ethical culture. On the negative side of speed and ethics, while the downside of cutting corners may be well understood, the risk of a limited, one-sided ethical approach is often not as well recognised.
ACHIEVING GREATER SPEED VIA ETHICS
The positive contribution that ethics can make to achieving greater speed is also arguably not well recognised. Jack Welch’s pursuit of speed during his tenure as CEO of General Electric from 1981 to 2001 warrants mention for being under the apparently unlikely banner of self-confidence, simplicity and speed. Starting with the view that it takes self-confidence to simplify complex issues, his business case was that self-confident people make it simple, and simplicity makes you fast. But the primary area where ethics can make a positive difference is relative to organisations that have a strong ethical culture and widely shared values. This affords them the advantage of high levels of clarity about what is and is not acceptable, which translates into both faster and more consistent action and decision-making. A good example of this, which is still used as a best practice case study, is the 1982 Johnson & Johnson Tylenol case, when Tylenol capsules laced with cyanide led to seven deaths in the US in the Chicago area. Johnson & Johnson’s admission extended to recalling 31 million bottles of Tylenol capsules and offering free replacements in the safer tablet form. After reintroducing their tamper-proof product, in just a year they had regained a 30% market share from a prior 37% share of the market. Central to this was the role their credo (values or code of ethics) played. It shaped, informed and kept aligned the myriad decisions which needed to be made and the priorities which underpinned them. As to the question of whether operating at increasingly high speeds can erode ethics, the answer is unfortunately a loud yes. However, with appropriate levels of awareness, these pitfalls can be avoided without unduly losing speed. Crucially, organisations need to recognise that ethics can promote speed – with the added bonus that it contributes to greater consistency and better business practices too
.
PHOTOS: SHUTTERSTOCK IMAGES
GORDON INSTITUTE OF BUSINESS SCIENCE
42
world
TWO-THIRDS OF THE WORLD IS EXPECTED TO LIVE IN CITIES BY 2050.”
Tokyo, estimated to be home to 38 million people
world
43
THE CITY AND THE GLOBAL ECONOMY Words James Sey, Part 1 of a 2-Part Series on Megacities
The world is changing. The focus of the global economy on the Western, ‘developed’ economies has given way to a shift in global economic power to the emerging economies, and the rise of new areas of potential economic growth in a world beset by diminishing resources and economic recession. Central to this shift is the move from the nation as a focus of wealth, growth and prosperity to a focus on cities, ‘megacities’ (defined as conurbations with more than 10 million inhabitants) and city regions. Rapid urbanisation is propelling growth across emerging markets and shifting the world’s economic balance. By 2025, says research company McKinsey, the process of urbanisation will have created a ‘consumer class’, with more than four billion people, up from a billion in 1990. Nearly half of these consumers will live in the emerging world’s cities, which are set to inject almost $25 trillion into the global economy. Of these cities, estimates McKinsey, 440 emerging-market cities, very few of them “megacities”, will account for close to half of expected global GDP growth between 2010 and 2025. New social, economic and political strategies that emphasize such cities are emerging in many countries and regions around the globe. These strategies take into account the new kinds of urban life developing in large city regions around the world, and how to ensure its prosperity and success. In fact, the world’s population balance has already shifted decisively towards urbanisation. Since 2008, for the first time in history, more people live in cities than in rural areas. The urbanisation process has accelerated from only 2% living in urban areas in 1800, to around 3 billion people, or half the world’s current population. Two-thirds of the world is expected to live in cities by 2050.
44
world
. . . LONDON ONLY EARNED MEGACITY STATUS IN 2013 . . .” Of course, this rapid and widespread urbanisation is not without challenges. As people flood into urban areas, cities around the world are battling to cope with the demand for additional infrastructure and services, lack of housing, worsening environmental problems and increasing traffic congestion. As a city grows to absorb immigration and natural growth, it expands beyond its defined and planned boundaries into the sphere of influence of neighbouring cities, urban and peri-urban areas. Given not only the intense flow of people, but information, trade, finances and resources between cities, a traditional approach to planning and governance is increasingly untenable. A new approach to planning and managing these burgeoning urban areas is required.
GORDON INSTITUTE OF BUSINESS SCIENCE
MEGACITIES
According to CNBC, today some three-dozen cities around the world make the megacities list of over 10 million inhabitants, and by 2030, more than a dozen more will be added to this list. The vast majority of these new megacities will be in the developing world. To get some perspective on the question, London only earned megacity status in 2013, according to the UN, and even then only by dint of adding in the population of the greater urban area. Tokyo, for some time the largest global megacity, is estimated to be home to 38 million people. But yet it is elsewhere in Asia, and especially in Africa, that some of the most rapid urbanisation is taking place. Kinshasa, the capital of the DRC, will have a projected population of 20 million by 2030, and Lagos, the most populous city in Nigeria, will have over 24 million inhabitants by then. This rapid urbanisation is fuelled of course by the search for economic opportunity in the city, but the massive
rate of urban growth is placing enormous strain on the resources and infrastructure of cities designed for far fewer numbers. According to European urban think tank Euramet, megacities now make up 2% of the earth’s surface area, but consume 75% of its resources. The imbalance will clearly impact as a huge challenge to sustainability – of food, energy, employment and other resources – and the infrastructure to support the production and supply of resources. What this challenge amounts to is the ability of the megacity to carry the economy of a country, since, increasingly, a country’s economic strength will be measured by the success of its cities. And, according to a recent Citibank report called HotSpots 2025, such projected success boils down to ‘a city’s ability to tax, plan, legislate and enforce laws and its willingness to be held accountable by its citizens – [this] requires strong institutions’. Megacities, according to McKinsey, will attract population growth almost twice that of anywhere else in the world in the next ten years – and that these cities will contain almost 35% of the expansion of the potential global workforce in that time. Business strategy in these cities cannot focus on one market or potential growth factor alone. Opportunities will be greatly varied, according to factors like, for example, the balance between formal and informal employment – the provision of housing, education and other social infrastructure, and thus the potential growth of a consumer class in the megacity.
THE OPPORTUNITIES AND CHALLENGES
Megacities act, like all urban settlements have through history, as accelerators of growth and development. The way in which cities bring together the factors of production and consumption across the entire value chain means that there are lower transaction costs and closer markets with the potential to grow.
world
Automotive industry logistics hub, Gauteng
The famous Mandela Bridge spans rail networks in downtown Joburg
45
46
world
The major challenge to economic growth in the current situation is the rapid pace of urban change. With 70-75% of the world’s population likely to live in cities in the next 25 years, what kind of urbanisation will nurture sustainable growth? In ensuring future growth for megacities, policy-makers have to work with big business to ensure the following, according to McKinsey: firstly, adequate rules and regulations. Secondly, a carefully thought out urban design. And thirdly, a financial plan for city growth that ensures adequate funding for key infrastructure mechanisms and resources. In all three areas, sadly, many emerging market cities demonstrate why these pillars are necessary: no company wants to invest in a city-economy in which the rules of law around financing and business regulations in particular, as well as property rights, are not guaranteed. Similarly, no business wants to risk investment in an urban economy in which planning is haphazard, and where congestion, pollution and informal settlement are prevalent. Lastly, urbanisation must be supported by national and regional policy to the extent that the urban centre can be run as a value-generating entity much as a business would. The opportunities in the rapidly expanding urban sector remain the same as they always have – better access to skills, income and markets, as well as raw materials and infrastructure. If the megacity is sustainable from policy and planning perspectives, economic growth too should be sustainable.
GORDON INSTITUTE OF BUSINESS SCIENCE
CITY-REGIONS
Another variant of the megacity, especially in the developing world, and which is perhaps more the reality of South African urbanisation, is the concept of the ‘city-region’. This is defined as a group of cities within a wider territory that have an interdependent relationship, forming a mostly economic footprint that comprises the city-region. Cities have distinct but complementary functions. They interact across local and administrative boundaries through flows of people, resources, information, finances and services. A city-region is therefore more than just a city and some nearby towns – it stretches from beyond the core city or cities to urban, semi-urban and rural areas surrounding and within commuting distance of the city. This geography can be described as the functional economy of the city-region. While city-regions are usually distinct from the original or planned administrative unit of planning for government and policy-making, which may be either the city itself or some form of provincial structure, policies which take the flows across a city-region into account can benefit the citizens of the region enormously. Such policies might focus on spatial planning, infrastructure, and service delivery across the entire
. . . INCREASINGLY, A COUNTRY’S ECONOMIC STRENGTH WILL BE MEASURED BY THE SUCCESS OF ITS CITIES.” city-region level and be co-ordinated across the local authorities who are part of the region. This would improve the efficiency of labour and housing markets, enable streamlined transport systems, and generate economic spin-offs through increased productivity, and a sharing of knowledge and innovation. In summary, global city-regions are usually: Defined independently of formal administrative boundaries; Constituted by a concentrated urban population, with significant size and agglomeration effects that attract greater volumes of people through in-migration; Spread across a large geographical area that is contiguous in nature; Inclusive of at least one large metropolitan area; and Possessed of a functional economy within the geography, which is able to compete in the global market, while contributing significantly to the national output. Collaborative rather than competitive among their constituent towns and cities. A few examples of global city-regions in the world include Greater London, Isle de France (Paris), the Randstad in Holland (consisting of the four cities of Amsterdam, Rotterdam, Utrecht and The Hague), São Paulo and Mumbai. In South Africa, Gauteng and the greater Cape Town area are considered to be primary city-regions. Does the concept of the city-region, and how it can be planned and developed in South Africa, hold out more economic promise for us as a nation? The opportunities and challenges of the megacity trend are clear – how is South Africa’s only megacity region, Gauteng, addressing these issues to foster a more competitive urban economy? We’ll examine this more closely in the next edition of Acumen
.
world
47
SAO PAOLO: MEGACITY FAILURE?
São Paolo, Brazil’s largest city and one of the largest in the developing world at over 20 million inhabitants, is often held up as an example of the best and worst of the contemporary surge in urbanisation globally. While its rapid expansion has resulted in a growing consumer class, an expansion of industry and services, and infrastructure, the massive influx of people seeking better opportunities has also created major challenges. The Guardian newspaper reported earlier this year (Theguardian. com/cities/2015/feb/25/sao-paulo-brazil-failing-megacitywater-crisis-rationing) that water supplies in the megacity – in a country which contains 12% of the world’s drinkable reserves – have run so low that rationing is being implemented citywide, with two days’ supply followed by four-day droughts. As the article points out, such scarcity of a vital resource immediately causes civil unrest and social breakdown. Other commentators often use the massive favelas, or urban slums, which characterise São Paolo’s urban architecture, as a case study for other social and health risks. These include everything from violent crime and gangsterism, with its concomitant drug trafficking and prostitution, to the spread of deadly disease (such as dengue fever in the wake of water supply problems), and to the huge upsurge in traffic fatalities in overcrowded and under-regulated cities.
São Paolo, Brazil
A feature article in The Telegraph, published last year (Telegraph. co.uk/finance/economics/11062542/), points out how London, despite being a relative latecomer to megacity status, is one of the fastest growing such cities in the developed world. This is primarily because of its pro-business economic policies, and is despite of London’s continuing pressure on house and commercial property prices brought about through overregulated property markets. London’s recent success – between 1997 and 2012, comments a recent Economist article, London’s share of Britain’s economic output grew from 19% to 22%. Consequently, the city’s economy continues to grow as its population grows, and it continues to, as it has, suck up more than its fair share (according to critics of the megacity growth trajectory) of resources and infrastructure spend from central government. The same article points out that the reason for the relative depression and collapse of outlying towns and cities in England is their distance from London after their commodity or industrial economies have collapsed. On the face of it, this is a circular argument about economic growth, but undeniably true when one considers the similar pattern of urban migration all over the world. As The Economist author also argues, if London is taken as a benchmark megacity – since it is well regulated and controlled – it is possible to see and measure the tangible benefits of this new kind of urbanisation – primarily on productivity, with increases per worker moving to the city of up to 30%. And yet the concomitant environmental destruction of these large conurbations is also easy to see – not something, in the longer term, that is easy to trade off.
PHOTOS: SHUTTERSTOCK IMAGES
LONDON: MEGACITY SUCCESS?
London, England
48
general management
DIGITAL IS JUST A PLATFORM Words Cara Bouwer
From marketers to journalists, strategists to tech wizards, the message at the recent IAB Digital Summit in Joburg was consistent: digital needs quality content. Clearly, the conversation around digital has shifted from the platform’s potential to the nuts and bolts of effective (and financially viable) engagement. “Any digital strategy worth its salt must look beyond monetisation.” That’s the view of mega ad agency Y&R’s global CEO David Sable, who flew in from New York for the event. Monetisation in web speak refers to the ability to generate revenue thorough a website, blog or digital platform. “Digital is everything, but not everything is digital,” stressed Sable. While he outlined future trends – or ‘digital game changers’ – such as oneclick shopping, the continued rise of mobile and the demise of websites, Sable’s central message was: “Remember: people first.”
GORDON INSTITUTE OF BUSINESS SCIENCE
Describing the tendency to “ascribe magical powers to” anything digital as “digibabble”, Sable noted that for the first time “a three year old and an 80 year old can use the same device in the same way. This is crucial.” However, the platform – the technology – is just the tool. What storytellers across all spheres need to remember is that a digital platform does not obviate the need for innovation and creativity in the way we communicate. “Humanity over algorithms,” he emphasised. “In our business storytelling is always still key. People want stories. They want to connect. What is important is the content.” In other words: create the right platform on which to share those stories, make the content compelling and the experience relevant and useful, and the return on investment will follow.
