Acumen Edition 14

MARK CUTIFANI MINING IN CRISIS. P.26

SOLAR SUPER-STORMS THE END OF BUSINESS? P.46 GENERATION Z THE REAL GAME CHANGERS P.72

R39.95 incl vat

Issue 14 • Fourth Quarter, 2015

WHITE-COLLAR CRIME HOW TO PROTECT YOURSELF P.38

The Infiniti Q50

contents Issue 14 • Fourth Quarter, 2015

Issue 14 • Fourth Quarter, 2015

features

P.26 MARK CUTIFANI MINING IN CRISIS. P.26

Anglo American CEO Mark Cutifani spells out the perils facing SA's mining industry.

WHITE-COLLAR CRIME HOW TO PROTECT YOURSELF P.38 SOLAR SUPER-STORMS THE END OF BUSINESS? P.46 GENERATION Z THE REAL GAME CHANGERS P.72

R39.95 incl vat

Issue 14 • Fourth Quarter, 2015

THE POINT OF NO RETURNS

ON THE COVER

P.38

Photo: Gareth Jacobs

PROTECT YOURSELF AGAINST WHITECOLLAR CRIME

James van den Heever reports on new GIBS research based on interviews with convicted white-collar criminals.

GORDON INSTITUTE OF BUSINESS SCIENCE

P.46 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.

THE COMING STORM

Physicist Ashley Dove-Jay explains the damage that will occur to your business when – not if – the next solar super-storm hits.

P.72

GENERATION Z: THE REAL GAME CHANGERS

Dion Chang introduces this important new bunch of youngsters.

P.30

et cetera

P.04 Contents P.07 Contributors P.10 From the Editor P.12 Network

opinion

P.17

GIBS Dean Prof Nicola Kleyn comments on the characteristics of leadership.

When Leadership Counts

p.18 A New Capitalism

Out Of Africa?

Trudi Makhaya asks if it's not time for a new form of African capitalism?

p.19

Sharing Profitably

Dan Moyane says corporate South Africa should abandon traditional CSI and embrace shared value instead.

p.22 African Generalisations

Royal African Society director Richard

Dowden warns against making sweeping

statements on Africa.

dialogue

p.24 New Rules for New Leaders Lindsey Pollak tells Chris Gibbons about

the challenges facing Millennials as they

become managers.

South Africa

p.30 Who Will Lead?

James van den Heever talks to experts,

including Roelf Meyer, about a way out of

the mining crisis. p.34 Healthcare & Government:

Fevered Relations

New research by GIBS reveals a worrying lack of trust between SA's healthcare sector and government.

P.60

P.46

renew

p.40 Greening South Africa’s

p.74 Copenhagen Cool & p.75 Stockholm Syndrome

Travel expert Caroline Hurry samples

Black Gold

Dr Ken Mathu says coal is here to stay and recommends ways of cleaning up its act.

p.42 iXperience: Aaron Fuchs

Eugene Yiga meets edu-tourism pioneer

Aaron Fuchs..

general management

p.52 Upping the Game to Customer i-Centricity

Prof Sandra Vandermerwe and David Erixon explore how new technologies enable value propositions.

dynamic markets

p.56 Innovation, innovation,

innovation

Africa expert Victor Kgomoeswana gives three examples of true African innovation.

p.60 Doing Business in Argentina

Acumen's South America correspondent

Tom Hennigan looks at Argentina's

problems and wonders if the new president

will be able to solve them.

Danish and Swedish.

p.76 The Finer Things

Acumen's fashionista Cheska Stark

points us towards summer. p.78 Forward Motion

A new jacket & helmet for when you bike

and the strangely named Citroën

C4 Cactus. p.80 Techno

Aki Anastasiou measures his own blood

pressure and lauds the new

Apple MacBook. p.82 Books

Chris Gibbons reads about Cricket SA

and Mewa Ramgobin and finds out

What's Wrong With Management. p.84 Classic Investing

Prof Adrian Saville cautions against

becoming too focused on a single country

when investing.

p64 Top Eight Things to Do

p.85 Alternative Investing

Mandy Walker treads on a few fine

Persian rugs as she looks for

alternative investments.

From the Andes to Patagonia via the nightlife of Buenos Aires, Tom Hennigan says Argentina is spectacular.

p.86 Wine

Acumen's wine fundi John Maytham notes

the resurgence of Cinsaut.

entrepreneurship

and See in Argentina

p66 Flashy, Affordable

p68

and Functional

Cara Bouwer meets Mobicel founder Ridhwan Khan.

A Disruptive Influence

Acumen is introduced to Bharti Airtel's mobile money offering - Airtel Money.

p.87 Simphiwe Dana’s

Triumphant Decade

Victor Dlamini celebrates ten years of Simphiwe Dana's music.

looking backwards

p.88 Workshopping the Workshops

Mike Wills enters the murky world of the

corporate workshop.

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contributors

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.

TRUDI MAKHAYA is VICTOR DLAMINI

is a writer, columnist, communicator and portrait photographer with a deep interest in social issues.

He collects art and music, especially jazz. He graduated cum laude in English at the University of Natal in Pietermaritzburg.

CEO of Makhaya Advisory, an economic and competition policy consultancy. She also writes regularly for Business Day, was previously Deputy Competition Commissioner and a Rhodes Scholar at Oxford where she earned an MBA and a Master’s degree in development economics.

7

a news reporter, editor and presenter. His broadcasting credentials include Radio Mozambique’s English Service, BBC, Talk Radio 702, SABC and eNCA. Currently he anchors Morning News Today on eNCA on weekdays from 6 to 9am.

He has been responsible for corporate communication and corporate social investment at MMI Holdings since 2009.

DR KEN MATHU is a 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.

DAN MOYANE is a seasoned broadcaster with 35 years of experience under his belt, having worked as

senior faculty and a researcher at GIBS with wide industry experience. He has authored a supply chain book Supply chain constraints in the South African coal mining industry and has published and presented a number of papers locally and internationally.

His research focus is in supply chain, geopolitics and sustainability issues.

Laurium Flexible Prescient Fund.

Boutique manager performance at its best.

www.lauriumcapital.com

Collective Investment Schemes in Securities (CIS) should be considered as medium to long-term investments. The value may go up as well as down and past performance is not necessarily a guide to future performance. CIS’s are traded at the ruling price and can engage in scrip lending and borrowing. A schedule of fees, charges and maximum commissions is available on request from the Manager. There is no guarantee in respect of capital or returns in a portfolio. A CIS may be closed to new investors in order for it to be managed more efficiently in accordance with its mandate. CIS prices are calculated on a net asset basis, which is the total value of all the assets in the portfolio including any income accruals and less any permissible deductions (brokerage, STT, VAT, auditor’s fees, bank charges, trustee and custodian fees and the annual management fee) from the portfolio divided by the number of participatory interests (units) in issue. Forward pricing is used. The Fund’s Total Expense Ratio (TER) reflects the percentage of the average Net Asset Value (NAV) of the portfolio that was incurred as charges, levies and fees related to the management of the portfolio. A higher TER does not necessarily imply a poor return, nor does a low TER imply a good return. The current TER cannot be regarded as an indication of future TER’s. During the phase in period TER’s do not include information gathered over a full year. The Manager retains full legal responsibility for any third-party-named portfolio. Where foreign securities are included in a portfolio there may be potential constraints on liquidity and the repatriation of funds, macroeconomic risks, political risks, foreign exchange risks, tax risks, settlement risks; and potential limitations on the availability of market information. The investor acknowledges the inherent risk associated with the selected investments and that there are no guarantees. Laurium Capital (Pty) Limited is an Authorised Financial Service Provider (FSP No.34142).

8

contributors

branding and communications at two of South Africa’s top market research companies. He also spent over three-and-a-half years working at an eLearning start-up before dedicating himself to his business as a full-time awardwinning writer. Eugeneyiga.com

VICTOR KGOMOESWANA is

editor Chris Gibbons Gibbonsc@gibs.co.za managing editor Zenzile Hlongwane HlongwaneZ@gibs.co.za cover photography Mzu Nhlabati

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.

layout and production Contact Media and Communications (Pty) Ltd designers Sudene Braun Quinten Tolken proofreader Angie Snyman

PROF SANDRA VANDERMERWE is an

JAMES VAN DEN HEEVER writes for a

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.

extraordinary professor at GIBS, specialising in customer-focused transformation. Her academic work is based on ongoing, application-driven research and collaboration with well-known thinkers and practitioners and has been published by leading academic journals.

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 Gaye Crossley Victor Dlamini Ashley Dove-Jay Richard Dowden Tom Hennigan Caroline Hurry Victor Kgomoeswana Prof Nicola Kleyn Trudi Makhaya Jacques Marais Dr Ken Mathu John Maytham Dan Moyane Prof Adrian Saville Stephen Smith Cheska Starck James van den Heever Prof Sandra Vandermerwe Mandy Walker Mike Wills Eugene Yiga 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:

GORDON INSTITUTE OF BUSINESS SCIENCE

CARA BOUWER is a

EUGENE YIGA graduated

with distinctions in financial accounting and classical piano but his career then took an interesting turn when he spent two-and-half years working in

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.

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.

12742

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10 editor’s note

FROM THE EDITOR Words Chris Gibbons

It was 1969 when British comics John Cleese and Michael Palin performed their immortal ‘Dead Parrot’ sketch in the first series of Monty Python’s Flying Circus on BBC TV. Cleese plays the customer who has just bought a parrot, only to discover that it is dead. He tries to return it but the pet shop assistant, Michael Palin, is having none of it: “No, no, he’s not dead, he’s resting!”

I’m starting to feel that South Africa exists more and more inside some gigantic Monty Python skit, with multiple versions of the Michael Palin character telling us that there’s really no problem with the mining sector or the broader economy or tourism visas or the vastly expensive nuclear programme or education or Eskom or the Post Office or anything else: “No, no, there’s no crisis, they’re just resting!”

GORDON INSTITUTE OF BUSINESS SCIENCE

It would be funny if it weren’t so tragic.

Now you may disagree with me about the extent or degree of the problems, but the chorus of industry players, including economists both local and abroad, as well as foreign investors, have been singing a loud and very consistent song now for some while. South Africa, they tell us, is being badly led. Government is spending too much on wages and non-capital items and making critically bad decisions in areas like investment in nuclear power. In areas like healthcare, it’s pushing ahead with the NHI, whilst knowing full well that our current education system cannot deliver the additional doctors needed to make NHI work.

Even if you choose to disagree with the host of experts who are critical of government performance in so many key areas, the current levels of the rand are the decisive pieces of evidence. At or near record lows against the dollar, euro and sterling, the country’s share price, if we can use the currency as a proxy, has never been worse.

Why this should be is a matter for speculation; your conclusion is likely to be informed by your political views and background. Corruption, incompetence and the legacy of apartheid will certainly be cited in swift order and it is not the purpose of Acumen to draw a conclusion one way or another. However, it is very much within our remit to ask how you and your businesses are dealing with these problems and preparing for what look like more tough days ahead. In other words, how you are facing this very considerable leadership challenge?

As you would expect from the Dean of one of the country’s leading business schools, GIBS’ Professor Nicola Kleyn has had extensive interactions recently with a number of very senior chief executives and others in similar positions, like Public Protector Thuli Madonsela. Kleyn shares her perceptions about how these leaders are approaching the obstacles.

One is Anglo American CEO Mark Cutifani, who spoke at a recent and heavily-reported GIBS Forum. We bring you his views – and yes, he does believe that we are facing a crisis – and we also speak to a number of experts about what needs to be done. Among them are

Roelf Meyer and Michael Young, both of whom were intimately involved in the negotiations that brought democracy to South Africa in the late 80s and early 90s.

Surely, we ask them, if we managed to negotiate our way out of that appalling, brutal mess, we could do the same again?

On a very different note, we’ve invited former South African physicist Ashley Dove-Jay, now based in Oxford, to outline the likely consequences of a solar superstorm. These happen roughly every 150 years, so statistically, one could happen at almost any time. In short, the outcome would be terrifying, with power grids completely down and electronics, i.e. computer systems, cellular phone networks and broadcast systems, smashed beyond repair.

Dove-Jay makes one critically important point which should not be overlooked.

The more reliant a country is on nuclear power, the greater the catastrophe should a solar super-storm strike. That’s because the storm takes out the electricity needed for the controlled shutdown of a nuclear plant. No electricity = full nuclear meltdown.

.

If that were to happen, we’d all be dead parrots

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12

network

NETWORK Words Acumen Contributors

Events and People at GIBS

GIBS BOOK LAUNCH 1: INNOVATION – SARAH WILD

Both GIBS and its parent, the University of Pretoria, have a deep commitment to innovation, so no surprise, then, for the Business School itself to commission and publish a study on the subject, called simply Innovation. But who better to write it than multi-award winning science journalist and, until recently, science editor at the Mail & Guardian, Sarah Wild. The book takes the form of a series of essays ranging from the Environment to Energy and Health, and Wild’s research makes it clear that South Africa has a deep well of innovation. Her book goes a long way to ensuring that we drink from that well.

Harvard Business School Professor Robert Kaplan

NO SA COMPANIES IN BALANCED SCORECARD HALL OF FAME!

Harvard Business School’s Professor Robert Kaplan has thrown down a challenge to South African business. Speaking at a joint GIBS/BRG Conference at Midrand’s Theatre on the Track, Kaplan confirmed that, as yet, not a single South African company had been elected to the Balanced Scorecard Hall of Fame. Kaplan founded and developed the Balanced Scorecard strategic planning and management system along with colleague Dr David Norton.

He told more than 500 delegates that the Balanced Scorecard Hall of Fame had been established – “somewhat immodestly” – in 2000, and it had just two criteria for entrance. One was that the company concerned “had to be using the Balanced Scorecard”, and the second: “Is it working for you? Is it delivering performance?”

The Hall of Fame now has some 200 members, but “sadly, even though David and I have been coming to South Africa for quite some number of years, we don’t yet have a South African member.” Kaplan revealed that Africa has just one company in this august institution and it comes from Kenya.

GORDON INSTITUTE OF BUSINESS SCIENCE

A DIGITAL BLUEPRINT Dr Ganesh Natarajan, Vice Chairman and CEO of ZenSar Technologies, also presents case studies at Harvard Business School.

Speaking at the GIBS Digital Transformation Blueprint for Business conference he told delegates, “You must have a cloud strategy and you must have a mobile strategy.” Natarajan also encouraged the audience to understand the rate of change that their companies could handle, along with the rate of external change likely to affect them, implying that a critical issue was the gap between the two.

Dr Ganesh Natarajan, Vice Chairman and CEO of ZenSar Technologies

network

A MILLION JOBS FROM MANUFACTURING

“If we were able to turn manufacturing around to its former glory as a 25% contributor to GDP, we could create about a million jobs so there’s an enormous opportunity to encourage manufacturing in South Africa and address some of our very serious socioeconomic and socio-political challenges,” said Nampak CEO André de Ruyter at a recent GIBS Forum on Cost Complexity in Manufacturing, adding that it was “an exciting opportunity that deserves the attention of government and industry.”

But de Ruyter was quick to qualify the prospect: “Before we can do that, we need to get a couple of things right. First of all we need to be competitive and in order to be competitive internationally we need to identify what our competitive advantages are and what our comparative advantages are.” One of his conclusions, he said, was that “as a country we have been so sheltered behind import replacement – and this is a legacy of the past, driven to a large extent by sanctions – that we became self-sufficient and we made everything ourselves. But now the tariff barriers have dropped, we are exposed as sub-scale in some instances, out-of-date and behind the investment curve.

We need to catch up.”

13

OVER TO YOU, YOUTUBE “The biggest marketing shift in decades,” was how Mofilm Africa CEO Jon Ratcliffe described the spectacular growth of online video. The former Google executive has returned to his native South Africa to exploit the opportunity, which is being driven, he explained, by the rapid increase in Internet download speeds allied to an equally rapid reduction in data costs. (See Dion Chang, p72)

Mofilm Africa CEO Jon Ratcliffe

Nampak CEO André de Ruyter

GIBS BOOK LAUNCH 2: THE E-TOLL SAGA – WAYNE DUVENAGE WITH ANGELIQUE SERRAO

Wayne Duvenage used to be CEO of car rental company Avis. These days he describes himself as a Civil Activist. He was at the centre of the fight in Gauteng against E-Tolls, co-founding and leading OUTA – the Opposition to Urban Tolling Alliance – and during the launch of his book at GIBS, he confirmed that government had threatened Avis’ parent with the loss of business if he was allowed to continue. His book describes not so much a Damascene conversion but rather a long and gritty transformation from corporate high-flyer to denim-wearing protest marcher. Duvenage is not done yet – he is very firmly opposed to government’s current nuclear plans.

14

network

REGULATORS AND THE SPEED OF CHANGE

“Regulators, by necessity, have to keep pace with, and respond to, the changing environment.

Unfortunately, regulators often play catch-up due to the speed of technological change and innovation as well as their lagging ability to fully understand the technology and the risks it may give rise to.” That was according to SA Reserve Bank Deputy Governor Francois Groepe, speaking at the annual PASA/Strate Conference held at GIBS in September, 2015: Game changers in Financial Markets: Regulation, Innovation and Cybersecurity. “The developments in cyberspace are a cause for concern for regulators, financial market partcipants, business and informed customers,” warned Groepe.

SA Reserve Bank Deputy Governor Francois Groepe

THE LOOMING CRISIS…OR NOT?

GORDON INSTITUTE OF BUSINESS SCIENCE

A packed house at GIBS in early October heard political commentator and veteran Oxford academic R.W. Johnson defend his latest book How Long Will South Africa Survive – The Looming Crisis in trenchant debate with City Press Editor-in-Chief Ferial Haffajee.

Johnson’s book echoes one of almost the same name which he wrote in 1977, forecasting the demise of apartheid. His belief now is that South Africa is in the ever-tightening grip of an ANC political patronage system which is gradually driving the country deeper and deeper into debt. He contends that the imminent result will be a ratings downgrade for South Africa by the international credit ratings agencies, junk bond status, and an IMF bail-out.

“I would be surprised if we got through the next five years without some form of credit crunch,” said Johnson.

Veteran Oxford academic R.W. Johnson

City Press Editor-in-Chief Ferial Haffajee

Haffajee disagreed, describing South Africa as a country “lived at fever pitch” and suggesting that a walk through Sandton’s thriving CBD would be a good cure for pessimism. She conceded that “our political leadership is not in the finest fettle”, whilst noting that right now there were “no visionaries in business either, as there were at the end of the 80s.”

.

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dean's note

17

WHEN LEADERSHIP COUNTS Words Professor Nicola Kleyn

No-one disputes that South African business is navigating turbulent waters – politically, socially and economically. The quality of leadership displayed by our organisations in the short and medium term will be critical in determining whether we slowly drift towards the status of a failed state or whether we are able to envision, articulate and enact a successful future.

Since taking over the reins at GIBS in April this year, I’ve been privileged to engage with a number of senior leaders in both public and private contexts. There is no shortage of studies on the competencies required of leaders to navigate in tough times, but it’s been instrumental to watch, listen and learn from those in action right now. They will either scupper their organisations or enable them to reach smoother waters as more resilient, competitive entities.

Although the traits I’ve identified below were reflected by many of the leaders, my interactions with each one highlighted particular characteristics that I believe we need collectively to move forward.

Anglo American CEO Mark Cutifani spoke at a GIBS Forum and I will remember him not only for his passionate yet down-toearth manner of engagement, but also his courage in defining our national mining situation as a “crisis”. Three qualities lie at the heart of leadership – the need to call things as they are, followed by the ability of the leader to provide hope as well as a plan for a way forward to shift the status quo. Cutifani achieved all three with aplomb; no surprise then that he is on the cover of this edition of Acumen.

The theme of hope and rational optimism was subsequently reinforced when SABMiller Africa MD Mark Bowman spent an evening with the GIBS community.

His passion for seizing opportunities was infectious and an important reminder that we are likely to go further if we view the glass as half full. His narrative also

reinforced the findings of many academic studies that leaders in times of adversity need a strong streak of impatience.

Ditching procrastination in favour of urgency pays dividends when all of us know that engagement matters, but only decisive and consistent action can shift the status quo.

Speed matters, but it must be coupled with insights about how to build competitive organisations in an industry and national context. Vodacom Group CEO Shameel Joosub’s deep industry knowledge illustrated the importance of making clear strategic choices based on a profound understanding of context. There’s no time in a leadership journey when this doesn’t matter, but when times are tough, leaders need to be even more knowledgeable about the economics of their business.

This sentiment was reinforced by Nampak CEO André de Ruyter who is in the process of unlocking value for multiple stakeholders at Nampak through a cogent application of the economics of manufacturing.

De Ruyter also underlined the dangers of autarky (the condition of independence or self-sufficiency) which characterised the South African economy during its years of political and economic isolation.

Although business can and must make a major contribution towards country competitiveness and economic growth, it is part of a greater national (and of course global) system.

A meeting between Gauteng Premier David Makhura and local CEOs of

US companies highlighted again the importance of business-government engagement. A few hours later we were with the indefatigable Makhura at an evening event with CEOs from Indianowned companies. I was struck by his preference to listen deeply and engage, rather than taking a prescriptive, onesided approach to business.

My final reflection arises from an encounter with the iconic Thuli Madonsela at an event hosted by the JSE. We all know her courage as another leader who makes tough calls, but what struck me even more was not only her sense of integrity but her deep commitment to building a better future. Whilst some leaders may, quite rationally, be arguing that their efforts to serve shareholders are better focused on growing their companies out of the country, Madonsela’s mission to build a stronger country for all was inspiring.

Whilst the many traits identified above are all important, for me, the sense of purpose conveyed by Madonsela was probably the most essential, enabling ingredient of leadership in tough times

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opinion

A NEW CAPITALISM OUT OF AFRICA? Words Trudi Makhaya

Not long ago, during an afternoon spent lounging in Piazza di Spagna in Rome, I walked into a Frette store for the first time. A haughty sales assistant forbade me from taking pictures of beds made up in the elegant linens the luxe textile store is known for. I walked away with a catalogue as consolation. Later, the Stepford wife in me pored over creations in macramé lace, jacquard and sateen.

GORDON INSTITUTE OF BUSINESS SCIENCE

From the catalogue, I also learn that Frette merchants in Africa are to be found in Angola, Egypt, Morocco, Nigeria, South Africa and Libya. Despite the snub to East Africa, this is not a surprising list. These are countries that have a critical mass of the kinds of people who might buy such exquisite threads. As more African economies thrive in this era of relatively stable and reasonably free markets, Frette will find even more customers on the continent.

WHAT WILL AFRICA MAKE OF CAPITALISM?” Africa is said to be the ‘new frontier’. And in this frontier, one economic system holds sway: capitalism.

It wasn’t always so. It’s not hard to see why, in the early post-colonial period, there was widespread ambivalence about capitalism. Newly independent nations wanted to demonstrate a clear break with the extractive, exploitative colonial past.

But experimentation with socialism and

other alternative economic orders has ended.

This is not an argument for capitalism, or against socialism or communism. It is just a realist’s view of the form economic organisation will take in the foreseeable future.

Across the continent, there is undeniable progress in terms of economic prosperity for some. But as the World Bank has warned, this has not translated into commensurate levels of poverty alleviation. Inequality is getting worse.

What will Africa make of capitalism? Will Nigeria practice an even more relentless version of American capitalism? Is Rwanda refining the Singapore model? Or will something new come out of Africa?

I ask these questions because capitalism is in deep crisis in the rest of the world, particularly in the West. In Greece, the UK and other parts of Europe, the left is challenging the prevailing economic order.

The brand of capitalism that prevails in many African countries is tainted by cronyism and predatory elements. Until recently, many African economies have been powered by natural resources, a sector prone to crony capitalism. High levels of state involvement open the door for special interests to seek and buy preferential treatment. Too many business people are engaged in rent-seeking activities, hunting for returns above what is justifiable on the grounds of effort. This has to change.

It is important not to generalise. There are vastly different political economies driving capitalism across the continent.

How it plays out in Nigeria is different from Kenya or Ethiopia. The ability of the poor and the marginalised to organise and to demand opportunities varies across countries.

For too long, capitalism in Africa has been dictated from the outside. It is time for African countries to shape this system for their own ends. This is difficult to do in a world that globalised under the AngloAmerican way but it is not impossible.

Asian societies such as South Korea and Singapore have been able to infuse capitalism with their own values and preferences.

New, sometimes heated, conversations are under way to redefine capitalism and its role in human progress. Collaborative, inclusive, conscious are some of the new qualifiers being thrown about in the search for an alternative capitalism.

Nigerian business leader Tony Elumelu has given it a bash too, coining Africapitalism as “the process of transforming private investment into social wealth” as he told The Economist. Some might say that social progress is the inevitable fruit of capitalism. But history has taught Africa, if not the whole world, otherwise.

As Africans, we need to reimagine the role of markets, private property and innovation for a continent that has seen the worst of unsustainable development.

This moment presents an opportunity for Africa to come up with its formula for a capitalism that generates wealth whilst also upholding human dignity and solidarity. Will African leaders take up the challenge, or be doomed to repeat the mistakes of others?

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opinion

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SHARING PROFITABLY Words Dan Moyane

Corporate South Africa, which spent R8.2 billion in social responsibility programmes in 2014, needs to ditch its current approach to social responsibility and embrace a radically new way of tackling societal problems, such as poverty.

The days of throwing money at societal problems or of a scorecard approach to social responsibility are over. Business must stop approaching corporate social responsibility as a mere compliance process, just to tick the box and earn the five points for their BEE scorecard.

Companies should act in a way that demonstrates that they know their sustainability is intrinsically linked to the well-being of communities.

If the billions of rand that are being spent annually in corporate social responsibility programmes are to have any real impact in the elimination of poverty, then they should form part of a more focused and inclusive model.

shareholders and the communities in which they operate.

and strengthening the company’s retail distribution channels and brand strength.

Although shared value is still very much in its infancy in many parts of the world, a growing number of companies are aspiring to incorporate it into their business strategy. In fact there are some good examples of shared value in action.

In East Africa, M-PESA is an innovative mobile money transfer system that provides Kenya’s under and un-banked populations with access to financial services while at the same time generating revenue and business opportunities for telecommunications group, Safaricom.

Discovery’s Vitality reward programme, launched in South Africa in 1997, is another example of shared value. Vitality’s purpose is to encourage customers to track essential health indicators and set goals for improved health. Customers earn points as they make progress and redeem various rewards. The social benefit is demonstrated through improving health outcomes and, indirectly reducing medical costs over the long term. Since 1997, Vitality has expanded to China, the UK and the US. According to Discovery, investment in Vitality has led to higher new business levels, strong loss ratio and lapse rate performance, and product innovation opportunities that create further competitive advantage.

