South African Business Integrator A B U S I N E S S I N T E R A C T I O N P U B L I C AT I O N September 2016/February 2017
Business with a social conscience Executive pay must be linked to value creation HIV/AIDS discrimination in the workplace Connected value creation: The natural order of things Indaba Hotel: Home away from home sabusinessintegrator.co.za
Current Affairs I Economic Development I Business Integration
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Contents n Cover Story
Business with a social conscience............................................ 8
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n Banking
Protecting ATM and point-of-sale terminals...........................12
n Communication
Don’t get taken for a PR ride....................................................14
n Business Integration
The natural order of things.........................................................16
n Corporate Governance
Executive pay must be linked to value creation....................20 A global leader in corporate governance...............................24
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n Entrepreneurs
When is the right time to scale up your business?..............25
n Environment
The future of recycling isn’t what you think............................28
n Finance
Choosing an accountant: proficiency over prestige............32
n Insurance
Insurers critical in reviving SA’s economy..............................35
n Human Resources
HIV/AIDS discrimination in the workplace.............................36 Helping staff to retire more comfortably.................................39
n Health
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Encouraging a healthier lifestyle...............................................41
n Infrastructure Development
The importance of SMEs in public/private partnerships..................................................................................44
n Security
Expert risk management services and solutions ..................46
n InvEstment
Man vs machine: Managing your investment risk for the future..........................................................................47 Reason for optimism: Further rand strength likely................49
n Manufacturing
Industry 4.0 and the advancement of African manufacturing...............................................................................54 Total lifecycle solutions for oil, gas and chemical sectors..........................................................................58 South Africa’s oil and gas regulator for the future...............60
n Retail & Branding
Promotions appeal to price-sensitive consumers.................63
n Science & Technology
Data leak dangers: Know your weak spots............................65
n Skills Development & Training
Making the most of learnerships..............................................68
n Maritime & Fisheries
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n Oil & Gas
Acknowledging transformation in SA’s deep-sea trawling industry.........................................................70
n Supply Chain & Procurement
Sourcing and supply chains......................................................71 BEE compliance not enough to expand SA’s economy...............................................................................75
n Travel & Tourism
Indaba Hotel: Home away from home.....................................80
n Water & Sanitation
Stainless steel could save SA Million in water costs..........84
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South African Business Integrator
South African Business Integrator
Issue 4
A B U S I N E S S I N T E R A C T I O N P U B L I C AT I O N September 2016/February 2017
Publisher
September 2016/February 2017
Media XPOSE excellence in exposure
Business with a social conscience
Tel: +27 21 424 3625 | Fax: +27 86 516 7277 PO Box 15165, Vlaeberg, 8018
Executive pay must be linked to value creation
Editor Emma Dawson editor@sabusinessintegrator.co.za
HIV/AIDS discrimination in the workplace
Editorial Contributors Ayanda Ngubo Carey van Vlaanderen Christo Botes Daniel Malan Delphine MaĂŻdou Donna Rachelson Faith Ngwenya Frans Pienaar John Tarboton Maarten Ackerman Ray Harraway Regine le Roux Richard Rayne Roland Rousseau Samuel Du Rand Shawn Theunissen Stacey Davidson
Connected value creation: The natural order of things Indaba Hotel: Home away from home
www.sabusinessintegrator.co.za
sabusinessintegrator.co.za
Current Affairs I Economic Development I Business Integration
Photographer: Adore Photography – Jackie van de Berg
Content Manager Melanie Taylor artwork@mediaxpose.co.za Content coordinator Melany Smith artwork2@mediaxpose.co.za Online Advertising & Marketing Coordinator Maurisha Niewenhuys marketing@mediaxpose.co.za Pictures: 123rf.com
South African Business Integrator @SA_Business_Mag
Design and Layout CDC Design carla@cdcdesign.co.za Project Manager Elroy van Heerden elroy@sabusinessintegrator.co.za Advertising Sales Consultants Granville Isaacs granville@sabusinessintegrator.co.za Micheal Makhawu micheal@sabusinessintegrator.co.za Chief Financial Officer Shaun Mays shaun@mediaxpose.co.za Distribution/Subscriptions Janine Mays distribution@mediaxpose.co.za
Printed by Paarl Media Paarl www.paarlmedia.co.za
South African Business Integrator A B U S I N E S S I N T E R A C T I O N P U B L I C AT I O N
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Disclaimer: The views expressed in this publication are not necessarily those of the publisher or its agents. While every effort has been made to ensure the accuracy of the information published, the publisher does not accept responsibility for any error or omission contained herein. Consequently, no person connected with the publication of this journal will be liable for any loss or damage sustained by any reader as a result of action following statements or opinions expressed herein. The publisher will give consideration to all material submitted, but does not take responsibility for damage or its safe return.
