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T B 2 B IS S U
UNCAGEING AFRICA AFRICA’S LONG-TERM GROWTH POTENTIAL LOW
HIGH
GIBS NEW CENTRE FOR
AFRICAN MANAGEMENT & MARKETS
DOMINANT LOGIC
THE SEARCH FOR SYNERGY
MANUFACTURING IN SA
LONG TUNNEL, MAYBE SOME LIGHT? ISSUE 26 Fourth Quarter • 2018 R40.00 R39.95 incl incl vat vat
B U S I N E S S
T H I N K I N G
M E E T S
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A C T I O N
Contents
5 By Africa, for Africa GIBS Dean, Prof. Nicola Kleyn explains the rationale behind GIBS' new Centre for African Management and Markets.
6 Network 10 GIBS Centre for African Management and Markets Prof. Adrian Saville explains the thinking behind GIBS' new Centre for African Management and Markets.
16 UnCAGE-ing Africa: Where To Take Your Business and Why Africa's an attractive investment destination – or is it? Ian Macleod presents a country-by-country analysis.
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Who’s In, Who’s Out in SubSaharan Africa in 2018 Africa expert Dianna Games gives her assessment of which African nations are doing well and which are not.
38
The Business of Branding
Eugene Yiga profiles rising marketing star Buyi Mafoko.
42 Healing African Healthcare Through Connections GIBS Alumna Dr. Yushavia Govender aims to use the power of the Internet to streamline African healthcare.
48 Dominant Logic – The Search for Synergy Prof. Nick Binedell offers a new framework for assessing and understanding your company's strategy.
52 You Are What You (Don’t) Eat Acumen's futurist Dion Chang looks at changing habits in the world of food.
30 Long Tunnel, Maybe Some Light? James van den Heever explores whether manufacturing can really help SA's economy.
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Economics, Accounting and the Sustainability Agenda WWF's Pravan Sukhdev tells Acumen that current accounting methods need to change.
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www.gibs.co.za
Editor Chris Gibbons Gibbonsc@gibs.co.za Layout and Production Contact Media and Communications (Pty) Ltd Designer Quinten Tolken
79 Travel Experiences Fund Humanitarian Programmes Eugene Yiga meets One Horizon, a new form of sustainable tourism.
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Less Is More
Acumen's business fashion expert unpicks the 'capsule wardrobe' concept.
84 The Motoring Business 60 Big Wins in Lagos GIBS star MBA Glad Dibetso explains his Nigerian success.
64 Shared Value and Sustainability – Ancient African Ideas Bonang Mohale and Morris Mthombeni explain the value of ubuntu as a management tool.
68
An Intelligent Customer Solution
Gaye Crossley looks at which companies and systems are winning the customer intelligence wars.
72 Technology Alone Is Not Enough GIBS faculty Abdullah Verachia says the human touch is vital in a hi-tech world.
76 The African Safari Business
Motoring expert Stephen Smith reviews the new Nissan Micra and the Volvo XC40.
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Technology for Business
Tech expert Aki Anastasiou reports on the latest iPhone and a new laptop from Dell.
90 Books Acumen editor Chris Gibbons reviews new books about political risk, Donald Trump and the collapse of fraudulent blood-testing firm, Theranos.
Proofreader Angie Snyman Publisher Donna Verrydt Donna@contactmedia.co.za Contact Media and Communications (Pty) Ltd 011 789 6339 Advertising Sales Sean Press Pressman@contactmedia.co.za 082 888 1137 Contributors Aki Anastasiou Prof. Nick Binedell Cara Bouwer Dion Chang Gaye Crossley Dianna Games Dr. Yushavia Govender Caroline Hurry Prof. Nicola Kleyn Ian Macleod Tamara Oberholster Stephen Smith Cheska Stark James van den Heever Abdullah Verachia Eugene Yiga GIBS Managing Editor Luleka Mtongana 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
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.
Travel specialist Caroline Hurry examines the highly competitive safari business.
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Dean's Note BY PROF. NICOLA KLEYN
By Africa, for Africa I recently had the opportunity to listen to a distinguished professor from a top global business school engage with a group of African students about Walmart’s founding strategy. A key observation that he cleverly extracted from the group was that targeting “rural” markets was key to the success of the behemoth in its early focus on growth its home country market. I noticed a pause in the room as students contemplated the implication of “rural” in the context of a retail strategy. As we know, “rural” means very different things in Arkansas and Angola. For all of us operating in our part of the continent, this sense-making process happens time and again as we engage with key management concepts and models, the vast majority of which have not been birthed in Africa, let alone some other developing market. That’s not to say that normative or often western business models are not necessarily important or useful. What I am suggesting is that some degree of interrogation is required before we rush to follow recommendations to build smart cities styled on those in developed markets when we don’t have basic sanitation sorted, procure precision equipment that demands constant voltage without considering a UPS to counter electricity surges, implement performance management models that were birthed in individualistic cultures, and assume that the largest stressors in the lives of our employees emanate from their workplaces. Beyond interpreting theory that has been developed in other contexts, we need to contribute to the field of management by generating our own as well.
Prof. Nicola Kleyn
Whilst the world argues about the relative pros and cons of tariffs versus free trade, democracy relative to dictatorship, and minimum wages in contrast to open labour markets, we shouldn’t lose sight of the absolutes when it comes to the demographic reality of this continent. The recently launched Indlulamithi South Africa Scenarios remind us that this year the median age in Africa is 19.7 years in contrast to the median of 40 in developed countries. By 2030 onethird of all children in the world will be African children. Whether you believe that population bulges automatically generate demographic dividends or not, what’s indisputable is that we are going to have many more people to serve. It’s not a large or sophisticated leap of logic to assert that we need models of management that are effective to do so. To get that right, we cannot just import thought leadership from the rest of the world – successful establishment and growth of organisations demands contextual relevance. Whilst our focus at GIBS has always been to search for and where appropriate re-interpret global best practice, the school has been more deliberate about
focusing on an African research agenda in recent years. The conceptualisation of the GIBS Centre for African Management and Markets (CAMM) was not built off the assumption that Africa is a single market, nor that there is only one effective way to manage across the continent. The deliberate inclusion of management in the naming of the centre is rooted in a frustration around the deficit of thought leadership about management across and within our African context. That’s not to suggest that there aren’t large numbers of managers who don’t have significant experience and expertise in doing business in the continent. The issue for me is that so much of the knowledge that is tacit has not been made explicit. Business schools have both an opportunity and a responsibility to play their part in creating and sharing thought leadership that leads to effective management of public and private sector organisations in our African context. To do this, we need to collaborate with each other, scholars located in schools outside the continent who are interested in our context, and most importantly, new and existing businesses that need to serve current and future generations of Africans. Gordon Institute Of Business Science
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Network
Our regular look at GIBS’ events and guests
Sorry, South Africa! McKinsey global managing partner, Kevin Sneader, used a GIBS Forum to issue an apology to South Africa for his firm’s involvement in the capture of the country’s state-owned enterprises. The newly appointed head of the consulting firm conceded McKinsey had made mistakes in its dealings with Eskom. Sneader admitted to a lack of oversight and an inadequate due diligence process, and acknowledged that the firm had lost the confidence and trust of many South Africans. In his opening remarks, Sneader said he was “very sorry personally and on behalf of McKinsey & Company, for the fact that we have had anything to do with any of the issues surrounding state capture.” Furthermore, he announced the firm would repay R902 million in fees to Eskom it had earned through the Turnaround Programme contract at the parastatal during 2016. He also detailed comprehensive changes to McKinsey’s processes in order to strengthen compliance activities when dealing with public sector clients across its global businesses.
Tell the truth and tell it quickly
While Chief Executive of Business Leadership South Africa, Bonang Mohale, said the apology was “better late than never”, he castigated Sneader and McKinsey for its unethical behaviour: “I’m hoping you’ll begin to understand not only the frustration but the bone-deep anger at state capture because it has raped the resources
Kevin Sneader
of this country at the time that we need it the most.” “The legacy is going to be with us for another 10 years. The ramifications are deep and wide; it’s not just about being sorry.” Mohale urged Sneader to “Tell the truth, the whole truth, and tell it quickly. It took McKinsey inordinately long to get to where you are, but we are happy that, eventually, you did.”
Bonang Mohale
Can big business learn from social entrepreneurs? The editors of just-released The Disruptors 2, GIBS faculty member, Kerrin Myres and well-known author, Gus Silber, believe the answer is a very firm “yes”. They point to a number of habits practiced by social enterprise which they think are useful for all businesses. Among them is the ability to dream big. Social entrepreneurs, say Myres and Silber, “dream that they will change the world, and oftentimes they do”. Another is to access multiple funding sources and revenue streams. The editors believe that failure rates among
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for-profit companies are high in the first few years of existence because insufficient attention is paid to “the establishment of multiple revenue streams and to varied sources of funding”. Social enterprises, on the other hand, “perhaps because they are so resource-poor, seem more likely to consider establishing multiple revenue streams as a matter of course”. The Disruptors 2 is published by GIBS and funded by the Government of Flanders. The book features essays and articles by a number of GIBS faculty, including Anthony Wilson-Prangley, Dr. Caren Scheepers, Dr. Dorothy Ndletyana, Dr. Zuki Mthimunye and Lauren Jankelowitz.
Digital disruption “In Africa, the statistics look amazing: 70% of people have mobile phones. But most of those phones are not smartphones, so they don’t have access and the digital divide is actually making people get further and further apart. We’re seeing that in Africa and in countries in the rest of the world, so there’s a really big challenge around inequality and justice.”
Sneha Shah
The words of Sneha Shah, CEO, Thomson Reuters South Africa, at a GIBS Forum that examined whether or not there was a downside to the digital world. Could it be, the speakers were asked, that digital technology brought with it its own set of ethical challenges?
Google’s Country Manager in South Africa, Luke McKend, recounted his personal experience: “I was in California recently, at the Google mothership, and I was struck by the huge diversity of the ethical dilemmas we are facing. When I joined Google about 11 years ago, the discussion around ‘tech for good’ was Luke McKend dominant. Everybody at the time believed that tech was necessarily a good thing regardless of where it was or what it was doing. “The fundamental change in California at the moment is that that has completely evaporated. The sense within the big tech companies, even within Google, that tech is necessarily a ‘good thing’, is no longer there… There is a sense of an ‘usand-them’ that’s being developed, a lack of trust manifesting
in real things, like the shifting of prices within San Francisco, where the tech worker is displacing people who just don’t have the wherewithal to live where they have lived for a very long time. “On the other hand, back in Africa, I feel we still have a ‘tech-for-good’, it’s still there, that tech can be for good, but our problem here is not so much that we have too much tech, but it’s too little tech and badly distributed. We have a small number of people who are able to use technology in a way that’s very, very similar to the rest of the world. For instance, if you look at people in South Africa who are about to buy a car, they run as many Google searches as people do in Europe or the US, so they behave very, very similarly. On the other hand, we have 20 or 30 million people who have no access to the Internet at all. This is the real issue.” Kuseni Dlamini, Chairman of Massmart and Aspen Pharmacare Holdings, took a different approach: “What we see with digitalisation is that it’s really changing the balance of power at a global level from a strategic and geopolitical perspective. We now see that countries such as Russia, when it comes to electoral Kuseni Dlamini processes in other countries such as the USA and Europe, are able to actually leverage technology to be able to drive their own nationalist agenda, or their own disruptive political agenda and that has wider implications. “A challenge that companies really have to grapple with is really building the capabilities, the skills and the know-how to be able to learn to negotiate with hackers, the cyberattackers. We saw this recently here in South Africa when Liberty was attacked. There were reports that the attackers were demanding a ransom. As a company, do you pay the ransom or not? What are the ethical implications of that? If you decide to do so, are you not creating a market for attackers to try and cash in?”
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Big downloads for GIBS case studies Two case studies written by GIBS faculty and published in the Emerging Markets Case Studies journal are amongst the journal’s top-five most-downloaded cases over the past 12 months. Building the BrightRock brand through change case written by Michael Goldman, Mignon Reyneke and Tendai Mhizha had been downloaded 1 356 times. The Leading change towards sustainable green coal mining case authored by Ken Mathu and Caren Scheepers had been downloaded 739 times.
Acumen wins at “Tabbies” It was the gold medal for Acumen at the 2018 “Tabbie” Awards, held each year in the United States. The Tabbies – more properly known as the awards of the Trade Association Business Publications International – are the Oscars of the business-to-business publishing industry. Said the judges of Acumen’s Issue 19, (Gold Winner, Best Single Issue: Top 25 Issues): “The issue’s intriguing cover carries through into the entire magazine. The departments are well laid out and easy to follow.” Commenting on the win, Acumen editor Chris Gibbons said, “I’m thrilled and delighted at the award; it’s a tribute to the strength of our writers, photographers and the design team. But – just as important – it’s also a tribute to GIBS, which has backed the magazine from inception, demanding the highest quality content but providing the means to make that happen. In a very fragile media environment it’s extremely gratifying to see this formula working.”
GIBS nominated as Top Gender Empowered Company finalist The Gordon Institute of Business Science (GIBS) has been nominated as a finalist in the annual Standard Bank Top Women Awards 2018. The business school has been selected in the Top Gender Empowered Companies in the Public Services Sector category. The award is reserved for companies operating in the public sector such as universities, government departments and municipalities that clearly and effectively demonstrate the highest level of gender empowerment, from staff to suppliers, through their programmes and policies. The nomination amplifies the business school’s continued efforts in advancing gender empowerment. In 2017, the UK Financial Times MBA Ranking also recognised GIBS in its continued efforts to bridge the gender gap for having 38% female faculty, 42% female students on the MBA programme and 50% female board members placing the school 11th, 7th and 5th in the world respectively when compared to other business schools. Dean of GIBS, Professor Nicola Kleyn, said, “To be selected as a finalist is an incredible honour for GIBS. This nomination has been a gratifying recognition of the work we do in our continued efforts to ensure significant progress in gender empowerment.”
Ex-president on campus MBA students following the elective on Geopolitics and Grand Strategy with GIBS founder, Professor Nick Binedell, were treated to a surprise guest speaker when former president Kgalema Motlanthe arrived to talk to them.
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PROF. ADRIAN SAVILLE is professor of economics and competitive strategy at GIBS, and chief strategist at Citadel. He has lectured and taught widely in both South Africa and around the world, has received the Excellence in Teaching Award at GIBS on nine occasions since 2007, and in 2012 was nominated for the Economist Intelligence Unit’s Business Professor of the Year Award. While completing his doctorate in economics, he formed an investment vehicle which became the forerunner to the investment business Cannon Asset Managers.
...you need to understand history...
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PROF. ADRIAN SAVILLE, IN CONVERSATION WITH CHRIS GIBBONS
GIBS Centre for African Management and Markets In keeping with its focus on the entire continent, GIBS recently launched its new Centre for African Management and Markets. The centre will be led by economics and competitive strategy professor, Adrian Saville, who is also the founder and CEO of Cannon Asset Managers. Saville spoke to Acumen editor Chris Gibbons, who began by asking him about the new centre’s purpose. Its purpose is to square up to the issues of building businesses and understanding context in a fast-growing, rapidly changing environment. Africa is an intricate and complex setting. What’s the old joke – how many countries are there in Africa? The answer – one. The reality is radically different: 54 countries, 1.3 billion people and immense diversity. On one hand, you have Ethiopia and Rwanda, having grown at 9% and 7% respectively per year for the last 15 years. On the other hand, their almost-neighbour, South Sudan, which for all intents and purposes is a failed state. If your strategy or narrative is ‘business in Africa’, the immediate questions become “Which industries? Where? When? How? Which segments or communities? And with which companies or partners?”
It’s a complex problem, then. How do you intend to approach it? From multiple angles. Understanding context is about the economic environment and the policy setting. The economic environment includes economic growth as an obvious high-level marker. But on the west coast of Africa you have the enormous Nigerian economy and equally large population that is dominated by energy resources. While on the east coast, by contrast, you have a much
smaller population in the shape of Kenya and a far more diversified economy. Kenya’s historical path of development is in the agricultural sector which has accounted for one-quarter of the country’s output, three-quarters of its employment and two-thirds of its exports. But new drivers of growth and development take the form of tourism, business services, infotech and logistics.
Each of these countries is remarkably different... As well as understanding economic performance and industrial make-up, you need to understand history, because history shapes a range of attributes all the way from political institutions and legal arrangements through to physical infrastructure. For instance, the smallest country on the mainland, The Gambia, is shaped unlike any other nation in the world. It is long and skinny, just 50 kilometres wide at its widest points; it looks like someone tried to stick their
finger into Senegal, which surrounds the Gambia on three sides. The only bit of the country that doesn’t border Senegal is The Gambia’s very short coastline. Another aspect of context is population size, culture and demographic structure. It stands to reason that a large part of sub-Saharan Africa is represented by young and still-growing populations, which make for very different market proposition and business models compared to populations that have achieved demographic maturity, such as Europe, North America and large parts of Asia. Geography matters, too: who are the neighbours? Are we connected or isolated from neighbours? Is our neighbour the ocean? And if it is the ocean, where does that transport corridor take us? And that in turn throws up many key business implications. For instance, drawing on the above example of the Gambia, if you want to get from the north of Senegal to the south of Senegal, the shortest route is through The Gambia. Conversely, if we go back to the obvious point of Ethiopia: here is a landlocked country that is growing extremely quickly and setting up its capital, Addis Ababa, as the transport hub for Africa, connecting 70 global cities to 60 African Gordon Institute Of Business Science
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cities. No other city in Africa does that, positioning Ethiopia and Addis Ababa as ‘the Dubai of Africa’.
From time to time, we hear the ‘Africa Rising’ narrative, but almost immediately there does seem to be a tendency to revert to corruption, poverty and violence. Or is that a misperception? This is exactly why a deep understanding of context is critical. By way of example, in the space of three years, Kenya moved 49 places in the World Bank’s Ease of Doing Business Index, from 129th to 80th in the world. You don’t do that by becoming increasingly corrupt. It’s simply impossible to make those kinds of gains if corruption is the order of business. As a rule of thumb, the last two decades have seen Africa’s political institutions become stronger, and you’ve seen that evidence in a range of places. A great case in point was Nigeria’s change of government in 2015, from Goodluck Jonathan to Muhammadu Buhari. That speaks of political maturity but – in the same breath – political, religious and ethnic violence continue to affect many parts of Nigeria. In the case of Rwanda, Paul Kagame is a head of state who’s been in place since the early 1990s, yet he has overseen exceptional economic growth and transformation. A little further south, in Zimbabwe, you have a recently pushed-out head of state, Robert Mugabe, who oversaw 30 years of economic collapse and institutional hollowing out. Whether his successor, Emmerson Mnangagwa, will be able to reverse this deep scarring remains to be seen. Each of these countries is remarkably different and that’s why understanding and appreciating context is so vitally important. Whether you are a local or foreign investor, your point of departure has to be: “Do I understand this market? What defines and drives
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this community or society? How do the jigsaw pieces fit together?” The Centre for African Management and Markets is not about ‘going into Africa’; it is about understanding the drivers and determinants of economies and of the forces that are shaping socioeconomic progress and prosperity throughout the continent.
...the last two decades have seen Africa’s political institutions become stronger... Are there countries which can play the role of regional role model, the kind that was so crucial of Southeast Asia’s success story? Southeast Asia is rich in role models: Japan, furthest back, more recently South Korea, and possibly we can add to that list smaller economies such as Taiwan and Singapore. To this end, a similar question was recently put to Paul Kagame, who was asked if, in 20 or 30 years, “will Rwanda be the Switzerland of Africa?” His answer was profound: “No, it will be the Rwanda of Africa.” To me that says we find ourselves in the midst of building some quite compelling role models and extraordinary cases. Rwanda comes from the devastation of the early 1990s and the genocide, to have achieved 25 years of uninterrupted economic growth. That presents itself as a potent role model. Ethiopia, more recently, is making the waves and noise of being a role model, with its rapid industrialisation and achieving one of the fastest gains in connectedness and economic integration with the rest of the world. It’s also
showing that it can work on improving not just economic performance and economic structure, but institutional performance and institutional structure. Without question, there are examples to look up to, and in the same breath, there are examples of what not to do. South Sudan and Somalia are obvious cases in point.
Many African countries seem to have a problematic relationship with democracy. Ethiopia, is one, Rwanda, another. Is democracy necessary for economic success? For the past ten years, one of the projects we have been working on involves understanding the relationship between political arrangement and economic performance. Let me quote Zambian-born economist Dambisa Moyo, who argues against “shoehorning democracy” and offers compelling evidence that maps out the relationship between political arrangement and economic performance. The argument is that if you put a democratic arrangement into a fragile economic setting, it is the economic setting that will trump the political arrangement. In fact, to achieve and sustain democracy, you need to first get in place a stable and healthy economic arrangement that feeds and supports stable institutions. It is this that will feed democracy rather than the other way around.
Five or ten years from now, what would tell you that the new Centre for African Management and Markets has been a success? The centre is about developing understanding, establishing networks and building relationships; those are our obvious markers. If we have achieved a deeper, more refined understanding of the context of what works, why it works, where it works and how it works, then I think we could claim some success. Behind all of this is the importance of networks and relationships across all organs of society, including business, social institutions and political organs.
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Africa’s long-term growth potential
LOW
HIGH
“Africa is the place to be.” That’s all the buzz in the glass towers and coffee shops of Delhi, Doha, Shanghai and Sandton. And with Africa home to six of the world’s 10 fastestgrowing economies, the chatter is justified. But where exactly should we be on this expansive continent of 55 countries and 1.2 billion people?
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BY IAN MACLEOD
UnCAGE-ing Africa Where to Take Your Business and Why
Savings & Investment
Saville’s work demonstrates strong explanatory power of sustained improvements in socioeconomic prosperity by identifying six factors that are resident in the case of every socalled “economic miracle”: the Saville Six Factor Model or, more colloquially, the Saville Sixpack. Not entirely unexpected are the elements captured in Figure 1 below. The wisdom lies more in the elements that fail to make the grade.
Elevated (>25% of GDP): productive (non-rent seeking assets): and funded domestically, with no more than modest rates of foreign direct investment (conventionally <3.0% of GDP). Gross domestic fixed investment (GDFI) is an excellent proxy.
Demography
More people need to be joining the workforce than going into retirement. A misconception is that longevity and higher retirement ages lead to "job displacement": the opposite tends to hold. Lagged population growth is an excellent proxy.
Policy & Institutions
Stable policies beat "good" or "bad" (sic) policies; and policy has to be backed by capacity and capability (ranging from institutional strength to physical infrastructure).
Education
The first 1 000 days are key; and spending on education is not always a good proxy for the effectiveness of spending on education.
Healthcare
Openness
Workforces must be physically and mentally healthy; robust proxies for these are infant mortality rates and life expectancy. Connections must be functional, fed by comparative advantage; and connections to neighbours tend to have more pronounced and enduring impacts than connections per se. Proxies are flows of trade and capital, and the movement of people and ideas (TCIP).