This model is best served through ‘shared value’ which is described as “a management strategy focused on companies creating measurable business value by identifying and addressing social problems that intersect with their business,” according to the Shared Value Initiative organisation.

. . . SOCIETAL PROBLEMS AS OPPORTUNITIES FOR BUSINESS . . . ”

A lot has been written and said about shared value, which was first articulated

by Harvard Business School Professor Michael E. Porter and Mark R. Kramer in 2011. They describe shared value as a way through which companies can tackle big social problems as a core part of their strategy. According to Porter and Kramer such companies “see societal problems as opportunities for business innovation and competitive advantage”.

SABMiller, the world’s second-largest brewery company, has successfully engaged in business training and leadership development for owners of mom-and-pop shops in low-income communities throughout Latin America.

This shared value initiative improved business managers’ efficiency and profitability, and also their economic well-being.

Shared value is therefore about creating value for the company, its shareholders and the community. It is about companies tackling social problems through a profitable business model using innovative and scalable solutions that benefit the business, its employees,

Another example is Coca-Cola’s Coletivo initiative in Brazil. Coca-Cola has strategically collaborated with a local Brazilian NGO as a ‘distribution partner’ on educating and training low-income youth. The aim is to reduce unemployment among low-income youth while increasing product sales

The question today really is not whether or not more South African companies should implement shared value strategies.

It is whether they are ready and willing to shift their mindset and implement it as part of their growth and sustainability plans. Not simply pay lip service to it in their annual reports. In my view they really have no choice if they wish to grow sustainably while creating more value for all their stakeholders not only shareholders.

Poverty has been identified as one of the biggest risks to business as it is a direct result of the huge gap between the rich and poor. For instance, some 12 million people in South Africa go to bed hungry every day. Surely companies in the foodmaking industry can create shared value strategies that can eliminate hunger?

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Perhaps effective shared value strategies could also give much needed impetus to the National Development Plan

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advertorial

MORE THAN JUST A PLAYGROUND!

It’s no surprise that it has become a global playground, after all it has the most amazing beaches, the tropical island setting and world class resorts and hotels, but Mauritius is so much more than the resorts it has to offer. A little venture beyond the reception desk and the island offers adventure on another level, cultural and historical enrichment as well as business opportunities!

South Africans have always rated Mauritius as one of the top holiday destinations to frequent, largely due to the setting and luxury that is head and shoulders above that on offer at other tropical holiday destinations. And while South Africans have known the secret of Mauritius for a very long time, the rest of the world is beginning to understand the value that this island has to offer too — in both the leisure and business sectors. In 2014 95 000 South Africans visited Mauritius for Leisure alone. The numbers continue to grow and the appeal across other nations continues to spread. But to box Mauritius in just the leisure segment, would do it an injustice as Mauritius business is not only admirable, it’s inspirational to the way people should do business throughout the world.

BUSINESS

Situated in the ‘golden triangle’ connecting Asia, Africa and Australia, Mauritius is the converging point of global civilizations – a place where a business person can really feel the cosmopolitan pulse of the world. So what makes doing business in Mauritius so attractive?

Did you know that Mauritius is an Ocean State with one of the largest Exclusive Economic Zones in the world. It boasts a very impressive track record of businesses they have launched and nurtured in the past and this coupled with political stability and more than three decades of sustained economic growth means you’re looking at a secure investment location with established

advertorial

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business objectives right now. Incentive groups, offered by most hotels to facilitate the organization of conferences, seminars and other motivation trips attracts much business tourism to the island. The island enjoys modern infrastructure, well-developed logistics as well as state-of-the-art technology, not to mention the beautiful and relaxing environment, thus positioning itself as a favourite destination for this type of event. The Swami Vivekenanda International Conference Centre in Pailles is also well equipped to welcome international conferences.

So whatever your reason for visiting Mauritius — whether leisure or business — bare in mind that there is so much more to this beautiful Island than meets the tropical eye and Mauritius Tourism invites you to explore the possibilities. It will be worth your while and the offerings you discover will keep you coming back time and time again!

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rule of law. The work force here is also largely skilled and bilingual (English/French) and labour relations are peaceful, multi-ethnic and friendly — an environment conducive to productive business.

But more than all of this Mauritius is open to foreign investment and seeks new talents and skills all the time because development and growth for their country is at the forefront of their agenda. The natural charm of the country and the tax incentives offered

by Government have also attracted other reputable businesses, including international hotel chains such as Four Seasons, Hilton, Intercontinental, Maritim, Le Meridien, Oberoi, Sofitel and Centara Hotels & Resorts.

But if you are not quite ready to set up a business in Mauritius, its good to know that Business Tourism is growing rapidly, which can service your current

Charmaine Appenah MTPA SA Representative Tel: 011 504 4000 Email: mauritius@edelman.com www.tourism-mauritius.mu

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opinion

AFRICAN GENERALISATIONS Words Richard Dowden, London

GORDON INSTITUTE OF BUSINESS SCIENCE

Outsiders love to make sweeping generalisations about Africa. Those who may have visited two or three African countries will tell you Africa is like this or that. Those who have never been at all assume all of Africa is like the images aid agencies use to raise money. No-one would make similar assumptions about Asia. And, by the way, could you draw the outline of Asia? And do you know where Asia’s western border lies?

Does the word Africa mean anything more than that distinctive shape on the map?

Every generalisation – by Africans as well as outsiders – about Africa is probably wrong. When Nigerians talk about Africa, they mean Nigeria. When Egyptians talk about Africa, they mean that far-away land where black people come from.

When South Africans talk about Africa they mean that mysterious and dangerous

place across the northern border about which they know little but fear much – oh yes, except for those beautiful Mozambique beaches.

Each African nation state has developed its own distinctive identity and particular characteristics. Ghana’s border with Côte d’Ivoire is an arbitrary boundary drawn on a map by outsiders just over a century ago. Today it is exceedingly porous but you know when you are in Ghana and not in Côte d’Ivoire. When you are in Kenya, Uganda is a foreign country. The Republic of Congo – Congo Brazzaville – has a completely different feel to the Democratic Republic of Congo. I would also add that there is also extraordinary diversity of culture, practice and behaviour within countries. When you are in Northern Nigeria you sometimes wonder if Lagos is in the same country.

It is not just a matter of culture. In most African countries a ten-minute car journey will take you from sumptuous wealth to shocking poverty. Put Kibera & Nairobi into Google maps and click on Satellite to see the fence that separates the biggest slum in Africa from the manicured greens and lush fairways of the Royal Nairobi Golf Club. The contrasts in South Africa are even greater. Alexandra is a stone’s throw away from Sandton.

One of the most misleading labels stuck on Africa in recent years is “Africa Rising”.

Africa was the Next Big Thing. Devised by smart business-orientated economists working for companies investing in Africa, it created the mantra to push up their share price. A decade earlier, companies operating in Africa concealed their engagement there because the very word Africa damaged their share price.

ELITE IN MY DICTIONARY MEANS THE BEST, BUT IN AFRICA IT MEANS THE WORST.”

opinion

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WHEN YOU ARE IN KENYA, UGANDA IS A FOREIGN COUNTRY.” The implication was that all of Africa from Cairo to the Cape and Dakar to Mogadishu was getting richer, a huge new middle class was emerging and the whole continent would escape from poverty and become the next China. It is true that in 2000 some African economies began to grow again after the World Bank’s devastating Structural Adjustment Programmes, which had impoverished Africa’s middle class in the 1990s. The World Bank would claim that its medicine was finally working. On the basis that whatever does not kill you makes you stronger, that may have had some truth in it. Ironically, this revival began just as The Economist ran “The Hopeless Continent” cover.

But the Chinese, who spoke about Africa in terms of partnership and antiimperialism, did not find Africa any easier to do business with than the Europeans and Americans. Eventually their companies have been forced to operate much as western companies and have increasingly applied pressure for better governance and have quietly encouraged more accountability and democracy. After the 2008 global crash, world demand for oil and raw materials began to fall and the prices dropped, China did not deliver on its promises and has reined in its operations in much of Africa. The continent’s growth rates also began to level off. The Economist ran an “Africa Rising” cover.

One of the main drivers of Africa’s revival in 2000 was the decision of the Chinese to target Africa for its raw materials. Beijing launched FOCAC, the Forum on ChinaAfrica Cooperation, and promised African governments billions of dollars worth of infrastructure and other investments and aid in return for Africa’s minerals. Western countries complained that the Chinese were taking over Africa. And African governments used China’s “friendship” with them to push back against demands from “old colonial” Western donors for more democracy, respect for human rights and environmental issues. Suddenly Africa’s presidents had an alternative partner.

The one big generalisation you can make about Africa is that its raw materials – oil and gas in particular – have been the main drivers of African growth. Had they been able to create the capacity to process and add value to them, Africa’s economies would now be in a strong position. But the economies of 37 of Africa’s 52 countries are dependent on less than five exported commodities. Since 1975, the proportion of manufacturing, adding value to Africa’s commodities, has steadily declined.

Until that is reversed, Africa will remain poor and at the mercy of world demand.

Continental growth was 3.9% in 2014 and sub-Saharan Africa’s was 5.2%.

South Africa, the continent’s only large

industrial country, grew by only 1.5%, about the same rate as its population growth. Elsewhere in sub-Saharan Africa, if you discount 2.5% for population growth, the figures suggest that most of Africa’s economies are floating gently upwards but not transforming into processing and manufacturing economies that would make Africa an economic giant.

The good news is that a few countries are now industrialising, growing manufacturing and service industries.

The bad news is that business, both local and international, is often up against a politically powerful and extremely rich elite which protects its own economic interests through its control of the bureaucracy. Elite in my dictionary means the best, but in Africa it means the worst.

These political mafias have inherited and maintain a chokehold on imports and exports, demand hefty bribes from businesses and can block anyone who refuses to pay.

It is hard to see how outsiders can change this. But what is coming down the track is a new, younger, bigger generation, better educated and globally aware through the Internet. When they see that their hopedfor future is being devoured by the few, I suspect this connected generation will do what the youth of Burkina Faso has done recently: take to the streets and make it clear that the age of elite control is over

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dialogue

NEW RULES FOR NEW LEADERS Words Lindsey Pollak, in conversation with Chris Gibbons

Baby Boomers are heading into retirement, leaving leadership gaps to be filled by an altogether different group: Millennials. Born mainly in the 1980s and 90s, Millennials are “self-expressive, group-oriented, global, tech-dependent”, according to consultant, speaker and internationally recognised expert on this generation, Lindsey Pollak. From New York, Pollak told Acumen Editor Chris Gibbons about her latest book on Millennials, Becoming the Boss – New Rules for the Next Generation of Leaders.

Yale-educated Lindsey Pollak says ‘Millennial’ is a “funny term”.

That’s because many of the Millennials she works with don’t even know they are described or characterised that way. “It’s certainly not a scientific term,” she explains, “it’s a demographic category that academics came up with.”

“With the upcoming massive retirement of the Baby Boom generation, we need them to step up and become really strong leaders. To become ‘the Boss’ is a very strong word but I also feel very strongly that a lot of Millennials are lacking some of the skills that leaders need to become excellent,” says Pollak.

If you’re uncertain as to whether or not you fit the category, Pollak has helpfully placed a short quiz in the Introduction to Becoming the Boss. Among the tests:

She believes that Millennials differ from previous generations in two key respects: “One is that they are going to be leading in a world of rapidly expanding technology. Social media, virtual reality, technology’s global reach. Previous generations didn’t have to think about their social media presence as a leader, or managing a global workforce with whom you are only going to communicate through telepresence or instant messaging around the globe.”

• I don’t have a landline; I use only a cellphone.

• I send or receive more than thirty texts a day (the average for a Millennial is sixty).

• I have multiple social networking profiles and I check them daily.

• I first used email as a student and not as a professional.

• I have my own website or blog.

GORDON INSTITUTE OF BUSINESS SCIENCE

There are several others, but if you tick 50% or more of these boxes, the picture is clear: you’re a Millennial and Pollak’s phrase “tech-dependent” would appear to verge on understatement.

From a previous book, Pollak has discovered that Millennials like their information served up in a particular way. Becoming the Boss is highly engaging, with plenty of short paragraphs, nuggets of information, check lists, bullet points and personal stories.

She calls it “curated information” and says her goal is to be “the best curator of the best available information and to bring that all together in one place on my topic.”

CONFIDENCE

Pollak has worked with Millennials in the US for more than a decade. She thinks they are “a very confident generation” with “extraordinary leadership potential”. She was uncertain about using the “Boss” word in the book’s title – “Some people don’t like the term ‘Boss’” – but she went ahead with it “to empower them”.

The second major difference relates once again to the exodus of the Boomers: “A lot of experts here in the US are predicting that Millennials are going to have to step up into leadership and management roles five and sometimes ten years earlier than previous generations, simply because we’ll have a lot more open positions because of Baby Boomer retirement.”

THE MORE THINGS CHANGE…

She’s quick to add that despite these differences, Millennials will face many of the same challenges that presented to their parents and grandparents: “They are simply new to the game – business, politics, or whatever worlds you want to lead in. That, I don’t think, has changed.” Equally clear is her statement that Becoming the Boss is “not meant to replace all of the good leadership advice and education that is out there” and reminds me that the very first chapter of the book, called Catch Up, reviews “all of what I consider to be the ‘must-read’ leadership literature of the past, from The Art of War all the way up to Stephen Covey and Jim Collins – even Sheryl Sandberg, to give a very recent example. My book is absolutely in addition to, not in place of, the very strong leadership advice of the past.”

A VERY CONFIDENT GENERATION . . . ”

dialogue

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. . . SHOULD I GO TO GRADUATE SCHOOL?” and ideas, never resting. He advised very firmly that you had to get outside your realm. For him, that’s entertainment, so he would look to sports or politics or science or anything else other than his area.”

A MILLENNIAL MBA?

Discussing learning and education with Acumen, the magazine of one of Africa’s leading business schools, it’s a natural progression to wonder if Pollak would recommend an MBA to her Millennials?

“I actually have a section [in the book] on whether graduate school is worth it. That’s a question I get really frequently from Millennials: Should I go to graduate school?”

Before she answers it, Pollak confides that she once had a psychotherapist tell her that “There are two things in life you never regret – exercise and education.” He said, “I’ve never had someone come in and say they shouldn’t have worked out today or shouldn’t have got that degree!” “Education is usually a really good bet and although I don’t have an MBA, I do have a Master’s degree.”

Lindsey Pollak

Pollak calls learning “sort of a personal crusade” and it’s clear she feels it underpins good leadership: “Something that I admire in some of our best leaders is that constant desire to always be better, always try harder, never feel that you have achieved everything, be humble and always be in a position to get more educated. My favourite quotation in the book is from [US President] Harry Truman, who said ‘leaders are readers.’ You have to consume information and always, always listen and learn.”

She adds a caution: “I do think that a lot of young people, because of the economy, turned to graduate school because they had nothing else to do, or they thought it was a good way to kill time. I don’t support that strategy. I don’t know how the education funding system works in South Africa but in the US it’s extraordinarily expensive. An MBA could cost as much as $150 000, so the factors that I recommend thinking about are: 1. How are you going to pay for it? Either in advance or through scholarships or a grant or a loan? And are you going to be able to pay back that money?

2. Do you need it? I always recommend that people speak to leaders who they admire – mentor-types – and ask if they feel that given your personal goals an MBA is worth it?

Another quotation Pollak uses to add nuance to the learning process is “Filling the Tanks”. It comes from Joss Whedon, creator of the hit TV show Buffy the Vampire Slayer. Pollak explains that Whedon is a very prolific creator, “famous at one time for having three of his shows on US TV at the same time – sort of unheard of – as well as movies and comic books,” so she started reading about his leadership and productivity.

If you do choose to pursue an advanced degree, you have to pursue that opportunity for everything it’s worth: the networking, the learning from professors, the opportunities for elevation. I think some people go to school to coast. Instead, I would encourage all of your students and alumni to use every resource available to them because that sort of education is so extremely valuable for the rest of your life. If you choose to do it, which is a very personal choice, make the most of it every second of every day, and when you graduate as well.”

“One of things he said was that he was constantly filling the tanks, constantly learning, gathering information and knowledge

Excellent advice for the new leaders of a new generation and just as pertinent as it always has been

FILLING THE TANKS

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GORDON INSTITUTE OF BUSINESS SCIENCE

26

south africa

INVESTMENT FOLLOWS RETURNS.”

Mark Cutifani, Anglo American CEO.

south africa

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THE POINT OF NO RETURNS MINING IN CRISIS - PART 1 Words Chris Gibbons

Mining – and South Africa’s broader economy – has reached a crisis point, says Mark Cutifani, Anglo American CEO. In a recent and widely reported speech at GIBS, Cutifani called for government, business and labour to work together to create a more competitive environment. At the same time, he warned that South Africa’s mining is not delivering sufficient returns to attract investment.

ON THE FUTURE OF MINING IN SOUTH AFRICA

The mining industry is one of the foundations upon which South Africa can build its future, it can be an engine in its own right and it can help us develop skills and expertise that can be applied across a much broader range of businesses.

Traditionally, the mining industry has also been a source of great competitive advantage for South Africa, but if we cannot at least arrest its decline in productivity and reduce our costs, we won’t have a viable industry to build the country.

ON PRODUCTIVITY

Above all, the South African [mining] industry has to be more productive. That is, we must produce more product per person employed. If we don’t get that equation right, we don’t have a future.

ON MINING FINANCE

Put simply, the cost of capital is high and rising, not falling as you may think. And by that I mean that as our credit ratings drop, even though we’ve had relatively low interest rates, the costs to borrow funds for companies like ours are going up because our credit ratings have been impacted by people’s perceptions of the jurisdictions in which we work. So the drop in ratings of South Africa is a serious issue for companies that work or who are based in South Africa. That’s a critical issue.

ON LABOUR

Our long history of adversarial labour relations, and particularly the trust deficit between labour, business and government, which has been accentuated in the Marikana tragedy, remains a great challenge for us to rise to. This is severely hindering the creation of a more efficient mining industry and of a more competitive South Africa.

ON COMPETITION

In order to create a competitive South Africa, government, business and labour must work together; there is no other way.

The government has a vital role to play in leading, facilitating and encouraging dialogue around accelerating the implementation of the NDP. We must build bridges and find common ground.

As a mining leader, I think our sector should be putting its full weight behind the structural reforms identified in the NDP, and specifically, President Zuma’s nine-point plan. I believe the latter shows considerable foresight in looking at the long-term needs of the country, particularly in regard to energy, broadband, and enhancing the value chain in mining and agriculture …. Mining, however, can only again become a core driver of South Africa’s economy, helping to deliver on the great expectations placed on it in the NDP, to the extent that the conditions are put in place to support an attractive climate for investors.

ON INVESTMENT IN SOUTH AFRICA Investment follows returns. It’s not the other way around.

Investment follows returns. If anybody thinks that investment or returns is a dirty word, then please don’t expect investment to come to South Africa. Investment follows returns and that’s what we’re being judged on now. And in our mining industry we’re not delivering returns. Until that changes, we can’t hope for people to invest in South Africa.

Where investors don’t see those returns, they don’t invest. And for us, in the long term, that means lower national tax receipts, fewer jobs and less sustainable communities. To think otherwise is to show a profound misunderstanding of how modern, global capital markets operate.

ON CHINA In China, relatively low salaries, improving productivity levels, and the propensity of the Chinese people to put money away in the form of savings, have together helped create a virtuous cycle of investment infrastructure, wage improvements from that lower base have also been driven by productivity improvements, and that’s also supported continuing investment.

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south africa

WE MUST PRODUCE MORE PRODUCT PER PERSON EMPLOYED.” ON SOUTH AFRICA AND CHINA

South Africa [is] talking to a state development model and China is going more and more towards private enterprise and moving away from its state development model because of the challenges they’re facing and a recognition that to compete on a global basis they’re going to have to rely on private enterprise.

ON STATE-OWNED ENTERPRISES (SOEs)

SOEs play a crucial role in our economy, and to a large extent, the ability of South African industries to compete globally is influenced by the effectiveness of our SOEs. Many South African industries rely on and intersect with the services provided by SOEs at critical points in our processes, whether relating to the provision of energy, rail or port services. Unless all the links in the chain develop at the same rate, and in collaboration with one another, a pinch point will appear and the chains will break, or at least be severely constrained. That impacts all of us in terms of what we produce and the effectiveness of us being competitive. So in simple terms, for South Africa to be successful, we have to be equally efficient and successful and continue to transform the effectiveness and productivity of our SOEs, along with the private sector.

SOEs form an integral part of the backbone of our economic and industrial infrastructure. They must be prioritised for investment and they must be led through the lens of commercial decision-making.

ON THE NATIONAL DEVELOPMENT PLAN (NDP):

The adoption of the NDP must be something that brings policy, business and people together. It must work for business, it must work for the government, and support its social commitments, and it must work for the people of South Africa. South Africa cannot build a sustainable future without touching these three or four key points.

GORDON INSTITUTE OF BUSINESS SCIENCE

ON SOUTH AFRICA’S ADVANTAGES

We have some of the world’s greatest mining assets and minerals resources, according to estimates worth between $2.5 and $3 trillion, although maybe not at today’s prices! We have a highly developed physical infrastructure of roads, airports and railways, including dedicated rail links and ports for the export of minerals, and mobile communications. We often underestimate or undersell the quality of the infrastructure we do have in place, although I think we share a frustration that we’re not operating it as well as we could. Compared to many other jurisdictions, we’re still pretty well positioned in the game.

ON SOUTH AFRICA VERSUS NIGERIA

Those that have visited [both] Nigeria and South Africa would still rank South Africa well ahead in terms of our infrastructure and the skills that we have available to us and how we are generally managing our affairs in the country. We’ve got world-class

universities and business schools. Our international reputation in the field of medicine is almost second to none. We are a first class tourist destination – if you can get a visa!

ON THE VISA ISSUE

It is a very big one. We, as a company, rely on the Chinese to buy diamonds. They have only two locations where they can personally front up and have their visa photos [taken]. Most of them are unable to get into the country to perform the work required to buy diamonds. We’ve made it almost impossible for the Chinese to come here and do business, which we absolutely rely on. So we do ask, when policies are set, that the potential unintended consequences are considered.

ON STRATEGIC MINERALS

Please carefully consider the implications of declaring a mineral as being strategic in terms of investment appetite. In fact, there’s nothing wrong with declaring a mineral strategic, but let’s make sure the implications of that declaration protect the rights and ownership of those that have invested monies, per the Constitution, so that there’s no investor scared to invest because they think a government may change the rules … We must apply international commercial logic to the beneficiation of mineral products.

ON B-BBEE AND FAILURE

I think we’ve made a mistake … we’ve not let BEE companies fail as a conscious policy decision. It is the right thing to do everything you can to make sure the company succeeds. But if it’s going to fail on the basis the leadership is not able to compete, then the tough reality that has to be faced is maybe it should fail. The money that could have been otherwise directed to a new and emerging BEE player may be better spent on that group who will make it work. If we prop up those that can’t be successful, we do those that can and will be and have the desire and the capacity to be successful, a disservice.

ON LEARNING

In actual fact, we’ve stolen many ideas from Toyota, Ford, BMW and the petrochemical sector for our developing and operating model, which is more a manufacturing approach in the mining industry. We believe learning from other industries is actually more important for our future because [mining] is generally a pretty closed shop, a small group, we learn from each other, we steal each other’s good ideas. What we don’t tend to do is steal from other industries or other thought leaders, and we think that’s the place we’ll get the best ideas.

ON LEADERSHIP

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If we want to be seen as leaders, we have to put some personal skin in the game and be prepared to lose. And lose personally. Because if we don’t then I think we fail the test of leadership

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PHOTO: GETTY IMAGES / GALLO IMAGES

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Anglo American platinum mine, Rustenburg.

WHO WILL LEAD? MINING IN CRISIS - PART 2 Words James van den Heever

GORDON INSTITUTE OF BUSINESS SCIENCE

Most people would agree that Mark Cutifani is right to argue that we need to develop a common economic vision. How to achieve it is the question, and the political process of the 1980s could hold some of the keys.

Cutifani’s speech ostensibly addressed the crisis facing mining, but his swelling subtext was the crisis facing South Africa’s economy as a whole. He argued that mining remains the most important sector of the South African economy, responsible for around 18% of national GDP, 60% of exports and more than 500 000 direct and 800 000 indirect jobs. If mining is in trouble, so is the rest of the economy – and so is society as a whole.

Without a healthy mining sector, South Africa simply cannot deliver on its broader national objectives of creating economic prosperity, as outlined in the National Development Plan.

of economic growth, and rethinking the dynamics of labour relations, are both fundamental issues that go to the heart of the economic model. The principle of black economic empowerment is also something that needs to be aired now that we have some experience of it; another difficult conversation, but one that has to happen.

More than that, the issues he identified cannot be debated and fixed within mining alone: turning SOEs into enablers

Surely our poor economic performance can be traced to the fact that these fundamentals have not been thrashed out,

In short, business, labour and government have got to hammer out a common vision that will see the broad principles underlying all economic activity understood and endorsed by all.

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IF MINING IS IN TROUBLE, SO IS THE REST OF THE ECONOMY . . . ” neither within the ANC nor society as a whole. To put it simply, the National Development Plan and the National Democratic Revolution cannot co-exist.

Cutifani’s reference to the role played by Gavin Relly, his predecessor at Anglo, in the lead-up to the political negotiations of the 80s and 90s also showed the need for a broader process.

Speaking with the authority of a respected corporate leader, he was clearly making a call to action on a wider front – and there was a palpable sense amongst his audience that something important had been said.

Allister Sparks, writing in Business Day1, also cited this speech within the broader context of looming economic collapse. He specifically alluded to the Finance Minister’s concern at the extent to which the economy is shrinking and, most tellingly, the news that money intended for capital expenditure would have to be diverted to pay the bloated public sector wage bill.

Sparks agreed that business and labour have to move beyond the adversarial mindsets of the apartheid era.

SHOULD MINING LEAD?

It appears that Cutifani’s call has not gone unheard, at least in regard to mining. Government, labour and mining bosses are currently involved in several initiatives aimed at coming up with solutions to the challenges faced by the sector, and the Phakisa process for mining (based on Malaysia’s Big Fast Results methodology) is underway. However, these initiatives are sectorspecific and do not address the fundamental fault lines that are condemning us to economic underperformance.