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Editor’s L E T T E R
Creating value for everyone
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Train people well enough so they can leave, treat them well enough so they don’t want to.” – Richard Branson
For this edition of SA Business Integrator I interviewed two remarkable men who, through different approaches, both work towards a common goal for the upliftment of South Africa and its people. Featured on our cover, Thabo Mokwena, the Founder and Chairman of the Leago Group, has risen through the ranks of the South African Local Government Association where he developed a deep understanding of the challenges faced by our municipalities. Now in the private sector, as well as wearing the Director’s hat at the Centre for Public Entities, Thabo works with municipalities, State Owned Enterprises and blue-chip companies to build a better South Africa for everyone. He is also passionate about education, and strongly believes that of vital importance for our economy is that we develop an educated society and workforce. ‘We need to restructure our economy from being mineral-based to knowledgebased,’ he said during our interview. Read this enlightening article on page 8. The other interview that really excited me was with free-thinker, Sham Moodliar, a business transformation expert, Director of Datonomy Solutions, initiator of the HambaSafe app and founder of ApeTown. Sham is energetic in his belief that we need to find new paradigms for working together from a point of connectedness to become ultimate value creators for all stakeholders. It’s a well-known fact that more engaged employees mean more engaged customers – and this is just one of the factors that Sham points out is accomplished by working with the multiplier effect. Understanding what is of value to your employees and investing in that value is the driver of an organisation’s value. He adds that it’s not all about the written contract but rather the emotional and psychological contract that employers have with their employees. Sham believes that every member of staff is an entrepreneur. ‘I want to understand, empower and unlock value for my employees and we want our staff to continuously work at adding value to themselves,’ he says. ‘This isn’t about charity, but you do need to make sure that your people can be entrepreneurial. After all, why would staff leave a company that’s adding value to them?’ This belief is aptly reflected in a quote by Richard Branson: ‘Train people well enough so they can leave, treat them well enough so they don’t want to.’ This glimpse into my interview with Sham barely scratches the surface of what Connected Value Creation is all about. Be sure not to miss the full article on page 16. I’ve only reflected on two articles here, but there are many in this edition that I’m sure you’ll find enlightening. Enjoy the read!
editor@sabusinessintegrator.co.za
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COVER STORY
Business with a social conscience
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Photo credit:
During an enlightening interview with Thabo Owen Mokwena, Founder and Chairman of the Leago Group, Emma Dawson discovered a man driven by his social conscience to make South Africa a better place for all its people.
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COVER STORY
Pursuing a career in business seemed inevitable when you hear about Thabo Owen Mokwena’s upbringing. ‘The person I am today stems from my early years, growing up in a catholic family-centric household in the townships of Pretoria,’ Mokwena explains. Besides the strong influence of his church, Mokwena’s parents were actively involved in his childhood, providing a strong foundation and durable family values. ‘My parents were also emphatic about my education. My father – at the time working with researchers at the CSIR – was determined I study science. Through his work, he met many visiting international professors who constantly inspired him. In fact, I’m named after Owen, one of the researchers my father worked with.’ He adds: ‘My mother, on the other hand, had a brief stint in teaching and dedicated her time to empowering her kids with education’. Another important aspect in the making of the man you meet today were the then political conditions in South Africa. ‘Growing up in the 80s, I was keenly aware of the country’s tense political environment and our socioeconomic conditions, which were important factors that shaped the direction I would follow. I became an activist. However, I was caught up in the “dilemma of the struggle first, education after”. I quickly realised that without education our struggle was meaningless – unlike some who saw these as mutually exclusive. I fortunately found a balance between education and pursuing the course of making South Africa a better place for everyone.’ After finishing school, Mokwena enrolled at the University of Cape Town (UCT) to study Social Science with a focus on economics and public administration – possibly not the degree his father had yearned for him to study but definitely the start to an enthralling career. ‘My father was uncompromising when it came to education. On reflection, I think he went a little overboard but I now value his insistence. As a result, I’ve always had a passion for knowledge and wisdom and, as I did as a child, still spend many hours reading,’ Mokwena maintains. ‘UCT was a culture shock initially and I found myself interacting with people from vastly different backgrounds. This was an eye opener and important experience. During my time at UCT I served on the Student Representative Council and was active in the University’s community. This extended beyond campus to engaging with neighbouring communities where I got involved in political and civic work, interacting with community structures, and working with community leaders.’ At this time, Mr Mandela was recently released from prison and politics were rapidly changing in South Africa. ‘I was part of the discussions about the future of our country and I had the pleasure of working with some of the leading progressive Marxist scholars based in the Western Cape. They encouraged rigorous debate about considerations on how South Africa must change to move forward,’ Mokwena adds. After he graduated, and with a new-found love for Cape Town, Mokwena remained in the Mother City
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It’s our responsibility to get it right and leave a lasting legacy for generations to come.”