THE MONEY QUESTION
Back in 2013 David Elms, the UK Head of Media for professional services firm KPMG, touched on the challenge of monetising digital content. He noted the opportunities on offer from a ‘digital switchover’ but also pointed to the concerns of traditional media houses about eroding tried-and-tested revenue generating strategies. But digital isn’t waiting for old-style organisations to catch up. “In my view, too many organisations are waiting for a magic
Ali Jafari
bullet; the perfect solution that will work for them all,” wrote Elms. “Crucially, there is no ‘one-size-fits-all’ approach; different online content models will work for different publications. Experimenting with smart technology is now a business imperative and organisations that hesitate are sure to miss the boat.” He called on publishers to “take the time to evaluate their content, and indeed their audience, so as to segment, position and price their services effectively”. While Elms favoured a “process of trial and error”, today’s digital experts are showing that strategic thinking is very much at the forefront of successful digitisation. A perfect example is the BBC which has been investing in multiple digital platforms since it launched a web presence in 1997 and rolled out its Digital Media Initiative in 2008. Taking delegates through the interlinked maze of interconnected platforms on which content is distributed, Dmitry Shishkin, BBC Digital Development Editor, noted how digital was taking its place alongside traditional platforms – and holding its own. The challenge, he said, was for journalists and editors to see digital content not as something to be filed “after the fact. If you do that it will be deprioritised,” he said, noting the drive to ensure that digital was given its own focus and not simply regarded as an ‘add on’.
INNOVATE. INNOVATE. INNOVATE
Trial and error is part of this new world and Shishkin highlighted how innovation at the BBC covered everything from news cartoons to storytelling aimed at social media, harnessing the power of Instagram and new audio platforms such as SoundCloud (a Swedish audio platform that enables sound
general management
Gregor Waller
Dmitry Shishkin
. . . TOO MANY ORGANISATIONS ARE WAITING FOR A MAGIC BULLET . . .” creators to upload, record, promote and share originally-created sounds), as well as the current flavour of the month: chat apps like WhatsApp and, in South Africa, Mxit. Shishkin added: “The big thing for any one organisation wanting to remain relevant is (the use of) chat apps. You need to have a strategy for chat apps. (At the BBC) we even have a chat apps editor. His job is understanding what is appropriate and what is not.” This approach was rolled out to good effect in South Africa using the Mxit platform during the 2014 elections and on WhatsApp and WeChat for the Indian elections. In mid-2014 the BBC World Service’s apps editor, Trushar Barot, noted of the experiment: “We were the first major news organisation to try out editorial content on these platforms, so we were very much venturing into uncharted waters. Rather than setting targets for subscribers or audience reach, we used these pilots as proof-of-concepts to see if there was an appetite for these editorial products from users on these platforms.” Clearly successful, the BBC used the same approach in October 2014 to launch a WhatsApp Ebola health alert service in West Africa following the outbreak in the March.
49
David Sable
KNOW YOUR AUDIENCE
Despite such innovation, a 2014 report into BBC News’ digital strategy was less than complimentary. The report by BBC nonexecutive director Sir Howard Stringer said the organisation was “punching well below its weight”. The report read: “Overall digital reach for the BBC – News and Worldwide – outside the UK stood at a peak of around 150 million monthly unique users in March 2014 (a big news month). This is more than CNN but still less than BuzzFeed’s peak of 160 million, and only the same as the MailOnline’s 150 million monthly audience ... Given BuzzFeed, for example, was only founded in 2006, this raises the question of why the BBC’s global digital reach is not more significant.” BuzzFeed is an American Internet news media site which, in 2014, was valued by The New York Times at “about US$850 million” after a US$50 million cash injection by venture capital firm Andreessen Horowitz. Stringer advocated the development of “an acute understanding of the audience and making news relevant to them in the same way (the BBC’s) Newsbeat and Newsround write stories online which, while never deviating from the core journalistic values of the BBC, present each story in a way that is particularly relevant and engaging for the target audience.” He said the solution lay in “encouraging journalists across all services to respond to the shifting needs and tastes of a specific audience. To be as effective as possible in serving audiences online, journalists must have the freedom to tailor their output to appeal to them.” However, talking to Shishkin, it seems the organisation is already working to address many of Stringer’s criticisms. Speaking to him following his presentation, Shishkin described innovating across platforms, trying to monetise news media and creating
50
general management
SIX SECONDS IS THE OPTIMAL TIME . . .” sustainable digital business models, while never compromising editorial. There are ways and means of experimenting with a business model, said Shishkin, noting one approach in use which allows users to read ten articles for free, in exchange for completing a quick mini survey. “It just takes two clicks (to complete the survey) and then you can read the article. I think it is quite clever,” he said. Media can, therefore, make money by charging companies for data collected from these surveys, and consumers can still access their ‘free’ content. A win-win. Of course, the BBC is a special case. “We are very lucky that we are a public service organisation, so there is funding year in and year out,” explained Shishkin. “I come from the global part of BBC News, the internationally reaching part of BBC News, and we (unlike the UK operation) are allowed to earn money from advertising. We take that money and we invest it in journalism.” So, even though generating income may see advertising being sold around a feature or editorial special, the quality of that content must always come first. And, increasingly, the way that content is packaged on digital platforms must reflect the way in which the audience seeks to engage.
A TAILORED APPROACH
GORDON INSTITUTE OF BUSINESS SCIENCE
Also at the Summit, Ali Jafari, Vice President of Direct Sales for Twitter: Europe, referred to Twitter’s 2012 acquisition of Vine, a mobile service for sharing short videos. Another growing avenue for content sharing, many marketers and media practitioners are still trying to get their heads around how best to use these five-or six-second video clips. According to Jafari, “Six seconds is the optimal time to attract someone’s attention”. As an indication of the dynamism in this space, in the media room following the presentation Y&R’s Sable and Jafari chatted about the optimal video length. “Ali, you say six seconds. Facebook says three seconds to get someone’s attention,” said Sable. “It’s interesting... I think Facebook is wrong. I love the six (seconds) because it gives you a completely different view. This has always been what we’ve said in our business: if you don’t get someone in the first five or six seconds, then you have missed them. And that was like a hundred years ago.” This discussion was picked up by Global Digital Strategist Gregor Waller, who stressed the importance of tailoring content to these new platforms. “You can’t take a 30-second car ad and put it on a mobile device,” he warned, calling on the advertising industry to
think differently and create content which is relevant on mobile and which talks to audiences engaged on those platforms and in the style and manner best suited to these mediums. Quite simply, said Waller: “If you want to succeed you have to invest in technology, people and creation… monetisation always starts with great products.” While the likes of the global advertising industry and traditional news organisations may find it tough to adapt to this new technology and the demands it places on creating targeted and easily accessible content, change they must. As New Yorkbased South African marketing pioneer Matthew Bull of Bull Whitehouse noted: “Advertising is reactive, we don’t look forward enough… As a species, technology drives how we change as a society. It is vital in advertising that we understand where this (digital) is going, otherwise how are we going to manipulate our species?” For Sable, Shishkin and Jafari this brings the conversation right back to storytelling. “You still need great content,” Sable told Acumen. “I get asked a lot what young people should learn today and I say they need to read the Bible, the Koran, the Iliad, Shakespeare, and then ask themselves why, years after these stories were written, people still read them. Because they were good! At the core is always a great story.” Right now digital connectivity is driving the demand for content, said Sable. But increasingly the need is growing for quality content, which manages to cut through the swaths of information out there. Shishkin, for example, points to the BBC’s use of immersive storytelling as part of its drive to expand the enduser experience. These 4 000-word pieces are combined with video and they can engage users for up to six minutes, “which is unusual in the digital world”. An interesting and exciting development, but, stressed Sable, it isn’t new. Nothing, it seems, is. “The only revolution that has happened in information technology was Gutenberg (who invented the printing press around 1439),” he declared. “What was the real revolution? The sharing of information. We’ve just kept evolving how we share information and the Internet is just a bigger way of sharing information. That’s all it is. If you understand that, then that drives everything that we do”
.
Owning a business is not child’s play.
Sometimes it is.
Open a kids sports coaching franchise today. Opportunities Available Nationwide SOCIAL FRANCHISING SINCE 2005
info@sportforall.co.za / 087 820 4030 / www.sportforall.co.za
52
south africa
HOW BIG DATA COURTS THE CLOUD Words Cara Bouwer
Almost two decades ago the world was introduced to the term ‘cloud computing’ – storing and connecting to services and data via web applications. More recently the buzz word is ‘big data analytics’ – the wealth of information generated by our digital world. Today, fleet-footed businesses are exploring how best to merge and exploit these innovations to gain a strategic advantage.
GORDON INSTITUTE OF BUSINESS SCIENCE
One man who is at home in this rapidly evolving new world is Yossi Hasson, CEO of SYNAQ, a leading provider of cloudbased messaging and communication services to South African business and a 2009 GIBS MBA Cum Laude graduate. Hasson founded SYNAQ in 2004, when he was just 22. The company has since been ranked by Forbes magazine as one of the top 20 tech companies in Africa and, in 2010, was named by AllWorld Network as the sixth-fastest growing firm in South Africa.
THE NEXT BIG THING
Hasson calls the cloud an ‘enabler’. This is an apt description when you consider that most of us already use the cloud on a daily basis, for example when we access Gmail, LinkedIn or file-sharing site Dropbox. Increasingly the cloud’s value as a platform for storing and accessing huge blocks of information – big data-is creating interest.
The company’s success hinges on understanding the innovations which underpin the IT sector and Hasson is mindful that speed and agility are vital in business. “Being nimble and agile is definitely important but if you become too obsessed with the changes happening you’ll never be able to focus and execute, so it’s a balance of ignoring what you believe to be irrelevant noise and moving quickly when you believe the changes are significant,” he told Acumen.
As a September 2014 ‘Big Data in the Cloud’ brief by global chip-maker Intel noted, it is the flexibility of this cloud-big data combination that’s exciting. In particular, Intel noted the costsaving and efficiencies element, the convenience of analysing data where it resides – “either in internal or public cloud data centres or in edge systems and client devices” – and the fact that companies would be advised to rather focus their IT budgets on building their own analytics capabilities, while leaving storage solutions in the hands of cloud specialists.
When SYNAQ cloud computing started, it marked one of those significant opportunities. At the time the idea of offsite data storage was radical. “It was a massive mind shift,” recalls Hasson. “In 2004 we launched one of the first ‘cloud’ email security platforms (in Africa) and were advocating the shift from ‘on premise’ infrastructure to the cloud… I think we were eight years too early and only now are we starting to see that business understands the benefits. For many years we thought maybe we were mad, because we just didn’t understand how clients couldn’t see it.”
While Hasson agrees that big data is the current ‘over-hyped buzz word’, he also notes that business innovations like this are essential to long-term business success and client retention. “(Microsoft founder) Bill Gates has a saying that goes something along the lines of: people overestimate the impact of technology in the short term and underestimate its impact in the long term. Currently, big data is over-hyped in terms of what business should be doing with it and is struggling to comprehend how organisations need to change to gain competitive advantage using it. But, in the long term, big data will be everything,” says Hasson.
. . . NEITHER BIG DATA, NOR THE CLOUD, ARE THE PRESERVE OF MULTINATIONALS.”
In terms of SYNAQ’s response, Hasson explains: “We’re looking at how our access to over one billion emails per month can provide clients with insights into their business and the economy that wouldn’t have previously been available – we haven’t answered that question yet.”
ON THE GROUND
Hasson is not alone in grappling with how best to practically exploit these new technologies. In recent years research houses and professional services firms have been trying to unpack
south africa
Yossi Hasson, CEO of SYNAQ
53
54
south africa
. . . WE WERE EIGHT YEARS TOO EARLY . . .” both what big data and the cloud are, and how a company might possibly exploit them. In 2011, when the Economist Intelligence Unit described big data as a ‘game changing asset’, the researchers noted that many companies were struggling with the basic aspects of data management and how to extract value. The conversation has since moved on and, in mid 2014, PwC’s Oliver Halter and Frank Rinaldi wrote an insights piece in which they noted how business was driving innovation by trading “IT complexity in favour of agility to focus on data exploration, predictive analytics, and real-time decision-making”. With reference to the cloud, they wrote: “Cloud technology reinforces this changing paradigm: an enterprise requires flexibility and scalability to support immediate action on fluid datasets.”
BUT HOW DOES IT WORK?
GORDON INSTITUTE OF BUSINESS SCIENCE
Businesses struggling to get a handle on how to take the theory and implement it need look no further to the likes of South Africa’s Discovery group and its Discovery Insure smartphone solution, which monitors driver behaviour, thereby gathering swathes of big data via the cloud and feeding the company essential information while encouraging safer driving. Frank Rizzo, a Partner in KPMG’s Johannesburg-based advisory business, explains that Discovery Insure “offers a wealth of usable data” while “using data in a clever way”. As Discovery CEO Adrian Gore remarked in September 2014 at the presentation of the group’s annual results, harnessing new technologies and innovations are central to Discovery’s ability to gather a “composite view of a client’s risk behaviour… by rewarding better behaviour, the actuarial dynamics improve considerably, resulting in savings across the business.” Other companies gaining first-mover advantage with this new technology combination include the likes of Coca-Cola, which used Google’s cloud platform to create its 2014 FIFA World Cup ‘Happiness Flag’ (a mosaic flag made from thousands of images sent in from more than 200 countries). Other big names include
IBM, HP, Microsoft, Amazon and Adobe, which in 2012 shifted its design software suite to the ‘creative cloud’, a move which allows for the collection of data and regular updates for monthly subscribers. Recently, engineering giant Rolls-Royce moved its global HR function to the cloud. The company told Computerworld UK that its Workday Time Tracking innovation would allow the group to “gain the agility and speed it needs to support continued growth and the ability to access and analyse real-time workforce data for better decision-making”. Rolls-Royce also said the move would help its managers to better gauge performance and recognise talent by ensuring deeper insights into the workforce. How? By enabling them to access information and workforce analytics at the touch of a button. While these are big-name examples, it’s important to note that neither big data, nor the cloud, are the preserve of multinationals. In fact, smaller, more agile companies, with flatter organisational structures may well be the ones worth watching in the future. As Internet Solutions’ Wayne Speechly told CNBC Africa’s Power Lunch in August 2014: “Many smaller organisations are now able to get access to these tools because big data, cloud technology and the availability of that information just makes it that much more easily accessible.” Take Hasson, for example, whose future plans include a drive northwards into Africa, rolling out SYNAQ’s services and thereby giving African businesses access to the same cloud platforms used around the world to support innovations like big data, social media and mobile. “The future of SYNAQ depends on our ability to expand into the rest of Africa. The impact of cloud computing in the region will be far greater than the impact here in South Africa; just like the impact of mobile leapfrogged that of fixed lines,” explains Hasson, whose company is exploring expansion into five African countries.