12 Real GDP Growth (Average %, 2001-2001)
Adrian Saville, professor in economics at GIBS, has spent the better part of a decade on a project – nay, a personal mission – hunting down the factors that explain why and how countries prosper. “We’ve scoured 160 countries, going back in the data 60 years,” he explains. “Why are economies as distinct and different
as Chile, Estonia, Germany, Korea and Rwanda rockstars in building prosperity? Is it by good luck or by design? And if the latter, can we identify the ingredients that establish the bedrock for economic superstardom? Or, in the negative, the factors which when absent or rickety, all but guarantee stumbling and stuttering growth?” There’s a cogent argument we can.
y=0,2904x - 3,8707 R2=0,5164
10 8 6 4 2 0
10
20
30
40
50
Investment Share of GDP (Average %, 2001-2010)
100
y=8,7429In(x) - 20,476 R2=0,4985
90 80 TCIP (Connectedness) Score
Commercial intuition – and a spot of good fortune – might land us in the right place. But luck is hardly the basis for business strategy – we may as well follow the weather. Attractive job numbers, declining corruption and rising gross domestic product (GDP) figures are all handy as discrete factors to consider in choosing investment destinations. But capital allocation is a strategic move of existential import. It is a decision demanding thorough investigation and custom criteria. Introducing Adrian Saville’s Six Factor Model and Pankaj Ghemawat’s CAGE framework.
70 60 50 40 30 20 10 0 100
1 000
10 000
100 000
GDP per Person ($)
DIAGRAM 1 - Source: Saville (2018) Saville’s Sixpack: Six powerful determinants of a healthy foundation for long-term economic growth.
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Now consider the proxies for the six elements. Breaking down education, the model shows that what really matters is the first 1 000 days in early childhood development, rather than advanced degrees. Also in need of a deeper dive is the make-up of a positive demography score. “More people need to be joining the workforce than are going into retirement,” summarises Saville. Here Africa looks good. Its demographic shape is Kardashian-esque – substantial at the bottom – in this case indicating a growing young population. The global situation shows no such wealth of future entrepreneurs, investors, innovators, consumers, taxpayers and funders of pay-as-you-go welfare systems. Male
100+
Female
0.0% 0.0%
95-99
90-94
0.0% 0.1%
0.3%
85-89
0.1%
0.1%
80-84
0.1%
0.2%
0.6%
0.4%
1.2%
1.0%
50-54
3.1%
3.1%
45-49
40-44
3.3%
3.2%
40-44
3.4%
35-39
35-39
3.4%
3.8%
3.9%
30-34
4.2%
4.0%
25-29
20-24
4.1%
3.8%
20-24
15-19
4.1%
3.8%
15-19
10-14
4.2%
4.0%
10-14
5-9
4.5% 4.7%
0-4 10%
8%
6%
4%
2%
PopulationPyramid.net
0%
2%
4%
4.2%
5-9
4.4%
0-4 6%
8%
10%
WORLD – 2017
Population: 7 515 284 153
10%
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1.9%
1.8%
2.3%
2.3%
2.9%
2.9%
3.5%
3.5%
4.0%
4.0%
4.4%
4.5%
5.1%
5.2%
5.8%
6.0%
6.7%
6.9%
7.6%
7.8% 8%
6%
4%
PopulationPyramid.net
DIAGRAM 2 – Growing Up Strong: No shortage of youthful Africans to drive future growth.
1.6%
1.5%
30-34
25-29
1.3%
1.2%
50-54
45-49
1.0%
0.9%
55-59
2.8%
2.8%
0.8%
0.7%
60-64
2.4%
2.3%
0.5%
0.4%
65-69
2.1%
2.0%
0.3%
0.3%
70-74
1.6%
1.5%
55-59
75-79
0.9%
0.7%
60-64
Female
0.0% 0.0%
0.1%
0.1%
65-69
Male
100+
0.0% 0.0%
0.2%
70-74
Having covered the nuts and bolts of Saville’s Sixpack, we’re able to understand precisely what story it tells. Saville begins with what the model doesn’t do. “This is not a tool to predict GDP growth next quarter or even next year,” he says. “This tool is relevant over many years and even decades.
95-99
85-89 75-79
by a thriving tech start-up. Salaries for jobs that make us unhappy are just the same as fulfilling work for a recent graduate. Almost entirely unmeasured are the informal sector and the ‘work’ we do without pay: caring for our children, volunteering. Saville addresses this head-on. “There is no doubt that GDP is an imperfect indicator of the sort of progress we want,” he concedes. “But there is a strong correlation between growth in GDP per capita and social progress measured by the Human Development Index. It generates a more-than-helpful translation into a happier, healthier society and better business performance.”
Also critical to understanding the Sixpack is the fact that not all elements are equal. The bulk of explanatory power sits in just two factors: 1. elevated levels of savings that fund and fuel productive investments; and 2. functional openness that feeds win-win integration. Put together, these two factors explain about two-thirds of the gains in country prosperity over the last 60 years.
0.0% 0.0%
90-94 80-84
At a time of increasing appetite for trade barriers – stoked mainly by Sino-American relations – the factor of “openness” points in the opposite direction. More flows of trade and capital across human-made borders, alongside uncomplicated movement of people and ideas, are what is needed, not less. That said, this GDP GROWTH marker conceals a potential anomaly: more can also mean - YES OR NO? worse, depending on the Despite its ubiquitous status as the nature and extent of openness. go-to measure of economic growth Refugees fleeing conflict, ivory and, by implication, happiness and prosperity, GDP (or GDP per capita) smuggling, human trafficking, is an undeniably flawed yardstick. It war and flouting of international says nothing about the ‘goodness’ intellectual property agreements of any spending for the economy. It do not feed mutually equates a rand’s worth of crimescene clean-up and a rand earned profitable outcomes.
2%
0%
2%
4%
6%
8%
10%
AFRICA – 2017
Population: 1 246 504 864
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First, consider the most glaring exclusions. Political arrangement would seem a shoo-in. The western mind leaps immediately for democracy ahead of some form of authoritarian rule as a substrate for prosperity. Economic philosophy is another favourite pick for the Sixpack, with the Washington Consensus insisting that free markets – albeit with some public goods – are the route to growth. But neither political model nor economic school of thought packs the punch for Sixpack status. “Barring extreme regimes, the positivity of a sustained, healthy and inclusive growth environment is almost agnostic of these aspects,” says Saville. Several examples rebut the conventional wisdom that democracy and free markets possess a monopoly on creating growth environments. One such example is Rwanda – small, hilly and landlocked – and under the firm-handed rule of Paul Kagame, who has been in power for 18 years. Just 25 years after a horrific genocide, Rwanda boasted 10.6% year-on-year economic growth in the first quarter of 2018. Then there’s socialist-leaning Vietnam, where growth has cycled between 5% and 10% with enviable consistency since 1990.” So, the first insight from the Sixpack is that stable policy and capable institutions trump political arrangements and economic philosophy, almost regardless of their content.
In other words, it is structural rather than cyclical and measures conduciveness of the environment to stable, long-term growth and – despite the flaws in GDP as an indicator of financial and human well-being (see Box: GDP Growth - yes or no?)– improved business performance and social prosperity.” This relevance to the long run determines who and what type of decisions the model is most applicable to. “When these elements are robustly in place, and an economy starts growing, this expansion develops inertia,” says Saville. “So, the value of the six-factor model is its power when considering which country to invest in – not via flows of hot money into shares and government bonds, but by moving operations and human and physical capital with a consequential time horizon. Other caveats apply. Perhaps the most critical warning is that even if a country has the six elements in place, this is not an assurance of an outcome. Countries can lose their way – Turkey is a case in point; or they can squander early improvements in structural elements – just think of Venezuela.
IMAGE SHUTTERSTOCK
Armed with these half-dozen core economic muscles, we can make our first exploratory inroads to shortlisting destinations for expansion. Let us start with a conservative removal from consideration of countries our model most clearly flags as structurally ill-designed for healthy growth. The six-factor model points to a global average GDP growth rate of 2.6% per annum for the coming 20 years. Of Africa’s 55 nations (including Western Sahara), 14 countries fare worse than 2.6% on that same yardstick. It would seem uncontroversial to screen them out at this early stage. And if the world average seems an arbitrary guideline, it is. “There’s no real science behind this threshold,” says Saville. “But it’s a useful start – these economies are structurally stuck in low- or no-growth frameworks.” Local readers may breathe a sigh of relief to learn South Africa clears this hurdle with 3.1% growth structure.
Country
Two-decade growth (2018-2038) %p.a.
World (Median)
2.6
Somalia
2.2
Sierra Leone
...stable policy and capable institutions trump political arrangements and economic philosophy...
Country
Population (mn)
World (Median)
6.1
Republic of Congo
5.1
Liberia
4.6
Mauritania
4.3
Namibia
2.5
Botswana
2.3
Lesotho
2.2
Gabon
2.0
Mauritius
1.3
Equatorial Guinea
1.2
Djibouti
0.9
Comoros
0.8
Cape Verde
0.5
2.0
São Tomé and Príncipe
0.2
Swaziland
1.8
Seychelles
0.1
The Gambia
1.7
Burundi
1.5
South Sudan
1.2
Niger
1.0
Chad
0.8
Mali
0.8
Democratic Republic of the Congo
0.7
Eritrea
0.6
Guinea-Bissau
0.5
Western Sahara
0.5
Central African Republic
0.5
DIAGRAM 4 – A further 14 African economies have populations smaller than the world average of 6.1 million people.
With a second screen we can cut out of consideration a further 14 economies we don’t want to cloud our more detailed analysis. Again, it is by a blunt sword’s edge, and we eliminate countries with a population size smaller than the world median of 6.1million people. Fewer customers means less opportunity to scale. With our list of 27 structurally solid economies of substantial size, we’re ready to holster the blunt sword and take aim with laser guidance. Our weapon of choice here is based on the CAGE Distance Framework devised by Pankaj Ghemawat, professor of
DIAGRAM 3 – 14 African countries 14 African countries fall short of the world median of 2.6% per annum two-decade growth forecast by the six-factor model. Gordon Institute Of Business Science
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CAGE distance framework • • • • • •
Language Ethnicity Religion Work systems Tradition Values, social norms, and dispositions
• Per capita income • Cost of labour • Availability of human resources • Organisational capabilities • Economic size
Cultural
Economic
DIAGRAM 5 – CAGE Framework
Administrative
Geographic
• • • • • • •
Colonial ties Trade agreements Currency Legal system Government policies Political hostility Visa and work permit requirements • Corruption • • • • • • •
Physical distance Common land border Time zones Climate Landlockedness Transportation Communication
Source: Prof. Pankaj Ghemawat - IESE
global strategy at IESE Business School in Barcelona and global professor of management and strategy at the Stern School of Business at New York University. In his MBA course, Globalisation of Business Enterprise, Ghemawat asks students why US media giant Star TV lost $500 million trying to deliver TV shows to Asia, assuming this booming market wanted English-language programming, but succeeded later in India with the same product.
country. We know that, for example, in mergers – one of the likely vehicles for expansion across borders – it is cultural rifts that result in failures far more often than a bad product.” For Africa, Saville asked how different country X’s language, ethnicity, religion and work systems are from those of South Africa. The further apart the proxies, the more difficult and riskier the location for expansion.
Ghemawat suggests the answer: “Look beyond a country’s sales potential (as expressed by national wealth or propensity to consume) – and analyse the probable impact of distance.” Here ‘distance’ is a term of art as much as it is of science, made up of four varieties, only one of which is geographic.
Similarly, administrative distance belongs in the CAGE model. Do we share trade agreements? Are our legal systems compatible? Are regulatory systems hostile? That’s clear enough.
“Cultural difference is a good jump-off point,” says Saville. “We want to know the degree to which we would feel at home in this
...can we identify the ingredients that establish the bedrock for economic superstardom? 20
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Saville pares down geographic distance to “How much time in how many airports?” One might gloss over differences in time zones and climate until that 3am conference call or a week of equatorial summer. We want the CAG elements of CAGE to be close. The E – economic distance – is more nuanced. “This is an ambiguous element,” explains Saville. “We don’t necessarily want to go to a place that shares our cost of labour, size and human resources. At the extreme, if our economies are identical, why would they want anything we have?” For example, a manufacturer might gravitate
towards substantially lower labour costs. A web start-up may chase a more technologically skilled workforce. It all depends. Saville applies the CAGE model to the shortlist of other African destinations for the South African firm considering expansion. Each country scores between 1 and 3 for each element of CAGE, 1 being the best score and 3 the lowest. Summing scores across the elements, a perfect score is 4, while a score of 12 points to high distance and suggests a host of challenges.
Country
CAGE Score
Kenya
4
Ghana
4
Zambia
4
Rwanda
4
Tanzania
5
Côte d'Ivoire
5
Nigeria
6
Zimbabwe
6
Ethiopia
7
Uganda
7
Cameroon
7
Senegal
7
Egypt
8
Morocco
8
Malawi
8
Mozambique
9
Madagascar
9
Tunisia
9
Angola
10
Togo
10
Sudan
11
Burkina Faso
11
Benin
11
Libya
11
Algeria
12
Guinea
12
This is not a tool to predict GDP growth next quarter or even next year.
We have combined our models to whittle down an intimidating smorgasbord of 55 potential destinations for expansion to 21 investible African countries for the South Africa-based business. That figure remains beyond most market research budgets, making one final screen important. Eliminating from the discussion all economies with a CAGE score of 8 (the average across our list of 21 finalists) or higher leaves ten economies standing. That is ten countries of substantial size that we are confident will grow well in the long run and are suitably ‘nearby’ (as CAGE defines it) to justify moving in for the long haul. Of course, our dismissal of commercial intuition earlier was only partial. The Sixpack and CAGE treatment got us this far, it remains for some combination of business wiles, industry specifics and CAGE distance to cover those vital final yards to an investment decision. Saville suggests one standout example to demonstrate this dynamic. “For a decade, the go-to destination for South African firms expanding in the continent was Nigeria,” he says. “Commercial intuition is drawn to the sheer size and market growth. But our analysis offers pause for thought. The six-factor model predicts modest growth in the long run, rather than spectacular growth; and the CAGE score puts Nigeria ‘further’ away than, for instance, Tanzania or Côte d’Ivoire.” Consider also Ghana. At 29 million its population is one-sixth that of Nigeria, and yet Ghana’s top-of-the-log score of 4 trumps Nigeria’s by two points. Geographically further from South Africa than Nigeria, Ghana is ‘closer’ on CAGE ranking. Add to that a stable democracy, natural resources alongside better diversification of industries than many African peers, sandy white beaches and warm weather year-round. Pause for thought indeed.
DIAGRAM 6 – Less is More: Four countries – Kenya, Ghana, Rwanda, Zambia – with a perfect CAGE score of 4 and attractive prospects for the expanding South African business.
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Sponsored Case Study
Training Tomorrow’s Leaders With a first round of more than 55 000 applications for just 30 or so places, AB InBev Africa’s Global Management Trainee (GMT) can clearly have its pick of the crop. But the company’s People VP, Lucia Swartz, says there’s more to gaining one of those coveted places than just high marks. “Clearly, academic performance is important,” says Swartz. “We look for AB InBev Africa’s people with either a Bachelor’s or Master’s degree, with at least a B-average or a 3- to 4-point GPA. But, as important, we want candidates with character and the right attitude. They need to be visionary, curious, bold and driven, with an open and global mindset,” says Swartz. “They need to have a much broader outlook and set of interests than just academia. We’re looking for very wellrounded individuals.” Swartz adds that geographic mobility is also important, and proficiency in English is a requirement. Candidates with up to two years’ worth of work experience will also be considered.
Many of our very senior managers – members of the leadership team – are graduates. AB InBev was already the world’s biggest brewer when it acquired SABMiller for more than $100 billion in 2016. As part of the AB InBev family, the GMT was launched in Africa the following year. The company has been running the programme in other parts of the world for a number of years. “We’re not really looking for work experience from graduates because part of the training programme is about giving candidates exposure and experience through the different functions of the business,” explains Swartz. “The programme lasts 10 months and during that time, candidates are immersed in hands-on experience in various functional areas from marketing to sales and operations. They’ll do a vocational programme through each of the business’s major functions to give them a sense of what each function has to offer.” In addition, they will work in the organisation’s breweries and head offices, getting to know senior leaders along the way. 22
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Applicants come from any of the countries in which AB InBev Africa operates.
Travel, learn and grow
Finally, the trainees from the Africa zone will head off to St. Louis in the USA where they’ll join cohorts from AB InBev’s other international divisions. The 270 trainees will spend a week there during which they get a good view of AB InBev’s rich heritage, undertake problem solving simulations based on life in the organisation, get an overview of the business by global leadership members and selected AB InBev zones from around the world, as well as participate in strategic planning workshops. The group also meets with and is addressed by the group’s CEO, Carlos Brito. “Once the training programme has been completed, the trainees will be absorbed into various functions of the business,” says Swartz, who notes with pride that the 2017/18 programme is about to end and every single one of its graduates will be joining the business. “This is a programme that is truly aligned to our recruitment strategy. In general, we do not go to the market to look for experienced talented people. We much prefer to home-grow our own talent at all levels of the company, if we can. So, our graduate trainees and our functional trainees play a really important part in building our organisation’s talent pipeline,” says Swartz. “Often, when you meet people from other zones of AB InBev, they’ll tell you with great pride, as they introduce themselves, that they were part of the GMT or GMBA (Global MBA programme) and which class they belonged to. There’s a rich heritage here and we put a lot of value to it. It’s an amazing programme!”
Creating employment
The GMT is just one part of AB InBev Africa’s training schedule. “In 2018, we also took on 105 functional trainees in areas like sales, marketing, finance, legal and corporate affairs. We have 114 people completing apprenticeships in various disciplines, and another 100 undergoing in-service training for areas like
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Lucia Swartz
brewing and quality control. We have 265 learnerships and about 13 low-income scholarships. In all, some 600 young people are benefiting in South Africa alone, where, of course, we operate under the South African Breweries Ltd. banner,” explains Swartz. She is also very clear about the GMT’s alignment with the request by South African President Cyril Ramaphosa for major corporates to employ young graduates. “There are manifold benefits to these programmes. We’re building skills, capability and affording people experience and opportunities. I think we win and South Africa wins.” Nor are these benefits just confined to the GMT. AB InBev Africa has made a five-year commitment to the creation of 10 000 real and sustainable jobs. Swartz is confident that this target will be met: “In 2017, we created 1 800 jobs. They are tracked and monitored on a quarterly basis, they’re compliant with the Basic Conditions of Employment Act and the minimum wage requirements. These are jobs which are created either down the value chain or up our supply chain. We also have a programme looking specifically at agriculture and recruitment in that sector. But these are not seasonal or part-time jobs – they have to be permanent and full time.”
On the programme, you are participating with colleagues from all over the world. There’s no doubt, though, that the GMT is one of AB InBev’s flagship initiatives. “On the programme, you are participating with colleagues from all over the world. The curriculum is the same in the Africa division as anywhere else. So, you’re competing on a truly global stage. It’s a superb opportunity for any young person.
For more information on AB InBev’s Graduate Management Training programme, please visit: www.sab.co.za/graduate-programme www.ab-inbev.com/careers www.facebook.com/ABInBevAfricaGraduates www.linkedin.com/company/ab-inbev-africa
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BY DIANNA GAMES
Who’s In, Who’s Out in Sub-Saharan Africa in 2018 As African economies modernise and become increasingly integrated with an ever more complex global order with its ebbs and flows, so their fortunes also change. A decade ago, many of the best performers in Africa were resource-rich countries such as Sierra Leone, Equatorial Guinea and Chad. In 2018, more diversified economies dominate the list of high-growth states. This shows both a maturing of the growth story in Africa but also indicates the impact of factors such as commodity dependency, governance and planning on economic outcomes.
By most measures, the top of the growth league in Africa is Ghana with projected growth of 8.3% in 2018 (World Bank). Growth, largely driven by oil and gold exports, jumped from 3.7% in 2016 to 8.5% last year. The country has recently come out of an IMF bailout programme following the fiscal crisis of 2015, precipitated by lower than expected oil receipts that year coupled with poor budgetary management.
This article looks at some of the variegated performance of African economies in 2018 in sub-Saharan Africa, focusing on the high-growth performers, a selection of countries that are unpredictable and the “almost rans”, who had a lot going for them but have failed to realise their potential over the past few years.
Solid governance and adherence to the IMF’s management principles along with rising oil prices and production have set Ghana firmly on a growth path for 2018 and beyond. A downside is that revenues remain dependent on commodities – oil, gold and cocoa primarily – despite a growing services and agricultural sector.
Top performers
Africa’s top performers of the past few years have a few things in common: investment in infrastructure, long-term planning, supportive governance and political stability.
Vying for top position in the growth stakes is an economy with a very different economic structure and history – Ethiopia. The second-most populous country in sub-Saharan Africa with 108 million people at last count, Ethiopia has grown mainly
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The Ashanti Goldfields strip mine in Obuasi in the Ashanti Region in Ghana
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Indian manager and worker on a farm leased by the Ethiopian government
on the back of agriculture, manufacturing and services. It has had sustained growth of about 10% a year for a decade and in 2018, growth was projected at 8.2%. Ethiopia is an example of a country that has succeeded through planning and vision rather than resources. The economy has benefited from strong state-led investment in the past with the aim of addressing pervasive poverty and creating an industrial, export-led economy. Past leaders have leveraged Ethiopia’s strong relationship with China to bolster growth and in addition to state-led Chinese investment, private Chinese companies have created more than 28 000 jobs in Ethiopia, mainly in the manufacturing sector. The country continues to prioritise tourism and has built its national airline into the continent’s top carrier, with strong investments in ancillary areas such as flight training and catering facilities. Large infrastructure projects underpin the national project including the building of the $4-billion, 6 450MW Grand Renaissance Dam and the $3-billion, 750km railway line linking Addis Ababa to the port of Djibouti.
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Ethiopia’s new leader, Prime Minister Abiy Ahmed, is taking the country along a new market-driven path by privatising stateowned entities and opening up formerly closed sectors to foreign investment. Côte d’Ivoire is also very much “in” in 2018, enjoying the fruits of high investment in infrastructure, good governance and solid planning. Driven by investment and consumption, GDP grew on average by 9% per year from 2012 to 2015 and it is expected to maintain this momentum in 2018.
...Ethiopia has grown mainly on the back of agriculture, manufacturing and services. The country has worked hard to rebuild the economy after a damaging civil war that ended in 2007. Under the guiding hand of the IMF, the country managed to re-establish multilateral relations, get public finances in order and begin a process of structural reform. In 2014 and 2015 it was ranked in the top 10 best-performing countries in the World Bank’s Doing Business reports. It is well integrated with international markets for its exports, mainly cocoa, gold and natural gas and is positioning itself as a logistics hub in West Africa. The country is also benefiting from the return of the African Development Bank headquarters to Abidjan in 2014 after an 11-year absence due to civil war. Senegal doesn’t get as much press as the other countries in the top performers category but it has been quietly plugging away at its development programme – Emerging Senegal Plan – which aims to make it a middle-income country by 2035. It is centred on 27 infrastructure projects and 17 structural reforms aimed at attracting foreign investment, and reducing poverty and inequality. Gordon Institute Of Business Science
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...miners have either pulled back on expansion, cut back their operations or avoided new investment in Tanzania. It has been given a boost by the discovery of oil and gas reserves near the border with Mauritania, itself an oil producer. The country has enjoyed several years of growth above 6%. In 2018, it is expected to continue strong growth that topped 6.8% last year. It faces an election in 2019 but there are no red flags as the country is one of the most politically stable in Africa. Rwanda has become best known not for high growth – which is expected to reach a not too shabby 7.2% in 2018 – as much as the efficiency of its economy, driven from the front by President Paul Kagame. The leader has tried to offset the liabilities of being a small and landlocked country by making Rwanda attractive to investors and to build what assets it does have, such as tourism and mining. More than 50 mining licences are to be awarded this year for gold, tin and tantalum with a view to attracting more than $2 billion in investment into the sector. The government is also trying to attract businesses to use Rwanda as a regional hub by improving the business climate and developing the ICT and logistics sectors. And it looks like this strategy is working with $1.7 billion in new investment registered in 2017, a nearly 100% increase over the $800 million it netted in 2007.