However, Cutifani’s call to action more broadly, to forge a new economic consensus (with all the implications that it would have for society as a whole) has not provoked the reaction one might have expected from business leaders, or other sectors of society.

The question is, therefore, who should initiate and lead such a process, and what would it look like?

Cutifani implied that mining as an industry had a leadership role to play, and he certainly emphasised Anglo’s willingness to be a “development partner” both within mining and society at large.

But he stopped short of positioning himself or his company for a decisive leadership role – a mark of how things have changed since the days when Anglo American was the South African economy.

By the same token, one wonders whether mining as a sector is best positioned to provide this leadership. Anglo and BHP Billiton (née Gencor) have globalised, and abandoned the vertical integration strategy that saw them drive investment into the broader economy. Cutifani himself said that we need leaders who have skin in the game, and thus have a real stake in a positive outcome – that is no longer true of many of our biggest companies, in mining and other sectors as well.

Important as mining remains, its end game should be more than a hole in the ground. At the same time, as the SA Institute of Race Relations’ Anthea Jeffery points out, beneficiation is already occurring and cannot easily be stepped up in the country’s current circumstances. “One must be realistic about our capacity, in terms of both energy supply and skills, to do more at present,” she says. Nonetheless, she adds, mining still represents our major export industry, and thus is a vital source of foreign currency.

Paul Jourdan, former President of Mintek and Deputy Director of the Department of Trade and Industry, and currently Chair of Coega Development Corporation, adds that mining only contributes to the broader economy if it is forced by circumstance or regulation to invest in what he calls “linkages”, essentially the up and downstream industries that create jobs and intellectual property for the wider economy.

A complementary point is made by Prince Mashele, Executive Director of the Centre for Politics and Research. Mashele argues that mining represents the foundational phase of the economy – the focus now needs to be on industrialisation, an area in which there has been precious little progress since 1994. If he is right, then ideally leadership should come from business more broadly, from the future of the economy, not its past.

Roelf Meyer, now a GIBS Fellow and the Nationalist government’s chief negotiator at the Multiparty Negotiating Forum in 1993, argues that it’s important to see business as broader than the private sector. “The SOEs have to be seen as part of business,” he says.

Mashele argues that business is the sector that feels the economic pinch first, so it should be the one to “pull the trigger”. But this does not mean business should or could lead the process. Mining bosses are unlikely to step up for the reasons given above; also, as Jeffery points out, they are particularly vulnerable to sanction from the state through the suspension or withdrawal of their

1 Allister Sparks, “Time for business, labour to talk as economic crisis looms”, BDLive, 5 August 2015, available at http://www.bdlive.co.za/opinion/columnists/2015/08/05/at-home-and-abroad-time-for-business-labour-to-talk-as-economic-crisis-looms.

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WHITE BUSINESS, GENERALLY, IS RELUCTANT TO RAISE ITS HEAD ABOVE THE PARAPET... ” mining rights. White business, generally, is reluctant to raise its head above the parapet and, in the estimation of the Helen Suzman Foundation’s Aubrey Matshiqi, is caught in a “crisis of legitimacy” that robs it of the ability to speak with conviction.

LEADERSHIP “BLACK HOLE”?

Meyer bemoans the fact that the organisation that should be leading the process – NEDLAC – is completely ineffectual.

With business as fragmented as government, he feels that academics or academic institutions could be well positioned to fill this leadership role. John Stremlau, former Vice President: Peace Programs at The Carter Center and currently at the Wits Department of International Relations, believes that academics could play an important role because they could be impartial and, critically, could provide the data and analytical firepower that a lasting solution would require. Meyer cites the role that academics like Willie Esterhuyse, Sampie Terreblanche and Pieter Le Roux played in the 80s and 90s process to create a political settlement.

The success of that previous process, of course, becomes a major point of reference in today’s crisis. Mashele is, as always, forthright: “We have to borrow from what worked in the past,” he says. Meyer, speaking from experience, agrees. He makes the point that while the situation today is not comparable – it is much more complex and fragmented for one thing – “We know things can get done through dialogue. Our own experience is the best proof of that.”

Michael Young, who initiated and facilitated the Mells Park negotiations between the ANC and the Afrikaner establishment

Roelf Meyer

PHOTO: GETTY IMAGES / GALLO IMAGES

GORDON INSTITUTE OF BUSINESS SCIENCE

Black business is the obvious choice but it remains strangely silent in the face of the crisis – it is too politicised and feels intimidated by the government, suggests Dr Nel Marais, CEO of Thabiti Africa Consultancy and a former member of the National Intelligence Service. One might seriously look to the South African Chamber of Commerce and Industry, the country’s largest business grouping, for this kind of leadership. Its President, Vusi Khumalo, certainly acknowledges the need for such an initiative, provided it includes labour, a point that everybody mentions.

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in the mid 80s, while working for another great South African mining house, Gold Fields, also believes that process offers us valuable lessons. Like Meyer, Young emphasises the “acute differences” between then and now, not the least of which is that the process would not need to take place in secret to avoid the unwelcome attentions of the apartheid secret police.

Young echoes the sense of urgency expressed separately by Meyer and Matshiqi – Meyer believes that inequality has created a time bomb that even government does not fully see, and Matshiqi that our political settlement is in danger of unravelling.

PHOTO: GETTY IMAGES / GALLO IMAGES

. . . THE ORGANISATION THAT SHOULD BE LEADING THE PROCESS – NEDLAC – IS COMPLETELY INEFFECTUAL.” NO FREE LUNCHES

Also, we simply have to understand that in today’s volatile and highly competitive global business environment, there is no free lunch.

“South Africa is not owed a living, and the country has to earn its own corn, something it can only do if business, labour and government have a common vision,” Young says. “Sovereign states can go bust – and quickly.” Greece offers an object lesson of this truth.

The Mells Park process took five years, so the first thing to recognise is we have to be in for the long haul. With the need for secrecy and a foreign venue removed, it might not take as long, but today’s issues are actually more difficult. Then, the challenge was simple if not easy – get rid of apartheid; resolving the ground rules of the economy is in some ways much more complex, and as hotly contested.

Young believes that a small group is absolutely essential. “Choose who they are with great care,” he adds. “The quality of the people around the table is cardinal.” Mashele agrees, saying that sharp intellects are needed. Other criteria would include a lack of baggage, enough flexibility to compromise and a certain acuity.

In addition, participants must have enough influence to influence the communities they represent.

Michael Young

While secrecy would no longer be necessary, a certain element of discretion, Young argues, would be required to avoid the inevitable grandstanding that publicity would provoke.

Given that South Africa is a democracy with a legitimate, elected government, Young is adamant that the President has either to will the process (and be prepared to live with the results) or support an independent process.

The latter option, one feels, might be the most practical because it would help to ensure that the process does not get pulled into the sound and fury of politics as usual.

SOUTH AFRICA IS NOT OWED A LIVING . . . ”

For all these reasons, Young targeted people who were one level below the apex.

South Africa’s case is urgent but we are not quite at the cliff ’s edge, Mashele believes – though clearly it’s time to get moving.

“South Africa can become the motor for Africa, but it needs to get its house in order, just like every other country has to do,” Young says.

Equally important is the quality of the facilitator, who needs to be neutral and respected, able to instil a high degree of rigour into the process.

Hats off to Cutifani for having had the courage to call the crisis and commit himself and Anglo American to its resolution. Now, who will push the start button, and who will lead?

An additional consideration is that the process would likely span administrations.

•

The offices of both the President and Deputy President were offered the opportunity to comment, but neither chose to do so.

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HEALTHCARE & GOVERNMENT: FEVERED RELATIONS Words Cara Bouwer

New research by the Gordon Institute of Business Science (GIBS) has revealed a worrying lack of trust between South Africa’s healthcare industry players and policymakers.

In August 2015 the International Business Review (Volume 24, Issue 4) published a paper by GIBS professor Albert Wocke and GIBS MBA alumnus Dr Terence Moodley entitled Corporate Political Strategy and Liability of Foreignness: Similarities and differences between local and foreign firms in the South African Health Sector. The paper, based on input from 103 firms, highlighted different approaches to navigating the complex healthcare environment by local companies and their international counterparts.

GORDON INSTITUTE OF BUSINESS SCIENCE

WE ARE WORKING TOGETHER. YES, WE HAVE DIFFERENCES OF OPINION, BUT THERE IS TRUST.” One of the fundamental differences centred on how multinationals dealt with uncertainty – such as regulations and the mooted National Health Insurance (NHI) scheme – compared with local players. The research showed a tendency for foreign firms to engage more proactively, while local companies were more likely to adopt an ‘avoidance strategy’. As the authors noted: “The reason for this could be that foreign multinationals have more resources and skills and would therefore prefer to deal with the uncertainty rather than avoiding it.”

However, a glimpse at the raw data reveals something more profound than a difference in corporate strategy: uncertainty and deep mistrust in the South African healthcare sector.

Observations from anonymous respondents include: “I believe the persons responsible for setting regulations either have little or no idea on the relevant topics.”

“Government lacks capacity.”

“Government is a law unto itself!”

“Government doesn’t listen – there is disconnect between regulation and reality.”

“Endless interaction with government and submissions of highly substantive data with recommendations has, in the past, not been particularly successful.”

“The agendas and objectives of business and government will never be aligned. However, the best outcome would be to a find a path that is workable for both.”

“The regulatory health authority has already on numerous occasions liaised and approached companies for comments and guidance. In order to ensure that the authority is sustainable, well-resourced and successful, it has to work with industry.”

“It is critical for stakeholders to play a role in influencing the legislative process as we have a direct stake in the outcomes.

More especially when the outcome is of a social good as in healthcare.”

“In the healthcare legislative environment, the trend has been to date for the regulator to ignore input from stakeholders and promulgate the legislation without always following due process.”

“Sadly decisions are often influenced by financial or political gain and some organisations have more influence due to ability to invest or promise more. A transparent process is required!”

Comments related to regulatory uncertainty, and included in the paper, include: “Regulations are legislated but the implementation and even-handed application of the legislation is non-existent”, and “Whilst the general direction of healthcare reform is reasonably clear, the actual impact and timing is unclear. History dictates reform legislation takes longer than planned and thus there is a relative amount of certainty in the short to medium term.”

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sector were not working together was inaccurate. “We are working together.

Yes, we have differences of opinion, but there is trust,” he said.

Despite such comments of solidarity, Moodley admits there are reasons for mistrust on both sides. “We haven’t, as an industry, covered ourselves in glory in the past,” he says. “There needs to be recognition that business does have motives, but making a fair profit is not a bad thing.”

He points to marketing practices as just one focus of government’s mistrust.

“There is cynicism around the way industry interacts with healthcare professionals and how that might influence decisions,” explains Moodley, who, before working for various multinational healthcare organisations, was a practicing medical doctor. To address this concern, the industry started a Marketing Code some four years ago, in order to determine acceptable practice.

“About 90% of the industry bought into it,” says Moodley, who chaired the committee for a year. In his opinion, government was sceptical of this form of self-regulation, but was not backing the industry with a usable legislative framework itself.

In 2014 Motsoaledi accused a group of multinational pharmaceutical companies active in South Africa of genocide and of a conspiracy of “satanic magnitude”. Motsoaledi said industry plans to convince South Africa to strengthen patent protection were an “attack” and would put profits above the health of citizens. The pharmaceutical companies were reacting to a proposed new intellectual property policy in South Africa, which contained a heavy focus on reforming medical patents.

Furthermore, government legislation often comes in bits and pieces, rather than a coherent whole. This, says Moodley, confuses and frustrates the industry. Take, for example, multiple reviews of the Medicines and Related Substances Control Act; Certificates of Need (requiring doctors to obtain permission before setting up a private practice), doctors’ rooms only being able to prescribe but not dispense medications, or single exit (maximum) pricing. “Working in a developing country you expect uncertainty and volatility; but to be able to create and invest in the country you do need a little bit of certainty,” he says.

Despite the frustrations evident in such comments, Joe Maila, Spokesman for the Department of Health, believes that the situation is much improved than in previous years. “We must ensure that we keep working together for the sake of our people,” Maila told Acumen.

Local companies may, shows the GIBS research, actually be better placed to deal with this uncertainty because they understand the dynamics at play, says Moodley. What this means in practice is that local companies with fewer resources generally choose to get on with their day-to-day business and deal with regulations only when it becomes absolutely necessary. “That’s the avoidance strategy, and that’s a dangerous thing,” explains Moodley, although he concedes that, in the short term, it might not be the worst approach. Perhaps because they are better resourced, it seems multinationals are more inclined to invest in trying to understand the implications and create mitigation plans. But, if nothing happens and the regulations are changed or scrapped, then those efforts are wasted.

Maila also added that, while he hadn’t seen the paper or the findings, the suggestion that government and the private

Moodley admits that “a lot of rules and regulations get published in the health sector, but then they get pushed back and are

PHOTO: SHUTTERSTOCK IMAGES

In a discussion with Acumen, co-author Moodley noted that while regulations were one area of ongoing uncertainty, issues like payment delays and negative comments by government have not helped relations. Recently the issue of a lack of availability of certain medicines, primarily in KwaZulu-Natal, saw Health Minister Dr Aaron Motsoaledi comment in a 24 May 2015 press statement: “We source these medicines from companies that are in business and their actions and decisions are not always based on the needs of patients but on what makes business sense.”

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GOVERNMENT IS A LAW UNTO ITSELF!” not enacted”. That said, there have been improvements under Motsoaledi, says Moodley, “although the bar was set very low”.

For example, government has put in place a 10 point plan, which delineates its top 10 health priorities. “That does set a framework and create more clarity. But it’s not just about government saying these are the 10 points. They need to engage with healthcare professionals, engage with suppliers, engage with hospitals and funders, get everyone together because that is the only way we can improve our fragmented healthcare sector.”

GORDON INSTITUTE OF BUSINESS SCIENCE

STEPS TOWARDS ENGAGEMENT

the initial three-year commitment of the participating companies comes to an end, many companies are reviewing the value of the potential spin-offs, he says.

THE GAME CHANGER

Amidst this stalemate, the mooted NHI could, fundamentally, change the game, says Moodley. “The Green Paper on NHI was published four years ago (August 2011) and we are still waiting on the NHI White Paper. So how do you build your business and plan for the next five years if you don’t know what is happening?”

Unfortunately getting all stakeholders to pull together is tough.

“Industry needs to engage with government to understand how to improve trust,” says Moodley, who also feels that government has reason to be wary. “If I look, with a really critical eye, I don’t believe the industry has transformed from a black economy empowerment perspective. I think there is more room for improvement and it should be more proactive and more selfdriven; I think that tends to engender more trust from government.”

In August 2015, Business Day’s Tamar Kahn examined the progress being made on the NHI front in the wake of Motsoaledi’s comments to Parliament’s portfolio committee on health that the documents were ready to go to cabinet. Motsoaledi emphasised how the White Paper envisaged a role for the private sector, with services due to be purchased from both public and private sector providers, reported the newspaper. Unfortunately, plans to recruit private sector GPs to work in the NHI pilot districts has got off to a slow start, said Motsoaledi at the time.

That’s not to say that progress isn’t being made. Moodley, for example, was involved in the Public Health Enhancement Fund (PHEF), an initiative in which over 20 healthcare companies, such as Discovery, Aspen, Roche and Netcare, contribute a percentage of revenue into a central pool. “That pool makes up about R40 million per annum at the moment,” explains Moodley.

Moodley believes for the NHI to be successful companies need to change their business models and all parties need to change their approach. But he remains optimistic. “There has been massive progress and strides under Motsoaledi, but there is a long way to go. The NHI could be the game changer which either pushes everyone together or further apart.”

The PHEF works with government to identify areas of priority and then assists in funding these projects. Moodley explains: “The PHEF allocates R20 million a year to funding an additional 200 medical students. The other programme is a leadership academy; the Minister has admitted that there is a gap in healthcare management and leadership level, so another R10 million goes towards trying to improve the managerial and leadership qualities – this is something GIBS has been involved in. Another R10 million goes towards health Masters and PhD students, to get them to do research into critical issues like HIV and TB.” Department spokesman Maila also singled out the PHEF as an example of a successful collaboration. “We have a number of partnerships with business, such as the PHEF, which business is funding. We need to be working with business,” he stressed.

In theory, the PHEF should be a way to bridge the gap between government and business, but while government buy-in is certainly evident, the department is shying away from full-on, proactive and open engagement with industry, says Moodley. As

Is this even achievable given the ill feelings which appear to be in evidence on both sides? Yes, says Moodley, and South Africa could look to East Africa as an example.

IT CAN BE DONE

Moodley, who is currently working on research projects in Tanzania, says: “I think East Africa generally seems to be better at these sorts of collaborative things. Not just public-private, but intergovernmental collaboration. The East African Community is more attuned to harmonisation and collaboration. For example, they are very committed to working with the private sector to get cardiac services running. I’m hoping we can measure a tangible outcome out of that.”

That willingness to work together comes from an ethos of collaboration, says Moodley. “Globally, we are never going to leapfrog processes in the areas of health we want to unless we get this right. And this is not just co-operation between public and private, but also private and private. If we don’t get all the parties together then we’ll always only have parts of the puzzle.”

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PROTECT YOURSELF AGAINST WHITECOLLAR CRIME

GORDON INSTITUTE OF BUSINESS SCIENCE

PHOTO: SHUTTERSTOCK IMAGES

Words James van den Heever

New research from GIBS means companies and their managers can make use of the insights offered by convicted white-collar criminals to help protect themselves against this growing risk.

White-collar crime costs the country some R930 million a year, according to Gillian Wolman, Head of Litigation at Risk Benefit Solutions, an independent insurance and risk specialist.1 According to PwC’s Global Economic Crime Survey 20142, the highest levels of economic crime are reported from Africa (50%) and North America (41%).

And the losses can be substantial: 18% of organisations suffering fraud lost between $1 million and $100 million. Losses are more than monetary and can include lost business, depressed stock prices, declining productivity and morale – not forgetting a damaged reputation with customers and regulators.

Another major factor is that white-collar crimes are notoriously difficult to prosecute.

Most commentators expect the rate of white-collar crime here to rise in future, particularly given the financial pressures that most South Africans face.

The inescapable conclusion? Prevention really is better than cure.

That was the thinking behind research by GIBS MBA student Luigi Muto. Muto set out to investigate what motivated people convicted of white-collar crimes in order to give business the 1 2 3

information needed to tackle the problem proactively.

The research and its conclusions have been published in an article co-authored with GIBS faculty member, Dr Gavin Price.3 Based on this research, Muto and Price believe there are four key principles that will help companies prevent this sort of crime from happening.

GORDON GECKO RIDES AGAIN

First, though, it’s important to understand the criminals’ motivations. Muto interviewed 13 men and 16 women who were serving time for misappropriation of funds. Most were employed in a financial capacity, and 80% of them were linked to criminal syndicates.

It’s clear from his analysis that what motivated these criminals was a complex interplay between need, greed and race. Need covers those who turned to crime to meet ongoing expenses, often related to single parenthood or an addicted partner, while greed covers those who aspired to a better lifestyle. Very often, some who were initially motivated by need continued to steal even after the financial pressures had receded as greed took over.

Race emerged as a surprising additional motivator, but always in conjunction with need or greed. It is typically used to justify

“White-collar crime a threat to SA businesses”, Finweek, 11 August 2015, available at http://finweek.com/2015/08/11/business-white-collar-crime-a-threat-to-sa-businesses/.

Available at http://www.pwc.com/gx/en/economic-crime-survey/.

Luigi Muto and Gavin Price, “An offender’s perspective of what motivates and deters white-collar criminals in the South African workplace”, South African Journal of Labour Relations 38(2), 2014, pp 1-13.

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. . .THE PERSON DRAFTING THE TENDER ALSO AWARDS IT” criminal activity; black people whose families suffered under apartheid, and white people thwarted by affirmative action, use it to justify criminal activities.

While the racial angle may be a uniquely South African complication, global research shows that justification plays a huge role in giving people “permission” to commit crime. The tendency to shift blame seems to be universal, with many using the circumstances in which they find themselves to present themselves as victims rather than perpetrators.

“Most people use their particular circumstances to bring their actions into line with their own ethical standards,” Muto explains. “One of the things employers can do is to influence those circumstances to make resorting to crime less likely.”

BUILDING DYKES AGAINST THE FLOOD

Once motivation exists, the potential white-collar criminal needs to find a weakness to exploit. Many of the following principles are counters to those weaknesses.

TREAT YOUR EMPLOYEES FAIRLY AND BUILD A CULTURE OF CARING

Creating a work environment that shows employees they are valued makes it harder for them to justify defrauding the company. Employees are also much more likely to ask for help when they face genuine hardships, such as medical or school costs – exactly the pressures that can cause internal ethical controls to be circumvented.

However, Muto warns, “If an employee comes to you for help and you turn him or her down, then you risk providing a real justification for crime.” By contrast, an employee who does receive help is likely to become extremely loyal.

ENSURE GOVERNANCE PROTOCOLS ARE IN PLACE, AND ENFORCED

Muto’s research, backed up by international findings, emphasises the value of strong governance. Those who commit these crimes do so because they can. “Organisations in which managers delegate too much authority and fail to institute checks are those where white-collar crime flourishes,” he says.

There’s a complex dynamic at play here. Trust is essential in business, but it cannot be taken for granted. “The trusted employee should know that checks are in place, and it should be clearly communicated that they do not constitute a lack of trust but rather adherence to the principle of governance,” Muto says.

“It must be understood that they are there to protect both parties.”

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Then there’s drastic managerial oversight or laxness. Muto cites the case of employees registering all 10 of their fingers onto a biometric payroll system, and drawing multiple salaries – something the relevant manager has to be able to spot.

Eternal vigilance is needed, in other words!

A related governance lapse is insufficient separation between duties, something that could be driven by the financial pressures that companies face. To put it simply: as jobs are cut, roles that should stay separate are fulfilled by the same person – for example, the person drafting the tender also awards it.

“Many of those I spoke to suggested that employees’ responsibilities should be better matched to their roles, authority level and income,” Muto says. “They also identified the separation of roles as important in order to create structural barriers to crime.”

IT governance is also important, given the extent to which modern businesses rely on technology. A number of respondents said they installed malware on company systems to enable syndicates to access them.

MANAGE CORPORATE ETHICS

This is a principle of King III, and at its core is the requirement that companies and their managers actively promote the creation of an ethical culture. “Managers must be ethical, but they must also promote ethical behaviour amongst their subordinates. One aspect is that the business should work constructively with the internal audit team, which has good advice to give on identifying and preventing fraud,” Muto says. “In addition, research shows that when employees perceive management to be ethical, they are much more likely to notify them of any fraud that is occurring, or could be occurring.”

EDUCATE THE WORKFORCE

Many of those currently serving time told Muto that if they had properly understood what constituted criminal action, and the consequences, they would not have done what they did.

International research also concludes that highlighting the consequences of white-collar crime provides a valuable deterrent.

In conclusion, Muto says that it’s worth recognising that employees do face real pressures, and that need can make them act out of character. He believes employers should not underestimate the power of forgiveness. “Giving somebody a second chance can, in the right circumstances, create a model employee,” he argues.

“Morality is always influenced by circumstance, and we should not forget our common humanity.”

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. . . EMPLOYEES REGISTERING ALL 10 OF THEIR FINGERS ONTO A BIOMETRIC PAYROLL SYSTEM . . . ”

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PHOTO: GETTY IMAGES / GALLO IMAGES

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Coal stockpiled for export at the Richards Bay Coal Terminal

GREENING SOUTH AFRICA’S BLACK GOLD Words Dr Ken Mathu

GORDON INSTITUTE OF BUSINESS SCIENCE

Abundant coal has been a mixed blessing for South Africa – but it’s the energy resource we cannot ignore. Decisive action is needed to optimise the coal supply chain.

We just don’t have a choice. As a country, we face years of power shortages that are already crippling our economy and threatening social stability through persistent joblessness. The promise of alternative energy sources is real and they are already making a contribution, but when it comes to reliable, affordable feedstock to produce the always-on base load that is the foundation of economic stability, then coal is the only game in town at present.

The reasons are compelling. South Africa has the ninth largest coal reserves in the world, and 75% of Africa’s coal reserves. At current usage levels, we have enough to last us the next 200 years – presumably giving us enough time to perfect (and, crucially, invest in) alternate means of power generation.

Another reason deserves to be highlighted: coal is a stable store of energy. Once mined, the lumps of coal require minimal management: no recharging, no rainy-day blues, just keep it dry.

(It’s rightly said that the challenge that renewable energy has to solve is the problem of storage.)

In other words, coal is here to stay. There is too much of it to ignore, it’s local, and the price is right. In addition, 25% of the coal produced is exported, earning much-needed foreign exchange.

THE SUSTAINABILITY ISSUE

However, the nominal price of coal doesn’t include the indirect costs of pollution caused by careless mining practices and the

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atmospheric pollution from burning it. Coal-fired power stations followed by Sasol are the leading polluters in the country – in fact, Sasol’s Secunda plant is considered to be the single leading industry polluter in the Southern Hemisphere.

Other parts of the coal supply chain are also problematic. The process of mining and storing coal causes degradation of the immediate site and can contaminate groundwater. Additional challenges include the ongoing risk posed by abandoned coal mines whose owners cannot be traced, and the fact that most of our existing coal-fired power stations are located on the Mpumalanga Highveld, whose nearby coal reserves are depleting fast and will in a few years become uneconomic.

Providing the Mpumalanga power stations with coal now depends heavily on wholesale trucking-in of coal, which is damaging roads, destroying local communities and causing accidents.

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Better rail infrastructure would also support coal exports via Richards Bay and eliminate the impact of transporting by road.

ABANDONED MINES AND ACID MINE DRAINAGE

Given that the owners of these mines can no longer be traced, there is no alternative but for government to undertake their rehabilitation as a matter of urgency. The Mpumalanga coalfields are adjacent to important wetland systems, and these precious water resources are at risk. They also fall within some of the country’s most fertile agricultural land.

MORE EFFICIENT POWER STATIONS

Some approaches here include upgrading plants to produce lower emissions – savings of 20% can be achieved. Also, the coal itself can be cleaned of its impurities. There are many ways to retrofit existing power stations, and also to divert the heat produced to warm buildings in the area.

INNOVATIVE UTILISATION OF ACID MINE DRAINAGE (AMD)

. . . COAL IS HERE TO STAY.”

A process needs to be put in place to clean this water early in the process, before it becomes a problem. Clean water has economic value, and one scheme in the eMalahleni area run by mining companies is producing and storing clean water for local consumption.