.
And, where the cloud goes, make no mistake, digital innovation and unconventional thinking will surely follow
Study for CGMA and become a business leader In response to the business need for financially qualified business leaders, the CIMA Gateway is an accelerated entry route to the CIMA Professional Qualification for MBA holders, masters in accounting and members of IFAC accounting bodies. On successful completion of the assessment, you will be granted 12 exemptions out of 17 papers and will be awarded the CIMA Advanced Diploma in Management Accounting, entitling you to use the professional letters CIMA Ad Dip MA. You can then progress directly onto the strategic level of the CIMA Professional Qualification. By choosing CIMA you are taking the next step towards a dynamic and rewarding career. With many CIMA members in senior management positions, The CIMA Professional Qualification it is a proven path to high achievement. will add value to your existing qualification by giving you a Register as a CIMA student today deeper understanding of business and find out more about the management, financial management CIMA Gateway by visiting and strategy.
www.cimaglobal.com/cga
J6595
www.cimaglobal.com/cga
GORDON INSTITUTE OF BUSINESS SCIENCE
56 south africa
south africa
57
GOOD RIDDANCE Words Tanya Zack Photographer Mark Lewis
They’re a familiar sight in Johannesburg – a procession of people, usually men, balaclavas drawn over faces against the cold, hauling mountains of recyclable stuff on homemade trollies across the suburbs. In the fifth book in the series Wake up, this is Joburg, writer Tanya Zack and photographer Mark Lewis track several of these entrepreneurs, following them for miles from their homes in the city, to the lucrative dustbins of Hillbrow, Killarney and Windsor, to the waste depots, and back home.
‘The birds work six to six, just like us,’ says Mbuso Shanagu of the birds on the landfill site south of Johannesburg’s inner city. There are pigeons, sacred ibises, egrets and, astonishingly, seagulls. A recycler laughs from where he is standing knee-deep in the rubbish. He throws his hands into the air and scatters birds, now pink against the light, across the city skyline.
58
south africa
At 6am Lucas Ngwenya begins his 5km journey to the depot where he will sell the waste he has collected over a twoweek period. It will take two-and-a-half hours to drag his gargantuan load over the top of the Witwatersrand. The cardboard, plastic bottles and white paper in his load will weigh in at 265kg.
GORDON INSTITUTE OF BUSINESS SCIENCE
His body mass is 61kg. When he arrives at the depot he will be asked for R10 “for cooldrink� from the cashier as he cashes in his load. Because, she says, she has been generous with the amounts she has recorded.
south africa
59
“Look at our work,” Naleli Kgomo says. “We work hard. We are feeding ourselves.” They are doing more than that. She and Lebo Selemela – who always walks directly behind her in their procession and fills two massive sacks each day – maintain their son, as well as their families at home in Lesotho, with their daily commute to the outer suburbs of the city and back. Lebo is slowly building a sizeable herd of goats and a few donkeys at a homestead in Matsieng, the traditional capital of Lesotho’s royal family. But life is uncertain and this work is hard. Months later Lebo is unable to work because his feet have been injured, and Naleli must walk the streets to reclaim waste alone.
“I don't have to stand on the side of the road and beg with a cardboard,” Frans Fourie says. “Every night when we get home we have a plate of food.” The family works wordlessly. All three pull the single large metal trailer that Frans has constructed. They are an unusual sight amongst the ranks of the reclaimers. They are white. And they work collectively, pulling their cart together and lifting and carrying items in silent co-operation. Lucas Ngwenya, Given Mattatiele and Livingston Sekunda collect waste from different parts of the city, sometimes walking over 30km in a day. It is more efficient to work together and to stockpile their materials for two weeks and then make several trips to the depot. The route is arduous. For the steepest parts the men combine their muscle power to pull a single load uphill. One man pulls the trolley while another pushes. They work co-operatively, but each man lives alone.
GORDON INSTITUTE OF BUSINESS SCIENCE
Lucas lives in the cavity of a highway underpass, where the repetitive crack of traffic passing over expansion joints on the bridge above him mimics the sound of an evening train. The sixty-two-year-old Livingston has used plastic bags and blankets to create a tent-like shelter under a Bougainvillea.
south africa
The series Wake up, this Is Joburg is published by Fourthwall Books and is available from Fourthwallbooks.com Limited edition photographic prints are available from Mark Lewis at Searose@mweb.com
61
Pieter – Recycler, PTA
Midrand Depot
Megan – Transporter, PE
OUR SYSTEM WORKS TO CREATE EMPLOYMENT & GROW SMME BUSINESSES Johanna – Depot Manager, Mossel Bay
Durban Depot
With unemployment on the rise – now is the time to turn the problem into a solution. REDISA manages the process of turning waste into worth via a Waste Tyre Management Plan that aids employment and supports SMMEs. Of the 200 SMMEs we are required to establish within 5 years, 170 have already been created. With this success you can imagine the potential our plan has for the future. For more of our remarkable achievements, statistics and stories worth celebrating, please visit our website.
JOIN THE JOURNEY | www.redisa.org.za |
/wasteintoworth |
@wasteintoworth
south africa
63
. . . MORE THAN 10-MILLION WASTE TYRES EVERY YEAR.” The wire material remains from tyres
TYRE RECYCLING FINDS ITS FEET Words Cara Bouwer
“For years, tyres were a hard-to-dispose-of waste product that threatened to clutter up the landscape. Advances in technology and legislation have allowed industries to now reduce these tyres to their constituent parts and reclaim the wire and rubber material for a wide range of applications,” explains Simon Gear, well-known environmental consultant and the Director of Kijani Green Energy. According to non-profit organisation REDISA (the Recycling and Economic Development Initiative of South Africa), the local tyre industry produces more than 10-million waste tyres every year. And, notes Reuters news agency, it is estimated that between 60-million and 100-million scrap tyres are currently stockpiled in South Africa. Formed as part of South Africa’s Integrated Industry Waste Tyre Management Plan, REDISA aims to develop a sustainable local tyre recycling industry by removing tyre waste from the environment. This will ensure that tyres do not end up in landfills or in the veld, or be burnt for the steel they contain, which in and of itself presents a number of health and environmental risks. While REDISA is not a recycler, over the past year-and-a-half it has begun partnering with a number of small, medium and
micro-sized enterprises (SMMEs), including transporter and depot operations. From a recycler perspective, Germiston-based Dawhi Rubber Recycling is one rubber crumbing business with which REDISA has been working closely. At this recycler, tyres are crumbed into different grades of granules which can then be re-used in various products and sold to different industries. Currently the main recipient of Dawhi’s crumbed product is the road construction industry, where it is used in asphalt. Another example of collaboration is Gauteng-based Milvinetix, one of South Africa’s first fully functional pyrolysis plants. At this processor, tyres are transformed into smaller and simpler compounds. These compounds can then be turned into various products including carbon char and oil, and can also be used to generate electricity. Currently Milvinetix supplies its products to
64
south africa
Handbag made from the rubber material
This stokpile of tyres will be reduced to their constituent parts
GORDON INSTITUTE OF BUSINESS SCIENCE
Neclace made from the rubber material
Workers cutting tyres to a smaller size
. . . MOST BUSINESSES DO NOT CONSIDER THE WASTE . . .” an organisation that further purifies the oil and sells it into the market. In addition, carbon char is supplied to interested parties who, in turn, re-process and refine the product, which again is sold off to the market. According to the REDISA website, to January 2015, 1 705 jobs had been created as a result of its efforts, 39 243 tons of tyre waste had been processed and 77 614 tons were collected thanks to the
efforts of 1 648 dealers. As at end-December 2014 REDISA was working with 173 SMMEs, collecting tyres across the country. As part of their drive to ‘turn waste to worth’, REDISA’s efforts highlight the fact that most businesses do not consider the waste that comes from their products or operations as their problem; and very few factor the cost of recovering and recycling this waste into their cost of manufacturing. The REDISA model requires tyre manufacturers and importers to take responsibility for their waste without losing sight of their core business. In the process jobs are created, SMMEs are developed and supported by the REDISA Plan, and the environmental disaster that waste tyres represent is being economically and effectively addressed.
.
As Gear notes: “Any well-run agency aiding SMMEs in this field is surely welcome in South Africa”
www.creditguarantee.co.za | Financial Services Provider No. 17691
66
dynamic markets
AFRICA STILL RISING Words Victor Kgomoeswana
Being an Afro-optimist I attract several challenges from associates to test my faith in the continent. Some suggest that I am in denial about the reality of Africa being a continent that is open solely for exploitation, not for business as I consistently suggest. One such remark came after the latest OAU Summit at the end of January 2015. This was the very summit that took place when the war in South Sudan, Africa’s youngest state, was raging. Boko Haram was wreaking havoc in Nigeria, threatening the prospects of holding a peaceful election in Africa’s largest economy. Tunisia, Egypt and Libya were suffering terrible after-effects of the Arab Spring. Most depressing of all, Africa was still synonymous with Ebola, although only three countries – Liberia, Guinea and Sierra Leone – were affected. So, my friend asked, how can you still talk of Africa being open for business? This was before the South African parliament saw the most tumultuous State of the Nation Address and Eskom – Africa’s largest utility – suffered the suspension of its CEO and three other senior executives. Do I still believe in the Africa Rising narrative, you ask? The answer is a resounding yes; and these are some of the reasons why.
EAST AFRICA – WHERE THE AFRICAN SUN IS RISING
GORDON INSTITUTE OF BUSINESS SCIENCE
Information and Communications Technology (ICT) remains the main thrust of this region’s forward march. The M-Pesa (mobile money) story is overdone already, but East Africa continues to churn out more reasons to believe in Africa’s potential. The International Telecommunication Union (ITU) of the United Nations had set a mid-June deadline for digital migration – from analogue to digital TV. The merits of this are known, including the fact that it is merely a more efficient use of bandwidth and offers better viewing experience. TV in our knowledge economy is not recreation, but a means to share information, facilitate service delivery and hold those in power accountable, if used correctly. Therefore, I argue that having Tanzania and Rwanda, both members of the East African Community beat the digital migration deadline by far was a plus for the region and a good example for the rest of Africa to follow. Kenya stumbled a bit, when in the rush to beat the deadline at the end of February, the country’s media houses blacked the television signal out in protest. Nonetheless, Kenya eventually joined Rwanda and Tanzania in completing its digital migration ahead of the ITU deadline. South Africa has yet to comply.
Another feather in the Kenyan cap was being voted among the top twenty fastest growing economies of the world by a Bloomberg survey. This came on the back of Nairobi, Kenya’s capital, being named Africa’s most intelligent city for the second year in a row by the Intelligent Community Forum (ICF). Why?
According to the ICF, “intelligent communities” are those taking “conscious steps” to establish an economy capable of thriving in the “broadband economy”. Kenya’s 17.3 million Internet users in 2013 should not be surprising, alongside the country’s mobile penetration of 74.3% (Africa’s average was 65%, in 2012, according to World Bank stats). Already in 2013, Safaricom was experimenting with free Wi-Fi for its subscribers on-board taxis to even outlying areas of country, like Nakuru. Although Safaricom tripped a bit in March 2015 when it tried to cap the usage of data by subscribers, the general telecommunications landscape of Kenya – with competition from players such as Airtel, Orange, MTN and Tigo in the greater East African region – is way above Africa’s average. It sets the bar pretty high for all other African countries to emulate. It is therefore not strange to hear of Rwanda having the cheapest Internet or even South Africa’s Pretoria following suit with free Wi-Fi.
WEST AFRICA
2014 closed on a high note for Ecobank, Africa’s largest-bybranch network. Nedbank and an investment group from Qatar each took up a 20% stake in the Togo-registered bank. Although by February 2015, Ecobank was making headlines over a lawsuit by former CEO, Thierry Tanoh, the transaction remains one of the most telling in the financial sector. It allows intra-Africa investment, something Africa needs. It also allows Nedbank to export some best practice from South Africa to the rest of the continent. Ecobank’s footprint is second to none in Africa and by strengthening its governance by attracting other more established banks, particularly African ones, it will ensure that this West African bank grows to become an even more competitive player alongside other established entities such as Standard Bank and Barclays (ABSA). For its own part, West Africa is exporting many other brand names in banking to the greater Africa, including UBA, Zenith and Access Bank. Another icon of West Africa, former CEO of UBA, Tony Elumelu, made a very encouraging headline through his Foundation. He committed $100 million to the development of SMEs from any African country over the next ten years. The Tony Elumelu Foundation ran a competition, which allowed entrepreneurs to make their business dreams come true. Winners are to receive funding, coaching and other forms of support.
dynamic markets
67
Former CEO of UBA, Tony Elumelu
All West Africa needs now is for Nigeria to manage its political transition and bring Boko Haram under control.
MORE HINTS OF AFRICA’S RELENTLESS ATTRACTIVENESS
I met very senior politicians from Province Orientale in the Democratic Republic of Congo (DRC) in December 2014. The leadership of this province in the north-eastern parts of the DRC was able to explain to me how, in the midst then of the trouble around M23 rebels, the DRC was able to attract a $600-million investment from a company like Randgold. Still unsure about the merits of their explanation, because they are politicians after all, I asked the senior leadership of Randgold Resources, present at the same function, how they justified investing so much in a country that was facing such political uncertainty? The answer was simple: they were on the ground; they were local and committed to the development of Province Orientale. The people in the area accepted them as part of the DRC, not outsiders who were there to take. That is the model for anyone wanting to invest in Africa: be part of the solution, be local and be sincere. Another shining example is Zambia. Well known for its copper mining and home to many international investors from BHP Billiton, to British American Tobacco, Vale to Vedanta Resources, a lot keeps happening in this country to make it attractive to investors. It is not the most decisive country when it comes to the treatment of taxation or royalties in mining, but Zambia keeps on getting one thing right over and over; and it did that in late 2014. When President Michael Sata died in office, the second Zambian head of state to do so in a short space of time, Zambia did what most African countries need to learn. They managed
the transition effectively and held peaceful elections. The essence of this is that sovereign risk of countries in emerging markets like Africa goes very high if they are unable to hold a peaceful election. Investors want and need certainty, especially political certainty. I even found a real silver lining in Eskom’s story when I interviewed Gerrie van Biljon, Executive Director at specialist SME risk financier, Business Partners. What encouraged me about Business Partners was the ability to turn the problem of power outages into a business opportunity. Realising that the incessant power interruptions were negatively affecting SMEs, Business Partners decided to create an additional facility to finance the purchasing of power generators for their clients. A small gesture, perhaps, but the exact spirit of what many other Africans need to do. Africa has problems, many serious. So how about following the example of Business Partners? By committing up to R250 000 for the purchase of a generator for an average SME in South Africa, this is one way of rekindling the very crucial small business sector in an economy that can do so much more than it has been able to achieve, even with the persistent power shortage. If every individual, institution, government or government agency in Africa were to think and act the way Business Partners did in response to the power crisis in South Africa, there would be no holding Africa back.