Volatile
Tanzania is rated as a top performer currently by most analysts. The country has averaged economic growth of between 6-7% for the past decade and in 2018 this is expected to reach 6.8%. However, there is much that could still go wrong to disrupt that positive trajectory. Volatile president, John Magufuli, has become a force to be reckoned with as he battles foreign investors in a quest for greater empowerment for his people and proceeds from the country’s resources. The president has accused international mining firms of false valuations of exports, tax evasion and other criminal acts and has made tax demands, seized a consignment of diamonds and introduced a ban on concentrate exports. In 2018, the fiscal and regulatory regime of the mining sector was overhauled to allow the government to renegotiate mining and energy company contracts and forcing miners to use only 100% Tanzanian-owned banks for their dealings in the country. The sum of this is that miners have either pulled back on expansion, cut back their operations or avoided new investment in Tanzania. The country also faces problems in the exploitation of the rich gas reserves off its southern coast. Negotiations on the commercial framework agreement for the development and a liquefied natural gas (LNG) plant have been long delayed because of disagreements between the government and international oil companies on the terms of engagement. South Africa, given the size and sophistication of its economy and its global integration, is always vital to any analysis of the continent despite its very low growth rates over the past decade. But in recent years, its fortunes have reached new lows in the post-apartheid era with a persistent and damaging strategy of state capture allegedly led by former president, Jacob Zuma, members of his cabinet and other powerful people. This has served to gradually further impoverish the country and undermine key institutions of state. These factors have contributed to costly ratings downgrades that have relegated its long-term debt to junk status.
Batches of copper at Mopani mines, Mufulira, Zambia.
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Zimbabwe is regaining some stature in discussions about African economies after years in the wilderness as a result of its unique economic circumstances under three decades of misrule
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Policy uncertainty persists under President Cyril Ramaphosa, although improving governance and attempts to halt rising debt and arrest the attack on institutions are signalling a return to normality. The World Bank projects that growth will pick up slightly to 1.1% this year and increase further in 2019 barring any unforeseen political or economic upsets.
Reconstruction work taking place on The Félix Houphouët-Boigny Bridge in Abidjan
by former president Robert Mugabe up to 2017. With a new president, Emmerson Mnangagwa, Zimbabwe has an opportunity to build its battered economy, which is suffering from serious liquidity challenges, foreign exchange shortages and low investment in existing assets and infrastructure. It is a tough task and relies on strong and accountable leadership, the rebuilding of trust with domestic and foreign investors and predictable policy.
Almost rans
Angola has a chance to modernise and diversify its economy under new president, João Lourenço, who has started dismantling the 38-year legacy of former president José Eduardo Dos Santos. Nigeria, which goes into a hard-fought election in early 2019, looks like it may have another four years of ageing incumbent Muhammadu Buhari unless the opposition can field a winning candidate.
Angola and Nigeria have both undergone similar trajectories since the bottom fell out of the oil price, on which they depend for most of their revenues and foreign exchange receipts, from 2014. With the oil tide out, their failure to sufficiently diversify not just their economies but particularly their revenue streams, has been laid bare.
Mozambique, once regarded as one of Africa’s best performers, is an almost insolvent country that is battling to service its unsustainable debts or engage international lenders. In ratcheting up more than $2 billion of secret debt through dubious deals in 2016, and defaulting on its debt payments in 2017, it has lost the budgetary support of the IMF and donors, and alienated itself from international funders. The government is now relying on investments in its gas fields to provide much-needed liquidity, although this is still a way off, with developments delayed by soft commodity prices in the recent past.
Nigeria, Angola and Mozambique have been, variously, among the best-performing or fastest-growing nations at one time or another but they have each squandered their assets because of poor governance, lazy economic policies and political expediency. All three should be in the list of top performers but instead, by their own hand, have become the almost rans.
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Zimbabwe is regaining some stature...
Both countries are now rebuilding after recession. Nigeria’s growth fell from just below 7% in 2014 to -1.6% in 2015 and 1% in 2016 while Angola reported zero growth in 2016. Critical foreign exchange shortages are being addressed and currency management has become more flexible as growth starts to pick up and the wheels of business start to turn again. In Angola, the World Bank projects growth of 1.6% this year from 1.2% in 2017, while in Nigeria growth of 2.1% is predicted for this year by the IMF and 2.3% in 2019 although these are largely premised on rising oil prices.
Growth has fallen from the average of 7% growth between 2011 and 2015 to 3.6% in 2016 and 3.1% in 2017, according to the World Bank, which predicts a similar trajectory in 2018. Mozambique is an example of how quickly things can go wrong in high-growth economies with great potential if the foundations are not firmly rooted in sustainable policies, strong institutions and accountable governance. Gordon Institute Of Business Science
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Going beyond borders The Industrial Development Corporation (IDC) has a long and illustrious history when it comes to promoting economic growth and development in South Africa. Established in 1940 as a fully owned entity of the South African government, it was mandated to create a safeguard for the South Africa economy during a time when trade with Europe was disrupted as a result of the Second World War. In eight decades that have passed since its formation, the IDC’s mandate has evolved. Among its core objectives, the institution is now responsible for unlocking infrastructure development and investments aimed at stimulating local economic growth and regional integration.
We go out and understand what the different countries are about, where there are infrastructure gaps and where the opportunities are… In the driver’s seat
Among other people that are central to achieving this goal is Ruse Moleshe, the IDC’s Head of Industrial Infrastructure. She has more than 20 years’ experience in the power and infrastructure space. Her ability to run this important division within the IDC is further enhanced by the fact that her experience has bridged both the public and private sectors. She has worked for the Development Bank of Southern Africa (DBSA), Standard Bank and construction giant Basil Read’s subsidiary (Basil Read Matomo), as well as within government. All of these roles saw Moleshe expanding her experience in the infrastructure space. Now, from her vantage point within the IDC, Moleshe is committed to helping the development finance institution meet its developmental mandate. “We are looking to further develop infrastructure across several key sectors like power, ICT, water and logistics, which include ports, roads, rail and storage facilities. This new wave of projects should ultimately support the country’s key industry sectors including metals and mining, basic and speciality chemicals, agro-processing and agriculture,” she explains. 28
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Her personal goal dovetails with that of the IDC as she seeks to increase the number of projects the IDC is involved in, not only in South Africa but regionally. Just like the IDC’s mandate, she believes in further enhancing the reach of the organisation by ensuring that people who were previously excluded from sectors, such as women in oil and gas, get an opportunity to participate through the IDC’s ability to drive this agenda through the deals they facilitate. Indeed, the transformation of women and the development of black industrialists and youth are issues close to Moleshe’s heart.
Committed from the start
As a developmental finance institution, the IDC has a greater appetite for risk than the commercial sector. “Unlike commercial banks, the IDC looks at core development of the projects,” explains Moleshe. “Commercial banks require bankable feasibility studies. We put in the equity to make sure that there is funding from the beginning to get the bankable feasibility studies and then we can draw in other partners.” Because of this approach, a number of successful projects which would never have got off the ground without the IDC’s intervention, are being implemented. The renewable energy sector in particular has benefited from IDC’s involvement. But the successes that IDC is achieving are not without their challenges. Moleshe explains that getting investors to back IDC initiatives can often be challenging, especially when dealing with traditionally more conservative investors, like pension funds. Also, she says: “We are working with a number of start-ups so a lot of hand-holding is required from an IDC point of view. We don’t always have the capacity to support these new businesses in the way they need, and this can be challenging.” Cross-border projects that involve South Africa and a neighbouring country can also pose challenges due to geographical and logistical issues. For instance, part of a project may be bankable on one side of the border, but could lose its appeal on the other. Moleshe mentions transmission lines as just one example. As the IDC pushes ahead into other African jurisdictions it is feasible that these challenges will increase, giving Moleshe and team a whole new set of hurdles to navigate. Africa is a vast continent. Its 54 countries not only have different languages and cultures, each country also works within individual legal and regulatory frameworks, and has different infrastructural needs and business environments. It is for this reason that the IDC works with partner entities like its sister company, the Development Bank of Southern Africa, which has vast experience in working across Africa and with regional commercial banks to co-develop projects. Working with local partners means that the
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The renewable energy sector, in particular, has benefited from IDC’s involvement. extensive experience of the African economic ecosystem to the table, and insights gained from the projects it already finances across Africa. So far, the projects that the IDC is interested in centre on the power sector in Southern and East Africa. “There is a lot of demand for energy sector projects,” notes Moleshe. The IDC is already financing power projects in Mozambique, Ghana and Zimbabwe. She adds: “There is also a demand for ports. Ports are an economic enabler for a lot of countries, so the demand for their development is rising.”
Delivering an investment pipeline for South African business
Intra-Africa exposure will guarantee the IDC greater diversity in its projects. In building a more extensive African portfolio Moleshe and the IDC will be better able to deliver on their mandate of driving South Africa’s economic development, supporting local manufacturing and creating much needed employment.
Ruse Moleshe
IDC gets access to essential specialist knowledge concerning the working conditions on the ground. In this respect, Moleshe cites the current concern around the repatriation of investment capital from jurisdictions that may not have the forex reserves or the environment to enable this. In spite of such issues, Moleshe stresses that regional diversification is a key strategic imperative for the IDC and that the organisation will continue working to drive this agenda forward. The IDC is well poised in this respect, bringing as it does
Phone: 0860 069 3888 Website: www.idc.co.za Email: callcentre@idc.co.za
But in order to do this the project pipeline needs to be established and filtered through to clients. Moleshe explains that between the IDC and its partner organisations, projects across Africa are carefully identified. She explains: “We go out and understand what the different countries are about, where there are infrastructure gaps and where the opportunities are. We then share this information with our South African partners and our clients to be able to say that these are the projects we can participate in.” This commitment and understanding of the opportunities that exist on the continent has given the IDC a leading edge in the African development ecosystem. Moleshe and her team are committed to driving an agenda that will ultimately mean greater success for South African businesses and entrepreneurs, and the people that they employ.
Address: Industrial Development Corporation 19 Fredman Drive, Sandown PO Box 784055 Sandton, 2146
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BY JAMES VAN DEN HEEVER
Long Tunnel, Maybe Some Light? The outlook for manufacturing in South Africa seems bleak, but it remains a vital engine of the economy that we must fix. One hears a lot about manufacturing’s potential for reinvigorating and expanding our economy – especially when it comes to the all-important issue of creating jobs. But the manufacturing economy is a complex machine with many moving parts, and gaining a clear picture isn’t necessarily that easy. Professor Robert Lawrence, who visited South Africa in March under the auspices of the Centre for Development and Enterprise, argues that we must recognise that the percentage of the workforce globally in the manufacturing sector has been on the decline since the 1960s at least.1 This decline is caused primarily by increased labour productivity combined with the ongoing development of manufacturing technologies. It is essential to note also that increased productivity is not evenly spread – much of the productivity gains are in manufacturing and agriculture because they can scale. Not good news for our president and his merry men who seem to be betting the farm, quite literally, on agriculture’s presumed ability to provide lots of jobs. By contrast, service industries are much less susceptible to productivity increases. The work done by plumbers, teachers, barbers, electricians, restaurateurs, nurses and so on simply cannot be scaled to the same extent, if at all. (One of the best of that rare species, an economist’s joke, is William Baumol’s observation that it takes as many musicians to play Beethoven’s Fifth today as it did when he wrote the piece.)
Here’s the kicker: the demand for goods is relatively inelastic. That means that even as manufacturing or agricultural output rises and costs decline, consumption of those goods does not rise to the same extent. Professor Lawrence calculates that for each 1% decrease in price, consumption of the good goes up only by 0.7% – thus as more goods are sold, the value decreases.
Fewer jobs, more money
The ineluctable truth is that as manufacturing productivity increases, those working in manufacturing find their incomes rising – but there are fewer of them. The data also shows that over time, as countries hit “peak manufacturing”, the percentage of the workforce employed in manufacturing tends to reduce, as does its per capita income. Table 1 shows this clearly.
USA UK South Africa Brazil China
Digitisation, artificial intelligence, robotic and 3D printing may eviscerate manufacturing further but as
1953
25%
$17,977
1961
32%
$15,214
1981
17%
$11,776
1986
15,4%
$11,492
2010
19,2%
$9,876
Table 1: Manufacturing employment and income2 Source: US Bureau of Labor Statistics
1 The CDE’s summary of Professor Lawrence’s various talks, The future of manufacturing employment, is required reading for anyone involved in or thinking about manufacturing. It is available at www.cde.org.za/the-future-of-manufacturing-employment. 2 Adapted from ibid, Table 2, p 5. 3 Ibid, Table 1, p 4. 4 South African Institute of Race Relations, South Africa Survey 2018. Gordon Institute Of Business Science
By contrast, as economies grow and incomes rise, people consume more services once they have enough goods. More and more people move from making or growing things to providing services. This trend will only be exacerbated by the Fourth Industrial Revolution, which will see much more work taken over by machines of one sort or another.
Share of Per-capita income Peak workforce (2015 dollars)
SOURCES
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Across the developed world, manufacturing’s share of the total workforce fell from the 22%-37% range in 1973 to 9%-21% in 2010.3 In South Africa, manufacturing employed 1.181 million people in 2017, a decline of 23% since 1990.4
IMAGE SHUTTERSTOCK
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Professor Lawrence notes, new jobs will be created in other areas. There are hundreds of millions more people in employment today than there were in the 1810s, he notes, and while it is possible the Fourth Industrial Revolution could change this pattern, “…to date, the productivity and employment data do not appear to support the conclusions of the pessimists.”5
Growth, already low, seems to be actually falling... Putting South Africa to work
Where does all of this leave South Africa? In line with so much else going on in our body politic and economic, not looking too rosy – but not altogether hopeless. Professor Lawrence’s analysis shows that, at best, we could not look for more than a relatively small percentage of the population employed in manufacturing, probably rather less than the 17% we achieved in 1981, as shown in Table 1 above. But anything more than the abysmal current 2% (1.181 million) employed in manufacturing would be worth having. As Philippa Rodseth, executive director at The Manufacturing Circle argues, “Manufacturing is the engine of growth.” Not only do manufacturing jobs pay well, they have a multiplier effect because goods spark the need for services – first to transport, store and market them, and then to complement them, not forgetting the needs of the salary-earners for a growing range of services. As a result, there is a strong correlation between manufacturing and GDP. According to the US Bureau of Economic Analysis, every dollar in sales of manufactured goods supports $1.33 in output from other sectors, the highest multiplier of any sector.6 Growing our manufacturing sector faces huge challenges. Ian Cruickshanks, chief economist at the South African Institute of Race Relations, is blunt: manufacturing’s
contribution to GDP has steadily declined from 18.1% in 1951 to 13.2% in 2015.7 “There’s no reason to believe this will change,” he says, adding that whereas South Africa used to be able to count on inflows of foreign capital in the R60-80 billion range, this year has seen massive outflows – R44.8 billion (net) had left the country by the end of August, with August alone accounting for R20.7 billion.8 Growth, already low, seems to be actually falling as the severe contraction in the first quarter of 2018 shows, and could even drop below 1%; population growth, however, continues to rise. “The country is getting poorer, and that means the government will increasingly struggle to fund the budget let alone the current account deficit, especially given the downgrade in our rating,” he says. To turn this picture on its head will require three basic conditions to be in place: investors will need to be sure their assets are secure; there needs to be a constant, reliable and cost-effective energy supply; and labour needs to accept that reward and productivity are linked. At present, all are lacking and the ANC’s policy trajectory looks set to actually worsen them. GIBS’ Professor Adrian Saville concurs broadly that these basic conditions need to be met. “We need to partner with international investors if we are to rebuild our manufacturing sector,” he says. Currently, however, even local investors are declining to invest in major new projects, and the picture is one of cost-cutting and maintenance, with new projects being minor, according to Ms. Rodseth.
Competing with the world’s best
One of the challenges of manufacturing is the ongoing process of globalisation, which means that manufacturers face much more competition in both local and foreign markets. South Africa is far from most of the biggest markets in Europe, North America and Asia so in order to compete, we have to offset high transport costs. Perhaps a more serious problem is that of scale. Manufacturing success is
Ian Cruickshanks
pre-eminently linked to scale and thus the ability to reduce the cost per unit. Achieving scale is hugely aided if there is a strong domestic market in which local manufacturers at least start in pole position, and which allows them to weather the inevitable fluctuations of international markets. Arguably, a large part of the United States’ continued economic success is the fact that its huge domestic market helps US companies attain scale, and ride out international business cycles. Because of its low growth and poorly conceived government policies, South Africa is caught in a double bind. “There just is no real domestic market,” says Eric Bruggeman, chairman of the South African Capital Equipment Export Council (SACEEC). He believes this could be changed if a sensible localisation policy was initiated. He cites PRASA’s infamous purchase of rolling stock as a prime example of capital goods that could have been produced locally. Professor Lawrence also broadly supports localisation as a policy provided its costs are well understood. His suggestion would be for public agencies to be compelled to buy local provided the goods are within say 10%-15% of the cost of the imported equivalents.
More and more people move from making or growing things to providing services.
SOURCES Ibid, p 6. Quoted by The Manufacturing Institute at www.themanufacturinginstitute.org/Research/Facts-About-Manufacturing/Economy-and-Jobs/Multiplier/Multiplier.aspx. South African Institute of Race Relations, South Africa Survey 2018. 8 JSE figures, supplied by Ian Cruickshanks, South African Institute of Race Relations. Gordon Institute Of Business Science 33 5
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HIV/AIDS ADVANCES CAN BE USED TO ACHIEVE UNIVERSAL HEALTH COVERAGE The battle against HIV/Aids has topped healthcare agendas for some three decades and delivered a wealth of lessons learnt, along with skills, resources and systems that have been honed while waging war against the pandemic. While today’s global role players are continuing the fight, they are also turning their attention to ways in which the progress made on the HIV/Aids front can be used to treat other diseases and achieve universal health coverage. According to Dr. Iain Barton, Imperial Logistics group executive: healthcare, leveraging the supply chain and distribution learnings and successes for antiretroviral drugs is integral to attaining this goal. “While focusing on HIV/Aids, we have refined supply chains and distribution networks. We have forged powerful partnerships, developed innovative ways of doing forecasts, and optimal strategies to deliver HIV treatments to where they are needed. We must take what we have learnt and developed through HIV/Aids to address the critical issue of more than 400 million people who do not have access to even the most basic healthcare, as well as 100 million who are pushed into poverty every year due to out-of-pocket healthcare expenses.” Supply chain optimisation strategies, economies of scale and supply chain transformation will also influence the path to universal health coverage, Barton states. “Getting ARVs to the current 21 million people on treatment has taught us the benefits of moving from the old style of manufacturing to order to manufacturing to stock, as well as the advantages of forward placing of inventory and committing inventory to market. HIV/ Aids has added impetus to the drive to standardise product registration, customs regulations and duties.” Technology and infrastructure innovations that have emerged during the Aids pandemic will also be leveraged. “There have been many brilliant innovations in the Aids space that can now be used to fight other diseases,” Barton says. “The technology developed and employed in the serialisation and authentication of HIV medicines is set to have a massive 34
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impact in ensuring the quality and authenticity of drugs to treat all diseases. Similarly, blockchain technology and pharmaceutical control towers developed to provide visibility and track and trace capabilities for ARVs will ensure supply chain transparency for other medicines and healthcare products.”
Dr. Iain Barton
Barton believes that experience and expertise gained in the war against HIV/Aids has revealed that the environment is no longer an impediment to the delivery of treatment. He cites the example of Imperial Logistics’ “Clinic-in-a-Box”, which provides a ready-to-use clinic and dispensary unit that can be erected within a day and contains all the components required to deliver a total solution, packed and ready for delivery in 20 to 40-foot containers. “This innovation has revolutionised the prevention and treatment of HIV across 35 countries in Africa by bringing essential medical services to remote communities at the point of need.” 10 Skeen Boulevard Bedfordview 011 677 5000 Imperiallogistics.co.za GPS Coordinates 26°11’44.48”S | 28°7’49.89”E
...it takes as many musicians to play Beethoven’s Fifth today as it did when he wrote the piece. Even if we could begin to create some local demand to kick-start local manufacturing, we would also have to confront the perennial South African question of skills. Our workforce is relatively unskilled and heavily unionised – there is great resistance to the idea of linking wages to productivity, one of the preconditions for success noted by Mr. Cruickshanks. This intransigent attitude can surely be traced back to the ANC’s characterisation of South Africa as an internally colonised country (colonialism of a special type), which in turn creates a predisposition to view economic success purely as a question of power dynamics, delinked from effort and know-how. A further critical point about skills needs to be made in the light of Professor Lawrence’s comments about the Fourth Industrial Revolution, quoted previously. Simply, it is that while it may be true that many new jobs will be created, it is painfully obvious that our existing workforce lacks the skills needed to shift into service industries or jobs, and that our educational system is, at best, woefully inadequate to produce new entrants to the labour market equipped to succeed.
Towards a recipe for export success
The challenges of upskilling the labour force and creating some sort of local market are far from insuperable, given political will and enough of a policy change to convince local investors to unlock their vaults. Although it is unlikely given the current state of the ruling party and its outdated economic thinking, if we did manage to ignite local demand and had sufficient of the right skills, how might we achieve success in international markets? Professor Saville notes that successful exporters tend to have either a single large trading partner (Mexico and the United States come to mind) or they are part of a “neighbourhood” in which learning by
contagion occurs. Asia is a good example: Japan, Taiwan, Hong Kong, Singapore, South Korea, China, Vietnam, Indonesia and the Philippines have learned from each other, and exchanged places on the manufacturing supply chain over the decades. The same point could be made about Europe. South Africa has neither – but what it does have is close proximity to some of the world’s fastest-growing economies. “Big business tends to focus on more distant markets or, at best, Nigeria,” he says. “We are ignoring big opportunities on our doorstep.” Careful targeting of African markets is thus one option that would effectively play to our strengths, among them market proximity and understanding. Another avenue suggested by Professor Lawrence is to specialise in what we are good at and can deliver at world prices. One such area is capital equipment, says the SACEEC’s Bruggeman. He says South Africa already exports capital equipment valued at around R178 billion annually, and has an excellent reputation for specialised and innovative products, particularly in mining and agriculture. He also says that bespoke versions of generic products, such as suction pumps, are a good niche. “We could double our production capabilities if we had a proper exim bank to finance our trade. Specifically, we could play a bigger role in the many African projects underway and planned,” he says. “There is huge potential – we just need to unleash it.”
EXPORTING TO AFRICA: THE BASICS While every African market has its own characteristics, Tutwa Consulting’s Peter Draper and Lesley Wentworth say there is a general approach that can be used to formulate a country-specific entry strategy. UNDERSTAND HOW TO USE INFORMAL INSTITUTIONS. Because many sub-Saharan countries lack formal intermediaries, regulators, and ways of enforcing contracts and resolving disputes, companies must be prepared to use informal institutions, build personal connections and put up with opaque power arrangements. Understanding the nuances of local culture will be critical.
DEVELOP A DETAILED RISK PROFILE. Many of these are “frontier markets” with unique risk profiles, often a combination of corruption, arbitrary rules, and faltering democratic rule and economic prosperity.
ASSESS THE MARKETS THOROUGHLY. A good assessment of the political economy is the essential starting point. This should include an assessment of political risks, and marketscoping. Based on this, the risk/reward of alternative markets can be compared.
KNOW HOW THE FIGURES WORK. Databases and indices covering Africa have distinct peculiarities, so each one’s basic principles must be fully understood when researching.