COAL-BASED INDEPENDENT POWER PRODUCERS (IPPs)

All of this is bad news for the country which, as I have argued, has no choice but to continue using its large coal resources to generate the majority of its power – but that’s what innovation is for! Human ingenuity is boundless, and we should remember how many challenges it has helped overcome. The list is endless.

We need to direct our attention to greening every stage of coal exploitation for the carbon-based energy supply chain. Key initiatives would include: SENSIBLE TRANSPORT INFRASTRUCTURE

New coal-fired power stations must be located near to the Waterberg coalfields where 70% of our remaining coal reserves are situated. Shorter distances would make conveyor belts practical, with short rail links to outlying mines. To supply the older power stations, though, we need to put in an environmentfriendly rail network to eliminate the need for destructive and polluting road haulage.

CLEAN COAL TECHNOLOGIES

It’s not as sexy as solar energy but it certainly is needed! One promising area is capturing the carbon produced by burning coal and either purifying it or storing it underground. The latter is being used successfully in the United States, China and Canada, and could eliminate up to 80% of emissions.

Another promising development is Eskom’s ongoing research into underground gasification of coal, which basically involves turning the coal into gas underground, and using the cleanerburning gas to generate power. This process eliminates surface damage and solid waste, while reducing emission and acid rain.

If Eskom could perfect this process, it would have the potential to change the game.

The Department of Minerals and Energy’s Renewable Energy Independent Power Producer Programme has successfully shown how harnessing private-sector innovation can drive down cost per kilowatt. The same process is now underway for coal IPPs: the deadline for bids was extended earlier this year.

The process should be fast-tracked. By effectively outsourcing coal-powered energy generation, the government could reduce its own costs and benefit from innovation.

LONG-TERM FOCUS ON OPTIMISING THE ENERGY MIX

In line with the National Development Plan’s mandate to reduce dependence on coal and create energy security, the focus on renewable and nuclear energy needs to build on its current success. We have seen what damage policy stagnation and the consequent lack of investment has caused Eskom – the same must not be allowed to happen in this sector.

. . . HARNESSING PRIVATE-SECTOR INNOVATION CAN DRIVE DOWN COST PER KILOWATT. ” I hope my point is clear. Like it or not, coal will continue to be used to generate power in South Africa and other countries for generations to come. Vigorous efforts to find ways of using it more effectively and safely need to be a priority, perhaps an even higher one than investigating alternate sources of power!

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Aaron Fuchs

IXPERIENCE: AARON FUCHS Words Eugene Yiga

GORDON INSTITUTE OF BUSINESS SCIENCE

A spell in the US and a gap in the market gave Aaron Fuchs the idea for iXperience, an intense and novel form of ‘edu-tourism’, based in Cape Town.

The ability to code is one of the most ‘in demand’ skills in the professional world. But even while institutions like Dev Bootcamp in the US are responding to the need, Code.org states that over one million American computing jobs could go unfilled by the year 2021.

“As an employer, I find myself in a position where I struggle to fill vacancies,” says Adi Eyal, Director of Code for South Africa. “At the same time, I receive dozens of inappropriate CVs from eager but inexperienced young people wanting to prove themselves. As a small business, we cannot afford the high cost of on-boarding a junior employee. I need to consider the amount of time needed to train them and the lost productivity of my senior staff. The opportunity cost is massive.”

One person aiming to fill the gap for these skills is Johannesburgborn Aaron Fuchs. He had many interests as a child, from swimming and tennis to cricket and chess. But although the

28 year old wanted to be a brain surgeon when he was growing up, he matriculated from Parel Vallei in 2006 and went on to study Mechanical Engineering on a full bursary from Yale.

“It was a crazy experience, much like the movies,” he says of his post-graduation job at SAC Capital, a Wall Street hedge fund.

“I used to wake up at 5:30, be at the office 6am, and then have summarised all the world news and markets by 10am. For the rest of the day, I would analyse financial data and come up with trade ideas to improve the position of our portfolio. Some of the most challenging areas of the job were learning how to balance risk and still make capital returns.”

Despite being thrown in at the deep end, Fuchs learned plenty about the finance industry and gained a unique set of skills. But after being away from South Africa for six years, he knew it was time to make an important choice.

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“I realised that if I didn’t go back to South Africa and give it a chance, I’d end up spending most of my professional life in the US,” he says. “I wanted to find a career where I could excel but also visit my family on the weekends, which was one of the biggest driving forces behind my decision to come back.”

In terms of demographics, iXperience strives to have an equal split between males and females (aged between 19 and 22), all of whom stay at Cape Town Backpackers. The School then organises four weekend excursions for the youngsters, after which they are free to plan independent trips and experiences with their friends.

Once home, Fuchs created iXperience, an academy dedicated to teaching people how to code. When he first started the company, one of the many challenges he faced with no track record was getting customers to believe in the offering. Some even accused iXperience of being a scam.

But it’s not all fun and (computer) games. iXperience also encourages students to think about the benefits technology can have on society. Two weeks after coursework begins, students pitch an idea for their own app. Classmates then rally around the most interesting ideas and, independently or in groups, develop a fully functional app to graduate at the end of the course. This gets presented on the evening of the last day of class, with the audience including locals from various Cape Town start-ups.

“I went overseas, met with potential clients, and built strong relationships with strategic, trustworthy people in the US,” he says. “This helped us build our credibility over time. Now that we have completed two successful years, we don’t have those issues anymore.”

Rather than expect students to sit back and listen to a passive lecture, iXperience’s methodology places strong emphasis on “pair programming and lots of collaboration”. The first four weeks of coursework involve intensive workshops where students learn how to code. After this, they spend another four weeks in a practical internship to apply their skills on real-world tech projects with local tech companies.

“There are currently no schools in the world where the students live together and study intensively for up to 12 hours a day and, by the end of a month, have all the skills needed to build their own web applications from scratch,” Fuchs says. “We even had one student who went back to college and built an online food ordering system.”

Fuchs mentions that other alumni have landed internships at companies including Microsoft and Facebook. Similarly, students in the academy’s two other courses have gone on to work at companies including Accenture, Deloitte, Ernst & Young, and Pick n Pay (for those doing iX Consulting) as well as Allan Gray, FNB, Investec and Nedbank (for those doing iX Finance).

“Eighty percent of our daily activities happen on a digital device,” Fuchs says. “This demand is continually growing and therefore knowing how to code will give you great career options.”

But although the coursework is demanding, Fuchs still encourages students to make the most of their free time. Not only does the ‘iXHQ’ have Silicon Valley-esque breakout rooms and study spaces – beanbags, couches and desks by the fireplace – but the coffee bar opposite the conference room and mountain bikes hanging from the walls give it the feeling of a college dorm room.

True to the idea of working hard and playing harder, students are free to “take breaks for surfing, yoga or even a nap”. iXperience also encourages them to experience the “natural beauty, incredible food and unparalleled opportunities for adventure” of Cape Town, the number one city to visit in 2014 according to The New York Times.

“Our students spend a fair amount of capital on tourism activities in South Africa and therefore we are bringing in a decent amount of tourism business into Cape Town,” says Fuchs, who agrees that iXperience is indeed an ‘edu-tourism’ provider. www.ixperience.co.za

“To be honest, there is not too much I would do differently,” Fuchs says of the set-up. “I think we got lucky the first time, and it seems that the things we did all seem to have some relevance with regards to adding value to the company.”

Still, while iXperience aims to create apps that address local problems, the courses are currently targeted towards students from the US and UK. Part of this relates to timing, with the

. . . PAIR PROGRAMMING AND LOTS OF COLLABORATION. . .” curriculum running during the northern hemisphere’s summer break. And part of it relates to competition, with class sizes kept at around 25 students and only 110 spots awarded from more than 800 applications this year.

But the biggest barrier is the cost. Spending US$8 000 for an eight-week course might be reasonable for US and UK students (especially given that it includes tuition, accommodation, planned weekend activities, and breakfast every day), but might be beyond a South African’s rand-bound reach.

For this reason, iXperience has partnered with Platform45, a company awarding scholarships to students who come up with innovative apps to solve social issues in Africa. It’s also why Fuchs’ plans for the future include adding new courses – Value Investing, Management Consulting, UX, and Design – and expanding the programme into other countries around the world.

“We are working on having local corporates sponsor talented students to do our courses,” he says, adding that Allan Gray sponsored two students to do the programme this year. “We also hand out a few of our own scholarships. It’s our dream to offer our courses to the top students in South Africa at zero cost and give them a world class education that can inspire them to shape the future of our country.”

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advertorial

MORE FEMALE ENGINEERS NEEDED FOR AFRICA’S ECONOMIC GROWTH The shortage of engineers is a major global concern, with young people’s interest in entering the profession in decline. This is a particular problem for Africa, with its growing requirements for infrastructure to support economic development. If the continent cannot source engineers locally, it will have to import skills to meet its infrastructure needs.

Worldwide, women are a largely untapped pool of human resources for engineering.

In South Africa, of the engineers currently registered with the Engineering Council of South Africa (ECSA), the country’s professional body for engineers, only 17%

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were black and only 5% were women. A mere 16 666 engineers were registered with ECSA and, while the number of engineering graduates has increased slightly, they make up a tiny proportion of total graduates across all fields of study.

The rest of the SADC is not performing any better. For instance, in Namibia, Zimbabwe and Tanzania, there is one qualified engineer for every 6 000 people, compared to one for every 200 people in China.

Engineering is critically important for the creation of infrastructure to alleviate poverty, accelerate industrial development and enable better healthcare, access to education and the development of an attractive environment for foreign investment.

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programmes have been in South Africa, but Kenya started rolling out WomEng programmes in 2014, and the organisation is set to spread to other countries, especially in Africa.

The WomEng pipeline includes GirlEng, which reaches out to schoolgirls with high potential in mathematics and science, nurturing them so that they are able to study engineering.

WomEng also runs an annual technical innovation challenge for female engineering students to find solutions to global challenges. Hema Vallabh considers the platform a valuable way to attract top young talent and get students business ready.

Given the need for engineers, initiatives like African Engineering Week (led by the Department of Science and Technology), which

According to ECSA’s Chairperson, Yashin Brijmohan, engineering is vital for addressing basic human needs, improving quality of life and creating opportunities for sustainable growth.

Brijmohan says that Africa relies on engineers that are by and large from South Africa, and that greater investment in African engineering is needed.

The Minister of Science and Technology, Naledi Pandor, is of the opinion that government needs to work closely with partners like professional bodies (ECSA), the Institution of Certificated Mechanical and Electrical Engineers, the South African Institution of Mechanical Engineering, academia and business.

As highlighted in the UNESCO report, Engineering: Issues, challenges and opportunities for development, engineering bodies understand the skills challenge, and they will need to quantify, qualify and lead the changes necessary to build engineering capacity.

It has been proposed that more African countries consider establishing engineering bodies like ECSA, and affiliating these bodies with organisations such as the Federation of African Engineering Organisations, which is recognised as a leader and regulator of the engineering profession in Africa.

For Hema Vallabh, co-founder of Women in Engineering (WomEng), the main concern is the shortage of girls in this field.

The engineering field remains dominated by men, with women generally being relegated to soft technical jobs. WomEng is a nonprofit organisation working to develop the next generation of engineering leaders in society by attracting young, female talent and mentoring it. Ms Vallabh believes the industry needs strong female role models. She has called for equal access to improved science, technology, engineering and mathematics curricula so that more young people, especially girls, can go into engineering.

In the past nine years WomEng has been instrumental in developing strong female engineering talent pipelines. Most of its

is held annually, aimed at raising awareness among the public, especially young people, about the importance of engineering and engineers in daily life, are vital.

Many countries, including the United States of America, Canada, Australia, the United Kingdom and Ireland, hold national engineering weeks, which have been very successful in promoting engineering as a career among students, as well as demonstrating the need for engineering to achieve sustainable development.

Various initiatives of this nature are being undertaken in South Africa, for instance the Eskom Expo for Young Scientists, the Department of Science and Technology’s National Science Week, and various science, technology, engineering and mathematics Olympiads and competitions. Much more, however, is needed in the way of awareness campaigns and education if South Africa is to have the engineers it needs to reach its full potential

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Zama Mthethwa Account Executive Department of Science and Technology Tel : +2712 843 6781 Fax : +2786 681 0140 www.dst.gov.za

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THE COMING STORM Words Ashley Dove-Jay

Super-storms on the surface of the Sun are more than just magnificent quirks of astrophysics. They can occur at any time, with little warning, and if sufficiently strong could wholly cripple our electrical infrastructure.

One September day in 1859, over the course of a few minutes, an event occurred that was to have spectacular consequences here on Earth. A sudden, vast and tumultuous eruption of solar flares and coronal mass ejections (CMEs) had just been released from the surface of the Sun, blasting swathes of X-rays and about a trillion kilograms of charged particles at speeds of some 3 000km/s towards the Earth. This event, in terms of energy, was equivalent to 10 billion Hiroshima bombs exploding simultaneously. There really is no way of comprehensibly expressing just how immense of an event it was.

The collision between those charged solar particles and the Earth’s magnetosphere – the magnetic shield that usually protects us from high-energy particles – swiftly stretched and tore it apart, triggering the largest ever “solar super-storm” in recorded history. The Northern and Southern Lights were swept from the poles to the Equator. The surge in energy crippled the world's electrical infrastructure.

GORDON INSTITUTE OF BUSINESS SCIENCE

THIS EVENT, IN TERMS OF ENERGY, WAS EQUIVALENT TO 10 BILLION HIROSHIMA BOMBS EXPLODING SIMULTANEOUSLY.” Back in the mid-19th century, thankfully that infrastructure amounted to no more than about 200 000km of telegraph lines. The impact to humanity was relatively benign. But in today’s world, which is ever more dependant on space technology and massively interconnected networks of power lines and fibre-optic cables, if a Carrington-type event1 were to repeat itself, the consequences would be catastrophic and long lasting.

Our electrical infrastructure, that now shrouds the surface of the Earth, and the magnetosphere that encompasses and bathes it are intimately tied together. So fundamental is this tie, that the study of electricity and magnetism has in the past century become lumped into one area of science: electromagnetism. Any change to the Earth's magnetic field generates a natural electrical charge. Any device tapping into the electromagnetic spectrum is therefore affected by geomagnetically induced currents (GICs). On small-scale electronic devices like mobile phones, these charge build-ups are negligible. However, when it comes to large-scale electrical systems, like power transmission lines, the story changes.

Named after the English astronomer Richard Carrington, that witnessed the event of 1859

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This coronal mass ejection (CME) was captured by NASA’s Interface Region Imaging Spectrograph spacecraft. IRIS, launched in 2013. Due to a differential in the latitudinal velocity of plasma across the surface of the Sun, magnetic field lines twist tightly into knots that are eventually released in massive eruptions that we call CMEs.

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Above: This is a photograph of a solar prominence taken in 1973 by astronaut Edward Gibson using the Apollo Telescope Mount on-board NASA’s first space station, SkyLab. The feature spans across 600 000 kilometres.

Left: The Solar and Heliospheric Observatory (SOHO) is a Sun-observing spacecraft developed jointly by NASA and the European Space Agency that can measure distortions in the Sun's magnetic field. Using data collected by the spacecraft, scientists created a virtual, 3D model of the magnetic field lines.

GORDON INSTITUTE OF BUSINESS SCIENCE

Below: Astronomers at NASA’s Big Bear Solar Observatory captured this close-up of the Sun’s photosphere. It is one of the most detailed snapshots we have of the surface of the Sun. To give a sense of scale, the very tip of each filament is roughly five times the size of Mount Everest.

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A SWATHE OF RECENTLY DEVELOPED DEFENCE AND DETERRENT SYSTEMS WOULD BE COMPROMISED.” It has now dawned on us – thanks to data from NASA’s Kepler mission (see box), numerical modelling and the study of historical records – that the mood of our nearest star is far more hostile than we used to think. Carrington-level events occur every couple of decades – though we are only ever in the path of around a tenth of them. According to Jim Green, director of NASA’s planetary-science division, “the Earth is, on average, in the path of Carrington-level events every 150 years.”

Moreover, according to estimates made by Peter Riley, a heliophysicist at NASA and the US Department of Defense, the probability of another Carrington-level event occurring within the next decade is as high as 12%. In fact, in July 2012, a Carrington-level event occurred. Thankfully it erupted on the opposite side of our star.

Some of you may remember the “Halloween storm” in October 2003. It was about 15% the intensity of a Carrington-level event, yet it disabled a number of satellites and destroyed 14 large 400kV-class electrical transformers across South Africa, crippling large sections of the country's power infrastructure.

Since then, very little has been done in the effort to mitigate against future potential threats to the South African electrical infrastructure. A decade after the 2003 Halloween storm, Professor Charles Trevor Gaunt of the University of Cape Town is still pleading at the proposal level for the government to begin implementing such mitigation strategies, “the risk of an extreme storm cannot be ignored.”

As Pete Worden simply put it to me, “space weather destroys stuff.” As a professor of heliophysics, a two-star air force general, and then the director of the largest centre for space research and activities, NASA Ames Research Centre, he more than anyone is an authority on this subject.

But how much damage are we actually talking about? How would the sequence of events play out if a Carrington-level event occurred tomorrow? And what strategies can we adopt to mitigate damage?

THE SOLARMAX TASK FORCE

To help find answers, I was invited by the UK and European Space Agency to take part in a 40-strong international, multidisciplinary task force of experts, led by Pete Worden and Jim Green. Over a period of six weeks, our group – dubbed SolarMAX – gathered to work out the risks from a solar superstorm to our modern way of life and identify the best ways of limiting the potential damage. The result was a 100-page document for dissemination to governments, space agencies and industry. You can read the full report online (http://ow.ly/yDOXp).

It would be nice to pretend that things would be okay in the event of a solar super-storm striking the Earth, but our findings were deeply sobering.

Carrington-level disturbances to the Earth's magnetic field would induce currents large enough to cause widespread damage to overhead transmission lines, and in particular to transformers regulating the power grid. New transformers typically require a year lead-time for manufacture before installation, and at R135 million a pop, utility companies rarely keep large reserves of such systems.

Concurrent destruction of a large number of transformers across the US and UK would cause widespread power outages that would likely last several months or more. Interestingly, China and India would be significantly less vulnerable to such an event.

Not only because of their more equatorial latitudes, but because of generally less GIC conducive soil and relatively modern power infrastructures. I dare say that it is well within the realm of possibility that a Carrington-level event could massively change the geopolitical map of today.

What such an event would do to the South African electrical infrastructure, especially given its degraded and ageing status, is something I would rather not put into words. The demand for replacement transformers to bring the infrastructure back online would wildly outstrip the supply capacity. Rapidly increasing that capacity through well co-ordinated government-declared emergencies and resource redistribution would not be a simple feat.

Without power, people would struggle to fuel their cars at petrol stations, get money from cash dispensers or pay online. Water and sewage systems would be affected too, meaning that health epidemics in urbanised areas would quickly take a grip, with diseases we thought we had left behind centuries ago soon returning.

Worse still, most of the developed world works on a “just-in-time” philosophy, meaning that there is never more than a few days worth of supplies available in urban areas at any given moment, be it food, fuel or medicine.

Pilots typically fly above about 80% of our atmosphere and are exposed to an order of magnitude more radiation than people on the ground. Already classified as radiation workers, a Carringtonlevel dosage would significantly reduce a pilot's service life and would potentially threaten their long-term health to some extent.

Significant interruptions to primary navigation management and communications systems would occur.

Satellites would be affected too, with the electrostatic discharges generated by geomagnetic storms frying electronics, damaging solar panels and confusing star-tracking orientation systems.

The Earth’s atmosphere would also heat up and expand during such an event, increasing the drag on satellites in low Earth orbit, significantly reducing their expected lifetime. Many TV broadcasts would cease. Radios and mobile phones would have

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SOUTH AFRICA'S NUCLEAR PREPAREDNESS IS DEFICIENT IN MORE THAN 40% OF ITS ASSESSMENT CRITERIA.” limited functionality, suffering from similar infrastructure problems to those in the power sector. Weather forecast services would be limited. A swathe of recently developed defence and deterrent systems would be compromised.

A significant proportion of the satellites that run navigation systems would either be lost entirely or produce data of limited use – hitting agriculture, surveying, oil-drilling and timing. Our transportation management infrastructure would grind to a halt, from air to sea. With more than 1 000 operational satellites in orbit (costing an average of about R1 billion each), our space infrastructure could take a decade or more to recover. In fact, a study carried out in 2008 by the US National Research Council estimated that the satellite blackouts caused by space weather could cost the global economy upwards of R27 trillion in the first year alone.

Meanwhile a separate 2013 study by insurance broker Lloyd’s of London and Atmospheric and Environmental Research, a climate and weather risk-management agency, estimated that the total collateral damage of a Carrington-level event on the global economy would amount to some R35 trillion.

SOUTH AFRICA'S ENERGY PLANS

GORDON INSTITUTE OF BUSINESS SCIENCE

Nuclear power plants are another major concern as they rarely have more than a week’s worth of backup power on-site to run their cooling systems. A switched-off reactor usually takes a month to cool down far enough to avoid a meltdown, which means that firms would find themselves fighting to get their hands on supplies of diesel fuel to operate those backup systems.

With more than 400 nuclear reactors across the globe, how many catastrophic meltdowns could be circumvented?

The South African government has given Eskom the go-ahead to build six new nuclear power plants over the coming decade, with increased capacity of 9 600MW expected by 2030. It is expected that this endeavour will cost between R105 000-140 000 per kW. Last year, Eskom shut down two power plants due to diesel shortages, and an additional two due to depletion of water reserves. If South Africa’s main power supplier is unable to maintain systems continuously during the normal ebb and flow of resources, how can it be expected to prevent six additional nuclear power plants from catastrophic meltdown during the long-term global power and resource crisis a Carrington-level event could catalyse? The International Atomic Energy Agency has found that South Africa’s nuclear preparedness is deficient in more than 40% of its assessment criteria.

The South African Government spent approximately R41 billion to host the 64 soccer matches that were the 2010 FIFA World Cup.

The government estimated it would make approximately 30% of this back primarily through the tourism generated – the reality was about 17%; ending in a loss of R34 billion. Tourism in South Africa since the event has been little affected, and how much of that can be attributed as a direct consequence of profile-raising from the event 5 years ago, and how much can be attributed to a global economy recovering from the hangover of a financial crisis, remains an open question.

One of the largest solar power farms in existence, the Californiabased Topaz Solar Farm, began construction in 2011 and became fully operational last year. The low-complexity system now produces about 550MW of clean energy. It is expected to do so for between two and three decades before significant maintenance actions need to be taken. Topaz cost approximately R34 billion – coincidentally exactly as much as South Africa’s FIFA World Cup losses.

Given the difference in latitudes and consequential levels of sunlight, a Topaz-scale farm just north of Johannesburg would register in the 700MW-class. Using the photovoltaic technology of 2011, that translates into a rate of approximately R50 000 per kW brought online within a few years. Based on figures over

NASA KEPLER SPACE OBSERVATORY

To get a clearer idea of how often Carrington-level events are likely to occur, researchers at NASA are currently mining data from the Kepler space observatory. The mission was designed primarily to discover Earth-like planets orbiting other stars and has so far gathered data on more than 170 000 “main-sequence” stars in our galaxy.

But by observing the variation in the luminosity of these stars over time, astronomers can spot and quantify the scale and likelihood of stellar super-storms.

Although only a small fraction of the Kepler data has been scoured for super-storms, the work has shown that the solar flares in the Carrington event of 1859 really were nothing special for a star like the Sun. Preliminary estimates reveal that super-flares with energy levels a thousand times greater than a Carrington-level event occur every few thousand years.

Studying the Kepler data has also given insights into how the properties of a star affect its volatility. For example, its rotation rate does not seem to alter the scale of super-flares produced, but the higher the rate, the more likely a superflare event is to occur. The good news – if you can call it that – is that our star has a relatively low rotation rate.

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This is a gradient filter image of a solar flare caught by NASA’s Solar Dynamics Observatory (SDO). Beyond generating beautiful art, viewing the Sun in this way is very useful from a scientific perspective. The red-orange features are constrained coronal loops of solar material revealing the structure and dynamics of the Sun’s magnetic field lines.

the last few decades, however, the cost of solar power per kW is halving every 5 years – so the 2011 rates are already significantly out of date.

South Africa’s GDP has dropped by 13% in the last 5 years. The nation’s neglected electrical infrastructure is classed as “junk” and in dire need of major overhauls. Why the South African government is pursuing nuclear power over solar power is beyond me. Nuclear power plants are vastly more complex systems requiring great levels of intricate maintenance. They evidently require about three times as much investment capital and a decade more lead time. And unlike solar power, during natural disasters like solar super-storms, they become a critical danger to the population they serve through the threat of meltdown.

MITIGATION STRATEGIES

You may feel that I am scare-mongering, but the plain fact is that our reliance on electricity has made us extremely vulnerable to anything that could cut supplies.

To protect our electrical infrastructures, there are two main facets that need to be addressed: forecasting and optimisation.

Right now, we cannot reliably forecast a CME or solar-flare eruption on the surface of the Sun by more than about an hour.

On top of this, we cannot reliably predict the paths emitted charge particles are going to take between the Sun and the Earth's orbit during such solar storms. We have a few satellites orbiting the Earth acting as outposts that give approximately 30 minutes warning of an imminent impact. Garnering a deeper

understanding of the Sun’s weather and the relationship between the Sun’s and the Earth’s magnetic fields would likely better these forecasts. An effective method for deepening knowledge and giving earlier warnings would be with a constellation of micro-satellites in an orbit slightly closer to the Sun. SolarMAX estimated such a project would cost NASA in the region of R7 billion.

A way of minimising the potential disruption from space weather is to exploit the fact that many nations are slowly updating their power transmission lines so that energy use can be measured at different points in the grid in real time via “smart metres”.

This technology lets energy companies monitor and adjust performance to deliver power more efficiently in response to local changes in demand. Such information would be invaluable during major solar events. A real time solar-weather response system integrated into the power management system would help to reduce the damage to the power grid by isolating vulnerable segments of the network from the rest of it to allow for smaller local failures rather than large inter-connected failures.

The risks are real. Solar super-storms are not a question of “if ”, but “when”. However, damage can be averted with the technology we have today. The primary obstacle and danger lies not within the Sun itself, but with the ignorance of decision-makers concerning space weather: governments, industry and the public.

As a species, we have never been more vulnerable to the volatile mood of our nearest star, but it is well within our ability, skill and expertise to protect ourselves

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Ashley Dove-Jay is a former South African and space engineer based in Oxford with a PhD in Aerospace Engineering. He has participated in and led numerous NASA and European Space Agency related projects.