.
So, do I still believe in the Africa Rising narrative? The evidence leaves me with no other choice
68
dynamic markets
DOING BUSINESS IN GHANA Words Diana Games
Until recently, Ghana was one of Africa’s economic pin-ups. But then came oil, and what looks very much like the curse of abundant resources. There is no doubt that Ghana will bounce back from its current travails, the country’s finance minister confidently declared after visiting Washington earlier this year to finalise the details of a $1 billion bailout package offered by the International Monetary Fund (IMF) to put the West African nation back on course. Such optimism from the man at the helm of Ghana’s economic crisis is surprising. Last year he drastically revised the country’s growth forecast for 2015 down to 3.9% from about 7% in 2014, predicting a tough year ahead. The commodity-dependent economy has been buffeted by a serious fiscal deficit that has resulted from a mix of high government spending, increasing imports and declining revenues. It is also experiencing its worst-ever energy crisis. The combination of problems led the government of this formerly donor-dependent nation to knock on the door of the IMF last year, asking for help.
GORDON INSTITUTE OF BUSINESS SCIENCE
In April the IMF finally approved a long-awaited three-year $918 million financial assistance deal aimed at restoring economic stability and boosting the economy. About $114 million would be released immediately. The move will give comfort to potential investors and fund managers, many of whom still have the country firmly on their radar despite the challenges. They appear to agree with Finance Minister Seth Terkper that the country will spring back to its former growth levels once the crisis has been tackled.
In 2014, despite its challenges, Ghana was ranked by the World Bank as the fourth-easiest country in which to operate in Sub-Saharan Africa after Mauritius, South Africa and Rwanda.
WHAT WENT WRONG?
Ghana was, not long ago, one of the high-performing African countries that helped to fuel the Africa Rising narrative. It is now an example of how quickly things can go wrong.
Its past fortunes have been boosted by political stability, high growth rates and huge opportunities in almost every sector. And it is only a short flight away from Africa’s biggest economy – Nigeria – but a more relaxed place in which to live and work.
Until 2013, the country was regarded as one of the most attractive emerging-market economies in the world. Its political stability, relatively investor-friendly operating environment, high growth rates, and low-hanging fruit attracted significant investor interest.
Many companies looking for opportunities in the wider West African market see Ghana, rather than Nigeria, as the gateway given its more central location and easier operating environment. But the country itself offers many opportunities created by its past growth and diversification into new sectors.
In 2010, Ghana celebrated its new status as Africa’s newest oil producer. The development of the large oil fields off the coast pushed GDP growth to unprecedented levels, reaching 20% during 2010. Growth in 2011 was an impressive 14.4%.
Ghana, Western Region, Takoradi. An oil rig by Takoradi Port.
In 2010, the country also rebased its economy. Overnight it became a middle income nation, with a 69% leap in GDP from $15.3 billion (2009 figures) to $25.8 billion. GDP per capita rose from under $800 to $1 363. But by 2013 it was apparent that not all was well as the country lurched into a revenue crisis, largely caused by oil. High-cost imports to build infrastructure for the oil industry were not offset by commodity exports in an era of lower prices for Ghana’s main revenue earners, particularly gold, which lost more than 25% of its value in 2013. The anticipation of oil revenues at a time of high prices also prompted the government to spend recklessly. A key beneficiary was the public service. In 2013, 47% of government revenues went on government workers’ salaries, up from an already high 44% the year before. By 2014, the public sector wage bill was a significant 49.3% of tax revenue. The country spent bucket loads of money on two elections – in 2008 and 2012. High oil prices hit consumers’ pockets as the government imported fuel to bolster its deficient energy sources
but the government cushioned the impact with subsidies. High recurrent spending on government departments and debt repayments absorbed significant resources. While government tax revenue stayed constant at about 17.7% of GDP between 2011 and 2013, government expenditures increased from 20.1% of GDP in 2011 to 26.7% at the end of 2013. But the oil industry had a setback: technical problems in the oil fields meant production, and thus revenue targets, were way off for a while. The country continues to be dependent on commodities, as it has been for decades. It raises 72% of export revenues from just three commodities – gold, cocoa and now oil. Manufacturing as a percentage of GDP has declined over the past 20 years. In 2013, the signs of the impending crisis started showing. Inflation began to rise and the currency, the cedi, weakened. In February 2014, the government took the drastic step of introducing strict foreign exchange controls in a bid to arrest the cedi’s decline. They were later relaxed after having little effect.
PHOTOS: GETTY IMAGES / GALLO IMAGES
THE MOVE WILL GIVE COMFORT TO POTENTIAL INVESTORS AND FUND MANAGERS . . .”
70
dynamic markets
THE COUNTRY CONTINUES TO BE DEPENDENT ON COMMODITIES . . .” Inflation continued to rise, reaching 17% later in the year, and interest rates spiralled. In August, the embattled government turned to the IMF for help. But before the details had even been agreed on, the economy was hit by another shock – a plummeting oil price. This meant that even with crude production back on track, the government’s hopes of addressing the fiscal crisis with oil revenues were dashed. Terkper has slashed the oil revenue forecast in 2015 by a massive 64%. In 2014 just over $400 million expected to be realised from oil sales, compared to $3.83 billion in 2013.
GORDON INSTITUTE OF BUSINESS SCIENCE
Rising debt is part of the problem. Ghana, despite being a beneficiary of more than $3 billion in debt relief in the 1990s, has quickly rebuilt its debt stock. In October 2007, Ghana, under then president John Kufuor, became the first sub-Saharan African country outside South Africa for 30 years to issue a dollar-denominated bond. The $750m Eurobond, which had an 8.5% coupon rate, was four times oversubscribed. In 2013, Ghana listed a second $750 million Eurobond. The debt-to-GDP ratio now stands at 60%. The government has floated the idea of a further Eurobond of $1 billion to plug the fiscal gap. But the IMF is unlikely to agree to it. Critical power shortages are a longstanding problem in Ghana, which relies on hydropower for most of its energy. In 2015, the country experienced its longest power crisis ever as a result of low water levels in the country’s dams and low supplies of gas that have seriously affected generation capability. Load shedding has increased to record levels, with power to factories run by the likes of SABMiller, Coca-Cola, Unilever, Fan Milk and Ghana Cement being switched off for 24 hours at a
time. Mines have also had to agree to cuts. At a time of serious financial crisis, it will be tough for the government to find money to generate more power. In 2014, the economy was also hit by the fallout of the Ebola virus contagion in the region. Despite the fact it did not have a single case, business slowed as investors waited to see what would happen, hotel occupancies fell and many expatriates left town.
INVESTMENT STILL FLOWING Despite pessimism about likely FDI inflows in 2013, there was only a marginal decline to $3.2 billion from 2012’s $3.3 billion inflows. Investment continued in 2014, some of it related to the new oil fields being developed offshore, but the figure is likely to be lower in real terms. Consumer spending, a major driver of new investment, has declined as Ghanaians bite the bullet in this difficult environment. But many of the investments in the country are long term, with money committed well in advance of the economic crash. The property sector, in which South African companies and funders are strongly represented, has continued to boom and high-rise buildings now dot the skyline of the once sleepy city of Accra. Airport City, a new business centre near the airport is the most visible sign of the property boom in the capital. Rand Merchant Bank has funded one of the biggest new Grade A office blocks – the $56 million Icon House. Stanbic in Ghana and Standard Bank of South Africa are partially financing a new commercial office and retail development, One Airport Square, being developed by Actis. There are others, including Atlantic Towers, owned by Ghana’s Meridien Group, and Nester Square.
dynamic markets
Shopping centres are springing up all over, most of them developed by South Africans. Atterbury Property Holdings is leading the pack with two malls built – Accra Mall and the brand new West Hills Mall – and another three sites secured in Accra and Kumasi. RMB Westport has also seen opportunities for formal retail, developing the Junction Shopping Centre, also in Accra. South African property management company Broll is managing several of the centres. FirstRand, which is funding projects in property, oil and gas, ports and the power sector in Ghana, is setting up a fully-fledged bank there scheduled to open this year. The shopping centres have drawn household retail names to Ghana. They include Shoprite, Game, Mr Price, Puma and Rhapsody’s who trade alongside local tenants. The Foschini Group and Truworths, both of which are having a difficult time in Nigeria, are looking at Ghana for store expansion while Pick n Pay is planning to launch in West Africa via Ghana. Accra has also attracted a range of international hotel brands including Mövenpick, Kempinski, Holiday Inn and Best Western with Zimbabwe’s Africa Sun also a newcomer. In telecoms, MTN is the market leader and has seen subscribers and revenue rising on the back of diversified products. In 2013, Times Media Group, publishers of Sunday Times and Business Day, acquired a TV network and five radio stations in Ghana. Last year, it bought a 49% stake in Radio Africa Limited. Despite the long-term optimism about this market, companies have had a difficult time over the past 18 months with the rapid decline of the macroeconomic environment. Costs have risen unexpectedly with the energy crisis forcing companies to rely on expensive generators for long periods. High levels of inflation coupled with a currency that declined by nearly 40% during 2014, have negatively affected business. Foreign exchange controls hit property companies hard as they were forced to move from charging tenants in dollars to getting rentals in the ever-weakening local currency for a while. Companies complained that they needed to increase profits in cedis by more than 50% in order to stand still in dollar terms. Mining companies Gold Fields and AngloGold Ashanti have seen balance sheets under pressure from lower gold prices, hikes in corporate taxes and rising local costs. In 2014, AngloGold Ashanti announced it was shutting its Obuasi mine in a $300 million exercise that includes laying off hundreds of workers in order to reconfigure the mine over the next 18 months to make it a smaller, more profitable operation. MTN’s Chief Executive Sifiso Dabengwa has said that volatile African currencies were among the company’s main concerns in African markets at present. It has been particularly hard hit in its
71
biggest market, Nigeria, where the naira has been devalued but the decline of the cedi has also been costly. There are also supply chain issues with the congested port at Tema outside Accra experiencing long delays in clearing goods as imports grow on the back of past high-growth levels. Although investors are having a tough time now, there is a general belief that investment in West Africa generally needs a longterm horizon to be viable. The arrival of the IMF in April may precipitate further hardships as the government is forced to cut back on populist spending but it will be a comfort to investors who see it as the start of the road to recovery.
. . . ALL IT TAKES IS FOR HARDY INVESTORS TO HOLD ONTO THEIR HATS . . .” Ghana’s new oil fields are expected to start production in 2016 and Terkper believes increased oil production in the near term from 110 000 barrels to 250 000 will eventually help to address the fiscal crisis. He told the Financial Times in February, “The most important thing for now is for the markets to know we are serious about the IMF programme, which builds on policies we have been implementing already and that the medium-term prospects remain bright.” Now all it takes is for hardy investors to hold onto their hats and hold on for the bumpy ride ahead.
BUSINESS ETIQUETTE IN GHANA
It is important to remember that Ghana is nothing like its large, upfront and rowdy nearby Anglophone counterpart in West Africa – Nigeria. Ghanaians are more reserved and less direct in their approach. People can seem to agree with you and you will only realise later that they did not by the lack of response to future communications or by an overly quiet reaction to a proposal during a meeting. Ghanaians tend to avoid any sort of confrontation. Be sure to use professional titles if people have them and break the ice with talk about family. Things tend to move slowly in Ghana so do not expect immediate results from a meeting. Accra is a rapidly growing city and traffic congestion is a growing problem so be sure not to be too ambitious in planning meetings, depending on their locality. The city centre is quite small so it is possible to walk to meetings from centrally located hotels. Crime levels are low and it is safe to walk around during the day. But be aware and cautious as you would be anywhere
.
72
dynamic markets
TOP SIX THINGS TO DO AND SEE IN GHANA Words Diana Games
In Ghana with time between business meetings or maybe a weekend to spare? Check out these attractions.
1. BEACH ATTRACTIONS AROUND ACCRA
Ghana is a popular tourist destination and has many attractions along its coast. In Accra itself, La Pleasure Beach in the Labadi area has become home to many restaurants, stalls selling food and clothing, bars and playgrounds. Loungers on the water’s edge make it easy to watch the people and the sea while having food and drink. There are two upmarket hotels along the same stretch of beachfront – Labadi Beach Hotel and La Palm Royal Beach – within an easy walk of these amenities. However, they are quite a distance from the city centre and new business areas near the airport. Bojo Beach Resort, a short drive west of Accra on the Cape Coast road, is recommended for a nearby getaway but it is too far from town to stay on business, particularly with variable traffic conditions. The attraction for day visitors is a large unspoiled sandbar that can only be reached by boat for a small fee. Kokrobite, a small fishing village about 25kms west of Accra with a long beach, is another popular area for a day trip, with accommodation and food at Big Milly’s.
GORDON INSTITUTE OF BUSINESS SCIENCE
Swimming in the seas of West Africa can be dangerous because of strong undertows and Accra’s beaches may also involve fighting off litter and other objects in the sea.