EXPOSE YOURSELF TO THE MARKETS. Desktop research must be complemented by comprehensive in-country visits.
ENSURE A RECEPTIVE MARKET. Design a (benign) strategy to influence key local stakeholders to ensure greater market receptivity.
PROCEED WITH CAUTION. Adapted from Peter Draper and Lesley Wentworth, Exporting in Sub-Saharan Africa – Worth the effort? (6 February 2018), available at http://www. tutwaconsulting.com/exporting-in-sub-saharan-africa-worth-the-effort. Gordon Institute Of Business Science
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WHAT ARE THE AFRICAN OPPORTUNITIES FOR SOUTH AFRICAN MANUFACTURERS? Given their distance from the markets of the developed world, and the extreme competitiveness of those markets, it seems to make sense for South African exporters to look to nearby African countries as export markets. After all, many of these are among the world’s fastest-growing economies. Presumably, too, South Africans have some fundamental advantages such as their relative closeness to the market, experience of African business conditions and practices, and a highly developed financial and governance framework. Most important of all, many citizens of target countries regularly visit South Africa to shop, have relatives working here or indeed are sending their children here for some portion of their education. The African Continental Free Trade Area agreement, which South Africa has pledged to sign, is likely to further streamline intra-African trade.
IMAGE SHUTTERSTOCK
Liz Whitehouse of Africa House says that in 2017, South Africa’s exports to subSaharan Africa amounted to $23.2 billion, and that 35% of all value-added exports from South Africa go to this region – thus falling into the broad manufacturing category. This means that our producers know what these markets want, but also that there is considerable potential for expansion, she argues. Of particular note, surely, is the fact that many manufactured products are maintained and serviced from South Africa – a clear example of the multiplier effect of manufacturing.
However, there are massive regulatory and infrastructure hurdles that need to be borne in mind. Tutwa Consulting’s Lesley Wentworth and Peter Draper warn that potential minefields include negotiating local gatekeepers, contact with whom might jeopardise the whole venture in the long run – McKinsey’s experience with Trillian Capital is a lesson to be taken to heart. Other barriers would necessarily include entrenched incumbents who will do what they can to prevent new market entrants, and the potential for locals to resent South African entry into their markets. Ms. Wentworth and Dr. Draper detail a general approach would-be exporters into Africa should follow, one that can be tailored to individual circumstances. This approach would include a proper political economy assessment, with desktop research backed up by several incountry visits, to understand the market’s potential and what its barriers to entry would be. The key, they say, is to remember that one will be “navigating ‘frontier’ circumstances and ‘institutional voids’, meaning that adaptations en route are inevitable”.9 The SACEEC’s Eric Bruggeman debunks the notion that South Africans are routinely seen as arrogant. “South African companies are in the main careful to employ and train local people, and our goods are valued,” he counters. “You are much more likely to hear complaints about the Chinese, who frequently bring
in their own employees and are often perceived to be dumping.” However, the Chinese continue to make headway because they are able to finance projects for African governments that are chronically short of capital. Mr. Bruggeman believes that if South Africa had a proper exim bank that could fund such projects, it could clinch major infrastructure deals. According to a report from the African Development Bank, Africa needs to spend $130-170 billion a year on infrastructure, with a financing gap in the range of $68-108 billion.10 He says the right moves are beginning to be made, with the signing of a Memorandum of Understanding between the Export Credit Insurance Corporation of South Africa (ECIC) and the Afreximbank in March for a $1 billion financing programme to promote and expand trade and investments between South Africa and the rest of Africa. The ECIC is a state-owned corporation of the Department of Trade and Industry. “We exported capital equipment into Africa worth R44 billion over the past two years – we could triple that given the right funding mechanism,” Mr. Bruggeman says. If we are serious about growing our manufacturing base, and it seems we should be, then the opportunities offered by fast-growing African markets – with all their challenges – should not be missed.
SOURCES Peter Draper and Lesley Wentworth, Exporting in Sub-Saharan Africa – Worth the effort? (6 February 2018), available at www.tutwaconsulting.com/exporting-in-sub-saharan-africa-worth-the-effort. ‘Massive’ infrastructure spending needed in Africa, says report, News24 (18 January 2018), available at www.news24.com/Africa/News/massive-infrastructure-spending-needed-in-africa-says-report-20180117.
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Six Legal Areas to be Aware of When Starting a Business Many entrepreneurs may have limited experience with the legal aspects of starting a business, which can be a veritable minefield. Here are six areas to consider from the legal practitioners at Barnard Inc. Attorneys:
THE LEGAL ENTITY Zoe Wort, Junior Director, says various legal entities have pros and cons. “The most important reason to consider registering a company as opposed to trading as a sole proprietor is to limit your liability. Directors of a company cannot be held personally responsible for the business’ liabilities, unless they breach their fiduciary duties,” she says. Wort says entrepreneurs should be aware of the upkeep required after registering a business with CIPC. For example, annual returns need to be submitted and directors’ details must be updated on the registry. Entrepreneurs may want to consider enlisting company secretary services to ensure compliance.
STRUCTURING THE BUSINESS Gerhard Truter, Financial Director, notes that this process should begin with the entrepreneur as an individual. “I ask a person what they’re doing and why to understand how to structure” he says. “Effective structuring starts with the end in mind. If, for example, you’re building a business you plan to build for the next 20 years, the tax structuring will be different to a business that you hope to sell within the next three years.” Truter says it’s easier to work on tax structuring from the start than to restructure later, which inevitably incurs costs. He emphasises that there’s no “one-size-fits-all” approach and it’s critical to develop a structure that will suit your specific business.
when something happens.” Without these, labour cases can potentially end up at the CCMA, where they may be dismissed because due process has not been followed. “Ensure you have a summary of the Basic Conditions of Employment Act and Labour Act on the walls of every floor. Take note of occupational health and safety requirements. Ensure you’re registered with COIDA and UIF. Ensure you have an employment equity plan in place. Requirements also vary across industries. It’s definitely worth consulting a specialist to assist you.”
COMPLIANCE Compliance covers a huge range of issues, from macro issues like tax compliance, B-BBEE and POPI, to internal compliance issues – things like social media and gift policies, and company terms and conditions. Chanique Collet-Serret, Associate, says compliance is a massive risk area for new businesses. “People think they’re compliant, simply because they’re not working with the regulations every day and are unaware of changes. The consequences of non-compliance can be dire.” Collet-Serret’s advice is to prioritise compliance from the beginning and to enlist professional assistance.
INTELLECTUAL PROPERTY Stefaans B. Gerber, Associate, says IP is a “bundle of rights”. Trademarks protect names and logos; patents protect
unique products, services or methods; and content is protected by copyright. Entrepreneurs need to apply for specific rights where necessary and to understand the limitations of these rights. “For example, if you disclose a process in a flyer before you’ve patented it, you diminish its novelty – one of the three requirements to obtain a patent (along with inventiveness and ability to be used in industry), so you lose your ability to protect it. Or, if you decide to expand into a new territory, your patent may only be valid in South Africa. It’s better to apply for patents in the countries where you want to operate upfront. Certain bodies, like OAPI and ARIPO, will issue a patent that is valid in a number of member countries,” he says. “It’s a complex subject, and it’s worth finding an advisor you can trust to assist with these things from the start.”
CONCLUSION Douw Breed, Managing Director, says the firm believes in and sincerely applies a very particular methodology. This methodology involves an audit process in order to fully appreciate and comprehend a client’s commercial interests and considerations before devising commercial legal strategies to reach outcomes which are sustainable and which truly add value. By implication, it means that sustainable solutions are provided to start-up businesses, whilst being conscious about their financial considerations.
LABOUR CONSIDERATIONS Many entrepreneurs have not adequately considered labour from a legal perspective, says Kylie Potgieter, Associate. “You need employment contracts in place, and formal policies and procedures that set out things like leave days and what to do
TEL: 0861 088 088 (national) | 00 271 264 83 988 (international) | FAX: 0861 099 099 | Email: starthere@barnardinc.co.za Centurion Gate Office Park, Units 2 & 3 | 1951 Akkerboom Street | Centurion | 0157 Visit their website at www.barnardinc.co.za
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Buyi Mafoko
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Gordon Institute Of Business Science
BY EUGENE YIGA
The Business of Branding Buyi Mafoko is taking Leratadima Marketing to new heights. Born in Durban in the mid-1980s and raised by travelling parents, Buyi Mafoko describes her childhood as an adventurous one. “My grandfather was a South African Breweries sales representative and subsequently worked in financial services, whereas my mother has always been in the hospitality industry,” she says. “Both roles meant that they could be assigned to any region around the country, which saw us move to small towns and main metros all over South Africa.” And yet despite this transient life, her interests were and have always been rooted in the artistic capabilities that enabled her to express her creative character. She initially found her outlet in school sports, which in her view are expressions of art, and wanted to have an impact in whatever she did. “I’ve always been attracted to the idea of bringing about real change in anything I participated in,” she says. “Your blessing or success lies in the area of your gift, and I have always had my gifts affirmed, and therefore understood that I was a gifted child with some uncommon capabilities. Although this response doesn’t settle on one career path, I am clear that marketing has given me a space within which to explore some of this inherent creativity.”
Your blessing or success lies in the area of your gift... The experience of studying at a different institution
The road to this, much like her childhood journeys, has been an adventurous one. After completing her secondary school education at Ferrum High School in Newcastle in 2004, she pursued an undergraduate degree in Human Movement Sciences at Wits University, a decision that was driven by her natural love for sports.
“It was maturing and a whole lot of fun,” she says of her time at the institution. “That environment has a way to help you discover yourself and grow up quickly. I also discovered my love for brands and their impact on our lives, which has captured me since.” She then proceeded to do a postgraduate Management Diploma at Wits Business School, which she completed in 2011. She also obtained a Digital Marketing qualification from Vega School of Branding in 2015 and is currently studying the Board Development Series at GIBS, which is set out as a five-day short learning programme, ending in October 2018. “As a Wits alumna, I wanted the experience of studying at a different institution,” she says. “GIBS has always been attractive to me for its excellent standard in education. The experience is certainly different because the institution is forward-thinking and dynamic in how it engages us as students. It’s given me a greater understanding of true strategic thinking.”
Showcasing operational excellence
Indeed, for someone who began her career in marketing without any formal qualification, the further education has been invaluable. She’s also found great value throughout her employment, with early roles at companies such as Adidas Group and Virgin Active. “I have always been fascinated with brands and their involvement in our everyday lives,” she says. “My affinity to building brands was asserted at publishing giant Media24, where I joined a marketing team that worked on distinguished brands such as True Love magazine.” In 2011, she joined Leratadima Marketing, which was established as an outdoor advertising business in 2007 (self-funded by the founding members) and recommended a re-brand that would position it as an integrated marketing agency set on client value creation. Fast forward to the present and she’s now managing director, leading a team of fifteen full-time employees and often more as the company scales up as needed based on the scope of any given project. “The growth was organic as we had the inherent experience to firmly progress our offering to include branding, design, trade
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marketing and strategy,” she says. “It was an opportune time for us to enter the market as a 100% black-owned agency that would showcase operational excellence, which challenged the usual perception of mediocrity.”
A partner in growth
The overall objective of the business is to build African brands, which it does through its creative, strategic and experiential services. Typical clients include those in the financial (Diners Club, Standard Bank), automotive (BMW Group South Africa), and FMCG (South African Breweries) sectors. “We’re not built on the traditional agency understanding,” she says. “We aim to be a partner in growth that helps clients define their frustrations and solve real brand challenges within their market segments. What appeals to them is our agility and always-on business culture that responds rapidly to their business needs.” Her work as MD involves understanding client business strategy for the year, identifying challenges that act as barriers to realising these objectives, and conceiving unique campaign experiences that bridge the gap between the brand and the envisaged consumer. “It’s a big responsibility being entrusted with helping our clients establish or improve their competitive advantage at a time when so many brands compete for the same consumer headspace,” she says. “We have to be innovative in resolving real brand problems for our clients, and it’s the process of birthing creative strategies that keeps me up.” More than just being creative, she’s a firm believer in being consistent. By refusing to restrict her capabilities, she’s found
Opportunities to innovate are everywhere.
More than just being creative, she’s a firm believer in being consistent. that the passion is what sustains her. “It’s an exciting time being part of the rising digital revolution,” she says. “Opportunities to innovate are everywhere.”
Consistently developing its strategy
It took the business five years to break even and a further two before it was profitable. It is now growing sustainably, which she attributes to an understanding it has in consistently developing its strategy to service the clients it likes. “We aim to distinguish ourselves to our clients who have multiple agencies by de-cluttering our service offering, and simplifying the unique value we can give them,” she says. “We’ve grown primarily through word-of-mouth from testimonials and referrals by other clients. This presents an opportunity for us to pitch our credentials and services, resulting in the acquisition of business.” As a business, the goal is to understand and therefore lead the insights conversation on how clients develop their level of preparedness for the impact of and transition to technological shifts such as the Internet of Things. This is why she believes it’s so important for the business to refine the service offering and carve out a niche in its established markets. “We have to future-proof our businesses and ensure that they are adaptive and relevant to the consumers of the future; likewise, for our clients,” she says. “Our bigger goal is to break down the boundary lines and operate at full capacity in all our divisions across the continent. We would then have fulfilled our vision to build African brands.”
Key Lessons Live your company values
Trust your instincts
Find quiet time
We recently had to decline an opportunity to work with a competitor client in a space that we’re comfortable in. This wasn’t a difficult decision as it ensured we upheld our value of integrity. Not pursuing the opportunity was a better decision for us because we didn’t risk an existing relationship we’ve worked hard at building.
Above all the formal education, I am most qualified through faith. I am a stern believer in the ability to have confidence in something bigger than ourselves and trust beyond the restrictions of our own minds to tap into our creative power.
The hardest part about the work is not being able to shut down because I see opportunities everywhere. But my first calling is as a wife and mother to two happy boys. I balance it all by ensuring that I reserve time for myself where I can be still, recharge, and show up engaged in all my roles.
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DR. YUSHAVIA GOVENDER began her career as a dentist in 2006. She bought a practice in Braamfontein in 2007 and another in Illovo in 2009. Finding the complexity of scaling her businesses difficult, she enrolled at GIBS and graduated with an MBA in 2014. She subsequently joined management consulting firm Letsema Consulting and Advisory. Starting a healthcare portal was an idea she had marinated for a while, but she wasn’t sure how to bring it to life until November 2017, when over coffee with a friend she was inspired to start the African Healthcare Portal.
BY DR. YUSHAVIA GOVENDER
South Africa’s healthcare sector is responsible for the first heart transplant, the first caesarean in Africa, the invention of the CAT scan, the cataract ‘retinal cryoprobe’ innovation and the Smartlock safety syringe. Now we have another: an online aggregator called the African Healthcare Portal. With it we hope to unlock the potential of the African healthcare sector as a unified entity. 42
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Healing African Healthcare Through Connections
For years, and despite the financial strain it puts on patients and practitioners, African governments have maintained a siloed, country-specific approach to healthcare which has failed to leverage a massive demographic dividend across the continent. Refreshingly, the tide has turned and 2018 is proving to be a significant year for Africa. With the advent of the African Continental Free Trade Area Agreement (ACFTAA) and steady progress being made towards meeting the United Nations’ sustainable development goals, of which healthcare is number three, Africa seems to be on the cusp of a new era.
Another interesting potential is medical tourism... Set against this background, the AHP is poised to serve as Africa’s premier healthcare corridor for the trade of goods, services, skills and information. The portal aims to promote continentwide research initiatives, knowledge and skills transfer as well as supply chain transparency; critical to this task is getting individuals to talk to each other in order to kick-start the process of collaboration on a grand scale. Collaboration has always existed within the African healthcare space, but in silos. This is what differentiates the AHP: it aims to consolidate every aspect of healthcare across the entire continent. The ultimate beneficiary of this endeavour will inevitably be patients.
What is the AHP?
The best way to get your head around the AHP is to think of it as a healthcare-specific amalgamation of Facebook, LinkedIn and Alibaba. Users in the healthcare value chain can sign up for free and engage with each other on a platform which is oriented toward solutionist thinking. Additional features to support this ideology include think-tanks, case study discussion rooms, research hubs, an education e-commerce store and buyer groups. The AHP is a business-to-business portal aimed at supporting healthcare professionals and corporates alike, to better serve each other and their communities.
What is the business model?
Revenue will be generated through advertising, renting out online think-tanks and project management war rooms, and through administrative fees charged on the e-commerce store and buyer groups. The think-tanks serve to promote innovative product development unique to the African context, while the project management war rooms facilitate low-cost co-ordination of project activity across the continent. Additionally, with regulation and compliance in healthcare proving to be so complex across the various countries in Africa, being able to provide up-to-date information to parties interested in doing business in Africa is an important role that the AHP would like to support.
Since the audience is selected, targeted and industry specific, these features are expected to take on a gravitas beyond the social media-type model and would prove to be a valuable communications tool for buyers, suppliers and professionals alike.
Why do we need it?
In the past few months South Africa has seen notable legislative changes in the healthcare space, including the approval of the National Health Insurance (NHI) Bill. While I believe that AHP exists outside this current debate, the NHI proposals will undoubtedly impact service providers across the sector. While the NHI will be hamstrung from the start due to a lack of administrative capacity and the absence of a robust taxpayer base, it does highlight the importance of ensuring access to quality healthcare for all, poor and rich alike. However, unlike the NHI approach, I believe this can and should be addressed by improving efficiency and transparency, so money can be funnelled into providing proper, quality medical care and medicines, and not skimmed off the top by an inefficient and ineffective supply chain. This is perfectly illustrated by an article carried on the website Nigeria HealthWatch which recently reported on a joint 2016 survey by the US Pharmacopeial Convention and the National Agency for Food and Drug Administration and Control to determine the quality of the drug oxytocin (administered to women after birth to reduce the frequency and fatality of postpartum haemorrhage). The study was sparked by the fact that, in 2015, 19% of global maternal deaths were in Nigeria. The results showed that 74.2% of the oxytocin samples in Nigeria failed lab quality evaluations, and 33.7% of tablets were found to be of substandard quality. The proliferation of sub-standard drugs in Africa is a real problem and an indictment of the current supply chain practices.
...Africa seems to be on the cusp of a new era. It is something I hope the AHP will begin to address, whether it’s getting all the small pharmacies or drug stores on board and educating them about counterfeit products, or empowering them to report incidents to the pharmaceutical body. Governments don’t have the resources to win this battle, so it’s vital to empower all the players in the sector, especially those who are customer facing. The portal, therefore, has a huge procurement element. If you can get all the drug stores or pharmacists across Africa working together, then we’ve essentially aggregated the base of the pyramid.
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...a healthcare-specific amalgamation of Facebook, LinkedIn and Alibaba. An aggregated approach
Using the AHP it is possible to cut out some of the middle men and ensure greater price transparency. It’s in the last mile to the consumer that a plethora of mark-ups drive up the price of medication and is one of the reasons why sub-standard products can proliferate. But, by creating buying groups and buying transparency, this unfettered skimming off the top can be reduced. Aggregation is the first step. Simplistically, I’ve been told this approach sounds something like the Somali spaza shop model. It’s almost like forming a large association where everyone who joins has something to gain, be it talking to other doctors in my country, or supplying local businesses. We keep talking about the importance of cross-border trade and intra-African co-operation: well this is it.
What’s next?
This is just the start for this platform. We have bold plans, which include a futuristic telemedicine feature. It would allow, for example, a patient in Rwanda who needs an expert paediatric
opinion to get in touch with an available professional anywhere in the world. There would obviously be a disclaimer to protect patient information, and we’d monitor that quite closely, but that’s the wonderful aspect of aggregation which is vital for the African healthcare context. Another interesting potential is medical tourism, which also talks to the importance of intra-African trade. This is a new feature and is quite far advanced. For companies in this niche sector we offer advertising space and exposure to a broad audience, as well as the ability to engage directly with doctors and professionals. Egypt, for one, is seeing growth in this sector, as is Kenya, and South Africa has an established medical tourism industry with Cape Town’s dental tourism sector being particularly noteworthy. In time, we’d also like to produce benchmark metrics, be it in pharmaceuticals, in the NPO sector or in medical tourism, so that we can get a sense of what standardised benchmarking means for Africa. Right now, this information simply doesn’t exist and having data of this depth would be a notable game changer.
WHAT’S IN IT FOR BUSINESS? Access to options
Supply chains in South Africa, and around the continent, are closed but AHP will showcase viable options and facilitate discussions around cost and quality expectations.
Access to markets
Smaller businesses stand to gain by grouping together. Smaller buying groups can order a shipment of medication once a quarter and bring this medication in at a fraction of the cost; disseminating the products between themselves.
Access to Africa
This is a vital ingredient since the size of the African market creates a large, viable customer base across borders.
Cost saving
For small pharmaceutical companies or Africa-based suppliers the AHP obviates the need to set up offices across Africa. Simply rent a think-tank or a war room and connect with the right people in country.
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Reaching out Advertise through the portal at competitive costs.
Upskill your people If staff members require training on a certain area then this could be run through the portal.
Connect Ultimately the portal helps you to find the right people, at no cost, quickly.
Foster trust Specifically in the NPO space there is a need for greater transparency and trust which can be facilitated by giving donors more information and control.
Share data Gain access to African healthcare trends and insights, to possibly stimulate conversations, facilitate business decision-making or even influence policy development.
In summary
While the commercial appeal of AHP lies in access to the attractive Africa-wide market, the underlying focus of the portal is to facilitate the upskilling of professionals on the continent, addressing wastage by cutting out the supply of sub-standard drugs in Africa, using the Internet to facilitate better healthcare standards and practices across the continent and, ultimately, creating a more transparent, fairer and more efficient healthcare sector for all.
There are a number of other portals which already exist in this sector, but in our view their myopic approach fails to take into account the power of an Africa-wide healthcare sector. With the African population already having eclipsed 1.2 billion people, the days of siloed structures and country-by-country strategies are over. The only way to bring quality healthcare to all Africans is by breaking down the walls which continue to drive up costs and create inefficiencies. Iâ&#x20AC;&#x2122;m hopeful that the AHP community will do just this.
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KEY TAKEAWAYS African Healthcare Portal (AHP) is an online platform designed to aggregate all players within the African healthcare value chain onto a single digital community.
The aim of the portal is to consolidate the highly fragmented healthcare industry and streamline activity within the sector through connection, collaboration and knowledge sharing.
The portal also focuses on the non-profit organisations (NPOs) within the healthcare space which, according to the World Health Organization, have been unable to show a return-on-investment (ROI) for almost 40% of donor money. The AHP aims to assist both donor and NPOs alike to drive efficiency and improve ROI by improving communication and access to training programmes aimed at honing audit skills as well as monitoring and evaluation methodology. Gordon Institute Of Business Science
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PROF. NICK BINEDELL is professor of strategy and leadership at GIBS and was its founding Dean (2000-2015). He lectures frequently at the Rotterdam School of Management and was recently a visiting professor at London Business School.
BY PROFESSOR NICK BINEDELL
Dominant Logic The Search for Synergy In this turbulent, fast-changing world, the search for, and successful implementation of, effective strategy is at the core of enterprise success.
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This article puts forward four frames of reference to strategy that are in one way different from each other and in another synergistic. The ideal outcome for any business is to perform well in all four, but most firms seem to choose over time a particular approach to strategy that fits into one of the four primary approaches. These four models are developed from academic literature, as well as practical experience.
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There are many frameworks and models for constructing and assisting teams to develop strategy. An approach which I have termed Dominant Logic is one and is relevant to the kind of challenges faced in the 21st century – disruption, innovation and reorganisation – by South African businesses. Powerful digital technologies in a world driven by very strong disruptors is one that must challenge the traditional logic of all businesses. So are rapid social change, exponential communications capability and an increasingly competitive and complete environment.