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UPPING THE GAME TO CUSTOMER I-CENTRICITY Words Professor Sandra Vandermerwe & David Erixon

Digital and social media technologies have the power to make enterprises customer i-centric, delivering value propositions never before imagined. This power comes from a combination of executive minds attuned to customer outcome rather than product push, and new technologies which connect people, data and things, to deliver superior integrated experiences at significantly lower cost. Here is the formula.

CUSTOMER OUTCOME ALGORITHMS BECOME THE CORE CAPABILITY

The core shifts from product or service capability, to algorithms, which make the organisation the expert at a customer outcome, either for an articulated or unmet need. This becomes its intellectual property (IP), not just knowing how to make and move stuff, fast commoditising.

Discovery Insure’s (DI) IP is the undisputed expert in the “Great Safe Driving” market space. Intricate connections of telematics and data built into the car or mobile smartphone, combine to correlate indicators of driving behaviour and patterns, fed back to customers to improve their driving.

GORDON INSTITUTE OF BUSINESS SCIENCE

A burning ambition to be the best at achieving a customer outcome, thereby locking-on customers in a market space, such as “Great Safe Driving” is what directs culture, and decisions, including capital, investments, partnerships and acquisitions.

VALUE IS GENERATED THROUGH REAL TIME CUSTOMER DATA

Legacy models use historic customer data to make organisations more efficient, e.g. pricing insurance policies or managing retail supply chains. With customer i-centricity, it is real time data that produces the customer outcome, and sustainable advantage.

Swedish based SKF Bearings has upped the customer-centric game it began decades ago in the “Trouble Free Operations” market space, using 8 000 smart products connected through mobile interfaces, with 45 applications in a “bearings with brains” seamless network of people, data and things, early

Professor Sandra Vandermerwe

detecting, preventing and rectifying, keeping industrial factories productive, and enhancing investments.

At the very least, real time means on-demand as these examples show. At best, it means instant. Uber does this in ‘Travel Mobility’. Rainfin, a South African start-up peer-to-peer online platform, connects real time data from large companies and their supplier documentation, supplying credit ratings and interest rate charges to unsecured SMEs, borrowers and crowd investors within minutes, so they can instantly transact in a paperless system.

ANALYTICS TURN BIG DATA FROM PREDICTIVE TO PRESCRIPTIVE

Data means nothing unless turned to customer value. Predictive analytics make big data prescriptive, improving customer decision-making. After two years, Oscar, the start-up online, has 15% of New York’s health insurers. Through a variety of applications and wearable technology, customers make decisions that improve symptom recognition, possible treatments and overall health.

Absa Capital improves business client decisions. Algorithms embedded with trader know-how and specific customer behaviours, enable robot advisors (either face-to-face or remote) help customers decide when to do foreign exchange transactions, minimising risk, maximising return.

Artificial intelligence in cognitive platforms links people, knowledge and computers. IBM’s Smart Cities is designed so that officials can make better integrated decisions for cities and

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DATA MEANS NOTHING UNLESS TURNED TO CUSTOMER VALUE.”

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potential. Nest now has a smart door lock sending individuals text messages if, for instance, a lock in their home is activated or an emergency battery is run down. And next for Nest can come connecting to its already comprehensive network any devices from that person’s computer or spectacles to cars.

SCALING IS ACHIEVED AT LOW/NO COST

With Internet-based economics, data is free, growing as it is used. citizens. In the medical arena, IBM’s Watson knows over 80% of the medical oncology data, whilst GE’s computer vision software tracks and correlates what is happening in a human body. All of which promises to integrate and improve practitioner diagnosis and treatment decisions.

To stay rich, prescriptive customer insights are constantly tracked and updated in real time, irrespective from where they originate. SKF gets this from the engineers, or “brainy bearings”.

Every patient experience brings deeper know-how for IBM or GE. Uber gets it from customer stories via taxi drivers, or real time supply and demand data. Either way, constant improvement is what maintains the lead, setting up barriers to competition.

OUTCOMES ARE AIMED AT AN INDIVIDUAL CUSTOMER “TARGETS OF ONE”

Customer i-centricity is about multiple communication with individuals in their daily lives, through interconnected channels.

DI knows if the driving performance of an individual improves, if an individual car is pushed close to its limit or its driving style alters, indicating theft, and DI reacts accordingly.

Faster, smarter networking technologies make interconnected intelligent homes central to customers’ lives. Nest allows its customers to choose temperatures they want in their homes and in which rooms, adjust schedules or settings anytime from anywhere, and monitor and reduce energy to meet their individual requirements.

Individualised experiences are made seamless across products, divisions, companies, industries and even competitors. Uber takes DI customers to and from venues over weekends to avoid post-party road accidents. Uber allows taxi competitors to join its fold. Newcomer Singaporean ConneXionsAsia, (CXA) uses employee benefits as currency to be swapped, traded and redeemed across companies and industries, so that customers can use them how they want.

Customer i-centricity joins applications, improving integrated experiences, continuously converting new data into revenue

Consumers or producers can be added at low-to-zero cost, driving a cumulative advantage, as Uber and others demonstrate on a daily basis.

Market spaces can be widened or diversified, capturing added revenues at low cost. The Absa algorithm could easily and cheaply include commodity trading or predictions such as the likelihood of an employee leaving. Uber knowing how to get services to customers where and when they want them has expanded into delivering massage, ice-cream and food at low cost.

Scale is also achieved by cheaply and quickly fine-tuning algorithms with know-how updated for cross-country growth.

Look at the vast, speedy geo-expansion of Uber (290 cities 50 countries), or Airbnb (34 000 cities 190 countries).

SAVINGS KICKED BACK TO CUSTOMERS PRODUCE A VIRTUOUS CYCLE

If savings due to customer i-centric economics are passed back to produce customer value, this sustains the competitive lead.

This may be in the form of rewards, but for behaviour, not just buying more stuff. DI sells more policies and has lowered the cost and incidence of its claims. It rewards customers significantly for better driving, as does Oscar for regular exercise targets reached, tracked by smart devices and fitness wearables. Both companies benefit from positive loops.

FNB supplies free data packages with customers buying smart products like iPads (FNB is the largest Apple SA reseller) online, latching the discounted purchase onto an existing account, interest and hassle free. By building use of social media from once digital passive customers, it builds FNB’s digital lead, in

OBJECTIVITY IS THE CURRENCY OF TRUST . . . ”

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general management

THE NEW MIDDLE IS NOT THE INTERMEDIARY BETWEEN PRODUCER AND CONSUMER.” turn allowing it to scoop up more customers and innovate, in an ongoing virtuous cycle.

Chinese Alibaba keeps growing because it kicks back gains, so as to fund, train and fuel sellers, attracting more sellers and potential buyer value.

COSTS BECOME ASSETS TO LEVERAGE CUSTOMER VALUE OVER TIME

Capital spent is leveraged cumulatively over time, because once set up, the marginal cost of upgrading, connecting or adding more data, people or products is low.

The initial layout is an investment in an asset, rather than an expense or piece of the promotions budget to be returned quickly.

Who can argue that Apple’s investment in its 800 million-strong iTunes customer base, all of whom have credit accounts, is not an asset to be leveraged? Within a few weeks, 20% of iTunes’ users were streaming music.

GORDON INSTITUTE OF BUSINESS SCIENCE

This principle applies equally in emerging markets. M-Pesa’s initial investment in Kenya created a life-changing way of storing and transferring money. Now its 20 million customer base, still growing, is buying an array of frugal innovative services from insurance to restaurant transactions.

LIKE UBER OR AIRBNB, ALIBABA OWNS NO GOODS

The new middle brings crowds together, like-minded customers with something, or seeking something. Peer-to-peer lending or equity groups are typically disrupting banks this way. Groups like Chinese Tuanguo come together voluntarily, leveraging collective power to negotiate price.

The new aggregated middle role is advisory, objective, and seeks to get a good fit not just get rid of stuff, in which they have a vested interest. Rather than a conduit for sales, it is a new world agent or broker for producers and consumers.

In this view of the middle, anyone that adds no value, which actually lands in the customer space, is considered waste, an unneeded cost and opportunity gap for someone.

Objectivity is the currency of trust, keeping customers from multiple supplier search, cherry-picking, or migrating to new entrants.

The initial costs can be leveraged over time for social good as well. DI has significantly reduced road accidents. Thanks to M-Pesa, incomes have been raised, the price of transferring money has been forced down, small business has spawned, and evidently it has been inspirational for young entrepreneurs in Kenya and all over Africa, to do things they would never have considered possible.

The customer i-centricity model also reveals unused capacity across the ecosystem, or even amongst competitors. This too is waste, another opportunity to match demand and supply in what has been termed the ‘sharing economy’. Here customers get access rather than own. Google’s RideWith gets Israeli coworkers and neighbours to ride-share to and from destinations.

Uber does the same, allowing competitor taxis into its fold.

Friendsurance, a peer-to-peer German start-up, combines crowd power with this collaborative consumption trend. It connects customers online in an insurance pool, redistributing annual savings to the customer network, who share in both production and consumption.

THE NEW MIDDLE LINKS DEMAND AND SUPPLY

LAST WORD

The new middle is not the intermediary between producer and consumer. It’s the branded platform that matches demand and supply.

Demand and supply data aggregated and transformed reveals options, comparing, rating, ranking and matching those who have, with those who want. Oscar directs customers to its 40 000 New York doctor network when they need help. Airbnb matches over 1.4 million home owners, with travellers looking for accommodation. Alibaba’s Tmall operates an online, more than 300 million Chinese-strong marketplace for international brands.

New technology is no substitute for the minds and models which drive behaviour and make or prevent enterprises from being customer centric. But, if used correctly, it ups the game to customer i-centricity which drives growth, at the same time lowering cost, with exponential effects.

Those who use new digital products and services to dominate market spaces will thrive. Those who fail to, or use technology for the wrong reason, will risk losing out, and find that start-ups, unheard of one day and global powerhouses the next, will be their chief rivals

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SMART ADVICE CAN PROTECT YOUR INVESTMENTS Compound interest is often called the 8th Wonder of the World, but it can also be a double-edged sword and come back to bite you.

Yami Swana

When I used to be a financial advisor I would ask my clients, “Do you want to live on a yacht in Monaco or in a shack in Alex when you retire?” The only issue is that most likely, if this was an average guy, he would still end up living in a shack in Alex whether he invested with me or not.

So what’s the solution here? Lower fees and reduced taxes... But I am not a financial advisor and neither do I claim to be one. All the information here is meant to enlighten you. Consulting a professional before moving forward with any of the information is the wisest advice I can give you.

The reason is, in the same way that your money increases more rapidly as you leave it in the market, the fees you are charged and the taxes you pay are also compounded. If you had invested R10 000, 10 years ago at 10% p.a. you would have R25 937.42 today. However, if you included a 1.5% annual asset management fee which is close to the norm, you have R22 609.83. That’s a R 3 327.59 difference, so what’s the difference over 20 years?

R16 155.00, and as time goes on the difference becomes larger and larger just by subtracting 1.5%.

The solution, reducing fees, comes from the basic principle of whether fund managers can beat the market. According to Morningstar, only 4% of mutual funds beat the market and the companies in the top 4% change every year. Therefore, investing in a passively managed low-cost fund is the way you can lower your fees instantly. When it comes to taxes there are a number of vehicles that can be looked at, such as retirement annuities or the tax-free savings vehicle.

Now that you understand the impact of fees on your investment portfolio, what else is hidden from you? There are at least five more different types of fees that are levied against your retirement funds. These include expense ratio, transaction costs, VAT, redemption fee and account fees, all of which could add another 1% to your costs. On top of that, you might well have to pay your broker a commission and possibly even an ongoing advice fee. That’s for advice you’re not being given.

But that’s not all. There’s something even worse than fees... and that’s taxes. Depending on which tax bracket you’re in you could pay up to 41% tax before retirement and 36% upon retirement, and all the while you have been paying VAT and income tax.

Imagine 36% of your money being taken away the instant you retire, this is money you’ve worked hard for and saved so that you could be independent when you retire. If you’ve been diligent these amounts could be substantial. If you retire with R3 million in savings, R500 000 is tax free but R2.5 million is taxable. Now, this tax may be once-off or charged annually but you’re still being taxed! Let’s imagine that you took one-third of your retirement savings now, so you would pay tax on R500 000, and that’s R90 000! That’s enough money to pay for DStv Premium for 12 years.

This barely scratches the surface of what’s possible and the things you can do to start investing like the top 1% of the wealthy do – but it is a start Esspresso is developing a digital advisor, which is an app that will both reduce the cost of investing while giving you the returns you deserve. To be part of the beta testing phase or to become an investor please email yamiswana@esspresso.net or call 074 187 3358

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esspresso Yami Swana Founder of Esspresso.net Email: Yamiswana@esspresso.net Address: Wilropark, Roodepoort, 1724 Contact Number: 074 187 3358 Office Number: 011 764 3033

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INNOVATION, INNOVATION, INNOVATION An electric lightbulb powered by M-Kopa solar technology

Innovation, be it evolutionary or revolutionary, is the stairway Africa needs to build and maintain to realise its true economic potential. Here are three examples of innovation that demonstrate incontrovertibly that Africa offers an opportunity to businesses to innovate where it matters most: solutions to counterfeit medicines, unaffordable insurance and poor access to electricity.

What the people behind these innovations have in common is that they are simple and have simply taken what already exists elsewhere to create a much needed breakthrough in addressing problems of underdevelopment across Africa. They are also scalable, portable and are great because they show that the developed countries have nothing to fear in Africa, if they are willing to adapt their technologies to African conditions.

GORDON INSTITUTE OF BUSINESS SCIENCE

First, though, let us remind ourselves what innovation is.

Businessdictionary.com defines it as “The process of translating an idea or invention into a good or service that creates value or for which customers will pay.”

Customers determine what constitutes value on the grounds that what they pay for meets a need or a want. It is futile to argue with a customer about the value of what we provide as businesses, because we can never really win. If they do not perceive any value, they simply will not pay. Equally, if they see value in what we offer them, but they cannot afford it, the uneconomically low demand will wipe out any need of supply.

These solutions fit this definition perfectly, proving that innovation need not be an invention. If anything, the brains behind these innovations only invented a new way of using what we take for granted.

INSURANCE NEED NOT BE A GRUDGE PURCHASE – MICROENSURE I am sure you have never felt like hugging your insurance company or smothering your insurance salesman with loving kisses; even if they miraculously settle your claim without hassles. If they do, after all, that is what you would expect after stuffing their bank accounts with one-way thankless payments called monthly premiums. In most cases, our relationship with insurance is like a forced marriage. Ever tried to finance a vehicle without insurance?

What makes insurance even more loathsome is the fad of no-claim bonuses. These are often quoted in today’s money, promising us an opportunity to go on holiday in 15 years, if we do not claim. Okay, so these insurance leeches and their actuaries have figured: not only are we happy to pay high escalating premiums, we do it so that we can go on holiday after not using what we pay for over a period of 15 years!

The combined effect of the business model of insurance companies and the lower per capita income in developing countries is the inability of low-income groups to buy insurance.

Would it surprise you then, that according to the South African Insurance Association in 2013, only 35 percent of the vehicles on the road were insured? Think about it: if there are 10 cars on the

PHOTO: GETTY IMAGES / GALLO IMAGES

Words Victor Kgomoeswana

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road and yours is one of them, only three would be covered by insurance; plus that 0.5 percent of a car or half a car! That might be the one-half of your car after you would have been smashed by one of the uninsured cars into two pieces.

In 2012, a report by Ventures Africa stated: “Kenya has 46 insurance companies and 4 576 registered insurance agents, yet a paltry 3% of Kenyans have insurance cover. This is in sharp contrast to countries like South Africa, with a 9% penetration or Malaysia, which has an estimated 41% of the population covered by some form of life insurance.”

Enter MicroEnsure! The company’s Marketing Director, Peter Gross, told me that his company, which was founded in 2002

by Opportunity International and supported by a multimilliondollar grant from the Bill & Melinda Gates Foundation in 2007, uses alliances with broad-based community organisations to increase access to affordable insurance.

Imagine getting life cover that is pegged to the amount of airtime you use. Gross said that because people have a better relationship with their mobile phone company, for instance, it is easier for them to trust it as a provider of insurance. In return, the mobile company enhances the loyalty of its customers by offering them more than simply airtime – rewarding their patronage with insurance. Too good to be true? Only to the uncreative.

MicroEnsure claims on its website to serve “15 million people in 17 countries around the world with insurance, the majority of whom have never before been insured.” In 2014, they added 8 million new customers in Africa alone.

This is no different from Voyager Miles, eBucks or any other loyalty programme. Nothing new, just a new way of thinking to solve an age-old intractable problem.

SPROXIL – NO FAKE

Most of us have seen or bought fake DVDs or sneakers. Imitations of brand names are commonplace, but imagine buying critical medication, only to find out that it is not the real deal. While a fake DVD might annoy you with a less than optimal picture quality, a counterfeit drug can kill you.

Sproxil estimates that more than 700 000 deaths a year are caused by counterfeit malaria and tuberculosis drugs worldwide – but emerging markets carry the brunt of this scourge. That is why Sproxil deploys its trademark ‘Mobile Product Authentication technology’ which “drives revenue and engages consumers at point of sale through brand assurance, fraud protection, and loyalty rewards” in emerging markets such as Nigeria, India, Ghana, Pakistan and Kenya.

CEO and Founder of Sproxil, Dr Ashifi Gogo, explained the way his company operates in a simple way. Authentic products, medical and otherwise, have a unique serial number and bar

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code. Their app allows a buyer anywhere in the world to scan this bar code with a mobile phone and verify the authenticity of the item in a matter of seconds.

By enabling buyers to be confident that they are procuring the real thing, and manufacturers to protect their intellectual property, Sproxil contributes to lower death rates and makes emerging markets attractive to investors who depend on royalties for their inventions.

No wonder Dr Gogo is among Fortune Magazine’s top 40 leaders under 40 years of age and is included in the latest Salt 100 Compassionate Leaders list. The latter promotes what founder Stephen Vasconcellos-Sharpe calls “a more conscious and equitable economy” – something which resonates with Tony Elumelu’s Africapitalism.

M-KOPA: PAY-AS-YOU-GO SOLAR ENERGY

We all agree that electricity has to be generated from renewable resources instead of fossil fuels. The problem is that, for all our talk about the abundance of solar energy in Africa, the technology remains unaffordable.

M-KOPA walks a different talk, thanks to the company’s innovative financing of solar energy equipment in countries like Kenya.

With “power for everyone” as its tagline, this company provides customers with a home-based solar system. The customer buys solar energy using the same technology they use to buy airtime, allowing them to switch their power on and off according to their needs and budget. After 12 months of regular payments, the customer owns the solar system – and can continue to buy solar energy on a flexible system which allows access to electricity on a day-to-day basis for as low as 45 US cents.

What these three innovative solutions can teach us, because all the three companies when I interviewed them were either in the US or the UK on a trip to meet investors or partners, is that the developed world and the developing world stand a better chance of succeeding in solving the problems of poverty if they work together. It is multilateral win-win economics.

Just like M-Pesa in Kenya took technology from the UK to design a pioneering African solution to an African problem, Sproxil, M-KOPA Solar and MicroEnsure are applying established technologies to problems of inclusivity. Africa and the rest of the developing world need solutions that work. It would be inefficient to re-invent technologies for Africa when such exist elsewhere.

It would equally be folly to import holus-bolus First World technologies without adaptation to local conditions.

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These examples of innovation address both these concerns; and that is why they are winners

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THE ABC OF ROUTE-TO-MARKET

FOR THE SUPPLY CHAIN SAVVY MBA

Imperial Logistics Chief Business Development Officer Cobus Rossouw

Executives striving to optimise the performance of their businesses should start by reinventing their understanding of supply chain management.

This is the advice of Imperial Logistics Chief Business Development Officer Cobus Rossouw. He contends that while many MBA graduates feel confident that they have a handle on what supply chain management is all about, the term is fraught with misunderstanding.

“Supply chain management is, in fact, not just about supply. It is certainly not merely about procurement. It is about synchronising supply and demand, but as a demand-driven process to get the customer what he wants in the most efficient way possible,” he stresses. With the misconceptions around supply chain management, and the inaccurately pared down understanding of it that is held by many executives, Rossouw believes that the term itself should be replaced in the executive’s vocabulary. “As supply chain management has become more demand driven, it is focusing more on the route-to-market, which more accurately captures the chain of interlinked activities that take products from their original source to the consumer,” he states.

“What executives and MBA graduates should be honing, therefore, is their understanding of route-to-market,” Rossouw asserts. He explains that, like supply chain management and logistics, routeto-market is about getting the right product to the right place at the right time, but it encompasses much more than this. “It brings together procurement, manufacturing, distribution, marketing, sales, logistics, operations and more – spanning the entire supply chain, from end-to-end. It is not just about cost, but also about availability and service. It is not just about distribution, but starts way before this, with decisions like where to manufacture and what raw materials to import,” he adds.

While supply chain management may once have been the domain of the supply chain manager or operations director, Rossouw says that route-to-market should be on the radar of everyone in the organisation. “It influences every area of the business and everyone from the CEO to the organisation’s suppliers should care about the company’s route-to-market.”

Expanding on the customer’s role in the route-to-market, Rossouw says that a successful formula is always founded on the needs of the end user. “The route-to-market must, first and foremost, benefit the consumer. It should be all about doing things in order

to best meet the needs of the consumer, whether this end user is the HIV patient on the receiving end of a pharmaceutical supply chain in Malawi or a homemaker buying bread in Bethlehem.”

Another route-to-market lesson that Rossouw considers critical is that in order to provide the best solution to the consumer, there will always be trade-offs in your route-to-market activities. “You can only get it right if, as the saying goes, ‘the whole is greater than the sum of its parts’.”

Clarifying this, he says that a winning route-to-market may not have the lowest warehousing costs, the lowest transport costs and the lowest risk. “The executive who really understands routeto-market will know that it is about the total cost of ownership, will have the skill to manage trade-offs and conflict between the different role players and activities in the route-to-market, and will be able to see the bigger picture and make the necessary tough decisions.”

Rossouw’s final piece of advice on route-to-market is that “you cannot be the best at everything yourself.” He urges executives aiming for route-to-market success to realise when and where to focus on their core competencies and when and where to partner with specialised service providers – whether these are marketing agencies or logistics partners. “Ultimately, the best route-tomarket is the one with the best final outcome; the one that delivers the greatest benefit to the consumer,” he concludes

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Thiloshni Ramdass Brand manager Cnr. Geldenhuis Road & Van Dort Street, Germiston, Gauteng Tel: 011 677 5000 GPS: 26°11'44.48"S

28° 7'49.89"E Imperiallogistics.co.za

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DOING BUSINESS IN ARGENTINA Words Tom Hennigan

When the little-known Néstor Kirchner ran for Argentina’s presidency back in 2003, he promised to restore his South American nation’s reputation as “a serious country”. It didn’t happen.

It was a message designed to appeal to an electorate battered by the humiliating sovereign debt default of December 2001 that turned what was once one of the world’s richest societies into a financial pariah, cut off from global capital markets and shunned by foreign investors.

That epic default capped a long and unprecedented decline in the country’s fortunes. At the outbreak of World War I Argentines earned as much as Germans, the Dutch and Belgians and far more than the workers of former colonial master Spain. But by the time Kirchner was sworn into office, a brutal five-year recession had dumped over half the population of what had once been a proud outpost of the developed world’s middle class into poverty.

GOODBYE, MRS KIRCHNER

Thirteen years later the Kirchner era is now drawing to a close.

Néstor died suddenly of a heart attack in 2010 but by then had already transferred the presidential sash to his wife Cristina, whose second term ends in December. She is leaving office claiming that her family’s self-styled “Victory Decade” in power has restored the country’s fortunes.

GORDON INSTITUTE OF BUSINESS SCIENCE

But most foreign investors would disagree and have yet to reintroduce Argentina onto their business itinerary.

For one thing a botched 2005 debt restructuring means the country remains shut out of capital markets almost 14 years after the default. The Kirchners offered creditors a brutal take-it-orleave-it write down on their investment. Some left it and have snarled up Argentina’s hopes of a return to markets in US courts, so successfully they even forced the country into another default last year.

Foreign direct investment which flooded the country in the 1990s has been scared off by price controls in crucial sectors like energy and transport and the forced renationalisation of companies the state had only recently sold off. This lack of investment has produced bottlenecks which in turn are fuelling the old curse of inflation. When that started getting out of hand the government responded by firing the economists responsible for compiling its statistics and replacing them with Kirchner supporters. They, unsurprisingly, reported a far lower figure which the IMF refused to use in its reporting.

A BEEF ABOUT STEAK

Initially, Néstor was able to play fast and loose with economic orthodoxy because he assumed office just as China’s voracious demand for commodities was shocking Argentina’s economy back into life. The vast Pampas grasslands grow a sizeable chunk of the food consumed by increasingly affluent Asians and, as the price of soy and other foodstuffs soared, the government in Buenos Aires suddenly found it had access to billions of dollars thanks to export taxes.

Néstor used this unexpected soy bonanza to fund a votewinning splurge in public spending that helped pull down the stratospheric poverty rates that followed the default. But other exports were sacrificed to political expediency. When the cost of Argentina’s famous steak started to rise, beef exports were restricted to force down domestic prices. The result was a dramatic decline in the country’s once legendary national herd.

Eventually, the soy effect lost much of its punch, forcing the government to scramble around in recent years for other sources of income to fund its increasingly profligate spending. A 2008 effort to increase taxes on soy exports was defeated by farmers and so the government nationalised the pension system instead.

This funding problem has grown even more acute with the slowdown in China and the impact that has had on the soy price.

Still unable to access markets to cover the growing deficit, Cristina’s administration has resorted to the old Argentina tactic of printing money. Despite the “Victory Decade”, she will leave her eventual successor one of the world’s highest inflation rates, dwindling foreign reserves, a yawning fiscal deficit and still unable to access to capital markets.

CRISTINA WANTS TO PRESERVE HER INFLUENCE AFTER SHE LEAVES OFFICE.”

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PHOTO: GETTY IMAGES / GALLO IMAGES

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Cristina Fernández de Kirchner takes over the Argentine presidency from her husband Néstor Kirchner in 2007

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THE PROBLEM WITH PERONISM

PHOTO: GETTY IMAGES / GALLO IMAGES

It is little wonder investors have given the country a wide berth.