2. HISTORICAL SITES IN ACCRA
Many of the main monuments to Ghana’s recent history are along the coastal road within Accra. The main ones are Black Star Square, also known as Independence Square, and the Kwame Nkrumah Memorial Park, which marks Ghana’s independence from colonial power, Britain. Memorials include Independence Arch and Black Star Gate, built in 1961, as well as a mausoleum celebrating the first president of Ghana, Kwame Nkrumah. There are many historical parts of town in various stages of decay but worth a visit. Jamestown, an old fishing port that is still in use today, is one of them. There are many buildings in the old colonial style and the area is dominated by the Jamestown lighthouse built in 1871 that offers views across Accra up a steep, but rickety, staircase. The Jamestown Walking Tour is recommended to avoid
touts and harassment. Usshertown nearby also has historical relics, including Fort Ussher. The area is not developed for tourism and most historical buildings are either locked or have people living in them so are not accessible. Osu Castle, a historical landmark in Osu, was the seat of government for decades right up until a few years ago. There are plans to open it to the public after the government relocated in 2013 but it is not clear when this will happen.
3. MARKETS AND TOURIST SHOPPING IN ACCRA There are a number of tourist markets in Accra. Although many of the old crafts have long been sold off (or exported to markets in Johannesburg), there is a variety of newer curios as well as textiles, jewellery, leather bags and musical instruments alongside modern tat. The Centre for National Culture is a popular location for tourists wanting a one-stop-shop for arts and crafts. The traders do harass potential buyers but all prices are negotiable.
The AACD African Market in Osu is quieter and many of the same goods are available but prices are fixed. At Airport City, Wild Gecko Handicrafts has crafts from around the continent as well as local goods, furniture and art. Hakim Jewellery in Osu is also recommended. The night market in the old part of Osu is best known for its myriad fresh food stalls selling local cuisine.
4. EATING OUT IN ACCRA
Accra is full of restaurants and anything from Japanese and Indian to Ghanaian food can be found. It is worth asking colleagues to recommend restaurants as places come in and out of fashion. Some of the most popular are French bistro and bakery Bread&Wine, Santoku Restaurant and Bar for Japanese food, French restaurant Le Must, Buka for African cuisine, The Republic Bar & Grill, Mamma Mia for Italian and Firefly, a bar and restaurant. The Accra Mall is a popular place for food and entertainment with movies and restaurants, including South African franchise Rhapsody’s. Out of the cities, the choice is limited and mostly West African food. Oxford Street in the Osu area of Accra is popular for nightlife.
dynamic markets
73
PHOTOS: SHUTTERSTOCK IMAGES
Cape Coast Castle
Kakum National Park
Kwame Nkrumah Memorial Park
5. FORTS AND SLAVE CASTLES NEAR ACCRA
beach lodges and hotels of varying quality in the area. The traffic congestion makes it difficult and tiring to do this as a day trip.
Ghana is home to former slave castles and forts along 500kms of coastline, east and west of Accra, which used to be centres of trade in gold and slaves. There were once 37 of them but many fell to ruin. The most prominent is Cape Coast Castle, the oldest European monument in Sub-Saharan Africa, situated in the town of Cape Coast, about three hours’ drive west of Accra – or more, depending on traffic. A UNESCO World Heritage Site, it was built in 1482 by the Portuguese. There are also two forts, Fort Victoria and Fort William within walking distance of each other in Cape Coast. A short distance down the coast is Elmina Slave Castle in the picturesque fishing village of Elmina. There are a number of
6. WILDLIFE EXCURSIONS The Kakum National Park near Cape Coast, a large rain forest with a long canopy walk above the trees, is a popular tourist destination. Although not that far from Accra, it is along the busy road to Cape Coast and can take several hours. It is best combined with the slave forts and castles. Another non-beach attraction is the Shai Hills Resource Reserve, the closest national park to Accra – less than two hours’ drive east of Accra via the port town of Tema
.
76
entrepreneurship
DESIGNING. GROWING. SUCCEEDING. Words Sean Christie
There’s a 21st birthday happening this year in Cape Town. One of South Africa’s most successful retail design agencies has come of age and Acumen traces its formative years. Motorists on Cape Town’s Marine Drive, which has the picturesque waters of Table Bay to the one side and the warehouses and factories of Paarden Eiland on the other, may have noticed some anomalous developments of late. Amidst the hodgepodge details of marine industria a compound of buildings suddenly and all at the same time turned a rich, storm cloud grey. A glass fitment centre at one end of the compound transformed into modern exhibition space and adjacent to this, ending a long tyranny of chip and salomie shops with Coca-Cola hoardings, the distinctive coronet of the Vida e Caffè brand has appeared. On closer inspection, this space becomes more intriguing still. A large roof, little more than a catchment for seagull guano these last
An African
Evolution. Co-creating an African led movement of technological innovation. Join the online movement facebook.com/mwotafrica twitter.com/MWO2M youtube.com/mwotafrica mwotafrica.com
years, has been transformed into an elaborate garden with decked walkways and benches with tremendous outlooks across the bay. The discrete sign at the entrance to this compound informs you this is the TDC&Co. Campus. Is it some sort of technical college, you wonder? Well, I did. TDC, it turns out, stands for Think. Design. Connect. We design and build beautiful spaces, the website claims, and there’s a note informing you that the company has its 21st birthday in 2015. The jolt comes when you hit the page of client logos, and realise that you’ve probably been exposed to examples of the company’s work twice that day already.
entrepreneurship
77
Nespresso, V&A Waterfront, Cape Town
“When people ask if they can see a portfolio, I ask ‘where do you live? Ok, go and look at the following…’ because whether it’s Lydenburg or Ladysmith, Cape Town or Calitzdorp, we’ve designed something they will be familiar with,” says CEO and founder, Derek Patrick. In the early 90s, Patrick had a secure job as a designer with Woolworths. However, as South Africa’s transformation from pariah state to rainbow nation neared, he had begun to sense that his long hair and earring did not fit him for the fast track to corporate success. He decided to make his own quiet but hopeful leap into independent retail design, launching The Design Company from his Cape Town apartment in April 1994. Designer Wayne Krull, now the owner of Phoenix 5 Productions, was The Design Company’s first employee. He remembers working out of Patrick’s spare room, “until the work came in, and we expanded to the dining room.” “Business was conducted very differently then,” says Krull. “The drawings were all done by hand, for example, and the only way you could send these overseas was to cut them into long A4 strips, which you would then feed into a fax machine. Then of course the world started to go digital, and I don’t remember that transition being smooth at all. I was almost killed one day by a computer that had been thrown from a window by Derek, who had been having one of his battles with our CAD (computer-aided design) system,” Krull recalls. Current Group MD and now co-owner of TDC&Co., Marc Olivier, joined the company in 1998, and together Patrick and Olivier began forging a relationship with The Foschini Group, which was to become the bedrock of the company’s growth.
“We were brought on board to transform The Foschini Group’s Pages brand into Exact!, which meant converting 74 stores in just 5 days. 16 years later we work directly with about 14 of The Foschini Group’s 19 brands,” says Olivier. To give dimension to this relationship, Olivier mentions that every @home store between Cape Town and the Middle East (and there are well over a hundred of them) has been designed “and the materials procured” by TDC&Co. Several more major retailers became clients in the coming years, including Pick n Pay, Woolworths, Checkers and Yum Restaurants (KFC). “Our oldest clients have been with us for 17 years, which in this industry is very unusual,” says Patrick. “This might sound a bit twee, but we choose our clients, just as much as they choose us. We have a rule that if a job is not going to be enjoyable, we won’t do it, and I believe it is this that has helped us to sustain our passion, energy and creativity,” he says. As the company’s client base broadened, so its operations began to diversify organically. Patrick and Olivier began to identify gaps in their operating environment, which the company was well positioned to cover. They realised, for example, that the mass stores sometimes experienced difficulties in bringing their designs to life, because the dimensions and configurations of their retail spaces tended to vary. “We started providing individual working drawings for shop fitters, to give the clients fuller ownership of their own concepts,” says Olivier.
An African
Evolution. Co-creating an African led movement of technological innovation.
Join the online movement facebook.com/mwotafrica twitter.com/MWO2M youtube.com/mwotafrica mwotafrica.com
Cycle Lab, Fourways, Johannesburg
“We also came to realise that suppliers and installers often take short cuts, endangering the integrity of the original design work, so we started taking care of procurement and installation processes on shop sites, checking quality control very closely,” says Olivier. In 2011, Patrick and Olivier initiated a restructuring process aimed at organising and optimising the company’s diverse capacities. “We created five distinct business units, each with the potential to become its own profit centre. We now have an interior design unit, a drawing office, a procurement and implementation unit, a branding division called Clrs&Co. and a division offering architectural management services. In practice what this means is we can walk beside our clients every step of the business set-up process, even working directly with landlords on behalf of our clients to ensure that their spaces are actually developed according to their exact specifications. It is this level of service that is proving particularly attractive to international companies looking to move into the South African market,” says Olivier, and he backs the talk up by naming three recently acquired internationals: Zara, Nespresso and David Jones. By 2014, the company’s name no longer encapsulated all that The Design Company could do, and so the brand was pegged to the acronym by which the company has been known for years: TDC. “The &Co. part of the name acknowledges the close internal and external relationships that the company prides itself on,” says Olivier. Of all the developments initiated at TDC&Co. in the last two decades, none has been more radical, trusting or progressive as the company’s shift in recent times from a top-down management style to one which sees all employees as leaders, capable of taking responsibility for the work they were employed to do. “Ultimately, what we do is sell intellectual property, and so our primary investment should always be in our people. It is critical that we are all learning all of the time, and that’s why we’ve named our office address the TDC&Co. Campus. Derek was one of the founding members of Boston College, and so we always have interns and students here. We see ourselves as an academy, a learning institution,” says Olivier. To ensure employees have the skills and wherewithal to assume greater responsibility, the company has hired performance and communication coaches. This approach has freed Patrick and Olivier up to explore new opportunities for the company. “The country is at this extraordinary juncture where established South African companies are increasingly looking to expand beyond national borders, while international companies are scrambling for a foothold in the South African market. We believe we’re well placed to cater for both trends and in fact we’re already doing this. I’ve mentioned the names of brands we’ve already helped to enter the South African market, but since the 90s we’ve been helping big South African retailers like Foschini and Woolworths to set up in the Middle East. More recently we’ve helped South African companies to break into burgeoning African markets, such as Namibia. I truly believe that we are on the cusp of another big step, and that the next 20 years are going to be our most interesting and fulfilling,” says Patrick
.
SUBSCRIBE
& SAVE 20% easyways to subscribe
Issue 12 • Se cond Quart er, 2015
15 rter, 20 rst Qua e 11 • Fi
Choose one of the following options and get your copy of Acumen now! SUBSCRIBE ONLINE AT subs.RNAD.co.za or email acumensubs@RNAD.co.za.
SMS THE WORDS
“Subs Acumen” to 33110. SMS costs R1.50.
CALL NOW on +27 11 473 8700 with your credit card details or to arrange a debit order.
JEFF M IM ELT
MAKE YOUR CHEQUE OR POSTAL ORDER out to RNA Subs
NAL.indd
_ISS11_FI
ACUMEN
and post to Acumen Subs, Freepost JHZ1135, Box 725, Maraisburg, 1700.
EFT OR DIRECT DEPOSIT Cheques to be made out to RNA Subs.
LLO D BLANKFEY IN
Please use the following details: Bank First National Bank Branch FNB Trade Services 657 Account Holder RNA Subs Branch Code 254655 Account Number 6210 4927 259 Reference Your surname + cell / sub no.
. . . CAUTIO USLY BULL ISH ON S.A. P.2 6
CLAYTON CHRISTEN SEN ON INVEST MENT FOR INNOVATIO N PM P.3 39 0 28: 12: 02/2015 03/
MEGACITI ES SHAPING OU R WORLD P.4 2 1
ROCKSTAR CEOs DO WE NE ED THEM? P.34
Fax your proof of payment with your mailing and contact details to 086 579 9449 For International Subscriptions, call +27 11 473 8700; fax +27 86 579 9449 or email acumensubs@RNAD.co.za.
R39.95 incl vat
Issue 12 • Se cond Quart er, 2015
l vat R39.95 inc
2015 uarter, • First Q Issue 11
IN ADING . . . ON LE MES P.36 AIN TI RT CE N U ENDS TO TEN TR OW P.26 TOMORR SHAPE BECHEK B BO W BAIN’S HIS VIE . . . GIVES TURE P.31 FU E TH OF N EW DEA GIBS N KLEYN NICOLA ENGES LL A . . . ON CH CING SA FA S P.22 BUSINES
FAX proof of payment or credit card and contact details to 086 579 9449 • Pay a once-off fee of R127.84 including Vat (four issues). • You save 20% off the cover price when you subscribe. • Get your favourite magazine delivered to your door every quarter. This offer is valid until August 2015 TERMS & CONDITIONS
Acumen is also available for your iPad or iPhone in the Apple App Store, as well as in the GooglePlay store for your Android device.
• • • • •
Offer valid for RSA residents only. Subscription activation is subject to payment confirmation. Delivery is subject to normal SAPO system. Processing takes approximately three weeks. Cancellations subject to a R15 administration fee.
80 future
THE CURRENCY OF PRIVACY Words Dion Chang
In the era of metadata every company with a digital footprint wants to track you. Will privacy become the new currency of a future new world order, accessible only to the rich? If you own a Smartphone, the almost daily notification of an app update and acceptance thereof is becoming a new normal – just like brushing your teeth. The app asks if you accept the terms and conditions before going ahead with the update? Most likely, you just tap “accept” without hesitation. We understand, but are no longer cognisant of the fact, that we are allowing the app to use our private data. A lot of this data is app dependant, like your physical location using a geotag: if it is a weather app it would need to locate your exact geographical positioning in order to give you an accurate weather forecast. However, there is a whole lot of other data that it asks to share, and those details start down a slippery slope. Can the app access your contact list? Can they share your information with a 3rd party? Can they push marketing information to your email? These are all listed in the privacy policy, but who bothers to read that fine print?