Purpose
A higher vision drives the company.
Innovation
Excellence
Massive disruption, new inventions and processes.
Everything is measured, rewarded and improved on.
Rivalry
Intense competition with often similar products.
The four frames of reference to strategy under Dominant Logic
What follows is a discussion of each approach to strategy.
RIVALRY The first and most easily recognisable concept is that of rivalry. Capitalism is based on rivalry: the simple idea that firms compete for customers and markets and have to drive their business on the basis of the logic of competitive advantage. In South Africa, our five main banks have overlapping formats and compete at the margin in terms of innovation, new products and services. Look closely at them and it’s clear that they have similar approaches to customer delivery. The oil industry is primarily a logistics business that imports oil, refines it and then distributes it through a series of franchise operations. All of them replicate very similar products but seek to differentiate them at the margin.
Heaven must be a business that is able to excel in all four of these quadrants. The emotional focus is to beat the competition – not just to serve the market – because the efficiencies in these types of companies are where the measurements are made. These are incremental businesses, searching for competitive advantage through massed rivalry and incremental innovation. Mostly this applies to mature industries where the rules of the game are well established. The customer at times may come second to competitive moves and the company’s thinking is often short-term and tactical in nature. It’s a tit-for-tat form of competitive arena, an “eat the lunch or be the lunch” approach to business. In South Africa, it is the most common framework for strategy.
The same is probably true in the fast food industry. McDonald’s, Burger King, Steers and Roman’s Pizza are all competing in the same territory with similar formats.
EXCELLENCE
In these types of organisation, rivalry is visceral and, to many, the essence of competition. Organisations that focus on this kind of rivalry are aimed at matching the competition, searching from time to time to out-innovate them, but primarily making sure that they are not leaving competitive spaces that customers want to be filled because they have a different strategy than the others.
The second approach is excellence. Excellence is the capacity of an organisation to design and put in place a set of goals and standards that are measurable and can be rewarded to stimulate and develop high performance. Incentives, bonuses and share schemes can all be engineered to reward an organisation for high standards, and, in addition and perhaps more powerfully, the Gordon Institute Of Business Science
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Anyone who worked at SAB knew the rules. leadership of a company put forward vision, goals and objectives that raise the bar. They are also marked by a high level of focus on financial measurement. A good example of this would have been South African Breweries over the last 30 years. A dominant company for almost a century in its home country, it performed remarkably well within a monopolistic condition to become the second-largest beer maker in the world. (It was acquired in October 2016 for more than $100 billion by AB InBev.) Anyone who worked at SAB knew the rules. Everything was meticulously measured, on a performance matrix. Even though it was all inside the organisation, these were very big drivers in terms not only of products and processes but also in terms of selection of executives, training, the youthfulness of the team and the setting of strict targets. In the excellence environment, company culture is all about performance. Reporting and accounting systems are geared to measuring where business units or products excel. Do they exceed the standards or do they fall behind, and if so, what action could be taken to improve performance? This is a tough performance environment and one in which rationality and the logic of measurement becomes the dominant paradigm.
INNOVATION The third approach is innovation. In recent years, we have seen a remarkable set of disruptive companies come to dominate much of the technology landscape and, subsequently, huge product markets around them. Classic cases we all know well are companies like Facebook (its enormous strength in social media), Uber (its disruption in the transportation business) and Amazon (in the retail and delivery business). Netflix in entertainment and Apple in communications and technology. Innovative companies are normally led by a founder or a small team of executives who have a remarkably different vision of the future. We saw this many years ago in the case of Henry Ford and the Ford Motor Company. There were 2 000 car makers in the United States, converting carriages into automobiles. The internal combustion engine had become a viable form of generating energy, as opposed to the 22 million horses that had
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been previously dragging Americans around their vast continent. Henry Ford’s tinkering as an engineer led to a production process that was eventually named after him: ‘Fordism’, which became the dominant paradigm for manufacturing for 60 or more years around the world. Ford was a massive disrupter, summed up by one great sentence: “If I’d asked my friends what they wanted, they would have asked for faster horses”. His vision of innovation in the mass production process – “You can have any colour you want, so long as it is black!” – led to massive decreases in the cost of motor vehicles. He forced prices down from around $2 000 per car to about $800 and the rest is history. In the post-modern, global economy there are many of these disruptors emerging. Nations, new industries and remarkable companies. They seek to pioneer a new technology, operating system or an approach to business that causes a new kind or scale of value to be created. They challenge the existing, dominant players, and that’s the basis of their success.
PURPOSE The final approach is purpose. It is a difficult path to follow. Most innovators, when they begin a business, are driven by purpose, not just to make money but to add value to a market. I’ve always been intrigued by the quote from the chairman of Kellogg’s who said, “The purpose of business is not to make money – what a boring and demeaning description of what we do. The purpose of business is to add value to people’s lives, and when you do that well, you make a lot of money.” They believe that just making money is putting the cart before the horse. Serving customers with value and a purposeful objective is putting the horse before the cart. This is a challenging approach to strategy but defining value and purpose in today’s economies seems to be critical to energising both an organisation and its market. People are motivated by the ‘Why?’ question, not just the ‘How?’ Most great work is voluntary
Henry Ford was a massive disrupter...
and those leaders of sizeable companies who have been able to fire the imagination of their employees because they have a greater purpose, have done well. I recall that in the mid-1980s, when I was working in Seattle, one of my students had joined Microsoft and I went to see him. He was working in a small cubicle, wearing a pair of shorts and a T-shirt. He’d finished an 18-hour spell developing marketing strategies for the newly formed Microcomputer Software company. I asked him what on earth he was doing as he tried manfully to explain what the technology of software was going to mean in the personal computer world. I understood little of it. At the end I asked him why, and with a gleam in his eye, he looked at me and said, because the purpose of Microsoft is to change the world. As we now know, Bill Gates used that vision to build an extraordinary global business. Another example of a purpose-driven business has been the strategic initiatives taken by Paul Polman at Unilever. Polman’s ‘sustainable living plan’ approach to strategy, and therefore its knock-on effects for product and market development, are an attempt to elevate Unilever into a high-order purpose. Polman believes Unilever should serve society in a distinctive way: its values become the fundamental framework used by its executives to build and lead the business.
In these types of organisation, rivalry is visceral... Heaven must be a business that is able to excel in all four of these quadrants. If by some extraordinarily hard work or even luck, you find yourself in a purposeful company led by innovation that’s highly competitive and where excellence is measured and the norm of the day, good luck to you, sustainable success will follow and you are in Elysium. However, if you have a “dominant logic”, check its assumptions, test the choice and keep both eyes open to the need to shift. When dramatic changes arrive, over time or quickly, and require a major change in focus, it is the moment of strategic truth. Business history is full of cases of those who couldn’t change, those who could, and those who read the winds of opportunity and created a business that disrupted the existing market and added value to people and society.
WHICH ONE’S FOR YOU? HOW TO IMPLEMENT DOMINANT LOGIC AT YOUR COMPANY This framework allows executives to consider where their company’s dominant logic lies. It may be important to start with the history of the business to understand what the dominant logic has been that has got them to where they are. What we know is that how you got in the room and what you’re doing in the room, is not how you’re going to get out of the room in today’s fast-changing world.
STEP 1
STEP 2
STEP 3
The management team needs to assess what is (or are) the dominant logic(s) of the business. It may be that there’s a significant focus in one of the four quadrants of the model. If so, that’s important to understand and agree on the mix.
Then, having looked at the basic framework, it is worth asking what combinations of the four might be most useful. For example, the rivalry-and-excellence mixture is a relatively slow change model, where an industry is mature and competitors are known. Doing that well could be the foundation of a business. The gear change would be to shift to purpose and innovation as your dominant change process, especially if you can disrupt or are being disrupted.
Next, ask yourself whether that dominant logic or focus area is what you want for the future? If it’s not, then you need to begin the process of thinking about how to move from one dominant arena to the next. These are always painful processes, especially for mature companies. For example, if you’re an emerging company with new technology and a new approach to business and new products or services that are shaking up the market, your maturing process is to move from purpose and innovation to excellence and rivalry. This follows the broad life cycle theory of most firms, as is commonly talked about and understood.
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BY DION CHANG
You Are What You (Don’t) Eat A Quiet Food Revolution is underway. The food industry is being disrupted, not by robots or any other Fourth Industrial Revolution elements (although robot baristas and pizza makers are becoming more commonplace), but by shifting eating habits, and the vanguard is a younger, and therefore the next-generation, shopper and diner. We look at the fast-changing taste buds of the modern consumer, the logistics involved in getting them their on-demand meals, and what that means for the future of the food industry. “So, you’re a limitarian then?” says Nick the deli owner where I’m purchasing my lunch, for which my default has suddenly become meat-free. I’m by no means a vegetarian, but of late, my dabbling with the concept of a “meat-free” Monday has naturally (and seamlessly) evolved into eating less meat. Far less, hence the term “limitarian”: I seemed to have inadvertently joined a growing global movement that is limiting their intake of meat and gravitating towards a plant-based diet.
One of the reasons for this switch comes from concerns raised by the World Health Organization on red meat consumption, as well as the growing empathy about animal welfare, both of which resonate, especially with a younger generation. Allergens are also contributing to the movement, which has spawned an umbrella hashtag – the #freefrom movement – ie: free from lactose, free from gluten, etc. The younger demographic supporting the #freefrom movement, and the switch to plant-based diets, is significant. Another UK survey taken in 2016, by The Guardian, confirmed that close to half of all vegans are aged 15-34 (42%), compared with just 52
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...one-third of food produced globally for human consumption is wasted...
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There has always been a long-standing joke about vegans: “How can you tell if someone’s a vegan? Don’t worry, they’ll make sure you know.” Cheeky but true, and now the vegans will feel vindicated. Globally, veganism is on the rise. In 2006, a UK survey found that 150 000 people opted for plant-based diets. Today, over half a million do. That’s a 350% increase in just a decade, just in the UK. Add to this another three million vegetarians, many of whom are Gen Zs, and it’s clear that there is a seismic shift taking place in global food consumption.
14% who are over 65. Two-thirds of the survey respondents were under 34, and one-sixth were Gen Zs. The Vegan Society’s statistics corroborate these findings. Their research also shows that veganism in the UK has risen by 350% in the last decade with 42% of vegans being between the ages of 15-34. Many (dedicated meat eaters) might write the movement off as a mere esoteric fad but the numbers don’t lie. For example, sales of Alpro almond milk have gone up by 2 343% since 2015. If you are in the food business, ignore them at your peril. This is a bellwether of change for the food industry.
Brands responding to the #meatfree or #freefrom movements Hellmann’s has already created an egg-free mayonnaise, while Flora is now offering a non-dairy margarine. Popular sandwich chain, Pret A Manger, has gone as far as opening stand-alone vegetarian outlets, identifiable by the colour of their logo, switched to green. Even fast food chains, under pressure for many years to offer healthier options, are tentatively testing meatfree options. McDonald’s in Finland is trying to appeal to this new market by testing a vegan burger.
Dark kitchens, or virtual restaurants, are an alternate business model to restaurants. Still need proof? Over in America, Forbes reported that sales of plant-based food in the US rose by 8.1% in 2017, which translates into revenues of $3.1 billion, according to research carried out by Nielsen for the Plant Based Foods Association (PBFA) and the Good Food Institute. In line with the spike in Alpro almond milk sales, plant-based dairy alternatives are expected to reach 40% of the combined total of dairy and plant-based dairy alternatives in the next three years – up from just 25% in 2016 – and the alternatives include barley, hemp, pea, flax and quinoa. But while supermarket suppliers are starting to stock new vegan-friendly product lines, the supermarkets themselves are responding quickly with their own range of meat-free, readymade meals. From Walmart in America to Tesco in the UK, and even locally at Woolworths, supermarkets are responding to the increased demand, as are on-demand food delivery services, like UCOOK, which brings me to the next component of the food revolution – delivery.
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The bricks and mortar retail sector might still be struggling to claw its way back from the “retail Armageddon” of 2017, but the on-demand food delivery business is booming, and competition is fierce. Battling for your too-tired-to-cook share of wallet locally are companies like Mr D, Uber Eats, OrderIn, Wazupa, King Delivery and Yumbi. The global food delivery boom has resulted in new business models, namely the rise of the dark kitchens, or virtual restaurants. Dark kitchens, or virtual restaurants, are an alternate business model to restaurants. The on-demand food business has become so successful that restaurateurs, or aspiring entrepreneurs, are now debating the cost of overheads and administration of running a restaurant, compared to just running a kitchen that delivers food. Gordon Institute Of Business Science
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Hellen Gqoboka launched one of Johannesburg’s first virtual restaurants – Lele's African Cuisine – in 2017. Her decision to forgo the tradition restaurant model came hot off the heels of Deliveroo’s global rollout of dark kitchens. Deliveroo, a London-based company now operating in 140 cities in 12 countries, raised $385 million in new funding last year, giving it a valuation of “over $2 billion”. Not content with delivering food from restaurants, they are pioneering their own dark kitchens. Deliveroo Editions is part of the company’s strategy to own more of this lucrative value chain. They assemble a cluster of shipping containers, each of which is repurposed as a kitchen. Each kitchen is fitted with grease filters, refrigerators and stoves, and the aim is to give smaller start-up restaurateurs a way to expand their businesses by moving into the kitchen and cooking exclusively for Deliveroo. Restaurant owners who work in Deliveroo’s dark kitchen then save significantly on overheads and are able to expand their reach without the costs of setting up new premises. They also benefit from the firm’s social media, IT and marketing network. It’s a brilliant new business model. But innovative ideas don’t have exclusivity for very long. In Singapore, a Goldman Sachs-backed competitor, Foodpanda, is expected to launch a similar model.
Food waste caused by “best before” dates and “ugly food”
We might be moving towards plant-based diets, but we seem to waste an awful amount of food. The Food and Agriculture Organization (FAO) reports that one-third of food produced globally for human consumption is wasted. That’s a staggering 1.3 billion tons of food wasted per year.
In just the three days we are together, we estimate that we can save more than 10 000 animals. The food waste happens throughout the supply chain, from farm down to household consumption where consumers are swayed by “best before” dates or reject “ugly food”: perfectly edible foods that are avoided because they are naturally misshaped or slightly bruised. Farmers dump them. Supermarkets and restaurants reject them. Consumers avoid them simply because they don’t adhere to an irrational notion that all produce should be perfectly formed. But the tide is turning. Flashfoodbox, an American fresh produce delivery company, added an Ugly Produce Box to their offering. The company simply approached their suppliers and asked if they could buy produce the grocery stores wouldn’t take.
How business is responding to the #meatfree movement WeWork, the New York-based company that pioneered coworking spaces for gig workers, implemented a companywide ban on meat in July this year. WeWork co-founder Miguel McKelvey informed his approximately 6 000 employees that the company will no longer serve meat at employee events or reimburse them for meals that include red meat, poultry and pork. In his email to staff, McKelvey explained that “WeWork can save an estimated 16.7 billion gallons (63 billion litres) of water, 445.1 million pounds (201.9 million kg) of CO2 emissions, and over 15 million animals by 2023 by eliminating meat at our events.” He added, “In just the three days we are together, we estimate that we can save more than 10 000 animals.” The trailblazing announcement is part of a new trajectory for big business to show their values and purpose by supporting environmental sustainability. WeWork operates in more than 20 countries, is believed to be worth $20 billion, and has in 2018, raised another $152 million from investors. Their target is a $35-billion valuation, a price tag that would place the start-up above companies like Airbnb and SpaceX.
Canada’s largest food retailer, Loblaws, launched a line of Naturally Imperfect fruits and veggies under their No Name house brand, which now offers 14 varieties of imperfect produce, both fresh and frozen. In May this year, Tesco started to remove “best before” dates from fruit and vegetable products in an effort to reduce food waste because most people misunderstood “best before” guidelines. “Best before” date labels are used by retailers to show that food might not be at its best but is still edible, while “use by” labels indicate that there is a safety risk if food is eaten after a certain date. “Best before” dates are therefore about quality and not safety, and yet we throw it away. Many people ask me, as a trend spotter, “if I was an investor, where would I put my money?” If I look at the components of this food revolution, then I’d have to say, “delivering a meat-free menu, made from ugly food, prepared in a virtual restaurant”. And if you can’t stand the heat, then you’d better get out of the dark kitchen.
DION CHANG is the founder of Flux Trends. For more trends as business strategy, visit: www.fluxtrends.com.
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BY TAMARA OBERHOLSTER
Economics, Accounting and the Sustainability Agenda Pavan Sukhdev, President of the World Wide Fund for Nature (WWF), argues that business needs to put a value on nature and to factor this into accounting practices.
As the most powerful entities of the modern era, corporations need to fundamentally re-evaluate their role in society to move past making profits to account for the hidden negative externalities of their commercial activities, says Sukhdev. These, he stresses, are wreaking havoc on nature – our natural capital. Speaking at a recent GIBS Forum, Sukhdev said that corporations are the engine of the economy (two-thirds of the global economy as measured by GDP is private sector), and therefore, any suggestion of large-scale change is meaningless unless it focuses on how this shift will be delivered through corporations.
...they also get a huge swell of positive emotion... In 2008, Sukhdev led an initiative called The Economics of Ecosystems & Biodiversity (TEEB) that focused on putting a value on nature, in accounting terms. Following on from this, his book Corporation 2020 describes key changes in micro-policy and regulation that can rapidly transform today’s corporation to tomorrow’s – a producer of more than profits for shareholders, but value for all stakeholders. 56
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Corporation 2020
Sukhdev contrasts Corporation 1920 with his vision for Corporation 2020. The former is centred around the business approach of Prof. Milton Friedman, who said, “There is one and only one responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.” This, Sukhdev says, remains the majority view of corporate social responsibility. Corporation 1920 is built around four defining behaviours – pursuit of size, active lobbying, leverage without limits and advertising without ethics, leading to negative externalities. In contrast, Corporation 2020 is built on social purpose (goals aligned with society), collateral benefits (measuring and managing externalities), creating human capital, creating social capital and conserving natural capital. This results in creation of both private and public wealth through positive externalities.
Integrated Profit and Loss™
Sukhdev has helped to develop a “green accounting” system that factors in not just financial capital, but human capital, social capital and natural capital. While financial profit captures the value to the shareholder, Integrated Profit and Loss™ (IP&L) captures the value to society.
Sukhdev said scaling IP&L uptake is becoming easier, given the advent of big data and corporations’ willingness to share information. “There is a willingness to experiment and a need to learn,” he said. “Managements are looking at this and seeing it as a way to avoid risk (today’s externalities are tomorrow’s risks and therefore potentially tomorrow’s costs). Then, by being transparent and exploring these social impacts and disclosing them, they also get a huge swell of positive emotion, which is better for hiring, visibility and brand. There’s a sort of charisma about it. They also find new ways of doing things. For example, Puma learned the true cost of leather, which has pushed them to pursue sustainable plastics.” However, scaling requires more than a few companies to embrace the idea. “Today what we have is leadership,” said Sukhdev. “What we need now is followership. We need these concepts to become guidelines, like those published by the Natural Capital Coalition in 2016, and then standards. This is where the accountancy profession comes in, which governs disclosure. And then assurance, where the auditing companies get involved. It’s a multi- stage process.” He noted that global change will require global effort. “Success has to come from a constellation of actors, including regulators, the accountancy profession and civil society, who all have to move in sync for it to work,” he said.
Pavan Sukhdev
For example, while business is an enormously important player, so too is civil society. “Business reflects society, not vice versa,” she says. “Society gives business its licence to operate. It’s a social contract. It’s important to recognise all the multiple perspectives.”
Dr. Jill Bogie
A multi-stakeholder approach
Dr. Jill Bogie facilitated the forum at which Sukhdev spoke. Bogie is Adjunct faculty at GIBS, holds a PhD in Business Management, an MPhil in Futures Studies and is a registered CA (SA). Her primary focus is on multi-stakeholder partnerships for sustainability and her interest is in applying long-term perspectives to explore the contribution of business towards the sustainability agenda. She believes a green accounting system is important, but it can’t stand on its own.
Bogie says people tend to try to simplify the complex world into simple mechanistic systems. “We want a forecast; we want an outcome. But the world is complex. A complex system has multiple parts and is not predictable. Outcomes emerge – they can’t be designed or planned. There’s a lot of interesting work going on currently in connecting complexity with sustainability. It’s often called large-scale systems change or complex adaptive systems. And I think that is an area we need to understand more – complex social systems.” She believes that many people assume that the whole world is driven by a western economic model, forgetting that there are other perspectives. “Business needs to recognise that sustainability is not just
Success has to come from a constellation of actors... about sustainable business,” she says, highlighting that business can make profits without needing to maximise profits. Thankfully, South Africa has robust corporate governance systems in place, although Bogie feels they are still rather idealised, not just at an accounting level, but on a broader macroeconomic scale. “That’s why it’s important that respected, knowledgeable people and economists like Pavan Sukhdev are talking about these things. But it’s not as easy as saying, ‘It’s business that will make the difference’. It’s collectively that we will all make the difference, with the power of social systems.” Gordon Institute Of Business Science
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Key action points for business The Economics of Ecosystems and Biodiversity (TEEB), is a global study, initiated by the G8 and five major developing economies (with Sukhdev as study lead). TEEB advocates for integrating the economics of biodiversity and ecosystem services (BES) into decision-making. In the TEEB publication, The Economics of Ecosystems and Biodiversity for Business – Executive Summary 2010, the following points summarise how businesses can begin to tackle the economics of BES:
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Real-world example: Sveaskog Sveaskog, Sweden’s largest forest owner, sells sawlogs, pulpwood and biofuel to customers in the pulp and paper and sawmill industries. Sveaskog also works with land transactions and develops its forests as venues for hunting, fishing and other nature-based experiences. The stateowned company recently presented its IP&L results for 2017. Using IP&L methodology, it has reported for the first time on previously invisible values, such as its contribution to Sweden’s GDP, the value created by its recreation and non-timber products, and the negative externalities of its operations, such as greenhouse gas emissions.
1
Identify the impacts and dependencies of your business on BES.
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Assess the business risks and opportunities associated with these impacts and dependencies.
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Develop BES information systems, set SMART targets, measure and value performance, and report your results.
Sveaskog generated social benefits of SEK 2.7 billion (roughly R4.6 billion), mainly through recreational activities and programmes.
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Take action to avoid, minimise and mitigate BES risks, including in-kind compensation (‘offsets’) where appropriate.
Net benefits from Sveaskog’s Ecosystem Services were SEK 7 billion (almost R12 billion).
5
Grasp emerging BES business opportunities, such as cost-efficiencies, new products and new markets.
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Integrate business strategy and actions on BES with wider corporate social responsibility initiatives.
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Engage with business peers and stakeholders in government, NGOs and civil society to improve BES guidance and policy.
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Points of interest included: Sveaskog’s contribution to GDP was nearly twice its net profit (considering profits, staff compensation, taxes, interest, lease rentals, etc.).
Based on negative externalities reported on for 2017, recommendations were made for 2018, including: Application of Biodiversity maps to identify hot spots for planning of production and conservation activities. Promoting supply chain engagement programmes aimed at reducing transportation impacts. Promoting rail transport to reduce impacts.
The biggest thing I got from GIBS is a thinking process...
IN A NUTSHELL In 2013 Glad Dibetso graduated with a GIBS MBA and won the international MBA Student of the Year award. 60
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In 2013 he relocated to Dimension Data in Nigeria as a sales director.