Despite its huge potential, foreign direct investment has lagged behind smaller regional rivals meaning Argentina missed out on much of the last decade’s record inflows into South America.

“The Kirchners ran a classic populist economic policy that prioritised the internal market and keeping people happy at the expense of integration with the wider world,” says Dr Samuel Amaral, an historian of the couple’s Peronist movement.

It is a policy mix that explains the divergence in how the Kirchner years are perceived by ordinary Argentine voters and the investor community. But it is a model that has finally run out of steam, its myriad internal contradictions and inefficiencies exposed by the downturn in Chinese demand for its few cash-earning exports.

Argentina is once again mired in recession with poverty back on the increase.

So why are investors suddenly optimistic about the country’s prospects? Bluntly put, because Mrs Kirchner will be quitting the Casa Rosada on December 10th. “In this election the question of who wins is secondary to the fact that it marks the end of the Kirchner era,” says Dr Amaral.

WHO’S NEXT?

The two frontrunners in the race to succeed the president are the governor of Buenos Aires province, Daniel Scioli, and the former mayor of Buenos Aires city, Mauricio Macri.

Mauricio Macri

His main challenge now is overtaking the frontrunner, Daniel Scioli, a former powerboat champion who, as governor of Buenos Aires province, cemented his reputation as a consensus builder in Argentina’s take-no-prisoners political culture. Like President Kirchner he hails from the populist Peronist movement and his bid has her backing, despite a difficult relationship ever since Scioli ran as her husband’s running mate back in 2003.

But this support does not mean a Scioli presidency would be a continuation of the Kirchner era.

“Scioli and Macri broadly agree on foreign and economic policy and are very different to President Kirchner in their view on the role of PHOTO: GETTY IMAGES / GALLO IMAGES

GORDON INSTITUTE OF BUSINESS SCIENCE

The son of an Italian-born industrialist and the former president of Boca Juniors, the country’s most popular football team, Macri had a mixed record as the capital’s mayor but is running a strong second in national polls. Amazingly, he is attempting to become Argentina’s first ever democratically elected right wing president. Even his ideological opponents acknowledge that he represents an advance in a country where the right traditionally relied on the military to exercise power with the pro-Kirchner intellectual Horacio Verbitsky hailing the “emergence of a modern right wing that observes the rules of democracy and has electoral potential.”

ARGENTINA IS ONCE AGAIN MIRED IN RECESSION . . . ” Daniel Scioli

dynamic markets

the state in the economy for example,” says Sergio Berenszstein, one of Argentina’s most perceptive political analysts. “As incumbent, Scioli would be different ideologically to Cristina and in fact more like Macri.”

Investors, at least, seem sanguine about which one emerges as the winner. Some prefer Macri’s more explicit commitment to orthodox economic policy. But others worry about the damning fact that the last non-Peronist elected president to see out his full term was the Patrician Radical, Marcelo T. de Alvear, in 1928.

Some investors therefore wonder if it would not be better to have a Peronist in charge of reinserting Argentine into the global economy as he would be better able to discipline the party’s governors and likely majority in Congress. The party’s ideological fluidity means Scioli’s current praise of Mrs Kirchner’s administration should not be taken at face value. After all he entered politics first under the wing of the Peronist playboy

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Peronism and she imposed a close confidant as Scioli's runningmate as the price for her support.

Cynics have pointed out that the president’s main motivation now is not ensuring that its populist ideology continues to hold sway under her successor. Instead, she is trying to prevent the courts finally investigating the many corruption scandals that marred the Kirchner era and saw the family’s wealth balloon, while close friends used their proximity to power to become multimillionaires.

But history is against her. “Cristina wants to preserve her influence after she leaves office. But she will no longer be president and in Argentina, the presidency is very strong. It is going to be difficult for her. There are few cases of former presidents remaining strong after office and the corruption scandals will take a toll on her reputation,” predicts Berenszstein.

SO WHY ARE INVESTORS SUDDENLY OPTIMISTIC ABOUT THE COUNTRY’S PROSPECTS?” president, Carlos Menem, who in the 1990s liberalised and privatised the economy with all the fervor of a Chicago Boy.

Though the winner is still to be decided at the ballot box it seems Argentina’s latest populist revival is drawing to a close.

“Henry Kissinger was once asked what presidents want and he replied ‘a second term’. If either Scioli or Macri wants a second term they will need to make changes to the economy because without them there will be no growth and they will not be reelected,” says Alberto Bernal, an economist with Latin American investment house Bulltick. “Both men understand this. They know what they have to do.”

A HUG, THEN A KISS

PAY THE VULTURES

Topping the to-do list is a settlement with the bond holdouts that would pave the way for a return to capital markets. President Kirchner has inflated the dispute into a principled stand against what she labels “vulture funds” preying on the country’s poor. But the amount of cash in question is relatively small and a deal would be a powerful signal that Argentina is reopening for business.

“If the country fixes its external accounts so much money could suddenly flood in it is not even funny,” says Bulltick’s Bernal.

Easier access to capital, the unwinding of costly subsidies and a less populist approach to public spending would also clear the path for desperately needed new investment in infrastructure with the country having a host of opportunities waiting to be explored in sectors such as energy and transport.

It is these expectations of better times ahead for investors that explain the rally in Argentine bond prices as the vote approaches.

But some observers urge caution. In recent months President Kirchner has been making unprecedented efforts to pack her loyalists into senior positions in a bid to preserve her influence after she leaves office. Her son, Máximo, is set to be elected to congress where he will look to lead the kirchnerista bloc within

Like most of Latin America, Argentina’s business culture is relatively closed and outsiders often have a difficult time gaining a foothold in the country. Building personal relationships is key. When starting off remember lots of eye contact and do not be surprised if after a few meetings a hug replaces the salutary handshake. Between men, you know you have established a friendship when, on meeting up, a kiss in the Italian manner replaces the hug.

Because the judicial system is so slow and corrupt there is a premium placed on establishing trust between prospective business partners. So plan on spending plenty of face time with your contacts and remember rambling, unnecessary meetings with little or no agenda are often just an excuse for locals to weigh you up.

So arrive ready armed with plenty of small talk. Argentines are unusually sensitive about how outsiders view their country so let them know how excited you are to visit and how much you are looking forward to the steak and wine. Sport is always a popular topic, especially football. Any expression of interest in seeing a game on your visit might lead to an invitation to a match.

Argentina’s business class speaks good English, is well travelled and despite its government’s policies thinks of itself as part of a global network. But there are cultural differences. Arriving at a meeting and getting straight down to business is considered rude but taking a call during it or talking as opposed to whispering during someone else’s presentation is no big deal. Also, Argentines eat late. If you are arranging a business dinner, do not think of booking a table before 9pm

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dynamic markets

TOP EIGHT THINGS TO DO AND SEE IN ARGENTINA Words Tom Hennigan

BUENOS AIRES

GORDON INSTITUTE OF BUSINESS SCIENCE

Argentina’s capital is one of the most intoxicating cities in the world whose inhabitants are a glamorous and passionate lot.

It is a hive of fascinating, distinctive neighbourhoods, home to some of the continent’s best culture and shopping. At night, its sensual side is unleashed. Whether it’s tango or disco you fancy be prepared to stay up late, very late.

IGUAZÚ FALLS

The Iguazú Falls is a stunning complex of 275 waterfalls located on the country’s border with Brazil. Its sheer scale and power often leaves many visitors overwhelmed at first. Spend two days here, first getting up close and drenched in one of the boats that sail from the Argentine side before taking in the panoramic views from Brazil.

PERITO MORENO GLACIER

RESERVA FAUNÍSTICA PENÍNSULA VALDÉS

THE PAMPA

THE ANDES

BOCA JUNIORS VS RIVER PLATE

URUGUAY

The vast grasslands that once made Argentina wealthy now contain numerous estancias, or ranches, that welcome guests. Here you can take a horse out for the day with some working gauchos while some places also provide polo lessons. At night there is typically an asado criollo, traditional Argentine barbeque slow cooked over wood that is superior to the charcoal version in town.

Argentines’ greatest passion is football and a trip to a match is one of the highlights of any visit, even for non-fans. Buenos Aires has more top-flight teams than any other major metropolis in the world and its superclásico between Boca Juniors and River Plate, the country’s two most popular sides, is one of the most visceral experiences in all sport.

Still in Patagonia, the Valdés Peninsula is one of Argentina’s great nature reserves where you can observe sea lions, whales, penguins and seabirds in glorious abundance. But its most stunning spectacle takes place between late February and late April when orcas thunder out of the ocean to snatch seal pups from the shore before sliding with prey back into the water.

A whole host of destinations await you along this mountain chain that stretches the length of the entire country. For serious climbers there is Cerro Aconcagua, South America’s highest peak.

For the more sedate Argentina’s best wineries can be explored from the charming city of Mendoza while in heavily indigenous Salta catch the exhilarating high-altitude Train to the Clouds.

A different country altogether, but a trip to Buenos Aires is a great a chance to visit one of South America’s most charming places.

Grab the hydrofoil to the old colonial town of Sacramento just across the muddy River Plate or take the ferry to the charming capital, Montevideo. In summer join the party at the glamorous Punta del Este beach resort

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PHOTOS: SHUTTERSTOCK IMAGES

Right down the other end of the country is the Perito Moreno Glacier, a giant river of ice advancing into Argentino Lake. From land you can marvel at its crystalline wall while hoping to catch the eerie sight and sound of an iceberg being calved into the lake.

Then you can trek on the surface of the ice itself.

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entrepreneurship

FLASHY, AFFORDABLE AND FUNCTIONAL Words Cara Bouwer

Ridhwan Khan has the shiniest shoes and the biggest desk imaginable. But don’t let the gloss fool you, he is the roll-up-yoursleeves, hands-on founder of mobile device supplier Mobicel, which manufactures affordable phones and tablets specifically for the South African market While Khan may not have set out to create his own brand, establishing Mobicel eight years ago has positioned the Polokwane-born entrepreneur well to service Africa’s love affair with mobile. Increasingly, research into the growing African consumer market from the likes of McKinsey, Millward Brown and Nielsen talks of a market which is not only brand loyal but favours products tailored to their needs and preferences.

In fact, in a 2014 report from global marketing research firm Nielsen (Why marketing to consumers, not the masses, is the key to brand success in Africa) the researchers noted: “An analysis found that products developed or tailored specifically for Africa’s consumers achieve a success rate of 40%, well above the standard 10%.” When you drill down into the Mobicel story, and the customers it services, the reasons why Africans like homegrown brands becomes even clearer.

GORDON INSTITUTE OF BUSINESS SCIENCE

Prior to 2007, Khan’s business focused on refurbishing phones.

He started out in the UK in 2001 and, in 2002, moved back to South Africa where he decided to concentrate on the informal market, the poorest socioeconomic group and one which economists call the bottom of the pyramid (BoP) and marketers term LSM 1-4. In South Africa this market represents some 22% of all households, with the next band – the emerging middle class (LSM 5-7) – making up more than 52% of the market in 2014, according to research from Urban Studies.

By 2005 he was selling more than 50 000 refurbished units a month. However, Khan recalls that servicing this informal market was challenging. “We found it very difficult to build a brand in the informal market,” he told Acumen. “You have spaza shops and small stores and they are just interested in selling a product, not building a brand. We found it difficult to get them to grasp the concept of a warranty and after-sales service. I witnessed it myself; that’s when I decided to change.”

He got out of the second-hand phone business almost overnight and self-funded a new venture: the creation of a sub-R1 000 phone designed to local market specifications. Mobicel was born.

DISTRIBUTION COUP

Looking back, through all the risk-taking and the bootstrapping, Khan admits that securing key distribution contracts with big retailers quickly was significant. His first stop was retail group

Ridhwan Khan

entrepreneurship

. . . SECURING KEY DISTRIBUTION CONTRACTS WITH BIG RETAILERS QUICKLY WAS SIGNIFICANT.” Edcon; and he struck it lucky. “It’s quite difficult for them to buy into a brand that’s just come in,” he admits. “With devices and entry-level, tier-three devices you have this stigma of Chinese and ‘fong kong’ (fake brands), that’s something we fight on a day-today basis. It was a game changer when Edcon decided to list the product, but we also had to sell our souls to give it to them: we had to pack the product and we gave it to them on a consignment basis. It was the first time Edcon had bought on a consignment, and they only paid us for what they sold.”

But, again, Khan took the risk. “We believed in the product.

Fortunately they sold more than they expected and it just grew from there. Once we had Edcon, the other retailers opened up, the likes of Foschini and Massmart. The big one was MTN; having a network backing your product is amazing. Now we have Cell C and we’re in discussions with Vodacom. So, in the last four years we now have listings with every major retailer in the country,” he says. The group also has a presence in Botswana, Namibia, Lesotho and Swaziland and Zimbabwe, where a local distributor handles distribution and logistics.

THE PEP CONNECTION

More recently, the big coup has been Mobicel’s tie-up with PEP, which operates more than 1 870 retail stores across Southern Africa and, according to the company “sells almost 50% of all pre-paid cellphone handsets in South Africa; 8.5 million cellphone handsets in the last year”. PEP also claims to sell “over 170 million airtime vouchers a year – that’s nearly 1 000 vouchers every minute (and 17 every second) during store opening hours”.

PEP, says Khan, is a highly strategic partner: “Like us they take their brand very seriously. We have a good relationship with them.”

As critical as distribution has been – after all, no distribution network means no business – it’s just part of the puzzle. The real game changer is customer service. He explains: “I think the most important thing for us is after-sales service. As an entry-level brand, our end-users need a guarantee. If they are taking R500 out of their pocket, they need to know who to contact if they have a problem. In our box we have a warranty card and a hotline which they can contact, and online support. We take this seriously.”

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A lot of companies talk about service, but Khan believes for the BoP it’s essential. “For my customers R400 is a lot of money.

If that guy has a bad experience, then word of mouth can be damaging.” They might not get it right all the time, and yes, he admits, there are arguments between his call centre and stores over trying to turn around device repairs in seven working days, “but we try. I actually think our service is better than a lot of other products out there.”

Khan is, he explains, cced on Mobicel call centre’s hotline email “and I go through everything. Sometimes at night I’ll reply to customers myself. After-sales is important. My philosophy is: Don’t chase the sale if you can’t look after the after-sale.”

In this respect, he takes his hat off to his new partner, PEP, for top product knowledge and after-sales service. “Just as I’m linked to my after-sales, their head of procurement is the same. It filters right down. They are serious about business and the perception of their brand. They have extremely loyal customers. And, at the low end of the market, brand loyalty is a lot more than at the top end.”

BUILDING A BRAND

Ultimately it is brand loyalty that Khan is after; and he feels he’s picked the right market in which to build a local brand. “The top-end of the market is brand conscious, not brand loyal,” notes Khan. “The bottom of the market isn’t like that. They want value, (but) affordability is not the only thing we offer. We’re offering a product, value add, after-sales, and we can upsell you onto something better when you are done with that product. We’re building a brand.”

The market he really wants on board is the brand conscious youth market, from 14 years upwards. “We want to build a Mobicel family within which they can grow. The youth are very brand conscious, so we’re trying to build some very cool products; because cool sells, not price. In 2016 we want to start playing with trendy stuff and funky colours… that’s going to be really exciting.

It’s a big space for us, because the youth are trendsetters.”

And youngsters will lead their parents to the brand too, he believes. “Our aim is to try and put as many devices in as many South Africans’ hands as possible. Every year we get closer and closer.” At the moment that translates into a market share of around 2%. But Khan is ambitious: “Our aim is to be at 5% by next year February. It’s a tall order. It’s a very tall order. But I’m going to get there.”

Khan, it seems, is putting his faith in his products and – just to be sure – a new brand-building marketing strategy incorporating above-the-line TV as well as youth campaigns, shopping mall activations, road shows, outdoor media and, of course, social media. “For the first time in many years we’ve actually seen a lot of traction on the product. I think the market is finally taking it in,” he says, “so we’re talking to the market. We are saying we aren’t a small brand and we’re here to stay.”

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entrepreneurship

A DISRUPTIVE INFLUENCE Words Gaye Crossley & Cara Bouwer

Bharti Airtel, the Indian multinational telecoms company, has been quick to jump on the African mobile money phenomenon. Their answer to the M-Pesa juggernaut is Airtel Money, and, it seems, there’s still enough pie to go around With operations in 17 African countries, after just four years in the mobile money game Airtel Money has 36 million registered customers of which 11 million are active. At end-2014, Airtel Money had facilitated 600 million transactions, valued at US$13 billion.

The man behind Bharti Airtel International’s Africa charge is Chidi Okpala, Director and Africa Head: Airtel Money. With more than 20 years’ experience in retail, financial services and strategy consultancy, Okpala is a Chevening Scholar and Sloan Fellow who holds a BSc Finance and an MBA from the University of Nigeria.

He also has an MSc in Strategic Leadership and Management from the London Business School.

Acumen caught up with Okpala during a recent visit to GIBS.

WILL MOBILE MONEY MAKE BANKS OBSOLETE?

We’re payment solutions companies. We’re not becoming banks, so we will not replace banks. We work and collaborate with banks. The funds we mobilise sit with banking partners and we work with them to develop our products. We also work with banks to enable them to extend their products and services more efficiently by using our channels. It’s a collaborative effort. The party we are disrupting, however, is cash. Completely.

GORDON INSTITUTE OF BUSINESS SCIENCE

WHY ARE TELECOMS FIRMS MOVING INTO MOBILE MONEY?

There are a number of reasons. The first is it drives ‘stickiness’ within the GSM (digital mobile telephony) business. Loyalty is not that strong in Africa, but the moment someone adds financial services to his phone then it becomes more difficult to switch.

Our own internal study has found that mobile money reduces change rates by as much as 50%. If you move, you not only have to set up another voice contract, you also have to set up another bank account. From a mobile money point of view, we have also added further products such as loans and insurance, so moving becomes a lot more complicated.

APART FROM CUSTOMER RETENTION, WHAT ARE THE OTHER BENEFITS?

Mobile money offers us an important new income stream; now that growth in the voice business has become soft it helps us to diversify revenue sources. Another reason for adoption is to

Chidi Okpala, Director and Africa Head: Airtel Money

reduce the cost of distribution. In Africa airtime is most often sold through a distribution network and the agent makes about 10%. But when you buy via mobile money it costs us nothing.

Even though we pay the mobile money business unit commission, the money is retained within the organisation, it saves us that hefty 10%, so the more customers we have on this platform the lower our distribution costs.

YOU’RE ESSENTIALLY TAKING AWAY BUSINESS FROM YOUR AGENTS. DOESN’T THIS CAUSE A MORAL DILEMMA?

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That’s a good question. We’ve discussed this, but the reality is there is no moral dilemma because there is an ecosystem that supports the mobile money business. It becomes a case of substitution. If all our subscribers are buying on Airtel Mobile Money, they still need phones, so we convert those agents into handset agents. They become merchants, in a continuous process where we keep creating roles for them.

WHAT PAYMENT OPTIONS ARE AVAILABLE TO MOBILE MONEY USERS?

On a personal level we have person-to-person transfers, so if I have an Airtel Money Wallet I can transfer money to someone else with an Airtel Money Wallet. I can also transfer to someone without a wallet. I can transfer to a competing airtime provider within my country, whether it’s MTN or Safaricom, as long as they have a wallet.

YOU’VE ALSO PARTNERED WITH VISA AND MASTERCARD. WHY?

Firstly we needed to broaden the access channels for customers.

With a card, wherever there is an ATM, they can cash out with the card and wherever there is a point of sale they can transact.

The second reason is we have single-use virtual cards, which enable our customers to use Airtel Money online, for example on Amazon. It’s really about just opening up those possibilities so people can pay for services.

HOW WELL REGULATED IS THE INDUSTRY?

Across our 17 markets, six markets have mobile money regulatory frameworks. In the other markets work is in progress but we are still governed or are operating on a mobile banking sort of framework. The good thing is that in all these markets we work with banks and they keep our escrow accounts, which gives the regulators a level of comfort. We’re working with regulators to develop regulatory frameworks. There is also the GSMA (a global association of mobile operators) which has a body dedicated to mobile money. The industry is setting standards for ourselves, putting in frameworks, regulating or providing guidance on the way we operate.

YOU’RE WORKING ON CROSS-BORDER TRANSMITTANCES WITHIN YOUR 17 COUNTRIES OF OPERATION. WHY ARE REGULATORS SO SLOW IN ADOPTING CROSS-BORDER TRANSACTIONS? Their concerns are around tourism, money laundering and issues around forex. There’s a general feeling that when you allow people to be mobile it makes these problems far more pervasive and regulators fear they will lose control. We have to keep demonstrating to them that their fears are not warranted.

There are limits to our wallets, for example US$1 000 [values are dependent on country]; so it’s not like bank transfers that can be limitless. We work hard to make regulators comfortable.

ARE YOU FINDING IT EASIER TO GET PERMISSION FOR CROSS-BORDER TRANSMITTANCES WITHIN TRADE BLOCS LIKE THE EAST AFRICAN COMMUNITY?

Surprisingly not. We have operations across East Africa, West Africa and Southern Africa, including Malawi and Zambia and the islands of Madagascar and Seychelles. In East Africa, we have

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only received approval for cross-border remittances in Rwanda.

But we have received approvals in Niger, Malawi, the Democratic Republic of Congo and Burkina Faso, so we’ve connected those markets, including Rwanda. We’re engaging the regulators and we think that in the next three to six months our approvals will all come through. Then we can go ahead, full blast, with the service.

HOW ARE LIMITS ON CROSS-BORDER REMITTANCES AFFECTING BUSINESS?

They do affect business, but at the moment, for us anything is good enough because people desperately want the service. For example, we launched cross-border remittances between Burkina Faso and Côte d’Ivoire, in partnership with MTN and Orange who are in Côte d’Ivoire. Today the transfer value is close to €6 million on a monthly basis in almost 3 000 transactions; and this is a new service. It just shows how desperately people need cross-border money transfers.

ACROSS AIRTEL’S CENTRAL MARKETS, NO TWO MARKETS ARE THE SAME” WHY IS SOUTH AFRICA PERFORMING POORLY IN THE MOBILE MONEY ARENA? I’ve not really studied it because Airtel doesn’t have a presence in this market, but my ‘back of the envelope story review’ is there are a few things. One of them is the level of sophistication of the banks. More importantly, I think South Africa has yet to have a proposition that appeals to the ‘pain points’ that relevant market segments are facing today. I think South Africa sees what is happening in Kenya, Tanzania and Uganda and then is simply copying and pasting. Across Airtel’s central markets, no two markets are the same. We have made similar mistakes in our markets before getting it right.

ANY ADVICE FOR LOCAL OPERATORS?

You have to start off with a single compelling case, then use it to build traction. One example I can think of is how many foreign migrant workers are in South Africa. Many of them pay up to 50% to get their money back to families in their home countries.

But on our channel it costs around 5%. This is just one idea.

HOW DOES THE FUTURE LOOK FOR MOBILE MONEY?

As regulators get more comfortable with the idea of mobile money, I foresee the increasing of wallet limits to US$3 000, then US$4 000 then US$5 000. Mobile money will start appealing to a broader section of the market including higher LSMs. People will have a bank account and a money wallet. It’s going to appeal to everybody

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MEGA HUMAN SETTLEMENTS ARE THE FUTURE The creation of Mega Human Settlements in Gauteng will complement the reconfiguration of the Gauteng Province as a City Region, said an elated MEC of Human Settlements, Jacob Mamabolo. This new approach in massive housing was launched at the Gordon Institute of Business Science (GIBS) in April this year.

“When we talk of Mega Cities, we are talking about building new integrated post-apartheid cities with a yield no less than 10 000 households. These cities will correct the spatial patterns of apartheid, which led to the disadvantaged people living on the periphery of our towns,” said Mamabolo.

He believes that Mega Human Settlements projects are not only about creating new cities, but also closing the chapter on the legacy projects.

The MEC said that the envisaged radical spatial transformation which will be part of Mega Human Settlements will include mixed land use management, densification and infill development, and infrastructure development.

“Mega Projects will have mixed housing typologies that will consist of affordable housing, special housing, high density, serviced stands and inclusionary housing.”

During the creation of these new settlements, the issue of security of tenure will be addressed.

“It is important to understand this vital issue, as a title deed is the only proof of land/house ownership and as it is able to change the balance sheet of a person from a negative to a positive.

Through these projects we will be able to deal with issues such as homeownership, sectional title schemes, rental housing schemes, proclamations and opening of Township Registers as well as transfers and title deeds registration,” Mamabolo said.

He added that the Department will be able to have effective and efficient rental and bond disputes resolution mechanisms.

“This will not only change the look and feel of our towns but it will also assist us to contain urban sprawl, promote infill

MEC of Human Settlements, Jacob Mamabolo

development and densification, enhance transportation and mobility, rebuild infrastructure (roads, storm-water, sewer, electricity and public amenities) and integrate residential and economic development,” he said.

The Mega Human Settlements projects will be built around the five corridors of development in Gauteng, which are City of Johannesburg (Central Development Corridor), City of Ekurhuleni (Eastern Development Corridor), City of Tshwane (Northern Development Corridor), Sedibeng District (Southern Development Corridor) and West Rand District (Western Development Corridor).

For the Central Corridor the Department of Human Settlements was looking at constructing 140 000 units in areas that include Lion Park, Diepsloot East, Fleurhof, Cosmo City, Malibongwe Ridge and Goudrand. Government was also working with the private sector and the City of Johannesburg on Masingita City, Rietfontein, Waterfall City, Modderfontein City and Steyn City – initiatives seeking to radically change the spatial landscape of the

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Central Corridor.In the Eastern Development Corridor more than 100 000 houses will be built in areas such as Chief Albert Luthuli; John Dube Extension 2; Tsakane Extension 22, Germiston South, Leeuwpoort; Rietfontein and Clayville Extension 45.

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In the Southern Development Corridor more than 120 000 houses in Sedibeng will be built in Boiketlong; Golden Highway; Evaton; Vereeniging, Savanah City, Ratanda and R59 Corridor.

The MEC said that there were many reasons projects were abandoned and some had to do with improper business practices by contractors whilst others had to do with the capacity of the department to make timely payments to contractors. MEC added that he was deeply concerned about abandoned projects and, in the case of Alexandra, it was going to be hard to activate the Alexandra Renewal Project without taking into account what was started and not finished.