GORDON INSTITUTE OF BUSINESS SCIENCE
The danger of not reading the “Terms & Conditions” was made abundantly clear in an experiment in London last year, when a number of people unwittingly signed over their firstborn children in exchange for access to free Wi-Fi. Wi-Fi is now a serious contender as a basic need in our digital era – I call it the new base tier in Maslow’s Hierarchy of Needs. As we live in a connected world, people feel vulnerable when they can’t access a wireless network and many people move nomadically from Wi-Fi spot to Wi-Fi spot during the course of a day. The experiment was conducted to guage just how intense the need for Wi-Fi is. Organised by the Cyber Security Research Institute and backed by Europol, a European law enforcement agency, a security company set up an unsecured, free, Wi-Fi hotspot in a busy London district. To gain access, would-be users had to agree to the “Ts & Cs”, but inserted into these was a so-called ‘Herod Clause’: users had to sign away their firstborn child. Six people clicked “Agree”. F-Secure, the security firm that sponsored the experiment, confirmed that it wouldn’t be enforcing the clause, but their point
was made: we don’t read the fine print and we literally sign our lives away for connectivity and digital access. In February, US telecom giant AT&T announced that subscribers to their super-fast gigabit broadband service would be able to opt out of having their online activity tracked, for a fee of $29 per month. The company is open about its intentions. It had previously announced plans to track and monetise its customers’ Internet activity, gleaning information such as which web pages they search for and visit, how much time is spent on the various pages and which links or ads they see and click through to. This practice is not new and is commonly known as ‘deep packet inspection’, an increasingly controversial practice that allows Internet service providers to monitor and mine the Internet traffic of their subscribers. Most companies operating in this industry allow users to opt out of sharing their information free of charge but, as was illustrated by London’s ‘Herod’ experiment, no-one really bothers to read the fine print, or adjust their own privacy settings, which can prevent your data being shared. You either can’t be bothered or don’t know how to.
future
Unsurprisingly, AT&T’s new privacy offer created a backlash. People questioned whether this was AT&T’s attempt to discourage people from opting out of data tracking, by charging a premium for that privilege? According to AT&T the data tracking and advertisement targeting associated with their premium gigabit service cannot be sidestepped using the normal privacy settings, hence the offer of a fee-based opt-out. Ironically, the issue was not so much the monetisation of their customer’s personal data (or the fact that data was being sold and shared), but rather the social justice implications as charging for privacy becomes the new normal. Anyone who runs a business today understands that, in a digital era, metadata is the key to not only understanding your core customer, but also a means to opening niche and very targeted communication channels: it is the new digital Holy Grail for marketing and advertising. As such, any company with a digital footprint now collects and analyses their customers’ data: it has become common practice. So much so that if you don’t track and make use of this data, you may as was well be running your business using fax machines. However, there is a flipside: the customer’s perspective. The increase of cybercrime is creating growing concerns about online privacy, and South Africa’s Protection of Public Information Act (POPI) – signed into law in November 2013, and the compliance grace period now ended – should go a long way in terms of protecting private data. Some of the obligations that companies will have to adhere to under POPI are to: only collect information that is needed for a specific purpose apply reasonable security measures to protect the data only hold as much as you need, and only for as long as you need it allow the subject of the information to see it upon request ensure it is relevant and up to date. The second point is most interesting: companies are not only required to be more mindful of how they use or share your information, but are now also obliged to secure and protect it. That responsibility was previously not placed with the company collecting the data. The ripple effect of this shift, in terms of who takes responsibility for the protection of data, is being felt globally. One of the domino effects of Edward Snowden’s leaks of sensitive government documents was the discovery that America’s National Security Agency (NSA) had relatively easy access to people’s private data, whether on social media platforms or from telecommunication companies. The backlash has been significant. The NSA’s once-secret bulk phone records program – the systematic collection of data of Americans’ calling habits – was exposed and its legislation overhauled. Now, bulk records remain in the hands of phone companies and the NSA can obtain specific
81
. . . CHARGING FOR PRIVACY BECOMES THE NEW NORMAL.” records only with permission from a judge, using a new kind of court order. Google, Apple, Facebook, Twitter, AOL, Microsoft, LinkedIn and Yahoo formed an alliance – the Reform Government Surveillance group – and approached President Barack Obama and the United States Congress to reform America’s surveillance laws. But the ripple effect went beyond America’s borders, affecting foreign investment for American companies. Microsoft lost customers, including the government of Brazil over fears that their citizen’s data was not secure. IBM is now spending over $1 billion to build data centres in countries outside of the USA to reassure foreign customers that their information and data is safe from government agencies like the NSA. In a reversal of fortunes, tech companies in Europe and South America are gaining customers who are wary of the security levels of American providers. It is already estimated that the cloud computing industry could lose $35 billion by 2016 – 25% of the sector’s revenue. Privacy is becoming a big business, and AT&T’s paid opt-out option is a bellwether of a new tipping point. However, consumers are also approaching a similar, but opposing, tipping point. It is almost impossible to opt-out of any terms and conditions set by service providers. For example, a friend of mine tried to retain some modicum of digital privacy and started to tap the “decline” button every time one of his apps was updated. He discovered very soon that there was a knock-on effect with other services within the digital ecosystem. Say “no” to the geotagging of where you are, and your other apps, like weather, can’t function, or can only provide you with a hugely limited service. It is a horrible Catch 22: you can no longer use a digital service without having to sacrifice your privacy. Many believe resistance as futile. Looking ahead, the collection of metadata can only increase. Currently our data is being mined on social media and telecommunication platforms, as well as in the retail space – ostensibly to be able to provide a better customer experience. With the rise of wearable tech the next invasion-of-privacy wave is going to be your health data, aka Care Data, which makes the intrusion so much more personal. Would you pay to keep your personal heath data private? Most certainly, but what about those who can’t afford to? Is privacy soon to become a privilege of the rich? Is this the start of virtual inequality? One could argue that people will always have a choice in a digital era: you either sign away your privacy, or join your local Amish community
.
82
renew
CAPTIVE IN CHIANG MAI Words Caroline Hurry
PHOTOS: SHUTTERSTOCK IMAGES
Elephants entertain tourists in Thailand’s Lanna Kingdom where visitors can join Buddhist monks on food-gathering missions or get doused at the annual Songkran Festival.
Songkran Buddhist monks
It’s 10.30am, the sun an angry eye in the sky, as I watch an elephantine Gauguin hold a paintbrush in his trunk, select a vivid shade of orange, and apply pigment to paper. He paints a flower with petals, leaves and stamens.
GORDON INSTITUTE OF BUSINESS SCIENCE
Lifting his back leg in concentration, he completes two more blossoms. With finesse he then signs his name – Ora Chai – beneath his masterpiece that will be sold to raise money for his sanctuary at the Maesa Elephant Camp. It takes just three months to teach a pachyderm to paint. Their sophisticated trunks contain between 50 000 and 150 000 muscles – experts still cannot agree on the number – with prehensile, fingerlike appendages at the tip that aid in flicking a coin, stabilising a log or turning out an intricate still-life. Ever since the Thai logging industries laid them off in 1989, Asian elephants have had to entertain tourists to earn their keep as industrial greed destroys their habitat. Even so, their population declines
Songkran Festival, Chiang Mai
Elephant signing name
apace with fewer than 3 000 left in the country. The precarious future of these gentle giants makes spending time with them all the more precious. Living is easy with eyes closed, misunderstanding all you see. Strawberry Fields marinates my brain as my 5.15 alarm brings me back to 3D reality. I had signed up to feed the Buddhist monks. They, I reflect, would have been up meditating for two hours already. Lofty thoughts or contemplation of the quality of the snacks to come, well who could say? Buddha prescribed some rigorous tenets for living, all in return for... nothing. Then again, nothing is real so nothing to get hung about. Riiight. By dawn people had prayerfully lined the road with their food offerings. Thai people believe the way to heaven is via the hem of a monk’s robe, so the snacks looked good. Hawkers flogged birds in tiny cages you could buy to set free for good luck. The hapless creatures would then be trapped again and resold. The truly devout held up placards exhorting abstinence from
alcohol and smoking. Suddenly seventh century sacred chants filled the air and a long orange ribbon of monks appeared. Caught up in the energy of sound, I felt light-headed. Hunger pangs gnawed but I resisted the temptation to purloin a drumstick. Buddha might be watching. You never know. After an hour of the chanting, the monks – from seven years upwards – went around collecting the food in steel bowls. The following day dawned on the lunar New Year, aka Songkran Festival. Traditionally, temple goers sprinkled scented water over each other to wash away bad thoughts but these days people drench each other on the streets. Tourists and police officials alike are considered fair game. As one impudent lad hurled a bucket of water in my direction with distressingly good aim, I told myself my sins had been cleansed for another year, but it was cold comfort indeed
.
renew
83
GAME WITHOUT FRONTIERS Words Caroline Hurry
Elephants roam free in Big Five country at the remote 60 000 hectare Klaserie Reserve, north of Sabi Sands and west of Timbavati. nThambo Tree Camp offers an authentic safari experience. The elephant is so close we can feel the breeze from his flapping map of Africashaped ears. He’s in musth, his legs wet with a pungent combination of urine and semen leaking from his penile sheath. Hot to trot but at least one female short of a happy ending. As he approaches the open vehicle, trunk at half-mast, ears akimbo, I think: so this is the way my world ends. Not with a bang but a trample. Isaack Nkuna, our tracker is sitting on the bonnet – talk about vulnerable – but instead of reaching for his rifle, ranger Matt Roberts doffs his hat, waving it high in the air. The elephant pauses and takes a step back.
PHOTOS: JOCHEN VAN DE PERRE
“Keep going, big fellow” says Matt. “Please...” To our relief, the elephant ambles off, ripping up a small tree en route, but the excitement doesn’t stop there. Near nThambo Tree Camp chalet
Jason’s Dam we happen upon around 300 buffalo cooling off in the water behind a hippo bull, cow and calf. Do hippo and buffalo get along? “Not so much,” replies Matt. “The hippos don’t appreciate the buffalo defecating in their water and kicking up the mud.” On cue, the bull arises like Neptune in a flurry of spray, cavernous jaws and glinting tusks. With a roar he surges towards the herd at tsunami speed. The buffalo scarper up the banks. Aroused by his alpha powers, the hippo then turns his amorous attentions to the cow, which is so not in the mood. During another 15-minute display of physical coercion, the buffalo venture back into the water. It’s the stuff National Geographic dreams are made of. Less than half the
price of other private safari lodges in Kruger, it’s also great value for money. From your nThambo chalet on wooden stilts perched over the dry surf of undulating grass you can see lightning skitter along the distant Drakensberg range, hear the giggles of distant hyena, count shooting stars, or tiptoe with pounding heart to watch an elephant feeding. In the end, though, it is not the Big Five that sparks me so much as the heady aroma of wild aniseed and elephant dung, the melodious bubbling of the Burchell’s Coucal, the busy silence of spinning golden orb spiders, and buzzing cicadas. Such a pristine paradise helps you forget for a minute, the other South Africa, the one rife with poverty, load shedding, sporadic Wi-Fi connections, potholes and traffic jams
Hippo power
.
84
renew
THE FINER THINGS Words Cheska Stark
GORDON INSTITUTE OF BUSINESS SCIENCE
HIS CHECKLIST 1.
Work shoes, R1 299, Aldo (011 884 4141 or 021 421 5674) New season, get some new work shoes. These may look like classic, black shoes but the texture gives them a whole new look and will change up your suit too.
2.
Work bag, R4 699, Tumi (011 783 4636 or 021 419 4253) This Tumi workbag means one thing: you are ready for business. With enough compartments for all your work essentials, the cool grey colours and easy structured shape makes heading into work or commuting not only functional but super stylish, too.
3.
Merino wool jersey, R1 299.95, Ted Baker (011 450 1156) Keeping warm this winter is all about quality. Invest in real wool, like this Merino wool jersey from Ted Baker – trust us, you will feel the difference immediately. The bright blue adds a pop of unexpected colour, especially amongst a usual dark winter wardrobe.
4.
Sunglasses, R2 025, Oakley at Luxottica (021 486 6100) Like most trends this winter, sunglasses are taken to a whole new level with a change in texture. We like the arm detail and the classic black makes these an accessory for any of your winter looks.
5.
Valentino Uomo, R1 160 for 100ml, Red Square (Redsquare.co.za) Valentino Uomo is the fragrance for the person who looks for classics and selects only top quality. Woody notes are in the base of this fragrance and the composition opens with bergamot and myrtle, succeeded in the heart by roasted coffee combined with gianduja cream, on a rich base of cedar and leather.
6.
Jeans, R999, Lucky Brand at Selected Edgars Stores (Edgars.co.za) Get ready to change your go-to jean brand to Lucky Brand once you try these dark-wash denim classics.
7.
Tuxedo jacket R3 650, Ben Sherman (011 444 2270) It’s time for some serious tailoring. This tuxedo blazer in navy is all about the sleek lines and chic details. We say dress up all the time with this investment piece.
8.
Checked work shirt, R999, Trenery at Woolworths (Woolworths.co.za) Trenery has hit the style nail on the head this season with their classic work shirts. We like the checked pattern as a change from stripes while the brighter blues allow for some colour co-ordination during the winter months.
7.