By late 2013 he had been promoted to MD.
In 2017 he spearheaded a private equity sale, resulting in the formation of Cloud Exchange West Africa Limited.
He continues to head up Cloud Exchange as CEO.
BY CARA BOUWER
Big Wins in Lagos Nigeria has been good to Olebogeng Glad Dibetso. In 2013, armed with a GIBS MBA and the title of international MBA Student of the Year, Dibetso moved to Lagos, Nigeria, as a sales director for Dimension Data Limited Nigeria. Today he is CEO of Cloud Exchange West Africa Limited. After almost six years in Lagos, Dibetso understands Nigeria almost as well as he does South Africa. He talks matter-of-factly about the flash floods in the rainy season that bring the city to a standstill, he speaks with respect of the people who work with him and their dedication to family and education. Critically, Dibetso has found more than just business success in Nigeria, he’s developed an appreciation for time and personal reflection, for mindfulness and trust in himself and his abilities. It all started in 2012 when Dibetso began liaising with Dimension Data to join the team in Nigeria. He relocated in 2013 and set about stabilising the sales team and “scoring a few big wins”. By the end of 2013 he’d been named MD of Dimension Data Nigeria, taking over from the previous MD who had battled to adapt to life in Nigeria. Dibetso served as MD until 2017 when black gold shook things up. As a major oil state, the Nigeria of today has much in common with most emerging African states, where commodities rule the economy. “Nigeria is still battling with diversification of the economy and the government, together with business, were reminded by the recent oil price crash to prioritise other industries,” explains Dibetso. Crude oil sees capital flowing into the country, but Nigeria currently relies heavily on imports hence the devastating currency depreciation.
how to manage time and stakeholders in the midst of complexity. The sale of Dimension Data West Africa had the same attributes.” Dimension Data gave Dibetso a short period of time to bring in prospects and, he recalls, “within two months I’d learnt what appealed to buyers and why they would buy. This was certainly one of the biggest challenges in my life, but I’ve learnt that painful experiences come with massive growth. So on 10 April, we completed the management buyout and changed the name to Cloud Exchange West Africa Limited.”
Lessons from Nigeria
There have been lessons aplenty from the formation of Cloud Exchange but, believes Dibetso, untangling all the tendrils from one business and establishing another has been a significant learning curve. “Something I still go through is dealing with the process of buying a subsidiary company that was part of an international group and what this means for legal, tax and compliance [and] what the impact is of changing names when you
...to be a good businessman you need to be a good person.
When the oil downturn peaked in 2016-2017, it affected all oil states, including Nigeria. “One of the biggest challenges was foreign exchange,” recalls Dibetso. “These events coincided with the Dimension Data geographical strategy review, which led to the full exit of West Africa. With client centricity at the heart of Dimension Data’s values it was important to them to ensure business continuity to all their clients especially the pan-African clients like RMB and Standard Bank. So fast forward to April 2017 and I’d concluded a management buyout through a private equity firm.”
have services contracts that must be retained. So I learn on the job,” he says. “This sale is a typical business school case study of comprehensive stakeholder management.”
With Dibetso at the helm, the Mauritius-based private equity (PE) firm Synergy Capital Managers acquired the majority of shares in Dimension Data Nigeria and Ghana. Dibetso stayed on as both CEO and a shareholder.
A better businessman
“It’s one of the biggest achievements in my life so far because I learnt a whole new language and a whole new industry that I knew nothing about before,” recalls Dibetso. “The process reminded me of my GIBS MBA. The biggest thing I got from GIBS is a thinking process, how to learn in a short period of time and
Dibetso admits that without his MBA training he might not have had the courage “to tackle something of this magnitude”. But something else helped too: a mindset shift that came from leaving South Africa. While Dibetso certainly believes working in West Africa has made him into a better businessman, he also feels it has made him a better human being. As the youngest of seven children from a bustling family, Dibetso’s life in South Africa revolved around family and community. While he misses the baptisms, weddings and get-togethers, he has Gordon Institute Of Business Science
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learnt to appreciate the gift of space and reflection time. “This year I’m reading 100 books, I’m already closing in on 55 to 60 and I wouldn’t have been able to do this if I was in South Africa… My culture absorbed all of me in a pleasant way, but I never had time to think of my own values, purpose and my life philosophy. Suddenly I came to Nigeria and I was able to start thinking about who I was and what I wanted to do with my life.” He began meditating and practicing mindfulness, aided by a wonderful book called The Mindfulness Playbook by Dr. Barbara Mariposa. He does yoga, breathing exercises and makes a point of not compartmentalising his life – which means he doesn’t have set working hours and working days. “I realised, in hindsight, that to be a good businessman you need to be a good person. And it has made me a better person, a better husband and a better colleague. So I promote authentic leadership in my company and I promote fun in my meetings; so there is a lot of living that we do while at work. This place has changed me for the better.”
Building for the future
Building on the NGO work he was previously involved with while at GIBS, when he served on the board of BizSchool, Dibetso has continued this theme in Nigeria through the Pyramid Educational Advancement programme, which serves to prepare high school students for the world of higher education. This is supported by the work of the Cloud Exchange Technical School, a Saturday school which helps to certify unemployed youth with IT qualifications. “Mentorship across the continent is a personal initiative and these are acts of love that give me fulfilment,” says Dibetso, who is quick to single out his latest (and favourite) protégé, Leroy Mwasaru, who was recently ranked second on the Forbes 30 under 30 list of young entrepreneurs. “He lives in Nairobi and is studying at the Africa Leadership Academy,” says Dibetso. “He’s one of my most fantastic mentees because he’s so different. I have people I mentor in Nigeria and South Africa but this young man is the youngest and we’ve never met outside of video conferences. Leroy gives me so much hope about what this continent can potentially achieve.”
Looking to 2021
This profoundly pro-Africa outlook is the reason why, following on from the Cloud Exchange PE exercise, Dibetso has become an angel investor. “You would not believe what an investment of $10 000 means to small emerging companies. We are not using this enough across the continent and it is now one of my biggest passions. What we did here [at Cloud Exchange] was enabled by PE firms that decided to focus on the continent. I feel my next life chapter will be in venture capital because I just feel we aren’t focusing sufficiently on SMEs and creating business,” he says. “By 2021, I will be in this space. And that means working to identify companies in which to invest for the purposes of creating sustainable businesses that will employ the continent’s youth.” One area he keeps a keen eye on is the birthplace of Nigerian online shopping mall, Konga, and software engineering firm Andela: Yaba. This vibrant Lagos suburb boasts “a plethora of youngsters all in tech, building anything you can imagine
You would not believe what an investment of $10 000 means to small emerging companies. from apps to software; some are working online for companies overseas. It’s a buzzing place that just needs support – coaching, mentorship and seed capital.”
Driving a vision
While Dibetso’s plan for the future is evident, he remains focused on Cloud Exchange and the evolution of the business into a fully cloud-based company. Currently Cloud Exchange is building the first Tier IV data centres in Nigeria and Ghana, as well as local cloud points of presence in both countries. “That’s a major milestone and another big achievement under my belt,” he says. “We are changing the tech space to enable entrepreneurs and businesses to focus on innovation and not on infrastructure.” He adds: “Until the data centre is off the ground I feel this is a baby that needs me to be permanently available.” When his operational role is no longer necessary, Dibetso is crystal clear about not overstaying his welcome. “Like Nelson Mandela, quit at the height of your game with the crowd asking for more.”
Lessons from Lagos “Your energy determines everything. I’ve learnt that from being in Nigeria,” says Dibetso. “In Nigeria you don’t ask government for help, you see the opportunities and you seize them. It’s about an internal locus of control.” He adds: “There aren’t many protests and strikes in Nigeria, but there is a lot of surviving and a ‘fix it yourself’ mentality. It’s a delicate balance. Yes, you do want government to play its part and you do want active citizenry, but neither party should be paralysed waiting for the other. This is the biggest lesson I’ve learnt, to actively solve problems. If you solve problems then you are creating value for the country and the people around you.” Nigerians also value education highly, notes Dibetso. Poor families take it in turns to support the education of one child through university, before the next child steps up and takes his or her turn. “A concept not different from Ubuntu,” he says, noting that African unity is a sure-fire way of changing the continent for the better. Gordon Institute Of Business Science
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MORRIS MTHOMBENI Morris is Executive Director: Faculty at GIBS. He joined GIBS in January 2014 as a lecturer in the leadership cluster and has been reading for his doctorate at GIBS since January 2013, focusing on corporate governance and sustainability. Prior to 2013, Morris was a chief executive of a large investment management business, and executive director of a large insurance based financial service company. Since 2013, Morris has also been a non-executive director of a listed banking group and other not-for-gain organisations. With more than 21 years of corporate experience, more than 15 at executive level, Morris aims to contribute to bridging the gap between theory and practice.
BY TAMARA OBERHOLSTER
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Shared Value and Sustainability - Ancient African Ideas
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Shared value and sustainability are two related but also distinct ideas that have become business buzzwords. And yet, according to Bonang Mohale, CEO of Business Leadership South Africa, these ideas have long been built into African cultures in the concept of ubuntu.
Ubuntu is often translated as “I am because you are” and encapsulates the idea of humanity, but more than that, how our personhood depends on relation to one another. This is summarised by the phrase, “umuntu ngumuntu ngabantu”, which means, “a person is a person through people”. Mohale believes that while the focus, even in African institutions, is often on western business school philosophies, there is much to be garnered from the idea of ubuntu and its applications in business. “We sadly have a history where most Europeans did not come to Africa to learn from it, but to change it,” he says. “It’s little wonder that today, borrowed conversations pour from our lips and borrowed robes hang from our necks. Anything and everything indigenous and uniquely African has been vilified and disparaged, minimised and destroyed. The world knows our first democratically elected president as Nelson Mandela, whereas his original name was Rolihlahla. Nelson was a name given to him by one of his teachers. Similarly, we know not Mangaliso but Robert Sobukwe, not Nontsikelelo but Albertina Sisulu. The same is true for many of us, since the first missionaries said Jesus would not be able to pronounce our given names! Even in management, most of our concepts come from the USA or are Eurocentric. By definition, business is Afro-phobic.” Given the recent student calls to decolonise education, this is an important discussion in the context of African business schools. Morris Mthombeni, executive director: faculty and lecturer at GIBS, agrees that many theories of leadership espoused in business school environments are derived from western contexts, and that not enough attention is paid to African leadership models. But, he says, this also has a lot to do with the way that knowledge is generated in the academic environment and how it sits in the broader literature of human capital. Western knowledge traditions dominate over African traditions because they are articulated as rational, rather than creative, and have a large body of knowledge backing them. “Until African leadership models have those levels of research, writing and testing in different contexts behind them, they will not be absorbed into the core body of knowledge and disseminated as effectively as western traditions,” Mthombeni says. “Gains are
Morris Mthombeni
“...most Europeans did not come to Africa to learn from it, but to change it.” being made, however. In Lagos, Nigeria, there’s work being done on ‘Africapitalism’, looking at an African model of capitalism that will create a more sustainable economy. But even that is not widely talked about yet. Concepts like ubuntu are discussed in the social sciences, like anthropology, but are not yet part of the core teachings in business schools.” Mthombeni believes that the new GIBS Centre for African Management and Markets is a step in the right direction to bringing African leadership and business models out of the fringes of academia and into its core. “It’s an invitation and an opportunity for academics, both at GIBS and more broadly, to find a home here for discussion, debate and ultimately knowledge creation on matters of interest,” he says.
What business can learn from ubuntu
Ubuntu is premised on the idea of shared humanity and equality, Mohale says. “Ubuntu adequately and effectively deals with calamities that befall us because we recognise our interdependence and the need for symbiosis. That has always been the Gordon Institute Of Business Science
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way of life in Africa. Bartering, for example, was not just trading for goods and services. It was more profound than that – a means for ensuring survival of whole communities. We recognised that when we were trading, we were creating future markets. We were building resilient societies. We understood that when we invested in the thriving of our neighbouring village, we were ensuring that they would bear sons who would grow up to be husbands to our daughters.” Many African traditions demonstrate the value of ubuntu, from lobola (paying a dowry for a bride) to letsema (where families would help one another to harvest crops). “Lobola was never about the price,” Mohale says. “It was about a young man demonstrating that he was capable of taking care of himself, first and foremost, before looking after another person. Similarly, in African families, we always cooked with the biggest pot so that we would be able to take food to those who had no means to cook for themselves, or in preparation for the visitor who might just pop in. We understood that you sleep better at night when you know your neighbour is not hungry.”
“...you sleep better at night when you know your neighbour is not hungry.” underemphasise the role of followers,” he says. “Ubuntu, on the other hand, shifts the logic to take into account the role of followers. In the phrase ‘umuntu ngumuntu ngabantu’, we see recognition that it is followers who authorise a leader to lead, who provide that social licence to lead.” When ubuntu is modelled, Mthombeni explains, leadership takes into account the entire community, which in a business context might be the people within an organisation, but also clients, suppliers and even competitors. As leaders seek to look after all the various stakeholders, so the whole community benefits, including the leader and the business. By focusing first externally, ubuntu ensures shared value is created. It requires an awareness of multiple perspectives and lenses, an enquiring mindset and more creativity than “great man” leadership models. It also demands ethical awareness. It is a complex approach, but one that pays dividends for everyone involved – not just shareholders.
Striving for ubuntu leadership in your business
Bonang Mohale
Reuel J. Khoza notes that “Ubuntu sees communities and leadership holistically. It can certainly form the basis of what has been called systemic leadership, but it has much more to offer.” Rather than replacing a management style, ubuntu leadership is, therefore, a humanistic lens that can be applied in every facet of business through what Khoza terms, “a uniting idea and set of caring values”.
The idea of creating shared value and contributing to the sustainability agenda, which are seen as being progressive business trends, are things that have always been deeply rooted in African cultures, Mohale says. “Whether we’re talking about moving beyond control and command leadership to peoplecentred organisations or developing and valuing human capital, the idea of ubuntu is applicable. When you strip off all the names, the idea is about genuinely caring about other human beings, and that is ubuntu.”
The Deeper Learning Institute suggests implementing the following components of ubuntu leadership – applicable in personal, professional, organisational and governmental spheres:
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Offer an understanding of leadership in relation to the world.
Mthombeni adds that many western leadership philosophies stem from the “great man” model, where the leader is the source of power and wisdom, and the force for transformation. “These models may overemphasise the role of the leader, and
3
Move away from the “us and them” mentality prevalent in politics, corporations and traditionally led organisations.
Exude principles of caring for each other's wellbeing and a spirit of mutual support.
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KERRY CHIPP is a senior lecturer at GIBS and at Sweden’s Luleå University of Technology. She has a demonstrated history of working in the research industry and is skilled in Analytical Skills, Coaching, Lecturing, Facilitation, and Management. She is a doctoral fellow at KTH Royal Institute of Technology.
BY GAYE CROSSLEY
An Intelligent Customer Solution In a market saturated with brands – often offering similar products and services – consumers now have greater choice and the customer’s voice has never been stronger. They are becoming more empowered and less loyal.
Bringing it together
To better understand the idea of real-time customer analytics it’s important to appreciate the concepts customer intelligence (CI) and real-time analytics.
CI cannot just be a single source of data...
One definition of CI comes from relationship marketing firm Optimove, which says: “CI is the collection and analysis of detailed customer data in order to understand the best ways to interact with each individual customer. In today’s digital-driven world, customers share information about themselves every time they interact with your business: their interests, their demographic details, their preferences, their needs, their wants.”
Today’s customers expect companies to respond to them in a timely, targeted and tailored fashion; which brings real-time customer intelligence and analytics into play. Those companies that are investing in the ability to do this are the ones that are going to be on a stronger footing in the future.
Elaborating on this, GIBS senior lecturer and data consultant, Kerry Chipp, explains: “CI has a massive history and has a lot of legacy systems around how the data is gathered. It also has many different types of formats, including primary data, secondary data, and behavioural data.” She adds: “CI cannot just be a single source of data. It has to be gathered across environments.”
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As customers become more demanding, companies are being driven to acquire, process and respond to data faster to meet consumer wants. As Harvard Business School explains in a March 2018 report entitled Real-Time Analytics: The Key to Unlocking Customer Insights and Driving Customer Experience: “Customers today have high expectations. They anticipate that companies will meet them where they are and when they want.”
Added to this, in today’s digital world, smartphones, computers, credit card machines, even car tracking devices and smart televisions are making real-time data collection and convergence possible. “Real-time analytics is then taking this data, gathering and processing it, and making it a bit more scientific, allowing businesses to be more responsive to a mass number of people in a very personal way.”
are FNB and Woolworths. Woolworths’ MySchool Card and loyalty cards operate across different divisions in the organisation, and FNB’s eBucks operates across different industries and companies, giving them more holistic data on all of their customers. “As your loyalty programmes become multi-companied, the more complete your data will be because you are getting a picture of someone across different environments,” Chipp explains.
However, says Chipp, combining the two is where it gets more complicated. “It’s how you bring these together. If you can take data gathered across different environments and sensibly apply them to an individual, then you can marry the two. Nobody, however, is doing this.”
Smoke Customer Intelligence, a Johannesburg-based customer experience management technology company, has embraced this and is offering its clients a real-time customer experience management capability. “What differentiates us in the customer experience space is that most companies out there provide customer experience software, but their systems are not equipped with real-time feedback and escalations,” says Smoke CI’s head of Sales, Gustav van Pletzen. He explains: “The minute there is an interaction with a contact centre, the moment a client is dissatisfied, it creates an escalation to someone within that organisation, and allows them to do immediate service recovery.” This real-time service resolution provides a critical opportunity for businesses to strengthen the client relationship with their brand.
...real-time customer analytics is the Holy Grail for customer-focused businesses... Certainly, companies leading the drive in real-time consumer analytics are those that primarily operate in the digital sphere – advertising, retail, banking, insurance and telecommunications. Younger companies that were ‘born’ digital are also at an advantage when it comes to adopting real-time customer analytics.
Who’s doing real-time right in South Africa?
Although the idea of real-time customer analytics is the Holy Grail for customer-focused businesses, the ability to farm, process and use data in real-time is perhaps still a far-off dream. But companies are investing heavily into getting greater access to real-time customers’ behaviour to better understand their wants and needs and then in return deliver a product or service in line with this. The best data is gathered across multiple environments. “In South Africa,” says Chipp, “Discovery is by far the best. Discovery is collecting customer data from across all of its platforms: medical aid, car insurance, banking and credit cards. This allows Discovery to obtain a more holistic picture of an individual’s life.” Chipp explains that Discovery’s approach is extremely clever. “They were realistic. They launched Vitality Drive which is linked to their car insurance. They started small and asked: ‘how do we process this data, how do we respond in real-time and how do we marry this with our other products?’ They then grew the amount of information they collected and what they could do with it. Although they started small, they have big ambitions.” Chipp explains that, ultimately, Discovery wants to be able to predict that a customer needs cough mixture and then get it delivered to them before they even leave their home for the pharmacy. Two other companies which Chipp cites as market leaders, although a distant second and third to frontrunners Discovery,
In other words, real-time customer feedback is allowing businesses to adjust their approach to individual customers as and when it is needed. Herein lies the appeal for business.
The business case for real-time customer analytics
According to Harvard, businesses perusing real-time customer analytics reported “more streamlined operations and efficiencies in sales and marketing, faster decision-making between marketing, sales, services and operations” as a result of utilising real-time customer analytics. In fact, four out of 10 respondents say real-time customer analytics can lead to increased innovation, as well as the introduction of new business models, products and services.
Discovery is by far the best. Harvard also found that nearly 60% of the 560 business leaders surveyed found the adoption of real-time customer analytics had resulted in a significant increase in customer retention. Half of them said they had seen a significant improvement in revenue growth and achieved a better understanding of their customers and the customer journey. Three-quarters of the companies also said they had increased their spend on implementing real-time analytics in their businesses. Some of the stats Harvard respondents reported included:
20%
25%
35%
INCREASE IN SALES
REDUCTION IN ATTRITION
INCREASE IN ANNUAL REVENUE
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Locally, Smoke CI believes customers have seen tangible benefits to tapping into real-time customer intelligence. Local business success has included: greater ease in getting customers to respond to surveys; improved internal processes and improved response rates to customers; better customer experience scores and greater overall customer satisfaction.
Real-time commitment
For companies to successfully adopt and use real-time customer analytics, there has to be a commitment from all cross sections of the organisation. Guarin Coetzee, lead: customer experience, strategic accounts for Smoke CI explains: “Businesses that tend to succeed in real-time customer analytics are those where not only individuals who are responsible for an area take accountability for the data but that it is driven as a collective, where all departments within a group take accountability for the outcome.” Chipp believes that while customer analytics is highly siloed, there are pockets of excellence. “But transferring it horizontally is complex because of different silos, and transferring it vertically
WHERE TO BEGIN? When it comes to implementing a realtime strategy, Harvard recommends the following ‘to do’ list: • Start at the top • Put the customer first • Develop and prioritise use cases • Map out the transformation • Consider usability from the start • Build for scale • Add data, capabilities and technologies over time.
The business school then lists the following tools as being the most important when it comes to real-time customer analytics in the next 24 months: 1. CRM 2. Predictive analytics 3. Social media monitoring 4. Content management system 5. Marketing operations management 6. Marketing automations 7. Cloud computing 8. Online surveys 9. Location-based applications 10. IOT/Connected devices 11. Text analytics 12. Interactive voice response 13. Intelligent assistants/Chatbots 14. Speech/Voice analytics 15. Mixed reality But, notes the report: “While it is important to figure out the strategy, at the end of the day, 95% of the work is in doing it.” 70
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STEPS TO SUCCEEDING WITH REAL-TIME CUSTOMER ANALYTICS Companies need strategic alignment when it comes to implementing real-time customer analytics. They need to have clear strategies and goals for data collection. Break down silos and have a top-down approach to driving the uptake of real-time customer analytics. Empower front-line staff and then make them accountable. According to Smoke CI’s Gustav van Pletzen: “Organisations that get this right add ‘customer experience’ to the KPI of employees’ performance bonuses. From line staff to the CEO level.” Harvard stresses that companies need to act on the data they are receiving, and give examples: “Respondents say they’re undertaking initiatives in this area to make more customerfocused decisions and take customer-centric actions at a greater scale across functions.” To really benefit from data collected this data needs to be clean, and businesses to be aware of good data hygiene – in other words ensuring data has not been contaminated in the storage, management or collection phases.
becomes difficult because the format must change – executives need it translated into strategy and customer insights don’t think like strategists.” With the right will, organisations can ensure that they can create the right foundations to ensure a positive outcome for their investment. Firms need to firstly ensure they have access to good data collection. They then need to have algorithms that are able to generate good-quality analytics. Once this information is at hand, companies can then ensure they have the proper processes in place to ensure those insights are used at the right time to satisfy the customer. Van Pletzen explains just how this can work when applied correctly: “We have advanced analytics so when that customer engages with someone in the organisation, we do record analysis based on that feedback that comes in – based on that feedback with advanced analytics we can show per department, per division, per brand what is working in your business and what is not working in your business in real time.” Real-time analytics is the future of customer intelligence, and with the speed that technology is evolving businesses need to adopt a significant mindset shift, and organisations need to fundamentally change the way they work. It can no longer be business as usual.
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Held annually in the US, the Tabbies are the awards of the Trade Association Business Publications International – the benchmark for business-to-business publishing industry internationally. Celebrated for its intriguing cover and accessibility, the award pays tribute to this world class business journal and its ongoing support by GIBS, home of Africa’s top-ranked Executive MBA programme by the esteemed UK Financial Times in its 2018 Executive Education ranking.