In the Northern Development Corridor more than 165 000 houses are being built in Hammanskraal, Winterveldt, Sterkwater, Lady Selbourne, Soutpan Phase 1 to 7, Lotus

“Unfinished projects and abandoned buildings are a haven for criminal activity and social ills and are a pain to councillors because they have to answer to communities. Currently there is

Garden, Fortwest, Capital Park, Vermeulen, Olivienhoutbosch, Nellmapius, Zithobeni, Kirkney and Danville.

no comprehensive detailed information of abandoned buildings in the province, there is no reliable data of where the abandoned buildings are, what their conditions are and so on,” said the MEC. The audit will help government know the extent of the problem.

More than 100 000 houses will be built in the West Rand in Chief Mogale, Kagiso Extension 13, Leratong, Westonaria Borwa, Thusang, Waagterskop, Kokosi Extension 6 and 7, Droogeheuwel, Mohlakeng Extension 11, Khutsong South Extension 1, 2 and 3 and Vaarkenslaagte. These areas are part of the Western Development Corridor.

Mamabolo said that as part of paving the way for the Mega Human Settlements projects an audit of incomplete legacy projects is underway and steps to complete them will be implemented.

“The beneficiaries of the houses will also be pleased by the completion of the houses. The audit will help us prepare for Mega Human Settlements projects as well as give government a clear idea of who should be held accountable for the problem of incomplete buildings,” he said.

According to the MEC, the audit will also give details of how much was spent on each abandoned project, how much still needs to be spent and how long will it take to complete.

MEC Mamabolo believes it is important to close the chapter of abandoned buildings and move over to Mega Human Settlements projects. “The turnaround of the Department must ensure that all legacy projects are completed as the new trajectory of Mega Human Settlements projects unfold.”

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Gauteng Department of Human Settlements 37 Sauer Street, Johannesburg 2001 Tel: 011 355 4000 Web: Gdhs.gpg.gov.za/www.gautengonline.gpg.gov.za

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future

GENERATION Z: THE REAL GAME CHANGING GENERATION Words Dion Chang

Brands and retailers have been obsessing about the Millennials for some time now, but there is a sudden shift of interest to the next generation: Generation Z. With no source of income this seems odd. So why are businesses taking such a keen interest this teenage demographic?

If you have never heard of a YouTube channel called EvanTubeHD, but have children between the ages of 8 and 13, ask them. It’s likely that they could be part of the 1.5 million group of followers who tune in daily to watch a young boy called Evan give reviews on toys, the revenue stream from which is, incidentally, his pocket money. Welcome to the world of Generation Z. Born around the mid 1990s (like South Africa’s post-94 Born Free Generation) this 17-and-under age group is starting to come onto the radar of major global brands and retailers, who are taking a keen interest in understanding what makes them tick.

With only their pocket money as disposable income, this sudden commercial interest seems misguided, until you understand their world and the knock-on effect it is having on household spend.

GORDON INSTITUTE OF BUSINESS SCIENCE

Let’s start with the basics. This is the first generation of true digital natives. Millennials, while very tech savvy, still had to adapt to and embrace new technologies, and even social media platforms. Gen Z has no comprehension of a world without Google, the Internet and smartphones. What we call new technology is simply the air they breathe.

They are also a post 9/11 generation and have witnessed, first hand, the harsh realities of (what we now call) the Great Recession. Terrorism, xenophobia, random high school shootings, climate change and cyber bullying are part of their lives and reality. They’ve had to grow up quickly as their parents have also hammered all these threats home to them.

At the Women in the World Summit in April this year, Noreena Hertz, an honorary professor at University College London, presented a research paper on Generation Z, which she prefers to call Generation K, in reference to Katniss Everdeen, heroine of The Hunger Games, the best-selling young adult novel, and now movie and series, set in a dystopian world.

She made the point that Gen Z’s world is “less oyster and more Hobbesian nightmare. Al-Qaeda and Isis have been piped into their smartphones and they have witnessed their parents lose their jobs. They are a group for whom there are disturbing echoes

of the dystopian landscape Katniss encounters in The Hunger Games’s District 12. Unequal, violent, hard.”

As a result their outlook on life as well as their own future is remarkably different to teenagers of other eras. Surveys by American research company Cassandra, revealed that 75% of Generation Z worries about terrorism and 66% worries about climate change. 43% of 7 to 13-year-old Americans feel that school violence and shootings will have the biggest impact on their generation; even bigger than the invention of social networking and the election of the first black President.

Research on South African Gen Zs (let’s call them Gen ZA), reveals similar “adult” concerns. Unemployment is a big worry for Gen ZA where one in three 18-to-25 year olds is without a job. It’s therefore not surprising that 86% describes wanting a job as a major concern and 77% are concerned about debt. South African teens are also aware of how government corruption impacts their lives and communities directly in the form of non-service delivery. 61% said the gap between rich and poor is harmful to their generation.

However, while their outlook is framed by a world that is “Unequal, violent and hard”, Gen Z are already prepping for their future to ensure they do not fall into the same trap of unemployment and debt and have formed a tenacious and resilient attitude to any problems that life might throw at them.

As they are a Google and Internet generation, they have little need to await direction. They can access whatever information they need relatively freely and that information is usually enough on which to base a decision. Whereas previous generations had to rely on a parent or teacher or supervisor to explain something to them, Generation Z isn’t bound by those constraints and can access the information they need when they need it and then get to work.

This behavioural pattern is one of the reasons why they are having such an impact on household spend. If a family needs to buy an appliance, book a holiday or plan the meals for the week,

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the Gen Z in the family inevitably takes on the task of doing the research before a purchase decision is made. 93% of Generation Z's parents admit their spending is influenced by their offspring, 74% influences family apparel purchase decisions and 73% says they influence the weekly dinner menu.

According to the Chamber of Commerce, in America alone, Generation Z has a combined buying power of $43 billion and influences an additional $600 billion of family spending. But it’s not just their influence on what items a household buys, but also a wide spectrum of factors that go beyond price, fashion and aspiration. For Generation Z, value is determined by looking at how an item is made, how long it will last, its environmental impact and whether they really need it. They’re concerned with ethical consumption and 66% claims to care about climate change. Labels such as fair trade, ethically sourced and low carbon impacts are all important in the purchase decision process. As future consumers, this is a complex bunch, hence the commercial interest in this demographic: they really have the potential to be game changing consumers For example, according to a US Cassandra Daily report, only 26% of Generation Z makes impulse purchases. More than 50% of Generation Z identify themselves as deal hunters. 57% also say they research products more than they used to before making a purchase. They have a ‘cost-per-use’ mantra and are mindful of the ‘resale value’ of their possessions. They choose to save up and buy more expensive high-end product designed to last that can either be resold later or used for years, outlasting cheaper, disposable consumer products. 54% of American Generation Zs surveyed say they prefer to spend on quality over quantity. For mass, fast fashion retailers, this should be a red flag.

So while Generation Z may not have disposable income, that’s not to say they aren’t already rectifying that situation, which brings us back to EvanTubeHD. Their downtime is productive.

89% say they spend part of their free time in activities they consider productive and creative instead of just hanging out, so while previous teen generations played with Barbie dolls and rode their Chopper bikes around the neighbourhood, Generation Z are creating revenue streams from their how-to videos on YouTube, just like Evan. Nearly 80% would like to find a way to make their hobby their future job and over 70% reports that they would like to be entrepreneurs. Some already are.

Kitties Mama is another YouTube channel featuring three teens from the same family. They post a variety of daily, how-to videos and their channel receives 30 million hits a month. Their mother now handles the social media side of their business, and they are being home schooled so that they can meet the production demands of their enterprise.

Another insight into this entrepreneurial spirit is the role models that Generation Z have. At 18 years of age Malala Yousafzai is already a Nobel Peace Prize winner and most of the Silicon Valley start-up entrepreneurs are already onto their third company at the age of 25. This not only embeds a strong “can-do” attitude, but, surprisingly, another strong characteristic of regarding failure as a badge of honour. Compared to Millennials, Generation Z sees failure as a means to learn and improve their life skills.

This might have a lot to do with the strong gaming culture of this digital generation where getting to higher levels within a computer game, requires determination and repeat efforts.

Some research companies are already of the belief that this tenacious approach to life will result in Generation Z becoming the landlords to the commitment-averse Millennials. I can believe that. According to Office Team, an American recruitment company, 32% of Generation Z already believes they will be managing employees within the next 5 years. They want to make the world a better place, and they have a game plan to do it.

Generation Z might be less hopeful, but they are more realistic, more action-orientated, less ethereal and have a sustainable outlook that is hard-wired in reality. 77% understands they will need to work harder compared to those in past generations to have a satisfying and fulfilling professional life.

I call them “the old souls of the digital world”. They are already prepared for the future.

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Are we prepared for them?

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COPENHAGEN COOL Words Caroline Hurry

Explore lakes, forests and farms, north of this compact, designer city.

Little Mermaid

Seaweed roof

GORDON INSTITUTE OF BUSINESS SCIENCE

Copenhagen has green copper domes, twisty spires, wide canals reflecting 17th century buildings, and cafés on cobblestones where British tourists chase ales with schnapps – mind how you go!

A guided “Kanal Fart” will sail you past the Opera House, Black Diamond and Little Mermaid, in a traditional low boat.

When asked for your “fart plan” hold the jokes about spontaneous combustion. The Baadfarten (pronounced “both fartin”) on a sturdy vessel built in 1895 encompasses four lakes and you can lunch at the 18th century Sophienholm manor overlooking Lake Bagsværd. Eating in Copenhagen will lighten your wallet in no time so the Madklubben concept offering gourmet fare at budget prices is a boon for cashstrapped South Africans. We tried three of their nine restaurants – Hanzó, Alabama Social, and Gran Torino in Nørrebro, where city night lights twinkle in the lake.

Immerse yourself in pastoral history at the 86-acre Frilandsmuseet showcasing 50 Danish farms, mills and houses built between 1650 and 1940. I admired the

Kanal boat fart

dried seaweed roof of a Faroe Islands cottage and chatted to a farmer’s wife who told me the best way to care for your undies was not to wear them. Sensible!

The north of Copenhagen is festooned with forests. On any of the sun-dappled paths you may encounter red squirrels, dog-walkers, or a random crone cackling downhill on a bicycle, silver hair horizontal in the breeze. You can pick wild raspberries and make silly puns when your husband shows you an old beech.

“This old beech took yew fir a noble oak!”

I know. Groan. It falls even flatter when you have to explain the puns to a native Dane who doesn’t get the fart jokes either.

Few do!

Visit Karen Blixen’s ancestral home at Rungstedlund, north of Copenhagen, where she lived until her death in 1962.

It’s furnished just as she left it. Stroll through 40-acre parklands comprising the bird sanctuary she started in 1958 and find the Out Of Africa author’s grave under

a tree. There’s a café, shop, and library containing all her writings and artwork.

Bakken, the world’s oldest fairground (started 1583), is a fun alternative to the more famous Tivoli in the city centre with 38 restaurants and seven theatres offering concerts, ballet, panto, cabaret and rides. If you feel like a good scream, Det Gyldne Tarn will hoist you sky high before dropping you like the rand. You get to appreciate the medieval rooftops for two seconds before plummeting to what feels like your certain death. Waterproof broeks recommended.

Cycling is the best way to explore Copenhagen and smart bikes with an inbuilt computer and GPS route-planner are available for hire at 25 locations or book one online at Bycyklen.dk A Copenhagen Card gives you access to all transport including boat tours, and free entrance to 74 attractions. Order one from Copenhagencard.com.

More about Copenhagen from Visitcopenhagen.com.

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STOCKHOLM SYNDROME Words Caroline Hurry

With 60 bridges spanning a filigree of waterways, Sweden’s capital seems to float, hence its “Venice of the North” soubriquet.

I like the lilt of the Swedish language, and their flag – a yellow cross on a blue background. This annoys my husband, whose passion for the Dannerbrog verges on obsessive. The Danish flag aka Dannerbrog – a white cross on a red background, adorns socks, crockery, every garden in Denmark, and our study in Joburg. Failing to display it marks you as a foreigner, or worse, an anarchist.

limit in the fast lane, irrespective of mile-long queues behind them. I’ve seen wheelbarrows driven with more zip.

“Yellow, the colour of Swedish teeth, is for cowards,” asserts my husband “Red represents the blood of our hearts, the force of the Dan tribe.”

In Stockholm, summer is celebrated in Kungsträdgården with open-air concerts where singers of varying talents yodel tender entreaties at old men hunched over chessboards. Lovers kiss, and teens cool their feet in the fountains.

Who knew? Changing the subject, I praise my hotel breakfast pastry.

“Delicious! Even better than the ones in Copenhagen.”

“Blasphemy,” hisses hubby. “Everyone knows what a Danish is but there’s no such thing as a Swedish when it comes to tarts.”

English is not his first language, so I let that pass. Something we do agree on, though, is that Swedes are the world’s worst drivers, sticking to the 120km/h Stockholm

Gung ho overtaking is a no go, thanks to the judicious enforcement of “Fart Kontrol” where speeding fines are based on income. The more you earn, the more you’ll pay. That’s Swedish egalitarianism for you. Equal punishment for all!

Two statues of kings called Carl – a popular name with Swedish royalty – dominate the park. Carl XII, the last Viking King, points a sword eastward; his menacing posture somewhat diminished by the seagulls crapping on his head.

Despite four lions flanking his statue, the other Carl (XIII) was regarded as a coward, who sought political advice from dubious soothsayers. With Lake Malaren at its back and the Baltic Sea in front, Gamla Stan

Stockholm is easily navigable. Around 60 bridges link the 14-island archipelago that forms this composite city arranged in meatball-sized portions.

A stroll through Gamla Stan, the original medieval Stockholm, unfolds teasing reflections of baroque buildings broken up by sailing boats in the filigree of waterways. Alleys twinkle through arches.

Everywhere, the water calls to you.

The salvaged Vasa, a 17th-century wooden ship that sank on its maiden voyage, is worth seeing. Around 50 of 150 passengers drowned, including the ship’s cat. The Vasa, then the biggest warship afloat, recalls Sweden’s history as a bellicose nation given to beheading transgressors with impunity.

Then, thanks to some sort of schnapps and reindeer stew-induced revelation, they did an about-turn and Swedes today are a tax-paying, authority-obeying lot.

Committed to social welfare, their borders are now wide open to immigrants. Is this a good thing? Judging by the country’s high rape statistics, jag vet inte

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Carl the Viking

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THE FINER THINGS Words Cheska Stark

GORDON INSTITUTE OF BUSINESS SCIENCE

HIS CHECKLIST 1.

Printed shirt, R699, Trenery, Woolworths.co.za Get ready for days in the sun with this on-trend floral-motif shirt. It’s cool, it’s casual and easily worn with shorts or jeans for hot summer days.

2.

Suede derby, R1 299, Country Road, Woolworths.co.za These suede lace-ups are right on-trend for this season – proving that suede is not just a winter fabric. The cool texture and smart laces add that extra ‘it’ factor to your look, be it at the office or out and about.

3.

Tom Tailor denim shorts, R699.95, available at selected Edgars and flagship stores, Edgars.co.za Trust us, you will live in these shorts this season. They are a classic, wardrobe staple that every man has got to own.

4.

Messenger bag, R779, River Island, Riverisland.com Look the part with this corporate-style messenger bag. It’s stylish, smart and ready for action. Remember, man bags are here to stay and you pretty much won't be able to conduct any business without the best business bag to suit your style perfectly. This is the one.

5.

Weber MasterTouch Charcoal Grill with Gourmet Grate, R5 399, Yuppiechef.com Get ready for the braai season and take your braaiing to the next level with this MasterTouch Charcoal Grill, a beauty of a braai that combines all of the features of the One Touch Premium Grill with the added awesomeness of the Gourmet BBQ System grate.

6.

Acqua Di Giò Profumo Parfum, from R890, Red Square, Redsquare.co.za Giorgio Armani introduces Acqua Di Giò Profumo. The Acqua fragrances consist of invigorating marine notes which mean you not only smell good but you feel good too. The fresh spray of sea salt, the cooling breeze against the skin, the warmth of the sun and the heat, this fragrance is perfect for summer.

7.

Calvin Klein wallet, R1 299, exclusively available at Edgars flagship stores, Edgars.co.za This super-slim leather wallet that caters to all your needs: cash, cards and more. A thin, minimalist-designed wallet that is stylish and functional, we love the bold branding which shows you are a man who puts your money where your mouth is.

8.

Oakley sunglasses, R4 175, Sunglass Hut, Sunglasshut.co.za It’s time for you to up the ante when it comes to sunglasses, The Oakley Carbon Blade sets the standard for performance eyewear. These frames are stress-resistant carbon fibre, which provides lightweight durability. Titaniumforged hinges, unobtanium earsocks and air-filled silicone nosepads create a comfortable fit that lasts all day.

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HER CHECKLIST 1.

Fringe bag, R2 499, Country Road, Woolworths.co.za The seventies are back in a big way this summer so get ready for a fringe and suede overload. This leather handbag from Country Road is the perfect addition to your wardrobe, a handbag is the easiest way to embrace a trend without looking full-on fancy dress. Plus the colour is easily worn with everything and it’s big enough to carry your life!

2.

Toni D'Orsay heel, R1 299, Trenery, Woolworths.co.za Hello summer, hello new heels! This heel is on our wish list for its midi height and brilliant combination of snakeskin and black. This shoe is easily worn to the office, everyday and just as easily with jeans for a sexy going-out look. The snakeskin detail ups the ante immediately.

3.

Bangle, R299, Mango, Shop.mango.com Accessorising is the key to taking your look to a whole new level. Extra bangles make you look put together and finish off a look perfectly.

This bold, gold bangle from Mango is a statement piece, while still classic enough to be worn with anything. Yes, wear it to work for a cool corporate look but don’t be afraid to wear it poolside too.

4.

Joli Rouge Brilliant in Watermelon 17, R250, Clarins, Clarins.co.za It’s always the day for a bold lip. Go for this bright Watermelon colour this season to turn heads and be bang on-trend.

5.

Flats, R1 299.95, Dune London exclusively available at Flagship and selected Edgars stores, Edgars.co.za Statement flats are a must-have this season. Summer is a time when one can get away with flats on pretty much any occasion but make sure they are flats worth noticing. These embellished ones do just that – they make up for no heel with serious bling factor.

6.

Floral dress, R1 299, River Island, Riverisland.com Bring on the florals this summer with this fantastic dress. It’s unusual yet easy to wear. Head into work with this, paired with classic heels or head to a summery weekend brunch with flats and wine in hand.

7.

Dolce & Gabbana sunglasses, R4 405, Sunglass Hut, Sunglasshut.co.za When it comes to summer sunglasses we say “go classic”. The oversized frames, yet black colour, tick all the boxes.

8.

Tropical swimsuit, R2 575, Banana Moon, 011 447 8238 Get tropical this summer with this ultimate glamour cossie. Gone are the days where the only way to glam up was in a bikini, this one-piece is the way to go.

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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 …

HUMAN-POWERED

ON YOUR BODY: CRAFT BIKE TECH JACKET

ON YOUR HEAD: MET TERRA MTB HELMET

ON YOUR BIKE: GIANT ANTHEM 0 ADVANCED

WHAT IS IT: Your first line of protection when the weather goes really grumpy. The Bike Tech Jacket – manufactured from technically advanced ThermoCool fabric – is not only waterproof, but also guarantees complete wind-protection, even during those unpleasant Cape winter storms.

WHAT IS IT: A lifejacket for your brain! If you ever do come off your bike, the MET Terra All-Mountain Mountain Biking helmet is rugged enough to keep your cranium intact. Tried and tested construction, a comfortable fit and excellent protection (courtesy of the In-Mold Shell assembly) combine with a proven Safe-T Twist system for on-the-fly one-handed adjustment.

WHAT IS IT: This marvel of modern technology is truly the pinnacle of velocipede design, The GIANT Anthem 0 Advanced is an utter rocket ship of a mountain bike, boasting a perfect combo of light weight frame, cuttingedge technology and thoroughbred geometry to blast you right to the front of the pack.

RRP: R1 499

RRP: R119 500

GORDON INSTITUTE OF BUSINESS SCIENCE

WHY DO YOU WANT IT: Available in classical black and white, it boasts highly rated eVent® fabric construction, thus improving the breathability whilst simultaneously keeping moisture out. A laser-cut panel design ensures an ergonomic fit and additional waterproofing, while articulated arms and a drop-tail back make for optimum coverage whilst cycling.

Reflective strips furthermore ensure 360 degrees of visibility to vehicular road users, especially after sunset.

WHY DO YOU WANT IT: Think ‘state-of-the art’, The Anthem 0 Advanced boasts a fullWHY DO YOU WANT IT: The MET Terra composite front triangle, mated to ALUXX SL ensures a deep fit around your head, and has aluminium rear triangle for additional rigidity. soft padding for an extremely comfortable This revolutionary design creates a light, stiff feel. Coupled with the click-wheel retention and hyper-fast full-suspension bike, with an system – which can be adjusted in small unmatched climbing capability, but without increments – the Terra epitomises solidity compromising its ability to soak up the rough. and safety. It also rates as one of the lightest Add to this the OverDrive steerer tube system helmets on the market, at only 295g. and you have a mountain bike that deserves its legendary XC racing pedigree.

DESIGN USPs: Well-spaced and spiked air vents provide large and consistent volumes DESIGN USPs: This is the bees’ knees, with DESIGN USPs: The Anthem 0 Advanced ticks of air-flow to your head, keeping it cool soft-laminated wind and waterproof fabric all the boxes: an advanced-grade composite while on the move. The adjustable visor giving four-way elasticity for freedom of frame; a tried and trusted RockShox RS-1 protects the face (and especially the eyes) movement. The Craft secret is that this is 100mm fork; the top-quality RockShox from branches, sun, rain or mud-spatter manufactured from two high-tech polyester Monarch RL shock; SRAM XX1 1x11 speed from your wheels, while reflective decals layers with a brushed backside, thus offering drive-train; classy SRAM XX hydraulic disc ensure that you are visible to other road superb thermoregulation across a full brakes; and SRAM Rise 60 wheels … it is a users at night. spectrum of varying climatic conditions. bike of absolute beauty.

GO GET IT : Craft outdoor technical apparel GO GET IT: MET Helmets are distributed GO GET IT: Available countrywide from all

by Royalty Sports and are available from is available from most well-known national quality national cycling retailers, or online GIANT Performance dealers, or check out cycling retailers, or online from from Takealot.com & Buycycle.co.za Takealot.com & Buycycle.co.za Giant-bicycles.com for dealer details.

RRP: R1 999

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FOR THE HEAD

FOR THE HEART

FOR THE PLANET

MOTORISED On the motorised side, we look at three vehicles similar at first glance, but with many a difference under the hood and inside.

Read on and see which appeals to your soul ...

FOR THE HEART: CITROËN C4 CACTUS

FOR THE HEAD: KIA PICANTO

WHAT IS IT: Only the French could have come up with the Cactus, and only Citroën would have been daring enough to put it into production. That daring has paid off, as the Cactus has won a boatload of awards, including the 2015 World Car Design of the Year. Hard to classify, the Cactus is a compact hatchback paired with a hint of SUV for intriguing looks.

WHAT IS IT: It might have been around for a while, but the Kia Picanto has been given a facelift that keeps it at the front of the budget motoring pack. It’s a good value, honest little hatchback.

WHY DO YOU WANT IT: The Cactus is a car that will hopefully encourage other car manufacturers to break the mould and do something distinctive every now and again.

If you look deeper, you’ll find a car that is not only fun to drive and to live with, but also offers excellent value for money.

DESIGN USPs: Most obviously, the Cactus has rubbery Airbumps on the sides to prevent damage from shopping trolleys and car doors, and probably from very minor accidents.

The interior is classy and minimalist, with a large touch-screen dominating proceedings.

A 1200 cc, 3-cylinder engine does duty in all three models, but in two of them a turbo has been fitted to increase power output from 60kW/118Nm to 81kW/205Nm. Unfortunately the rear windows don’t wind down, but pop out.

GO GET IT: Prices start at R229 000 and go up to R284 900. A 5-year/100 000km service plan is standard, as is a 3-year/100 000km warranty. Visit Citroen.co.za for more information.

WHY DO YOU WANT IT: The Picanto 1.2 is surprisingly fun to drive, the peppy little engine feeling far more alive than the paper figures of 65kW/120Nm would suggest. Even the base model Picantos get air-con, an iPod-compatible sound system, driver and passenger airbags, front electric windows and a trip computer. The 1.2 EX gets ABS brakes, which is worth the extra money in my book.

DESIGN USPs: When Kia designed the Picanto the brief was for an affordable car that made no compromise on styling, features or technology. The Picanto gets very close to realising this. Fuel consumption is a very good 6l/100km.

GO GET IT: Prices start at R139 995, but the pick is the 1.2 EX manual for R154 995. It comes with a 5-year/150 000km warranty. Visit Kia.co.za for more information.

FOR THE PLANET: ZERO DS ELECTRIC MOTORCYCLE WHAT IS IT: Where there should be a petrol engine there’s an electric motor.

Where there seems to be a petrol tank, there is actually a charging cable. This is the Zero DS electric motorcycle, a vehicle that supplies emission-free commuting with decent performance, and in silence.

The Zero DS is also a dual sport bike, which means it can tackle dirt roads.

WHY DO YOU WANT IT: Commuting for free is everyone’s holy grail, and the Zero DS comes very close to achieving this. It looks good too, and is very easy to ride as there are no gears and therefore no clutch.

It even offers reasonable value when you take into account the savings on fuel, as a single charge should cost around R16.

DESIGN USPs: The electric motor produces 40kW and 92Nm, which is enough oomph for a 0-100km/h sprint of just 5.7 seconds. The standard charger takes just under 8 hours for a full charge, and the range on a charge is claimed to be 160km, at a cost of about R10c/km. This will vary according to how aggressively you ride, but makes most commuting possible. You just need to plan around load-shedding.

GO GET IT: The price is R167 775, including a 5-year/160 000km warranty on the power pack and 2-year warranty on the bike. Visit Zeromotorcycles.co.za

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TECHNO Words Aki Anastasiou

PHOTOFAST MEMORIESCABLE YES! A CABLE THAT STORES DATA AND CHARGES Priced from R 1 200

The PhotoFast MemoriesCable is a clever cable designed for Apple phones that allows you to charge your phone or use it for storage. Once you’ve downloaded the PhotoFast app the menu gives you the option to download your data onto the cable. You can store anything – your contacts, music and videos – from your phone – even your Dropbox files. You can automatically set the MemoriesCable to back up while charging your iOS device. Worried about security? Don’t stress, the cable can use a password and Apple’s Touch ID to secure your data. Storage sizes start from 32 GB to a massive 128 GB!