8.
renew
85
HER CHECKLIST 1. Sunglasses, R2 358, Dolce & Gabbana at Luxottica (021 486 6100) If you are looking for a pair of sunglasses this winter, try going nude! While you may worry that black or tortoise shell may be too boring for winter, a nude pair of sunnies can make a chic style statement. Dolce & Gabbana also ticks all the boxes when it comes to shape and the detail of leopard print gives them an interesting edge. 2. Tinsel flat pump, R2 440, Pretty Ballerinas (011 325 5411) Who said flat shoes are boring? Certainly not if they are covered in tinsel! These pumps are easy to wear – day or night – yes, we said tinsel for day! Pair them with a classic tee and your favourite jeans or dress them up at night with a party dress and a pair of stockings. 3. Opulent bloom print skirt, R1 899.95, Ted Baker (011 450 1156) Once again florals are a huge trend this season as are fifties skirts. Combine the two and you will make a serious style impact. We like to brighten up our winter days with sweet florals and the oversized poppy print of this skirt does just that. Pair this with a knitted polar neck or on warmer days try a crisp white shirt. 4. Mid-point court heels, R749, Forever New (021 419 4552 or 011 883 4585) One thing that we have learnt from style guru Kate Middleton is that a classic nude court heel is a staple that every women needs in her wardrobe. This pair of heels will save your look time and time again. These heels are ultra flattering and go with pretty much everything. 5. Kimono cardi, R169.99, Mr Price (Mrp.com) This is the knit that will get you through the cold of winter. It’s long enough to snuggle up in, layered over your favourite comfy tee and lazy pants at home, or pair it with boots and pants for a day out or to the office. The colour goes with everything and, trust us, you will want to wear it every single day. The kimono style of the knit is right on trend, stealing from the classic shapes of the East. 6. Tote, R549, Aldo (021 421 5674 or 011 884 4141) New season means one thing: new bag! This tan Aldo tote will be your daily companion in no time, big enough to fit pretty much everything in, but stylish enough to not make you look like a bag lady. We love the structured shape and the classic handle detail with miniature buckles. 7. Cape, R5 200, Karen Millen (011 784 2937) Once again get ready to be warm, yet comfortable, this season with this woolen cape. Bang on trend for winter 2015, it will go with you everywhere, not as structured as a coat but not as casual as a cardigan. You will look the professional part in this on-trend piece. 8. Lipstick in Pink Pucker #46, R220, Elizabeth Arden (021 936 5924) If you follow one style rule this winter it has got to be ‘colour on the lips’. While the colder weather usually means more muted tones in your wardrobe like blacks, greys and nudes, when it comes to your lipstick choices this season make sure you go bold. We love this Elizabeth Arden shade because it adds the perfect amount of pink to your natural lips.
.
88
renew
FORWARD MOTION Words Jacques Marais and Stephen Smith
With or without an internal combustion motor, here are half a dozen ways to get ahead (and stay ahead) of the pack. Funky or fun. Far-fetched or absurd. Classic or alternative. Acumen’s motion maestros check out six incredible ways of having fun while moving from point A to point B…
GORDON INSTITUTE OF BUSINESS SCIENCE
HUMAN-POWERED
ON YOUR FEET: ASICS GEL-FUJI ATTACK 4 TRAIL SHOES
ON YOUR BIKE: THE SILVERBACK SCOOP FATTY FAT BIKE
ON YOUR BARS: THE RUNTASTIC BIKE CASE FOR SMART PHONES.
WHY DO YOU WANT IT: This should be your trail weapon of choice if you want a neutral and hard-wearing, yet responsive, set of footwear. The Gel-Fuji Attack 4 is a low-profile trail shoe specifically designed to assist off-road runners who suffer from over-pronation. The shoe’s aggressive outsole pattern and forefoot Rock Protection Plate makes it the top choice for a wide range of trail users.
WHY DO YOU WANT IT: The latest MTB evolution has seen the development of ‘fat bikes’, with wider tyres enabling you to explore extreme terrain like snow, sand or swamps. The larger footprint tyres offer floatation on these surfaces where regular tyres would sink in. Get ready to put the fun back into your riding with the Fatty Scoop!
WHY DO YOU WANT IT: Easy-peasy… download either the Runtastic Road or Mountain Bike app, pop your phone into this tough bike case and you have a professional cycling computer at your fingertips. Not only is the case shock and splash-proof, but it also has ports allowing you to connect headphones or a battery pack. Plus, navigating all phone functions is easy through the transparent and touchsensitive display screen.
DESIGN UPS: The technical jargon won’t make sense to most buyers, but you will feel it in your feet! Simply put, the superb forefoot protection and a heel gel unit makes this a superbly comfortable shoe for the long haul. Great traction from the full contact outsole and discreet Eyestay lacing technology means you get a shoe that is stable and built like the proverbial tank. GO GET IT: Available from Sportsmans Warehouse (Sportsmanswarehouse.co.za) R1 500
DESIGN USPs: Contemporary fat bike geometry incorporates a range of specific frame design features in order to accommodate the large-volume tyres. The BB and rear axle width are increased to allow the chain line to bypass the large volume tyres without affecting stability too much. The 4.7” tyre size requires extreme rims too, with a width of at least 80mm-100mm. GO GET IT: Contact Info@silverbacklab.com for information on dealers throughout South Africa.
DESIGN USPs: The Runtastic Case comes with a universal tool-free mounting bracket for your bike bars, and can be mounted either in Portrait or Landscape. Included foam strips allow you to customise the fit to your phone, accommodating a maximum size of 13.6cm x 7.0cm x 1.2cm. The case is waterproof when closed or water-resistant when seals are open to connect to the phone.
R27 000 (Single Scoop) R14 000 (Double Scoop)
GO GET IT: Available at Due South Stores (Duesouth.co.za) R799
renew
89
FOR THE HEAD
FOR THE HEART
FOR THE PLANET
MOTORISED On the motorised side, we look at three machines similar at first glance, but with many a difference under the hood, so to speak. Read on and see which appeals to your soul... FOR THE HEART: RANGE ROVER SPORT
FOR THE HEAD: VOLVO S60 D4 R-DESIGN
FOR THE PLANET: BMW I3
WHAT IS IT: The Sport is the Range Rover for the young, the hip and the classy (we needn’t point out well-heeled). Slightly smaller than the Range Rover but with similar levels of opulence combined with scintillating performance, the Sport is about as cool as it gets.
WHAT IS IT: Take a moment, close your eyes and forget everything you know about Volvos. Concentrate on words like ‘square’ and ‘boring’ leaving your mind. Finished? Good – now you can give the Volvo S60 the attention it deserves, because this is a highly desirable luxury sedan.
WHAT IS IT: When BMW decides to do something, they do it properly, and BMW has entered the electric vehicle market. Recently launched locally, the i3 is something of a revelation.
WHY DO YOU WANT IT: It’s hard to look past the immense brand appeal of Range Rover, but if you do you will see one of the world’s most competent all-rounders looking back at you. Nimble and quick on any terrain, the Sport can even venture very, very far off the beaten track.
WHY DO YOU WANT IT: Think of the S60 as the thinking man alternative to offerings from the German triumvirate. Buy one and you’ll be comfortable in the smug knowledge that you’re driving a car because you know better than the sheep following stars, rings and blurred propellers.
DESIGN USPs: The range of turbocharged diesel V6s and V8s and supercharged petrol V6s and V8s are the best reason to own a Range Rover Sport. The 5-litre V8 petrol produces 375kW and 625Nm and is the epitome of justifiable excess. Remember that the acclaimed Terrain Response 4x4 system comes standard, which is what really sets the Sport apart from its rivals. That, and unheralded levels of luxury.
DESIGN USPs: Understated elegance is probably the S60’s biggest selling point, but it’s far from the only one. More refined than most of our food, the S60 is an absolute pleasure to drive. The 2-litre turbodiesel engine (133kW and 400Nm) is paired to an eight-speed gearbox for performance, fuel economy (5.5l/100km) and smooth travels. It is superb.
GO GET IT: Priced from R916 000 to R1 800 000, the Range Rover comes with a 3-year/100 000km warranty and 5-year/100 000km maintenance plan. Visit Landrover.co.za for more information.
GO GET IT: Priced at R473 000, the Volvo S60 D4 R-Design represents a whole lot of car for the money. It comes with a 5-year/100 000km maintenance plan and warranty. Visit Volvocars.co.za
WHY DO YOU WANT IT: The fuel price is going up, fuel taxes are up, and that doesn’t even take into account the environmental costs of fossil fuels. The i3 gets around all of these in a stylish little package wrapped up in a carbon fibre frame. DESIGN USPs: A BMW badge means quality, and the i3 feels like a real BMW, just a silent one. A bank of 8 high-voltage lithium-ion batteries power the 125kW and 250Nm electric motor, which means acceleration from 0-100km/h in just 7.2 seconds and a top speed of 150km/h. Interestingly there is also a i3 REX model, complete with a 650cc petrol engine that doesn’t power the wheels, but can charge the batteries when a power socket is out of reach. Range, the allimportant factor with electric cars, is about 130 to 160km per charge, while the range extender adds a further 100km to this. GO GET IT: Prices are R525 000 for the i3 and R595 000 for the i3 REX. It comes with a 5-year/100 000km maintenance plan and an 8-year/100 000km battery warranty. Visit Bmw.co.za
.
90 renew
BOOKS Words Chris Gibbons
BRILLIANT IDIOTS THE INNOVATORS BY WALTER ISAACSON
SIMON & SCHUSTER UK I R370
GORDON INSTITUTE OF BUSINESS SCIENCE
Steve Jobs, Bill Gates, Larry Page and Sergey Brin. Even if your interest in computers and computing is no more than superficial, these are names you would probably know. But what about John von Neumann, John Mauchly, Presper Eckert, Grace Hopper or Ada Lovelace? I had vaguely heard of von Neumann – a Princeton mathematician? – but certainly not the others. Yet we can say with absolute certainty that the first four would not have been able to achieve their fantastic successes without the others, successes which have brought immeasurable benefits to the modern world. Ada Lovelace, for example, was the daughter of the poet, Lord Byron. She was also a collaborator and confidante of mathematician Charles Babbage, whose Difference Engine and Analytical Engine are held to be the forerunners of the modern computer. Yet, according to Walter Isaacson, in his new book The Innovators, it was Lovelace who understood that “such machines could process not only numbers but anything that could be notated in symbols”. Isaacson also credits Lovelace with writing “the first computer program ever to be published”. All of this in the 1840s. At its most basic level, The Innovators is a history of computers, computing and the men and women who made breakthrough after breakthrough. But if that were all, it would be as much fun as a history of washing machines or refrigerators. Instead, Isaacson describes a fascinating journey of discovery, seeded with intriguing and brilliant visionaries, to say nothing of a couple of deeply flawed characters. He is a writer of great skill and perception, not only author of the
hugely successful biography of Steve Jobs, but also a former managing editor of Time and chairman of CNN, and he drives his tale with a central philosophical question: will machines – computers – ever become clever enough to supplant the human brain? More simply, “Can machines think?” Of equal importance in his narrative is the question of innovation itself – hence the book’s title. Isaacson wants to know what drives innovation and under what circumstances it flourishes? Do you need a lonely genius toiling away in a dingy garret or rather a team of engineers, all brandishing PhDs, in well-funded, brightly lit laboratories? A third strand of enquiry – something of a sub-theme until the book’s very last movement – involves the relationship between mathematics and physics on one side, and the humanities on the other. Isaacson reminds us that not only did Ada Lovelace have a poet for a father but also a mathematician for a mother. Lovelace went on to coin the phrase “poetical science” but isn’t that what we have in the exquisite form and high functionality of so many Apple products? Steve Jobs understood this perfectly, and Isaacson
quotes from Jobs’ final product launch in 2011: “ ‘It’s in Apple’s DNA that technology alone is not enough – that it’s technology married with liberal arts, married with the humanities, that yields us the result that makes our heart sing.’ That’s what made him the most creative technology innovator of his era.” Isaacson and many of the people interviewed for The Innovators are firmly of the belief that machines will never be able to think the way humans do. That they can process incredible amounts of information at almost the speed of light – i.e. enough chess moves per second for IBM’s Deep Blue to beat world chess champion Garry Kasparov – makes them nothing more than “brilliant idiots”, to use the words of IBM’s director of research, John E Kelly III. Instead, the future holds closer and closer symbiosis between man and machine: what are computers good at and what are we good at? In that alliance lies enormous strength. To begin to understand what it might mean for you and your business, you would do well to read The Innovators.
renew
91
THE ETHICAL WAY ETHICS CAN - MANAGING WORKPLACE ETHICS BY CYNTHIA SCHOEMAN KNORES PUBLISHING I R299
The concept of ethics is probably as old as humanity; certainly it stretches back to the ancient Greeks. Its roots lie in “doing the right thing – even when no-one else is watching”, and that, in turn, probably ties in to the old biblical injunction: “Do unto others as you would have them do unto you.” In essence, a high standard of ethical behaviour becomes a recipe for a frictionless social and business life. All of which makes it quite alarming that modern ethical standards, especially in business, have fallen so low. Author, trainer and business ethics expert Cynthia Schoeman is determined to change that, arguing that, if nothing else, good ethics makes good business sense.
Her argument’s moral dimension has recently been given some very sharp teeth by changes to the Companies Act as well as the recommendations of the King Committee on Corporate Governance. Her latest book – Ethics Can – is a meticulously researched text that will tell you everything you need to know about the subject: what we mean when we talk about workplace ethics, whose role is ethics in the company, managing workplace ethics and how to implement a monitoring and reporting programme. It’s also structured in such a way that you could use it in the workplace as a primer to stimulate discussion and allow these critical issues to surface. Highly recommended.
BEGINNERS PLEASE! ROOKIE SMARTS – WHY LEARNING BEATS KNOWING IN THE NEW GAME OF WORK BY LIZ WISEMAN HARPER COLLINS I R350
A wise old grey-beard will always have the edge over a downy-cheeked newcomer, right? Or, to put it another way, deep experience in the ways of the world and the corporation wins the day every time over naive innocence, not so? Well, actually, no. More often than not, according to new research by former Oracle senior executive and now top coach and author Liz Wiseman, it’s the other way round. Experience becomes a mask for a bored, we’ve-always-done-it-this-way approach compared with the intensity of the blind panic which flows from being thrust into a new, often completely unfamiliar, situation. This is the world of the rookie, who instantly reaches out to anyone and everyone for help, asks deeply obvious, yet fundamental, questions and moves at a break-neck pace to avert disaster. Knowledge and learning are acquired at a rapid pace and – yes, this is possible! – the people involved work incredibly hard but have fun as they do so. The rookie mindset is particularly, although not exclusively, applicable in a high-tech environment,
where constant reiteration is the name of the game and the work is innovative and urgent. Rookies come in various flavours, according to Wiseman – Backpackers, HunterGatherers, Firewalkers and Pioneers – and she compares them to Veterans, firmly ensconced in their comfort zones: Caretakers, Local Guides, Marathoners and Settlers. There are some obvious exceptions: you don’t really want a rookie pilot landing your jet airliner or a rookie surgeon performing open heart surgery on you. But, by and large, Wiseman makes a compelling case for freshness and inexperience and one which is about generating infectious energy in the company. And for those of us who are grey-beards, perhaps in need of some rejuvenation, she also sets out a very concrete course of action, while reminding us that the late, great management expert Peter Drucker did the bulk of his magisterial work when he was past the age of 65! That, says Wiseman, is because Drucker was insatiably curious – one of the key traits of the rookie
.