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TABBIE INTERNATIONAL GOLD MEDAL AWARD WINNER OF 2018!
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ABDULLAH VERACHIA Abdullah Verachia has been recognised as a leading speaker, disruptor, strategist and thought leader on competitiveness and the interplay between strategy and disruptive innovation. Abdullah heads up The Strategists – a leading strategy consulting firm that helps organisations craft competitive future strategies. Abdullah also serves as faculty and programme director for the Harvard Business School Senior Executive Programme for Africa at GIBS.
BY ABDULLAH VERACHIA
Technology Alone Is Not Enough What is the common denominator between Apple founder Steve Jobs and Alibaba’s Jack Ma? Technology? Digital? Disruption? Actually, it’s an appreciation for what humans bring to the table.
More recently, Ma told a Bloomberg Global Business Forum: “If you want, in this world, to be successful you must have the IQ, EQ and LQ… the Q of love, which machines never have.” He continued this theme at the 2018 World Economic Forum in Davos when the Chinese e-commerce guru called for a new way of preparing youngsters for the world of work: “We cannot teach our kids to compete with machines, which are smarter. We have to teach something unique, [so] that machines cannot catch up with us.” What both Ma and Jobs were highlighting is that technology, while all-absorbing, topical and essential to our modern way of life, is just an enabler. It is not a market disruptor. These two digital doyens appreciated that the human 72
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touch is critical to building sustainable competitive organisations. Right now, however, we are caught up in a veritable frenzy of technology, lurching from one new disruptor to the next. Unfortunately, many people and organisations are getting so caught up in the hype of technology and the ensuing digital disruption that they fail to realise that we don’t build technology for other machines, we build technology and we digitise for human beings. We are in business for humans.
...technology... is just an enabler. This might seem obvious but, instead, technology has become an easy way out for many organisations that lack the imagination and the drive to put people first. Often companies make the mistake of thinking that digital –
and digital alone – makes the lives of customers easier. I passionately believe that companies should be taking the time to determine if the technology they are harnessing has relevance to the end user. If not, why bother? Using machine learning and artificial intelligence and digital for the sake of it does not enhance the customer experience on its own. For that you need people.
The human value
If you look beyond the tech-speak, you’ll find a wealth of sectors moving towards a more human-centric approach to doing business. Often the results are disruptive and game changing. Take, for example, Multichoice’s current battle against Netflix in South Africa. Multichoice’s DStv offering, for so long the standard bearer in South Africa (and Africa) for entertainment, is now under pressure from a choice-orientated, client-driven platform. I would suggest that Multichoice responds by getting even closer to their customers by harnessing human creativity
IMAGE SHUTTERSTOCK
In 2011, just months before his death, Jobs made the following comment: “...technology alone is not enough – it’s technology married with liberal arts, married with the humanities, that yields us the results that make our heart sing.”
and their local contextual knowledge and insight to find people-focused solutions.
IMAGE SHUTTERSTOCK
Similarly, in the world of retail, Amazon has – and continues to – shake up the sector. Locally we’ve seen Stuttafords close and Edcon and Mr Price under pressure, while online continues to grow. Just recently, Geraldine Mitchley, senior director of Strategic Partnerships and Emerging Payments at Visa SubSaharan Africa, told the DHL eCommerce Money Africa summit that e-commerce in South Africa amounted to about R10 billion in 2017, helped by a more connected customer and simpler and better online platforms. “Companies are eagerly implementing a variety of digital initiatives to transform the customer experience,” Fin24 quoted Mitchley as saying. If you want an example of where this transformative, human focus will take us, look no further than Amazon in the US. Amazon grew 1 934% in terms of its market cap between 2006 and 2016.
It went from being a US$17 billion company into a US$355 billion company. It is now set to be the next exclusive member of the trillion dollar club. Why? Because Amazon understood the changing nature of the retail sector and the changing nature of the consumer. It managed to grasp how consumers’ needs and expectations of retailers were changing, and used technology to meet those needs.
A balanced approach
Not surprisingly, the successful organisations which I observe are those that are able to fuse the digital sciences with the social sciences. Yes, we can digitise artificial intelligence, but social intelligence and emotional intelligence are human characteristics. It is those traits we should be embracing because anything we can’t digitise will ultimately become much more valuable in the future. So what can’t we digitise? What can’t we put into a neat little box and automate
...successful organisations... are those that are able to fuse the digital sciences with the social sciences. to ensure slicker and quicker services and experiences? Global futurist, Gerd Leonhard, declares that we can’t digitise humour, dreams, creativity, persuasion, self-consciousness, serendipity, inspiration, compassion, ethics, playfulness, value sets, imagination or experience. He told Channel NewsAsia in 2016: “Humans don’t function on an algorithmic scale. We buy things from people that we trust, we value emotions, we value experiences.” Gordon Institute Of Business Science
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In short, the successful organisations and people in the future will understand the delicate interplay between humanity and technology. Absolutely, we must keep playing with technology and expanding its uses and applying it to our lives, but only to give us more time to be human. It is misguided to assume that technology is damping down our humanity; rather it is providing an opportunity for humancentred behaviours to flourish. Successful organisations, brands and individuals of the future will be those that understand how harnessing their innate human characteristics will have more benefit in a world where automation is diluting the mundane routine of living. Freed from repetitive tasks, this becomes a world of experiences and options, the perfect playground in which to flex our human
muscles and force ourselves out of the boxes imposed by the 18th and 19th century Industrial Revolution way of thinking. This means putting down our phones and tablets, disconnecting from Wi-Fi hotspots and 24/7 news channels and giving ourselves a break – a digital detox – from time to time. It means stepping out from behind laptops and tablets to meet and engage with people, to learn from one another and foster the human connectivity that exists beyond technology.
What does this mean for business?
Actually, a great deal. Any future-focused organisation worth its salt will recognise that human complexity cannot be
How to apply the human touch to your business Start having more conversations within your organisation about the future direction in which your company is moving. As leaders, be honest as to whether or not your company is nurturing human talent. Learn to bring in alternate voices to future-orientated conversations – or risk simply focusing on the digital disruption trend and overlooking the equally important component of ‘the human touch’.
Key takeaways Successful organisations and people in the future will apply the careful utilisation of technology, recognising that it is an important enabler but no substitute for uniquely human abilities. While many fear the onset of technological advancement will claim jobs, dampen down humanity and make mankind somehow ‘obsolete’, the counter-argument is that technology is actually providing an opportunity for human-centred behaviours to flourish. In the new world of work and business, anything that cannot be digitised will become more valuable. Therefore organisations, people and brands that can tap into their innate humanness – fostering characteristics like curiosity, empathy and creativity – will be in demand. As professionals living in a new digital age, it is vital that we work to enhance our humanity by engaging beyond social media and through digital tools, by opening ourselves up to human interactions and experience and keeping the spark of humanity alive.
Seriously start considering the kinds of skills needed to be future-fit. Companies facing industry-wide digital disruption – like the hospitality space dealing with the emergence of Airbnb and Trivago – should develop their human-delivered service options in order to stand out from the crowd. Locally, the Saxon Hotel has achieved this on a boutique level, adding human touches which take the experience to a new level. Globally, the Atlantis Hotel on the Palm Jumeirah Island in Dubai applies this same highly personalised service model across 1 539 rooms; proving that exceptional service and experience is not only the domain of niche industries. Become exceptional in the eyes of the consumer – this will be the mark of successful organisations in the future. Amplify and truly understand your end users – companies that get this right will be the winners of the future because they understand the human, emotive, bespoke, personalised element which no machine, no computer, no mobile phone and no algorithm can achieve.
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automated and that digital and technology is not always the solution. They will realise that technology is an enabler; nothing more. They should cement their future-fit credentials by building their products around the very human characteristics outlined above and they should be motivating their staff to recognise and foster such abilities; in conjunction with the smart and effective use of technology. Only when we combine the power of digital with the social sciences can we fully equip ourselves and our businesses for the future. To ignore either is foolish, but to favour only one will inevitably prove reckless.
BY CAROLINE HURRY
The African Safari Business When it comes to high-end travel, Africa sells itself on safaris. But in the wildlife business, survival of the fittest still applies.
Londolozi leopard spotting
In the mid-1970s, Londolozi and Mala Mala provided the only luxurious alternatives to the basic parks board camps at rates so eye-watering even Hollywood stars drew in their breath. 76
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“In 1990 Mala Mala was charging $100 per person per night,” recalls Kevin Leo-Smith, a director of the Safari Investment Advisory for industry-specific expertise, and co-founder of safaris in South Africa, Botswana and Zambia. “That’s the year we started &Beyond’s Phinda Game Reserve – KZN’s first private game lodge to cater to upper middle-class South Africans.” From there, the concept sparked like burning savanna and today Leo-Smith counts 150 private game lodges around Hoedspruit alone. He recommends game lodge owners get the ‘Five As’ right for repeat bookings and referrals:
IMAGE ELSA YOUNG
Back in the day, our family would pile into my dad’s low-slung Valiant for the Kruger Park where we stayed in thatched rondavels with ant poison on the floor. We brought our own rusks and Rooibos; hardly roughing it compared to the late 1920s when rangers shared toothbrushes with forgetful park tourists, but the notion that a safari might one day require butlers, chandeliers and spas, was as foreign as fitbits.
Access
Must be affordable, comfortable and easy to reach. If your land is remote, think self-sufficiency. You may have to generate electricity, supply your own water, and grow vegetables to thrive.
Animals
Must include the iconic and general species expected of the area.
Jagged thorns... line the dirt track to success.
Attitude
It’s all about the staff. An ideal manager should be able to repair a game vehicle, soothe a charging elephant (or have a tale about it) and look good in shorts carrying a rifle. Cellphones should be silent. Clients are not paying top dollar to hear a Dladla Mshunqisi ringtone while soaking up the raw power of the African bush.
Architecture
This would include furniture, finishes, food, décor and camp set-up.
Altruism
Let it shine. “Lodges that invest in their people at community level, get it right,” says Sharon Gilbert-Rivett, Africa Tourist Board member and co-founder of The Safari Collective SA. “Taking care of your people is a cornerstone of sustainable tourism. Happy staff make happy guests!”
Call of the wild
For many, a safari is an Instagram-honed aspirational vacation with #fiftyshades_of_nature and #wanderlust hashtags. For others, it’s a vocation; a way to stalk those elusive tourist dollars. For the select few it’s a decades-long marriage. “Having a lodge is like having a wife,” says Dave Varty, whose family bought a depleted cattle farm in 1926 and turned it into Londolozi; a “successful family-run, single unit operation, with engaged staff and extraordinary wildlife”.
Leo-Smith argues that the breeding market is highly competitive. “Giraffe and antelope are mostly worth their meat value sold live while wild lions, leopard and elephant are free at capturers’ risk and cost. It’s clear the mythical American Hunters are not going to pay a fortune for a semi-tame large-horned buffalo.” Van Coller begs to differ. “There’s a shortage of the hard-boss ‘dagga boys’ so demand remains strong.” Both agree policy insecurity is thinning the investment herd as bureaucracy proceeds with all the speed of a three-legged tortoise. Leo-Smith points out that “the EFF and ANC versions of EWC are not even closely aligned” but advises against approaching local community representatives to make ‘land claim deals’. “Rather involve Land Affairs and the official Community Property Association, proceed through development approval, and comply with Environmental Impact Assessment conditions.” Then there’s fractional ownership, where you buy a rotating cycle of weeks in a year and pay a steep levy for use of the lodge staff, food and game drives. Says Leo-Smith: “It’s an option, but not a license to print money.”
IMAGE CHRIS MARTIN
Sounds idyllic, but running a safari, warns Leo-Smith, takes expertise, experience, time, creativity and deep pockets to succeed. “Often people believe they’ve bought an Eden, without finding out what else is out there. They fall for the old ‘build it and they will come’ logic – a big mistake.” Jagged thorns ‒ from poaching to negative media attention, politics surrounding land security, and EWC threats ‒ line the dirt track to success. Drought in many parts and a struggling economy as potential investors prance like skittish impala scenting predators, add to the dung pile. “It’s the perfect storm,” says Limpopo buffalo breeder Alan van Coller. He’s weathered it so far. “Even though buffalo prices have dropped dramatically, I still make a good living,” he says. Gordon Institute Of Business Science
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...policy insecurity is thinning the investment herd... Safari snares
Now that welcome drinks, rolled towels, crisp linen and beds under mosquito netting are de rigeur, safari owners might want to avoid some potential traps:
Sacrificing the wilderness ethos on the altars of luxury
While producing Simply Safari, a coffee table book on lodge décor, wildlife photographer and author, Daryl Balfour felt irked by the whole ‘aspirational magazine focus’ at the expense of experiencing wildlife as the early hunters did ‒ “under canvas, at one with Nature.” Leo-Smith calls this “my decorator is better than yours” syndrome. In Balfour’s case, it motivated him to start two highly successful tented camps in Kenya’s Maasai Mara.
Employing mediocre guides
“Being a guide is more than simply knowing how to ID a bird, mammal or tree,” says Balfour. “Even on disappointing gamespotting days, a great guide – sadly, a rare breed – will keep guests enthralled. Many safari lodges employ barely-out-ofschool youths, or locals, who interpret their role as driving a 4x4 around, pointing out animals. That’s it. This is partly due to labour legislation, but also a short-sighted way of cost-cutting. “This has led to the rise of the private guide industry. Today, knowledgeable tourists book their safari with a GOAH – a good old Africa hand – to enhance their experience.”
Allowing children on game drives
IMAGE CHRIS GIBBONS
Don’t do it! Even more annoying than being subjected to the screams of a bored toddler that sent two elephants running for cover, was being told the lion section of a reserve was out of bounds, lest a big cat snatch the brat off the vehicle. Agrees Balfour: “Predators react to distress calls, going on high alert to make a kill. A crying child sends out just such a signal. The only time we’ll accept anyone under 16 is if the family books out the entire camp.”
Combining game viewing and hunting
The markets don’t mix. Choose one and stick to it, says Leo-Smith.
THE REST OF THE SAFARI PACK Here’s how other African countries compare: BOTSWANA Apart from the world-renowned Okavango Delta wilderness plus easy access via South Africa and its long-haul connections, around 40% of Botswana is under some form of wildlife land-use. Safari companies with exclusive, long-term concessions that enable off-road and night game drives, encircle the parks and game reserves.
NAMIBIA Easy to access via its own German and South African connections, Namibia has good infrastructure where it’s needed, and none where it’s not. It has an excellent combination of parks, game reserves, private areas and arguably the most successful community-based wildlife areas in the world. A great diversity of dramatic scenery and experience balances the lesser wildlife spectacles in places.
ZIMBABWE After decades of reputational difficulties, Zimbabwe can offer great internal circuits with high diversity such as Victoria Falls, Kariba, Zambezi River and traditional savanna wildlife choices. Access via South Africa is good, and the wildlife experience and tourism infrastructure are reasonable.
ZAMBIA While not as easy to access, involving longer travel times from South Africa, Zambia’s Livingstone, Lower Zambezi and South Luangwa areas offer world-class operations. However, safari industry logistics and infrastructure need improvement, particularly for self-drive visitors.
MOZAMBIQUE Other than excellent coastal and island offerings, Mozambique is still a developing situation with respect to safari tourism.
TANZANIA Despite some governance challenges and logistical issues due to long distances between the northern and southern circuits, tourists flock here for the high diversity of wildlife scenery and experiences from islands to Africa’s highest mountain. The wildlife areas are huge compared to all other countries especially considering the surrounding sustainable use concessions with 35% of the country under conservation practice.
KENYA Arguably the most tourism-focused country for traditional safaris with many good operations, excellent marketing has lured international tourists for decades with the diversity of experiences, scenery and wildlife, from deserts and beaches to alpine areas. Tourism structure is reasonable although some roads could be better. Ditto the main airport.
UGANDA Uganda’s high population density means wildlife areas are smaller and more isolated. Excellent great ape experiences as well as river, lakes and alpine diversity.
RWANDA Quality gorilla and chimp viewing, plus the developing wildlife experience of Akagera, makes this new entrant to the safari scene a winner. Positive factors include the rapidly improving economy and infrastructure with an international airline.
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BY EUGENE YIGA
Travel Experiences Fund Humanitarian Programmes One Horizon is both an experiential travel company and a not-for-profit humanitarian aid organisation. For most of its history, international aid work has been considered the domain of large, multifaceted, and governmentfunded organisations. For Colin Murray, these highly politicised organisations are a club and, whilst they do good work, they actively discourage those outside the club to get involved. And yet when travelling in Africa, he found that in so many places, these aid organisations were absent. “I wondered how it was, that after 70 or more years of the United Nations and billions being spent, people still lived in misery,” he says. “How could it be that malnutrition and disease were rife in major cities without a response? Somehow, these major aid organisations were driving past the people that they were supposed to help.” Murray also noticed that these organisations spewed out information that said sustainability was the key; that unless a programme that alleviates poverty was sustainable, one shouldn’t even try to help. While he agreed that this stance was all well and good, it still didn’t answer the question of how to tell a hungry child that they didn’t qualify for help because nutrition programmes were often not considered sustainable. “The final straw came when, after being invited to a forum on Africa, the major decision was to develop a model of how to
alleviate poverty, as if this was a new concept and as if we didn’t already know the drivers of poverty and what was needed,” he says. “I walked out of the forum and my fellow director and I decided to do something. Not tomorrow, but now.” They didn’t want to be beholden to any government so they decided to never accept or apply for state funding. Instead, the power of people who wanted to get involved would provide the funds required. But they also knew that they wouldn’t be able to attract others if they didn’t demonstrate that they were backing it themselves with their own funds. “We believed in the goodwill of people; that given a chance people would get involved to help others less fortunate,” he says. “And we knew that governments couldn’t solve every problem, nor should they be expected to do so. But we knew that harnessing people in collective action was the way to go.”
Solutions developed by Africans
The result was One Horizon, an organisation that now employs over 70 people directly. As executive director, a hands-on shared role, Murray’s job is to identify and operationalise the practical programmes and projects to help people on their journey out of poverty. This involves bringing local people together to facilitate the process. “We’re a grassroots organisation working in local communities with everyday people,” he says. “But in doing this we never impose our own programmes on people. The solutions to the problems that keep people in poverty where we operate are developed by Africans themselves. We, the directors, only
Little is returned to the slum community and it’s difficult to see what travellers get out of it. Gordon Institute Of Business Science
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apply our business skills to foster the relevant training and development in relation to the knowledge, skills and funding required.” One Horizon began in Kenya but expects to be operational in Tanzania in 2018 and further expand through Botswana in 2019. In South Africa, it funds local initiatives on approach from individual organisations consistent with its objectives. This was an evolution from taking people to centres and hosting them. Its reputation has also meant that it’s often approached by organisations that want to contribute back to society, meaning it can act as the facilitator of the programmes and funding. “One Horizon realigned its key messaging in 2017 in a way the travel industry could relate to,” Murray says in reference to their message ‘holidays that change lives’. “And through the media of video storytelling, we related the stories of our community and travellers, which struck a chord with everybody. One Horizon had, in the end, to educate travel agents about this trend. Travellers themselves were leading the trend, but travel agencies were slow to understand. It was the demand from travellers which led the push.” Indeed, One Horizon has now been embraced by many travel agents who hadn’t been able to get their heads around what it did. In the past, they didn’t understand what responsible tourism was in relation to ‘people’ issues (which many of them still don’t grasp) and often had simplistic notions of what it entailed. They also often interpreted One Horizon as a charity (which it isn’t) and didn’t realise how the wider community of travellers could get involved in changing lives. “When One Horizon attended a trade show in London a couple of years ago and requested use of the responsible tourism logo, we were perplexed that our request was denied,” Murray recalls. “That just goes to show where the current focus is and that responsible tourism as it applies to people and helping them out of poverty still isn’t understood.” 80
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A greater societal trend
There is a growing awareness in society for environmental issues (as anyone who has had the audacity to ask for a single-use straw recently knows) and the travel industry has embraced the greater societal trend. The trend in looking at hotel facilities and their impact on ecosystems is a positive one, especially in pristine environments. But the human element of employment in these resorts hardly gets mentioned.
...individual travellers are intimately linked with delivering the benefits. “For example, most four-star hotels in Nairobi charge visitors between $200 and $250 a night,” Murray says. “Yet the salaries of hotel staff – kitchen, cleaning and front desk staff, which are by far the biggest employers for locals – average $100 to $180 a month and many staff walk to work because they cannot afford transport. The positive trends in tourism are paying lip service to the human element and there could be a good case for exploitation of local workers.” There’s also exploitation of local communities, as seen in what Murray describes as the appalling growth of slum tours, which many agents still support. Often these experiences provide nothing more than voyeurism and do nothing to help local communities. The only winners are individuals who lead the tours or, at worst, the tour companies that run them. Little is returned to the slum community and it’s difficult to see what travellers get out of it. “The challenge of this trend is that providers that are tokenistic in their efforts to impact communities are quickly identified by
travellers,” he says. “In One Horizon’s case, the benefits to our community programme are transparent, validated and there for all to see. Our pig farming operations for communities and the impact on communities are on display every day. And individual travellers are intimately linked with delivering the benefits.” Murray sees a great overall opportunity to harness what for many is a first-time experience and turn it into a longer-term association. In that regard, One Horizon is experiencing repeat business that, on its forward bookings, represents about a 60% growth rate. Leveraging and sustaining that will require a
greater degree of engagement with travellers after their initial tour. “Travel agents often struggle with what we think is an easy concept to understand,” he says. “But One Horizon has some amazing and supportive travel agents that have reaped the benefit of the association with us, and our communities with them. The opportunity for One Horizon and its communities is that there is growing pressure on travel agents to provide the kind of experiences that groups like One Horizon offer.” www.onehorizon.net
One Horizon achievements Key figures
Key achievements Communities
Women
• In Kenya, the average annual income (per person) is $1 300. • Unemployment levels are estimated at over 45%. • 50% of the population live at or below the poverty line. • 25% of all children under five years are chronically malnourished and underweight. • Infant mortality is 38/1 000 births compared to 5 in western societies. • There are 2.4 million orphans in Kenya. • The mean age in Kenya is 19 whilst 47% of the population are aged 14 years or less.
• Nutrition programmes for children at 23 centres across Nairobi • Vocational, lifestyle and small business retraining programmes for women • Small business enterprises (pig and chicken programmes) for grandmas • Housing and resettlement programmes for displaced women • Youth outreach programmes
• Over 580 women have received small business training and been established in their own businesses. • Over 120 single-parent families have been kept together by One Horizon’s resettlement programme.
Children • Over 2 000 children receive breakfast and lunch each day. • Over 2 000 children receive medical support.
• 20 biogas systems have been installed in small-scale pig farms, eliminating community needs to cut down trees for fuel and/ or purchase coal for cooking. • Over 70 ablution blocks have been established in communities. • Over 95 water wells and fresh water supplies have been supplied to communities. • Health and hygiene programmes have reduced hospital admissions by 50%. • Supply of electricity to community resettlement programmes.
Grandmothers • Over 100 small businesses (chicken and pig farms) have been established for grandmas and these have resulted in incomes of between $3 000 to $6 000 for participating grandmas against the Kenyan average of $13 000 per year. • 10 local community field kitchens for grandmas have been established to reduce malnutrition levels.
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BY CHESKA STARK
Business fashion
LESS IS MORE
Do yourself a favour and put together a capsule wardrobe.