TRAKDOT LUGGAGE TRACKER Price R960

Ever been one of those 26 million passengers every year at airport arrivals, standing alone, staring at an empty carousel when everyone else has already picked up their luggage?

Losing your luggage has got to be one of the worst feelings in the world!

The card-sized TrakDot Luggage Tracker will hopefully take some of the anxiety out of travel by tracking your bags. Powered by two AA batteries, it uses cellphone technology to alert you to where you luggage is as soon as you land. It has a smart chip built in that shuts the device down as soon as the airplane takes off or goes over 100 knots. When the speed goes below 100 knots the TrakDot turns itself back on. You can get a text, email or even use the app to find out exactly where your luggage is. It will even send you an alert just before it comes out onto the carousel which can potentially be more thrilling than seeing your family members waiting for you in Arrivals.

KARDIOFIT BLOOD PRESSURE MONITORING

GORDON INSTITUTE OF BUSINESS SCIENCE

Price R216 per month

Healthcare is an industry set for major disruption. The notion of the quantified self is essentially using modern-day technology to track your health on a regular basis. One SA company taking this forward is KardioFit which has launched a world first in treating hypertension or high blood pressure, which, in turn, is linked to heart disease and strokes.

KardioFit has partnered with iHealth Lab – a world leader in mobile personal healthcare products to provide blood pressure monitors. The devices can be used from the comfort of your home to check your blood pressure on a daily basis. But this technology goes one step further. It links to an app and syncs the information after the reading has been made.

The information is then available to doctors, caregivers and ER24 who will monitor for any irregularities. If your blood pressure is too high and there is an emergency, ER24 will automatically dispatch an ambulance. The app also sends patients messages to remind them to check their blood pressure. Users will pay R216 per month for the service which includes the iHealth blood pressure monitor.

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APPLE 12-INCH MACBOOK IS THIS THE FUTURE OF LAPTOP COMPUTERS? Priced from R18 999 Apple’s new 12-inch MacBook is incredibly thin, light and defies engineering. What they have packed into a computer that is 1.3cm thick, has a full keyboard and weighs 920g is quite astonishing. And it has a 2 304 x 1 440 Retina display! Apple has redesigned every element in the new 12-inch MacBook. The new keyboard uses a “butterfly” mechanism as you press the keys – be warned, it does take a bit of getting used to. The new Force Touch trackpad is probably the piece of technology that sets this laptop apart from all the others. The new trackpad has clever sensors that monitor the amount of pressure you apply to add more functionality to your experience.

What! No USB ports? Apple chose to use the new USB-C port in this new MacBook. USB-C is the new industry standard that will be used for connectivity and power in next generation laptops. You will need an Apple USB-C Digital AV Multiport Adapter if you will need USB support and for presentations. Ultimately this is where computing is heading. With everything moving to the cloud and data connectivity becoming ubiquitous the USB is set to go the same way as the DVD. The new MacBook uses Intel’s Core M processor to deliver a battery life of around 8-9 hours. It comes in space grey, silver and even gold for the true fashionistas.

PLANTRONICS VOYAGER FOCUS STEREO BLUETOOTH HEADSET WITH ACTIVE NOISE CANCELLING Price R3 999

The Plantronics Voyager Focus headset is designed to offer a high-quality user experience in the work environment while not compromising on music quality. It does this using sophisticated intelligent sensors built into the headset that cancel out background noise both in the headphones as well as the microphone. There are three separate microphones that offer dynamic noise reduction – even take a call next to a vacuum cleaner running and it cuts the noise out! You can connect to your laptop, phone, tablet and even smartwatch simultaneously. If you are on a cellphone call for example, and a Skype calls comes in, you will be given the option to put your call on hold and take the Skype call or vice versa. It is designed to make unified communications seamless and the smart technologies built into this headset make working hands free and taking calls more productive. The Voyager Focus has a range of 45 metres and a battery life of 12 hours

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BOOKS Words Chris Gibbons

WHAT’S WRONG WITH MANAGEMENT AND HOW TO GET IT RIGHT FAITH & COURAGE: THE POLITICAL PAPERS OF MEWA RAMGOBIN – ANTI-APARTHEID AND DEMOCRACY STRUGGLES, SOUTH AFRICA, 1960S TO 1994

GORDON INSTITUTE OF BUSINESS SCIENCE

EDITED BY IAIN EDWARDS I AMAZON.COM I $13.67 That apartheid was a monstrous system is common cause and the brutally tragic deaths of the likes of Steve Biko and the Cradock Four are well-documented. Far less so are the lives of lesser luminaries like Durban activist Mewa Ramgobin, a long-time foe of the National Party government, President of the Natal Indian Congress, Treasurer of the United Democratic Front and 1984-85 treason triallist.

GIBS Professor Iain Edwards has moved to redress that imbalance with this meticulous new collection of Ramgobin’s memoirs and political papers, working closely with Ramgobin himself who is well into his 80s. What emerges is not only a picture of considerable personal courage, like so many of his contemporaries, but also of the grinding, soul-destroying bureaucracy of apartheid. Here is a man who spent more than a quarter of his adult life under either house arrest or banning order, which meant strict confinement to a building or a particular suburb, forbidden to meet with friends or relatives or to travel. For example, the sudden sickness of a relative was never an excuse, forcing late-night visits to a Kafkaesque magistrate asking for permission to travel to a Durban hospital.

Permission was sometimes granted, sometimes not.

This legal de-humanisation went on year after year, something that has, in my opinion, been quickly forgotten by many who did not experience it first-hand. In that sense, Ramgobin’s decision to allow Edwards access to his papers was important and one which will be of considerable assistance to future historians. Edwards has also written an extensive introductory chapter summarising Ramgobin’s life and achievements, and placing the documents that follow in their historical context.

At this stage, the book is only available in e-format from Amazon. It would be a great pity if it were not finally published on old-fashioned paper.

TONY MANNING I PENGUIN I R250 Tony Manning is one of South Africa’s foremost strategy consultants and a prolific author on the subject. So it comes as something of a shock to read his new book which says, in essence, that the Management Emperor has no clothes. Or, to put it differently, there has been nothing new in the development of management theory and practice since Peter Drucker in the 1950s, and much of what he codified had been developed by the likes of Henry Ford and Alfred Sloan half a century earlier.

Into the dustbin, then, go the likes of Tom Peters (In Search of Excellence), Jim Collins (Good to Great), W. Chan Kim and Renée Mauborgne (Blue Ocean Strategy), Gary Hamel and C.K. Prahalad (The Core Competence of the Corporation) along with a veritable host of boxes, matrices, dashboards and balanced scorecards.

Manning’s compelling argument is that “Every management idea is a framing device – and no more than that”. These are mere tools that force us to think and until “they provoke and shape conversations, they’re worthless”.

He stipulates that those conversations need to revolve around eight critical practices which every single company must study if it wants to be competitive. If you love a glitzy new fad, you may find Manning’s list depressingly close to ordinary, basic common sense. Among the eight: • Be led by people who are driven to grow their business, and to do it by growing their people.

• Learn what’s happening in the world, and adapt, faster than rivals.

• Be highly effective at execution.

Be warned, though. The fact that his list is so plain vanilla does not in any sense imply that the task is easy. Apply Manning’s eight practices to your business with rigour, and you will have to think as hard as you have ever thought about anything.

That’s also perhaps Manning’s central message: to do the basics and do them brilliantly – all of them – takes immense mental application and great skill. And there are certainly no magic bullets or instant solutions to help.

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DELIBERATE CONCEALMENT

MTUTUZELI NYOKA I PICADOR AFRICA I R250 Read this if you need to understand why corporate governance is necessary. Dr Nyoka recounts the IPL Bonus saga, which engulfed South African cricket between 2009 and 2012, culminating in the dismissal of Cricket South Africa (CSA) CEO Gerald Majola. For much of that period, Nyoka was President of CSA. With remarkable honesty, Nyoka confesses his own role in the affair.

Growing up with Majola in PE’s townships, the pair were close friends.

When rumours about Majola’s conduct started, Nyoka admits siding with his friend and ignoring the facts. These were two young, black men commanding the heights of sport in a new South Africa; anything said against them was simple racism. Solidarity born of the struggle against apartheid is understandable. But it’s overlaid with an ugly “thou shalt not criticise” attitude. Woe and betide anyone who dared.

Along the way, reasonable, honourable men, acting in cricket’s best interests, like Paul Harris and Barry Skjoldhammer, were pilloried.

Nyoka apologises for his blindness.

When the scales fall from his eyes, he is left fighting a lonely, dangerous battle against Majola. At issue – bonuses paid to Majola and, tournament director, Don McIntosh, for the successful staging of the IPL tournament in South Africa.

Certainly the tournament was a huge success and Majola and McIntosh deserved reward, which they were duly given by CSA. But unbeknownst to the CSA Board, the pair had also received massive undeclared bonuses from the IPL. Hence the title of Nyoka’s book, Deliberate Concealment.

Nyoka’s story provides deep insight into many of the problems facing broader South Africa at the moment. Many parts of government are just as sensitive to criticism now as Nyoka and Majola were in their pomp.

Critics are regularly dismissed as racists. Corruption runs as deep.

The problem, as Nyoka discovered and as the rest of us are learning, is that once entrenched, corruption and its hanger-on, patronage, become remarkably difficult to root out.

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SOCIAL MEDIA AND EMPLOYMENT LAW

MARLEEN POTGIETER I JUTA I R245 It’s Sunday morning. You are slightly hungover. Reaching for your smartphone, you vaguely recall that it was a helluva party. You also check your Twitter account and suddenly you feel very ill indeed. You didn’t really send out that string of abusive Tweets about your boss and the company did you? Oh no, you did! So how much trouble are you in? And would it make it any better if you said sorry, or sent out another Tweet saying that this is just your personal opinion? Oh, and by the way, your Twitter account is also linked to your Facebook timeline – the debacle is all over that medium, too.

Does any of this sound familiar? Hopefully not, but in this new world of social media, which also includes LinkedIn, WeChat, WhatsApp, Instagram, YouTube, Pinterest and a whole host of wannabes, you can’t be too careful.

Which is why former law firm partner and labour consultant Marleen Potgieter has taken the trouble to wade into the social media minefield, and to give both employer and employee a short guidebook. It is to her credit that she has taken a part of the law that is not only relatively new but also quite technical and rendered it highly readable. Social Media and Employment Law is an absolute must for anyone in the HR or employment field, but also journalists, bloggers and anyone else with a heavy online habit.

One catch-all warning: if you wouldn’t want to see those trenchant views about your boss all over the front page of the Sunday Times, you certainly wouldn’t want them on Twitter or Facebook either. The fact that it’s digital social media and not newsprint will not make the slightest difference to the judge who hears the defamation suit against you, nor will your defence that you had had too much wine and thought you were being funny. It might be social media, but many of the basic communication and media rules remain exactly as they always have been

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CLASSIC INVESTING INVESTING FROM MARS Words Professor Adrian Saville

When considering the onshore/offshore allocation of your investments, it can help to take a view from somewhere very distant. Somewhere like Mars.

Most investors have almost all of their assets based in their home currency. That’s because it’s easiest to take decisions about companies and assets that you can see and touch. For instance, as a South African investor, it’s much easier to think about a JSElisted company when you can walk into a mall, see the business and sense how well it’s doing. People that you talk to might know about the business and you might even work there. That emotional attachment and line-of-sight causes us to overweight our home-based assets.

Investment professionals call the phenomenon ‘home country bias’ and this bias is a global attribute. Look in Japanese, American, British or Brazilian portfolios: you’ll find the same thing.

GORDON INSTITUTE OF BUSINESS SCIENCE

. . . IF WE LIVED ON MARS, WHAT WOULD WE DO?” But if you lived on Mars and thought about investing on Earth, your view probably would be very different. Your first question might be about a country-weighted allocation of assets. You’d find that South Africa’s economy represents just 0.5% of Earth’s economy, and on that basis, South Africa would receive only 0.5% of a Martian’s investment. Yet South Africans have more than nine-tenths of their assets invested in the country; and many will talk about being passive investors who have ‘bought-theindex’ as a great way to beat the market.

Actually, they are not passive. In fact, they are extremely active because they have the bulk of their investment exposed to a single currency, in a single country.

So, if we want to build a truly global investment position, we should start with a different question: if we lived on Mars, what would we do?

That said, there’s an important qualifier. You should always have your assets and liabilities matched. Thus, if you’re going to retire in South Africa, your retirement needs to be funded by rand

income. If, for example, all of your assets were in US dollars, and the rand went from its current level of around R13.00 to R6.50 to the US dollar, your pension would halve if your expenses were in rands. It may seem like a ridiculous idea right now, but remember that the rand traded at R13.80 to the US dollar in 2001, and by mid-2011 had recovered to around R6.50. The rand then went on to set a new all-time low just above R14.00 earlier this year, illustrating that major currency swings happen over time. If you had taken money out of South Africa in 2001 at R13.80, you would have taken 15 years to recover your original position!

Matching assets and liabilities means not being exposed to forces beyond your control or which can materially disrupt investment objectives. So, although I make the argument that if you were South African and lived on Mars, you would have the bulk of your assets outside of the country, that would only be after you had funded your retirement or other lifetime obligations.

This underlines the importance of recognising the role and influence of currencies. If, in fact, you were Martian, you wouldn’t invest the bulk of your retirement funds into Earth-based assets.

You would only invest off-planet – to coin a phrase – if you had surplus assets.

For a South African investor, that does not mean you can’t go offshore, but you must take careful consideration of the fact that those assets, ultimately, are going to be brought back in rands (or for that matter some other currency). So if you were to buy SABMiller, for example, that income is reported from a wide basket of international currencies. That would be a fairly safe position, because currency movements would wash each other out. But were you to buy something purely South Korean or Zambian, you would have very high, single country and single currency risk.

Thus, international investment positions should by funded by surplus assets and begin with geographic and currency diversification. In addition, as we explained in the last edition of Acumen, to represent a good investment, these good assets must be bought at good prices. Some examples that spring to mind in the current setting are P&G, 3M, Pepsico, Samsung, Nike, BMW, McDonald’s, Merck and LVMH

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ALTERNATIVE INVESTING

ODE TO A WORTHY PERSIAN Words Mandy Walker

It’s probably the only investment you’ll trample on. So you don’t want the wool content pulled over your eyes. But finding the right one is tricky.

Zimbabwe-born Oscar Khulekani Ndlovu has observed the rug trade for 14 years. He started and owns Simply Rugs – a small business operating in the affluent suburbs of Johannesburg. He has the spotless kind of reputation necessary for matchmaking investment-worthy Persian rugs to people who want to understand what they’re buying, for how much, and why.

YOU AREN’T THE TYPICAL PERSIAN RUG DEALER, OSCAR… WHY RUGS?

I used to be a car wash guard at a business in Benmore. A man named Hossein ran a small Persian rug repair shop there. I often helped him carry carpets that arrived while I washed cars.

I asked him to look for a job for me. In 2001, when I was 19 he found me a job at a Persian carpet warehouse called Kashan Imports/Exports – a private supplier to the Hyde Park area. They received containers from Iran, Pakistan, India, Tibet, Turkey and Afganistan. I was there when they opened the bales and saw and learnt to identify the rugs, first. By name and design. For example, a Kashan rug comes from Iran and is named after the Kashan village tribe. And rugs from cities like Tabriz take the city’s name.

WHICH RUGS FIT INTO THE CATEGORY “PERSIAN” & WHY?

The original Persian rugs came from towns and cities in Iran.

They were so popular that other countries like India and Pakistan copied them – also adopting the name of the Iranian city each design originally came from.

Today, the word “Persian” is associated with hand-knotted quality and applies only to those Oriental rugs made in Iran (formerly Persia). But it’s often associated with copies, too. A true Persian has an unusually thick pile (up to 160 knots per square inch), extremely rich colour combinations and unique designs.

Persians use 100% wool (sometimes 100% silk or wool/silk) and age well. Compared to say rugs (many from India) which wear and the colour runs after cleaning. Or with twisted knots that cause uneven pile. Knock-offs are common, but genuine Persians are very different.

WHICH TYPES OF EACH ARE WORTH INVESTING IN AND WHAT SHOULD I EXPECT TO PAY? R30 000 for a Kasim silk rug from India. A Qum silk rug from Iran has a 100% silk base and pile. They’re rare, superb

Oscar Khulekani Ndlovu

investments but you’ll pay R60 000 for a 1.5m by 1m rug up to R100 000-plus. A single one can take a person (often an elderly granny) up to two years to make.

A ‘Nain-6la’ (“la” in Farsi means “layer”) from India is good. It combines wool with a silk base. They come only in white and blue sometimes with a little red. Miri designs from India are great but hard to come by.

WHAT WILL R10 000 BUY?

Nothing worth investing in. An investment-quality rug is signed and/or comes with a certificate of authenticity. To properly identify a rug you need to find someone fluent in Farsi to translate the signature.

HAVE RUG PRICES GONE UP MUCH OVER THE YEARS?

Yes. Even more lately. In 2014, a Mori Bokhara rug from Pakistan averaged around R800 per m2. Now it costs R1 100 p/m2 due to currency fluctuation.

MOST IMPORTANT FACTORS?

Find out what it’s made from and where it was made. Do your research. Hunt down those from Iran, especially from Qum, Tabriz and Isfahan. Or find a Kashan Silk rug at a competitive price. Isfahan rugs are preferable if they are silk as some of the wool ones dyed with vegetable dye are sensitive and need an expert to clean. Someone who doesn’t know what they’re doing can cause colour to run.

COMMON MISTAKES?

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Buying cheaper versions mistaken for being the same thing.

“Saving” money on a rug is always a mistake. Two may look the same but aren’t

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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.

OUT TO IMPRESS Cinsaut is making something of a comeback. That’s partly driven by a growing understanding of how important the grape was in some of the older South African wines that are achieving almost cult status. Very Important International Palates that taste old Nederburg, Zonnebloem, Lanzerac and Chateau Libertas wines compare them very favourably to famous French wines from the same period. And the experts believe that cinsaut plays a critical role in keeping that fifty or sixty-year-old wine still so fresh and alive. The renaissance is also driven by a younger generation that wants to make wines that are different from what was made by a previous cohort.

In wine geek circles there is debate about whether cinsaut works best as a stand-alone grape or as a blending partner; and, if the former, whether it makes wine with sufficient gravitas to be considered great. But for a generation of drinker that cares more about drinkability than longevity or label status, there is an increasing number of cinsaut or cinsaut-led wines that give great pleasure. None more so than the Naudé Old Vines 2014.

It is an exceptionally attractive wine full of bright, delicate cherry and red berry aromas and flavours. The sort of wine that renders debate about its ageability moot – because it is so damn drinkable in its youth. R200 – available via Info@adorowines.co.za.

DINNER PARTY

GORDON INSTITUTE OF BUSINESS SCIENCE

There was a time when opening a bottle of KWV Roodeberg for guests was a quasi-political act. And refusing to drink a glass was equally a statement about more than the quality of what was in it. The wine was only available via a quota, and that quota was only extended to people and companies that were grace and favour holders in the National Party establishment. Those days are (thankfully) behind us. In 2015, opening a bottle of Roodeberg indicates no more than a modest wine-buying budget and an eye for quality. It’s been a long time since the Roodeberg was the apex KWV wine – that honour is now held by the increasingly interesting Mentors Range. But Roodeberg remains an expertly crafted blend, offering interest and quality way above the price point. There are six named varietals in the 2013 blend, plus 3% other. Cabernet sauvignon, shiraz and merlot are the dominant trio and meld with the minor partners in perfect harmony. There’s plum and cherry and chocolate and spice and cigar box and lots of other good things. There’s balance and fruit purity and complexity. But, most impressively of all, there is Value with a capital V. R65

EVERYDAY It is extremely rare to find really cheap wines that not only taste better than their price point, but don’t taste cheap at all. Such a recent find is the Mount Vernon Unbelievable White. The name was prompted by the favourite adjective of rugby commentator, Hugh Bladen, who is a great fan of the wine. The packaging is distinctive – the clear bottle identified only by the cardboard neck tag attached by an elastic band, and proclaiming the wine to be “uncertified, unlabelled, unbelievable”. The idea is to stand out from the competition on the shelf, and there is an environmental benefit. There is no glue used, and that makes the bottle more recyclable. It’s a chenin blanc, and proof again of how versatile and forgiving this cultivar is. The wine is crisp and fresh, with a level of fruit purity and balance that is really unusual for entry-level wines.

The alcohol is a low 12%, and the wine is much drier than is common for this price point – a residual sugar level of only 2%. How good is it? Well, in The Ultra Value Wine Challenge earlier this year, with all the entries tasted blind, it outscored, by some margin, wines at four times the price. It’s very good, and at a retail price of R25 – it is UNBELIEVABLE!

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SIMPHIWE DANA’S TRIUMPHANT DECADE Words Victor Dlamini

Certain singers bring something completely new to the music. It may be the way they sing just slightly behind the beat, off key, or the way they make familiar lyrics sound new. One thing is certain: after you’ve heard them, it’s impossible to hear even the most familiar songs in the same way again. Simphiwe Dana belongs in this very small group which includes Nina Simone, Miriam Makeba, Carmen McRae, Shirley Horn and Sathima Bea Benjamin.

In the decade since releasing her first album, Simphiwe Dana has become one of the most forceful musicians in South Africa. While it was her debut album Zandisile that signalled a stunningly fresh voice, it was her second album Bantu Biko Street that showed her courage. She didn’t try to repeat what she’d done on the first album. This disappointed a lot of her fans and angered some critics who insist that artists should retain their ‘sound’.

But a decade is long enough to give a sense of perspective to an artist’s overall impact and Dana’s recent Ten Year gig in Johannesburg provided this. Since its move from Melville to Newtown, the Bassline has seen many important performances. Little wonder she chose this venue for the anniversary. On the night, the Bassline was so full you couldn’t move once Dana got on stage. There she

was, regal in an all-black David Tlale outfit, her huge Afro resting proudly above her shoulders.

Every bit the rebel, Dana in performance switches her role to enchantress with a voice that can swing from barely a whisper to a fierce cry. She opened with Zandisile, a clear nod to her moment of arrival as a singer. Appropriately, next came Umthandazo (The Prayer) for at times this session was filled with a sense of reverence to the gods of music.

Dana is big on tracing the roots of her own history and the culture of her people. Nzinga/Flower Of The Nation was a tribute to Queen Nzinga, one of the most formidable figures in Southern Africa. Then the ballad Malaika reminded everyone present why she’s such a singular entertainer, capturing both the melancholy and declaration of love that has made this one of Africa’s greatest standards. She delivered the Swahili lyrics with such depth of emotion you could have sworn she was singing in her own language.

As she sang Mayine, it was clear that she was now fully possessed by the spirit of the music. Mayine is a great anthem, at once a celebration of rain and an invocation of whatever it is that brings the rain after a drought. On this one, Dana

was cajoling, crying, praying and revelling; resplendent in her rich black gown, she looked like a modern-day goddess casting a spell on the rapt audience.

A singer who always keeps her eyes wide open to the world around her, Dana played Chibok, a song she composed for the Nigerian school girls who were abducted

by Boko Haram. Here she was not only reminding us why she’s our own Nina Simone, but also asserting her deeply Pan African identity.

Just like Nina Simone who risked everything with Mississippi Goddam, Dana knows that songs like Marikana and Chibok confront uncomfortable realities.

She will not hesitate to find the lyrics for the world’s deepest pain. Once inside the embrace of the song, you almost forget the anger as you sway to its rhythms.

Fittingly, she closed with the staple Ndiredi. This love song still retains the shock of its languid but irresistible lyrics when one first heard it on her debut album. Here was Dana on stage, singing, teasing and smiling contentedly as her fans took in the meaning of ten years of her career.

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In a world where starlets shine briefly and fade, Dana has shown that she is here to stay

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looking backwards

WORKSHOPPING THE WORKSHOPS Words Mike Wills

A workshop used to mean a room where things were made. It connotated the most productive place on earth where hammers hammered, saws sawed and sweaty men got manual.

– in answer to which most people, for some reason, will say either a wolf or an elephant although one colleague of mine memorably blurted out “the Energizer Bunny”.

A workshop had benches, tools and hardware. It was always a noun as used by George Bernard Shaw when he famously described the industrial English city of Birmingham as “the workshop of the world”.

The facilitator, of course, will always have something smooth and clever – “I am inspired by the bee because it breaks all the rules of aerodynamics when it flies” – because he or she is the only person who knows in advance that this awkward conundrum is going to be posed.

Nowadays a workshop is something very different for most of us in the corporate whirl.

GORDON INSTITUTE OF BUSINESS SCIENCE

We’ve turned it into a dreaded verb – “let’s workshop this” – and, in the process, created one of the least productive spaces on earth where the hardware has become software as we PowerPoint ourselves into projected nauseam for hours, even days, seemingly without end.

These company workshops usually involve an expensive facilitator deploying glib thought-starter techniques, scrawling indecipherably on a flipchart and hovering anxiously over breakaway groups before flashing the ‘vote for the best idea’ Post-it notes.

I know these insidious creatures very well because, it’s time to confess, I have been to one myself more than several times.

All too often these events begin with the dreaded ‘ice-breaker’ in which people like me ask attendees, off the cuff, to come up with something like their ‘spirit animal’

After the ice has been broken into a thousand little pieces there’s usually an 84-slide deck on ‘The Journey So Far’ which is either a criminal waste of time – concise material should have been supplied and read in advance so we can get straight to the nitty gritty – or a good chance to start the day with a gentle doze.

Many of the problems with workshops stem from the venue, which is usually chosen for the catering rather than for the qualities of the room where you will actually spend an interminable part of your life. The two things that matter in the space, and are rarely found in combination, are 1) air conditioning somewhere reasonable between the arctic and the soporific and 2) decent technology that doesn’t automatically power down when you are trying to power everyone up and also can deliver quality audio on the key piece of video without demanding three degrees in computer science to work out exactly how that happens.

The rest of the problems with workshops stem from obvious things like the lack of a clear purpose, too many people in the room and them going on way too long – all day is bad enough, three days and participants lose the will to live.

It’s also worth noting that a workshop is not an effective copywriting or crafting mechanism nor is it a decision-making body – at best it informs the process and the person accountable must make the final call and explain it back to those who attended.

However there is one final condition, no -one must ever say during a workshop run by me “we need to really sit down and talk about this” when they are already really sitting down, for a whole bloody day nogal, and talking about it.

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Aside from that, it’s all good with workshops and long may they continue because I need the money

Success is achieved by those who

TRY and keep trying W. Clement Stone

Scoring tries since 2005.

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