92
renew
TECHNO Words Aki Anastasiou
A FRANTIC START TO 2015! It’s been super-busy so far, with the International CES 2015 in Las Vegas at the start of the year, and then Mobile World Congress in Barcelona during March. CES, which focuses on consumer electronics, is the biggest gadget show in the world and this year we saw 4K and 8K televisions for the home taking centre stage. Connected cars, wearable devices and the Internet of Things were the key underlying themes that are driving consumer trends. At Mobile World Congress, the focus was on bringing all these connected things together, with your phone playing the pivotal role in how we will ultimately control and use these technologies. Mobile operators face massive challenges. Fuelled by new technologies and driven by the adoption of LTE/4G, data is showing explosive growth. Gartner predicts that mobile data will grow 59% this year. Operators face a dilemma. Business and consumers want higher speeds but want to pay less for data. Mobile operators need to provide the infrastructure for all this high speed mobile broadband connectivity to happen and at the same time deliver profits to shareholders. Consolidation is inevitable.
GORDON INSTITUTE OF BUSINESS SCIENCE
MWC, Barcelona. The "new" smartphone is the motor vehicle. Next generation vehicles will have at least 200 sensors built in.They will share valuable data with devices in our homes and work places as well as other objects that will assist in streamlining our lives and ultimately also making roads safer.
SAMSUNG BRINGS OUT THE BIG GUNS – GALAXY S6 AND S6 EDGE:
The biggest event from Barcelona was Samsung’s launch of the Galaxy S6 and S6 Edge. The Korean tech giant has come under increasing pressure in the premium smartphone market to come up with a more solid-feeling device. The new Galaxy S6 and Galaxy S6 Edge are clear evidence that the design slate was wiped clean when this process was started. The new devices feature a blend of metal and glass embodied into one. The 5.1 inch Quad HD Super Amoled screen is bright and crisp. The new S6 Edge features a curved screen on either side of the phone to offer more functionality on notifications. Both devices feature wireless charging as well as a fast charge capability that will give you 4 hours of battery life from 10 minutes of charging. The 16 MP camera promises to shoot amazing photographs, even under low light conditions. Samsung has also simplified their software taking the “bloatware” apps out. The new flagship devices from Samsung are stylish and sleek but be warned: they come at a price. The S6 and the S6 Edge will start at R12 000 without a contract.
CES 2015, Las Vegas. The Babolat Bluetooth tennis racquet collects data while you play and then gives you information on how you hit the ball and how to improve your game.
renew
93
WITHINGS ACTIVITÉ – RETRO DESIGN WITH A DIGITAL DNA
The French-designed, Swiss-manufactured Withings Activité watch combines a classic analogue-feel timepiece into a fully functional activity monitor without compromising on modern digital functionality. It tracks your movements as well as your sleep patterns. It then combines this data with other information collected by your phone to give an indication of your wellness. It even works out how many calories you’ve burnt and syncs the information to your phone. No recharging is required thanks to the built-in battery that works like a regular watch. With an elegant stainless steel casing and a leather strap, this watch doesn’t look like a wearable device. It’s not cheap though at R5 500. Perhaps a small price to pay for style?
CARBONTRACK PUTTING ENERGY MANAGEMENT IN YOUR HANDS
With electricity costs skyrocketing, isn’t it time you had more control of your energy consumption by optimising your usage to save costs? Local company carbonTrack has developed an interesting gadget that allows you to not only keep tabs on your electricity consumption but also to control and manage your energy usage via an app. The device has sensors and switches that can be connected to appliances such as geysers and pool pumps‚ and even your lights. carbonTrack is hidden away into your roof and talks directly to the Internet via 3G connectivity. An app via your phone displays your energy consumption as well as giving you the ability to add timers to your geyser, adjust the temperature or even turn it off. carbonTrack costs R4 999 but think of saving 30% on your electric bill.
APPLE WATCH – THE SMARTWATCH CONSUMERS HAVE BEEN WAITING FOR?
What Apple does so unbelievably well is create incredible hype and desirability around their products. So much so that you’ll eventually start feeling bouts of FOMO. Yes, FOMO – Fear Of Missing Out, for you non-millennials . They understand the consumer. The Apple Watch is beautifully styled and designed for the fashion conscious as well as those that appreciate some functionality. It has an 18-hour battery life and connects to your iPhone. You’ll be able to receive and make calls, read messages via the notifications, and keep tabs on your fitness levels and even view maps on the watch face. Developers like Uber are hard at work creating many more apps that will ultimately add more productivity to this wearable device. Apple Pay is a cool feature. It will allow you to pay for things without pulling out your credit card, simply by waving your Apple Watch near a credit card machine when paying. Apple Watch will be available in three styles, with many different strap choices and starts at $349 for the base model going up to $17 000 for the solid gold version. Guess what Justin Bieber is getting for his birthday? Do I want one too? Oh YES!
.
94
renew
WINE Words John Maytham
Acumen’s wine expert picks three of the best at three different price points: Everyday, Dinner Party and Out To Impress.
EVERYDAY South Africa doesn’t have anything like the Beaujolais Nouveau tradition whereby the end of the harvest season in France is celebrated by the release, on the third Thursday of November, of a vin de primeur made from the gamay grape, and fermented for just a few weeks. The hype around the race to get a Beaujolais Nouveau wine first to an international market has prompted other regions in France and other countries to follow suit, amongst them Italy, Spain and the USA. But wine geeks in SA do keep an eye out for the first releases of a new season. In 2015 the ‘race’ has been ‘won’ by Lourensford – their First Fruit Pinot Noir Rose was released on 14 February. Not far behind, and traditional front-runner in the early release stakes, is Van Loveren’s Sauvignon Blanc 2015. Released on 19 February, with the last of the grapes being picked on 22 January – just under four weeks from the vine to the consumer’s mouth. The result is exactly what the vin de primeur tradition celebrates – a wine that is fruit-driven; fresh and uncomplicated and fun to drink. And, at R43 a bottle, the fun extends to the credit card.
DINNER PARTY
GORDON INSTITUTE OF BUSINESS SCIENCE
A good story doesn’t make a bad wine into a good one. But a good story can enhance the attractions of a good wine. A case in point is the Jordan Inspector Péringuey Chenin Blanc 2014. It’s named after the eponymous Louis Albert, who was appointed Inspector-General of Vineyards by the Government of the Cape in 1885. A year later he identified the extremely pernicious phylloxera root louse in a vineyard on a farm in Mowbray. He then supervised the importation of American rootstock from France and took great personal care to ensure that all vines were inspected and declared phylloxera free before being planted. It’s no exaggeration to state that without his efforts the South African wine industry would have been dealt a near mortal blow. Happily the wine is more than good enough to bear this association with history. It’s made from 32-year-old vines; half of the juice being tank-fermented and the other half in older barrels. It’s a very smart wine, with peach‚ pear and citrus notes on the nose, and a full and broad palate that emphasises the purity of the fruit. A cellar door price of R90 makes this exceptional value for money. Salut, M Péringuey. OUT TO IMPRESS It’s called Capensis – it’s a chardonnay and it is also the most expensive white wine in South Africa with a suggested retail price of R935 a bottle. Only 12 000 bottles were made, so you’d better hurry to secure yours. Much of the discussion since the launch earlier this year has been around the price, and whether it is worth between 3 and 5 times what its main competition charges. But at this level, value is a complex proposition, having much more to do with perceived desirability than any intrinsic production factors. Of course‚ there has to be a baseline quality, and Capensis is a wine of sublime excellence, and will become even more so with time in the bottle. It’s a joint venture between the US-based Anthony Beck of Graham Beck Wines and US company Jackson Family Wines. The grapes are looked after by viticulturist supreme, Rosa Kruger, and the wine made by Graham Weerts. It’s a wine that demands concentration and repays that attention amply – the nose is intense and insinuating, the palate is fresh and elegant, with a harmonious intermingling of carefully judged oaking, lively acidity and pure, mouth-filling fruit. The finish is long and dry, and the overall sensation one of focus, attention to detail and promise of more to come
.
renew
95
JAZZ IN THE BRAAMFONTEIN ORBIT Words Victor Dlamini
Pitika Ntuli is a man whose mission seems to be to defy convention and straddle as many categories as possible. He is a sculptor, art collector, poet, linguist, historian, teacher, writer and academic. His studio in the Wynberg Industrial area seems to be a bridge that connects Alex to Sandton.
Pitika Ntuli
It was no surprise then to find Ntuli on stage at the increasingly important Orbit Jazz Club in Braamfontein, bringing together several generations through poetry and jazz. In less than two years since it was opened, The Orbit has established itself as the leading venue for live Jazz in South Africa. The vision of founder Aymeric Péguillan to create a venue that brings live jazz performances most days of the week seemed impossible, but it appears as if the plan is working. Dressed in a simple but regal striped Ghanaian robe, Ntuli’s voice rose and fell with the inflection of a gentle wave. Then gathered pace as his lines moved from English to SiSwati, SeTswana and Afrikaans. Band-leader Siphiwe Shiburi was painting a complex percussive tapestry with his drums. Yonela Mnana’s deft touches at the piano were almost like a whisper. The bassist Amaeshi Ikechi played with a permanent smile etched on his face, his black and gold Dashiki a striking counterpoint to the complex notes he was teasing from his imposing instrument.
Amaeshi Ikechi
If Ntuli’s costume suggested a pan-African sensibility, it would come as no surprise to those who know his travels across the African continent during his 32 years in exile. He has also lived and studied in the United Kingdom and the United States. His poetry and art draw from this eclectic experience. Co-host for the evening, Natalia Molebatsi, like Jenkins and Ntuli, was dressed in Ghanaian garb. Her Kente cloth dress was a vibrant combination of yellow, green and red, reminiscent of the richly coloured food found in West African cuisine. Like Jenkins, Molebatsi did not limit herself to the role of traditional MC, but interspersed her delivery with performances of her own half-poems- half-announcements Where De Korte Street in Braamfontein would have been deserted a few years ago on most Tuesday nights, this time there was no free space to park in the precinct surrounding The Orbit. The performance was sold out, and even the owner of The Orbit expressed his surprise that this still experimental fusion of jazz and poetry had attracted such a vibrant audience. But it was easy to understand why. For so long starved of quality live music, Joburgers once again know that there is a place that possibly exceeds even the standard set by the famous Kippies in Newtown
.
Natalia Molebatsi, Myesha Jenkins & Pitika Ntuli
Nova Masango
96
looking backwards
PASS THE WORD ON PASSWORDS Words Mike Wills
A company of my acquaintance requires me to change my intranet access password every two months and then places bewildering constraints on my options including none of the previous 24 choices (honest, 24) and no mention of any word or combination of key strokes that I could ever easily recall. The cyber centurion then exhorts me not to write the new secret code down anywhere.
GORDON INSTITUTE OF BUSINESS SCIENCE
Whenever, as a result of all this, I forget my latest Enigma variation, I end up with an email request to re-establish my bona fides via a series of strange questions which I can never answer completely accurately. (My bank does the same. After pincode blaapses on my part, I’m asked identification conundrums no sane person could be expected to answer easily like; “What type of account do you have?” Who can possibly remember which layer of marketing bollocks they’re on – Gold, Prestige, Titanium, Platinum, Diamond, Elite, Affinity or Infinity and Beyond? My standard reply of Basic Fee Gouger Account usually gets me into even more trouble.) This company I work with is a routine business, it’s not the CIA, so it’s far from
clear what, if any, of our digital ramblings and endless PowerPoint strategy slides would warrant such intense protection. I am clear that the only remotely serious breaches which have happened had nothing to do with passwords as they involved lost memory sticks, stray laptops, unfortunate Reply All emails or the day I left the Edit Tracker chain of abusive comments about the client in the copy sent to the client. I also have no doubt that Edward Snowden, those devious North Koreans who hacked Sony, half the population of China and several of my teenage daughter’s classmates could crack this system in about five minutes if they set their minds to it. In fact‚ the only person ever inconvenienced by these precautions is me, as the software automatically locks tardy password changers out, usually at the most awkward time. None of this grumbling is unique. Password complexity has produced a stream of GIFs, memes, LOLs and comedy routines across the globe. What is weird is that no company ever seems to act on it. On the contrary, the digital doo-doo usually just gets deeper with every “threat” and there’s far more chance of more complexity than there is of less.
No-one appears to find it important to add some sanity to a daily process that incrementally frustrates staff and lowers the company’s credibility in the sense that “you know that I know that we all know this stuff is an infuriating waste of time but we have to do it anyway.” It’s a truism of organisational theory (or if it isn’t, it damn well should be) that anything done for the sake of it without meaningful purpose or outcome is not only unproductive, it, ultimately, is counterproductive. As a slight digression, the entire hassle-inducing FICA/RICA edifice built by our government falls into this particular dirty laundry basket. So every organisation (possibly excepting the CIA) should dial down the paranoia and get a sense of perspective. If there’s genuinely confidential material that needs protection – stock price sensitive stuff springs to mind here – then ring fence that into a separate zone rather going DEFCON1 on everyone. Accept that in cyber space there’s no such thing as complete security and trust your staff to respect the basics of confidentiality in their routine work (and feel free to sack them if they don’t) rather than building what amounts to a cyber C-Max for potential traffic fine offenders
.
BRING YOUR TRADING TO LIFE CHOOSE CFDs Smart traders need smart technology. That’s why our platform offers direct market access, price improvement technology and much more. And that’s why they choose to trade CFDs with IG.
Find out more at IG.com
Losses can exceed your deposits
IG.com CFDs: SHARES | FOREX | INDICES | COMMODITIES IG is a trading name of IG Markets Ltd and IG Markets South Africa Limited. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.