We continually look for ways to simplify our life yet our wardrobe remains stuffed and overflowing. Now it’s time to simplify it. There are many methods and inspirations out there for wardrobe simplifying – from Marie Kondo’s tidying “Does it bring you joy” technique to those who wear the same thing every single day, it’s all about less is more. Now the latest buzzword for clothing organisation and choices is “capsule wardrobe”, and we can see why. Basically, this is a collection of items which firstly you love, secondly are extremely versatile. They all can be worn with each other and allow you to put together many great, easy outfits.
Two key things to remember when starting your capsule wardrobe: Starting a capsule wardrobe can be tricky and expensive so don’t just throw everything out – your new capsule collection without a doubt is made up of items that you already own as well as new items. But it is about reducing.
1 2
You shop once a season to add new, quality items to your capsule wardrobe.
There are some bloggers that say their magic number is 20 or 37 but realistically 40 is a good number. You won’t get bored but at the same time, your wardrobe won’t be overflowing (especially with items that you never wear or are saving for that occasion/weight loss). Blogger, Oh Happy Day swears by her 12-piece wardrobe but that’s a little extreme for us.
Choose your magic number:
Now it’s time to select your pieces, think about: Colours
Go for neutrals and no prints. Think black, white, grey, navy and maybe khaki if you insist on colour.
Versatility
You need to use pieces in more than one way so you can’t have a statement dress or tuxedo in a minimalist wardrobe. However, having said that, your wardrobe needs to match your lifestyle, so don’t get rid of your suits should you need them.
Must-have items on your list: The perfect jeans 82
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A great white tee
Cardigan
Relaxed blazer
Leather jacket
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Quality
This is a reducing, simplifying, organising method. It isn’t about cheaper items. Less is more so you need to invest in quality items which are going to last and look good for the entire season.
Finally, how to put your outfits together: Because you have selected neutral, versatile items you should be able to put looks together easily. Everything should work together, so wondering if this shirt goes with these pants shouldn’t be a problem. Remember, this wardrobe is not full of statement items.
When getting dressed, to still bring interest into your look, think about layering and accessory choices – swopping shoes can dramatically change your look. Layering is always key – adding a cardigan and blazer or a simple tee on its own can have very different results.
Example of a capsule collection of 40 items for women:
10
8
Tops
“Next layer” tops
Make sure this includes the perfect white shirt and some classic tees (in black, white and grey).
Include a leather jacket, trench, charcoal cardigan, a great blazer and a mélange tracksuit top.
2 Dresses
One for work, one for play. Keep them neutral and make sure they work with your leather jacket and cardigan.
8
8
4
Bottoms
Pairs of shoes
Accessories
Your perfect jeans, Sneakers, great the best black pair of flats, sandals, heels, pants, a skirt or two, ankle boots, casual athleisure shorts/ athleisure-inspired track pants, shorts and that pair you (if in doubt a denim can’t be without. pair is your answer).
2 bags and 2 scarves
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Example of a capsule collection of 40 items for men:
10
8
2
8
8
4
Tops
“Next layer” tops
Suits
Bottoms
Pairs of shoes
Accessories
Make sure this includes your shirts, golf tees and some T-shirts.
One for work, one Light and dark jeans, for play. Keep them chinos, athleisure Include a blazer, neutral and make sure shorts/track pants, leather jacket, they work with your shorts and some trench as well as leather jacket casual shorts. some knitwear and and cardigan. sweater tops.
Sneakers, work shoes, boat shoes, slops.
Two bags and belts
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BY STEPHEN SMITH
The Motoring Business Here are two vehicles that will surprise and delight. OUTSIDE It could be suggested that Nissan has done this car a disservice by calling it a Micra – it looks nothing like any previous Micra, and is undeniably sexy. A five-door hatch with hidden rear door handles and a floating roofline, the Micra manages to look sporty, athletic and thoroughly modern, thanks mainly to the angular front end, prominent air diffusers and flared rear wheel arches. The Nissan designers have hit the nail on the head here and a good reminder that this is the same company that designed the GT-R.
INSIDE
Graduate
Nissan Micra
The cabin of the Micra has been very well built with topquality materials. Like the exterior, it is modern without sacrificing practicality, and everything is well laid out for the occupants.
The Nissan Micra is a compact five-door hatchback with which I have a love-hate relationship. The third generation was the first available in South Africa, and it was brilliant – quirky but practical (love). The fourth generation lost the quirkiness and brilliance, and was little more than a good option for a hire car (hate). But the fifth generation, available locally for a few months now, is the best ever – the love is back!
Safety has been prioritised, and every new Micra comes with six airbags as standard, plus Isofix child seats, including in the front passenger seat. Electronic safety systems include Vehicle Dynamic Control, Anti-locking Braking System, Electronic Brakeforce Distribution and Hill Start Assist.The Visia comes standard with 15-inch steel wheels, daytime running lights, front power windows, a manual aircon, a Bluetooth and MP3-compatible audio system, cruise control, automatic headlights, six airbags and much more. The Acenta adds 16-inch alloy wheels, front fog lights among other features while the Acenta Plus has 17-inch alloy wheels, a leather steering wheel and an Energy Orange interior. The 7-inch touchscreen colour display on the Acenta and Acenta Plus allows the driver to access features such as music, messages and maps through Apple CarPlay in addition to the MP3, USB and Bluetooth in the Visia model.
WHY THIS?
THE DRIVE
Nissans offer reliability and decent resale value, and with the new Micra you also get a crackingly good-looking car with an outstanding interior that is great to drive, and it’s not yet another Polo or Fiesta. It has to be the best blend of exciting and sensible in the segment today. Also, when you first start working, it’s nice to be able to budget accurately, and Nissan’s excellent 6-year/150 000km warranty as well as a 3-year/90 000km service plan all but eliminate unforeseen costs during ownership.
Local Micra buyers have no option when it comes to the drivetrain – all three models come with a 0.9-litre (900cc) turbocharged petrol engine (which is also used in a number of Renault vehicles) and a five-speed manual gearbox. It produces power of 66kW and torque of 140Nm, using a claimed 5.1L/100km of petrol. These modern little engines are quite phenomenal, but you do need to learn how to drive them, keeping them in their optimum rev range for decent performance.
WHAT IS IT?
The drive quality is another aspect that is worlds apart from earlier Micras. The cabin is well insulated from noise, the ride quality is comfortable without being wallowy, and it handles nicely too. Overall it’s an entertaining car to drive.
FINAL WORD Nissan has been daring in totally revitalising the Micra name, delivering a complete compact car package with a bold new face. If you can come to terms with a car named Micra being desirable, you won’t have any buyer’s regret. 84
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GO GET IT Prices are easy to remember: R233 500, R257 400 and R272 400, for the Visia, Acenta and Acenta Plus respectively. Visit www.nissan.co.za for more information.
OUTSIDE Even alongside the other thoroughbreds in its stable, the XC40 looks as though it was sculpted by a master’s hand and with a master’s eye. To me, none of its rivals come close in terms of aesthetics and charm, while it exudes the road presence and status of a far larger, more expensive vehicle. The designers have based the XC40 on the designs of the XC60 and XC90 (you can’t miss the family grille and headlights) but managed to give it a fresh interpretation that is fun and funky without losing the classiness. The black-roofed versions are particularly effective, as the roofline disappears into the background, highlighting the svelte but angular bodyline, perched atop large, beautiful wheels.
INSIDE The charm continues as you slip behind the wheel of this, the littlest XC. It is attention to detail that really pays off, and this is a lesson that can be carried across to just about any business – these are what make the customer feel special and happy. While the dashboard is centred around a massive 9-inch touchscreen, it was the classy, stainless steel, rectangular air vents that repeatedly caught my eye. Another highlight is the gear selector, which is small and beautifully crafted from stainless steel and leather. It is these touches that you find yourself noticing time and again, making the cabin of the XC40 a place that you genuinely enjoy spending time in, which in turn adds bookmarks to your long day in the office with a period of solace.
Middle Management
Volvo XC40 WHAT IS IT? As with many vehicle manufacturers, Volvo is expanding its SUV line into multiple size and budget brackets. The XC40 is the most affordable of the true Volvo SUVs, but it is at the same time the most stylish – with it you can downsize without downgrading.
WHY THIS?
THE DRIVE
In these days of recession threats, austerity measures, staff cutbacks and diminishing profits, it is important to be seen to be sensible and sympathetic to the bottom line. Going with a slightly smaller, less in-yourface vehicle might be the considerate thing to do.
Volvo has done a good job of balancing comfort with agility with the XC40’s suspension, as well as offering a number of engine options that should meet with just about everyone’s needs. There are small petrol engines (T3 – 115kW/265Nm), big petrol engines (T5 – 185kW/350Nm) and medium diesel (D4 – 240kW/400Nm) engines, although only the T3 petrol engine is available with a manual gearbox and front-wheel drive. The others all get all-wheel drive and 8-speed automatic gearboxes.
There are a few vehicle brands on the up-and-up, and Volvo is most definitely one of them. Long gone are the days of boxy practicality and a one-string reputation – safety over anything. Have a look at the Volvo model range and you will be casting your eyes on some of the most scrumptiously designed vehicles on the market. The SUVs are all particularly irresistible, the XC90, the XC60 and this, the XC40.
FINAL WORD An SUV for the city, the XC40 does not promise to take you on remote adventures over the weekend, but it does deliver comfort, style and happiness in large doses, all of which make the work week that much more endurable.
As always, Volvo has been serious about safety with the XC40, including all the regular active and passive safety features as well as things like City Safety, which is described as like having a co-pilot on the lookout for other vehicles, pedestrians, cyclists and large animals that might pose a threat of collision. Brilliant if you spend time on the road making work calls (via Bluetooth, obviously) or are distracted by other work pressures.
GO GET IT For a car this appealing, the entry-level price is quite incredible. R486 500 will buy you the T3 manual, although the most expensive XC40, the T5 Geartronic AWD is another R160 000 at R644 100. All Volvos come standard with a 5-year/100 000km warranty and maintenance plan. Visit www.volvocars.com/za for more information.
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AKI ANASTASIOU
Technology for Business
iPhone Xs and Xs Max Creating the next trillion for Apple Cost from R17 000 Apple became a $1 trillion company in 2018 and it’s hoping to gain more market share and value with the new range of iPhones and a newly redesigned Apple Watch. This monumental growth in 11 years is largely attributed to the iPhone, which was launched in June of 2007. The iPhone incidentally makes up two-thirds of Apple’s revenue and CEO Tim Cook also pointed out that they are about to sell their two billionth device. Astonishing growth! To put this into perspective, Apple’s market cap in June of 2007 was sitting at around $127 billion. Don’t you wish you had bought a few Apple shares back then? But I digress. Will the new generation iPhones help take Apple to their next trillion dollars? Well, consumers seem to think so, and by the sounds of it, will continue upgrading to the latest iPhone model, even though it’s becoming more expensive each year. Apple introduced three new devices, the iPhone Xr aimed at a lower price point and their flagship devices the iPhone Xs and the Xs Max. All the new devices have Apple’s new A12 Bionic Chip. The power and speed of
the new chip is a massive jump compared to the previous version. The 7-nanometre chip has 6.9 billion transistors, a 60% jump on the previous iPhone and can now complete five-trillion operations per second vs the 600 billion last year. The A12 chip is an extraordinary engineering feat. What it means for you and me is that the phone is up to 50% faster, depending on which apps you use, and as much as 50% more energy efficient. One transistor in 1960 would have cost $150, today you can buy 70 000 transistors for $1 cent. Let that sink in for a bit. Hello, Fourth Industrial Revolution! Back to the phones… both the 5.8- and 6.5-inch phones have Super Retina displays, the cameras have been upgraded with even better stabilisation and faster sensors. Essentially the magic happens with Apple’s Neural Engine software together with their fancy chip that helps you take those amazing photographs. “Do I upgrade?” is the question. They are pricey, but the new chip with the screen enhancements make it difficult to resist, especially the iPhone Xs Max with that huge 6.5-inch display!
Apple Watch Series 4 New redesign with fascinating health insights Cost from R6 000 The Apple Watch Series 4 was, for me, the most exciting product announced by Apple. The watch has been redesigned and re-engineered with some amazing technology. It has a slightly larger screen and is thinner than the previous model. It has a sensor that can detect if you fall and even has the capability of alerting an emergency responder if you don’t respond to say you’re OK. The heart sensor constantly monitors your heart rate and will alert you if your heart rate is too low or too high. It can also detect atrial fibrillation by analysing your heartbeat and alerting you if you have an irregular heartbeat. The new watch has the capabilities to do an electrocardiogram (ECG) using the new ECG app which also, interestingly, has FDA approval. Together with all the exercise functionality, Apple has built an impressive watch that gives us a glimpse into how we may monitor our health in the future.
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ISSUE 26 • Four th Quarter •
UNCAGEING
AFRICA’S LON
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CTURING IN LONG TUNNEL , MAYBE SOM SA E LIGHT?
ISSUE 26 Fourth Quar ter •
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Samsung Galaxy Note 9 The ultimate business phone Price from R18 000
The newly launched Samsung Galaxy Note 9 is an exceptional phone packed with functionality. It features a 6.4-inch Super AMOLED display and Samsung’s new intelligent 12 MP dual aperture lens to help you take the best photographs by automatically adjusting to light in the same way the human eye does. The Samsung Galaxy Note’s unique feature is the S Pen, a feature that Samsung brought to the market back in 2011. Having the functionality to make notes like you would with a pen and paper but on a screen digitally, has massive appeal to those who want to add notes to a photograph, a message or use the S Pen to draw things and navigate around the phone. The Note 9 now features a low-powered Bluetooth S Pen that has added functionality by pressing the button on the pen. You can take photographs by simply pressing the button or hold it down to go into selfie mode. If you’re doing PowerPoint presentations, you simply plug the phone into a screen and use the S Pen to change your slides. The Galaxy Note 9 also has a 4 000 mAh battery which will easily give you a full day’s usage! It has all the bells and whistles you would expect to find in a phone plus more. The Samsung Galaxy Note 9 is an exceptional phone and contender for phone of the year!
Dell XPS 13 The ultimate business notebook Priced from R20 000 If you’re looking for a high-end, very light, stylish, ultra-portable laptop running Windows then the Dell XPS 13 is for you. It’s a beautifully designed laptop with an aluminium exterior and a black carbon interior around the keyboard. This is the Porsche Cayenne of notebooks. It just feels amazing. The 4K touch screen is really useful when you want to multitask while typing. The 8th generation Intel Quad Core i7 makes the Del XPS 13 purr between tasks. There is hardly any lag when opening a program or email. Dell has pushed the display right up against the edges using their Dell Cinema Infinity Edge display so you actually don’t even notice the edges of the screen. With a battery life of 10 hours plus, this is a machine for any executive on the go.
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BY CHRIS GIBBONS
Books Political Risk
Stealing Fire
Orion UK – R300
HarperCollins – R210
Former US Secretary of State and now-Stanford Business School Professor Rice, and long-time collaborator, Hoover Institution Senior Fellow Zegart, have written the definitive text on political risk in the 21st century and how that can hammer your business. But let’s be clear: political risk does not mean economic risk, i.e. inflation, unemployment, GDP growth and so on. By their definition, political risk means “how political actions affect businesses, a topic that receives surprisingly little attention in MBA courses or business books but that causes a great deal of concern in boardrooms and C-Suites.”
If you have ever been in a top theatre company, orchestra or sports team, you may well know the feeling. Or you might have experienced it as part of an elite military unit, spiritual group, management team or even just in the crowd at your favourite football club. It’s that extraordinary moment when you, the individual, are subsumed by the group; you feel yourself pulled into something that is much larger, more powerful and as a result more effective.
Condoleezza Rice and Amy Zegart
An example: US theme park operator SeaWorld Entertainment, Inc. was famed for its shows with orcas (killer whales). SeaWorld listed very successfully in 2013, but within weeks, a lowbudget documentary called Blackfish was released, detailing how an orca called Tilikum had killed trainer Dawn Brancheau mid-way through a performance in Orlando, Florida. Blackfish’s bottom line: SeaWorld’s practices were extremely harmful to both orcas and humans. Immediately seized upon by animal rights activists and celebrities, the movie went viral. Just 18 months later, SeaWorld’s share price had dropped 60% and its CEO had resigned. That’s just one of many examples of political risk cited. More obviously, think about the election of Donald Trump or Brexit; both had been dismissed as well-nigh impossible. But they happened. Rice and Zegart analyse the various kinds of political risk, explain why it is so hard to manage, offer copious examples of how to deal with the crisis when the risk arrives, and conclude by offering a detailed recipe for strengthening what they call “your political risk muscles.” This is one that should be beside the bed or on the desk of every director of every company, listed or not. 90
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Steven Kotler & Jamie Wheal
Many words have been used down the centuries to describe this altered state of consciousness: ecstasy, euphoria, and more recently ‘flow’, defined by the authors as “an optimal state of consciousness where we feel our best and perform our best”. Alternatively, “in the zone”. Almost as many attempts have been made to create it or recreate it artificially, from meditation via extreme sports to psychedelic drugs. To study the relationship between peak performance and flow, the authors established the Flow Genome Project – an attempt on “mapping the neurobiology of flow…” But as they went along with their research, talking to more and more people, they discovered a remarkable thing. Behind almost every corner was someone trying to hack their own personal path to flow – “We met military officers going on monthlong meditation retreats, Wall Street traders zapping their brains with electrodes, trial lawyers stacking off-prescription pharmaceuticals…” Everyone, it seems, is trying to steal their own version of Promethean fire – which is where the book’s title comes from. In part, that’s because once you’ve experienced flow, it’s highly addictive and you want to return as fast as possible. Stealing Fire is a fascinating journey through history, but also a detailed examination of where humanity might be heading. Think virtual reality, pharmaceuticals and regular access to altered states. Think very high performance indeed.
Bad Blood – Secrets and Lies in a Silicon Valley Startup John Carreyrou Picador – R330 At one stage, Elizabeth Holmes was Glamour’s Woman of the Year and Fortune’s Businessperson of the Year. The founder of bloodtesting company Theranos, Holmes was personally worth around $4.5 billion and boasted the likes of Henry Kissinger, George Schultz and James Mattis as board members. The company itself was worth as much as $9 billion. All of that now lies in the dust. Holmes and her former lover, Ramesh ‘Sunny Balwani’, face multiple counts of fraud and conspiracy to commit fraud. Her tale of having invented a blood test that could offer dozens of different diagnoses from a single drop of blood taken almost painlessly from the tip of a finger turned out to be nothing more than a fantasy. Bad Blood is by John Carreyrou, the award-winning Wall Street Journal reporter who spent months investigating Holmes and Theranos and eventually exposing them. It’s a fascinating tale and a great example of how a top-ranked investigative journalist like Carreyrou plies his trade, fully backed by an equally prestigious title like the Journal. If it has a weakness, it is not that Holmes and Balwani managed to get away with it for so long, but how they managed to dupe so many superstars and superstar investors to back their product. The gadget itself almost never appeared in public and when it did, it almost never worked. Medical experts said repeatedly that multiple different diagnoses from a single drop of blood were simply impossible, yet no-one listened and many stumped up the cash. Jeff Skilling (Enron). Bernie Madoff. Bernie Ebbers (WorldCom). Adriaan Nieuwoudt (Kubus). Now Elizabeth Holmes. They appear again and again and yet we fall for them every time.
Spin: The Art of Managing the Media
Nick Clelland and Ryan Coetzee Penguin – R160 Until quite recently, SA’s main opposition party, the Democratic Alliance (DA) has grown steadily. It has taken control of four major metros – Cape Town, Johannesburg, Pretoria and Nelson Mandela Bay – and a slew of smaller towns, mainly in the Western Cape. Much of that success is down to some extremely slick management of the media. Meet the puppetmasters: Clelland and Coetzee are themselves both ex-DA MPs and experts in the dark arts of spin. Dark arts? Well, not so much. As they make clear, much of this is nothing more than sitting down with your client long before anything resembling a reporter has shuffled over the horizon and doing some basic planning. What’s the message you want to get across? What do you want not to say? Would you really want to see this remark or that Tweet on the front page of the Sunday Times? Have you nominated your spokespeople? Have you trained them properly? The same applies to crisis management. Have you considered the kind of crisis that is likely to affect your organisation or company? Do you have a Crisis Management Plan and does that plan have a Crisis Communications component? Have you updated that plan recently? And so on. Along the way, the pair throws some very interesting light on the success of Donald Trump – some very dark arts there, for sure – and also provide us with a glimpse of the inner workings of the DA. But if the book has a weakness, it emanates from the same place: the DA has had a tendency down the years to be a little smug, spiced with a touch of self-righteousness. Now I know where that comes from. Gordon Institute Of Business Science
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Death and Taxes
Unhinged
Jonathan Ball Publishers – R270
Simon & Schuster UK – R340
On the face of it, this is a book about a man and his career at SARS. Johann van Loggerenberg is one of the key players in the drama – still unfolding – centred around the so-called ‘Rogue Unit’ at SARS.
At first glance, an insider’s ‘kiss-and-tell’ book about the inner workings of the White House might not seem to have great relevance to Acumen’s readers. My contention, however, is that the power vested in the occupant of the White House’s Oval Office is so great and far-reaching that it touches every single one of us, however directly or indirectly.
Johann van Loggerenberg
He’s already told that story in Rogue: The Inside Story of SARS’s Elite Crime-busting Unit. This book seeks to throw the net wider and its subtitle gives a clue: How SARS Made Hitmen, Drug Dealers & Tax Dodgers Pay Their Dues. In fairness, the author does cover a great deal of ground unrelated to the Rogue Unit, including the Dave King/Specialised Outsourcing case, alleged fraudster Billy Rautenbach and Orlando Pirates boss, the ‘Iron Duke’, Irvin Khoza. But make no mistake. As van Loggerenberg traces the development and growth of the various divisions of SARS which he came to head, he builds a relentless case that describes the process we now call state capture. Read this book and you will understand why SARS’ Large Business Centre – one of its most effective sections – had to be closed down. You will also read with dismay and amazement about the collapse of relationships between SARS and units like the SAPS Crime Intelligence Division and the Scorpions. It’s no wonder SARS missed its collection target last year by some R50 billion! Van Loggerenberg’s frustration and disgust at this state of affairs leap off page after page. He’s also very clear about the colossal leakage of expertise from SARS over the past few years, as well as what needs to be done to fix it. At least one piece of the jigsaw is already in place, with the suspension of Commissioner Tom Moyane. At the time of writing, his own case has not been resolved. It’s clear that the creation of the ‘Rogue Unit’ was fake news, put about by van Loggerenberg’s enemies and swallowed by a distressingly gullible Sunday Times. The case needs to be withdrawn immediately a new National Director of Public Prosecutions is appointed.
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Omarosa Manigault Newman
For example, when President Donald Trump lashes out at Turkey over that country’s detention of an evangelical American pastor and the Turkish lira crashes, so too does the South African rand. That weaker rand pushes the price of fuel sky-high, which affects every person in this country. So when Omarosa Manigault Newman, a former Assistant to the President, but also a member of the original 2003 line-up of The Apprentice, Trump’s wildly successful reality TV show, says she fears for his mental health, we need to pay attention. She is an African American, so when she says she is now convinced that Trump is an out-and-out racist, we should consider believing her. Her book is also part-confession, in that, for the best part of 15 years, she had convinced herself that Trump was ‘racial’ and not ‘racist’. It’s a very fine distinction indeed and she goes to great lengths to explain how and why she entertained this self-deception. Her contention is that Trump is suffering from some form of dementia or has suffered a stroke or strokes. She points to his often rambling and incoherent speeches, his inability at times to lift a glass of water without using two hands, and his excessive consumption of Diet Coke. A recent study, she says, has linked Diet Coke to strokes. Unhinged is well written, easy reading – and very scary.