where he worked for Wesgro and later the Foundation for Contemporary Research (FCR). Through the FCR he conducted research pertaining to new structures and systems for local government transformation, which led to his appointment at the South African Local Government Association (SALGA). ‘I was still young, in my mid-20s, and was thrown into the deep end dealing with policies and local government legislation, as well as being solely responsible for representing all municipalities at Parliament.’ While Mokwena recalls how challenging his job was, he remembers the sheer excitement of this ‘baptism of fire’, as he calls it. He also recounts how everyone – united in the common goal of transformation – was prepared to listen, despite his age. Proving he could get the job done, Mokwena was then uprooted to Pretoria to head SALGA, as the CEO. Still in his 20s, he was responsible for 824 municipalities and spent his time crossing the country to understand the issues the municipalities were facing. ‘I was under enormous pressure to appreciate each region’s complexities and to help implement change, but this was definitely a highlight of my career. I used to say, “no-one knows this country better than I do”,’ he quips. In 2005 Mokwena entered the private sector and established the Leago Group. ‘Our initial focus was on the mining sector and we applied for mining licences and opportunities. However, we soon realised it would require heavy investment and we quickly exited this space – we realised we didn’t have the appetite for the huge debt and borrowing required.’ It was at this point that the company’s focus shifted to BEE investment opportunities, advisory services and engineering – still the pillars of the Leago Group’s activities today. In the energy sector, the company predominantly supplies engineering services to Eskom’s new-built projects and to Independent Power Producers (IPPs) ‘It’s one of our core business areas,’ Mokwena points out. Leago Engineering provides a focus on infrastructure development in the form of roads, water projects, and consulting engineers (development of plans and policy). ‘This became our flagship programme. We are renowned in this arena and work mostly with municipalities on their infrastructure programmes.’ Leago Group’s advisory services business provides strategic consulting and advisory services to big stateowned entities (SOEs) and blue chip companies. ‘We work closely with CEOs, helping them to restructure and turnaround their businesses, and to realise their strategies. And, finally, under our Investment company we do acquisitions through BBBEE programmes with a vision of growing our portfolio of investments,’ Mokwena explains.
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COVER STORY
‘Municipalities offer big opportunities and it’s a large market. However, you need to understand how they operate and what they need. With my experience at SALGA, it made sense to go into this sector and reap the benefits of the institutional knowledge I had gained. Municipalities are struggling and, while we do derive financial value, our conscience is clear because, ultimately, we’re doing something good for their communities.’ He adds: ‘We know that where there’s infrastructure, investment follows. There aren’t many companies prepared to work in undeveloped areas but we’re happy to be at the coalface of infrastructure development. Investment in infrastructure projects will definitely boost our economic development. The projects we’re involved with benefit poor communities and provide value creation and rewards for companies like ours – this is doing business with a social conscience.’ Another issue close to Mr Mokwena’s heart is education, something reflected in the Leago Group’s CSI projects. ‘This is where I want to put my money,’ Mokwena insists. ‘I believe one of our biggest challenges is education. If we improve education we could sort out the economy, politics and the issues of unemployment. I also believe it’s never too late. ‘Our youth is preoccupied with how to become wealthy. They’re not orientated towards using their brains and acquiring knowledge. While I believe there’s nothing wrong with that, the youth needs to consider how they’ll get there. I think it’s so unfortunate that the country’s role models, whether politicians, business leaders or celebrities, don’t enforce the message of the importance of education. I also believe the authorities are not doing enough to radically turn around our education system – each new minister institutes a new policy but what we really need is a solid education system that will stand the test of time. The fallacy of presentism, suffered by each new incumbent, inhibits our ability to leave a lasting legacy for the following generations.’ He adds that education doesn’t necessarily amount to a career. ‘Education is a basic foundation in life. It opens your eyes, it teaches you to be a human, it enlightens and empowers you, and provides a basis from which individuals can make choices as to the direction they wish to follow. I got empowered to engage with life, I know how to apply my mind, and how to consider risks and opportunities. Education helps you to navigate the intricacies of life,’ he states. ‘I believe that the most important thing for the South African economy – and for us to integrate into the world economy – is to have an educated society and workforce. We need to restructure our economy from being mineral-based to knowledge-based. Africa has massive infrastructure requirements and we should be focusing on building and maintaining the skills to develop Africa together as a unified continent.’ When asked what he believes is most important for South Africa’s future, Mokwena puts on his hat as the Director of the Centre of Public Entities (CPE): ‘My
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primary goal is to influence SOEs to start doing what they’re supposed to be doing. If we get them to do their jobs properly this country would be a much better, far different place. If we can achieve this, we can tackle our challenges head on and leave a lasting legacy,’ he insists. He continues: ‘All too often I see public servants who have lost sight of their core responsibilities and serving the public. Instead, they are preoccupied with selfenrichment programmes. I urge those I work with to think about my grandmother in the village, think about a child about to be born in a hospital. The things we do have an impact on the lives of all these people. Often, our public servants, public entities, and public representatives haven’t internalised what they work for, nor do they have a deeper sense of how their actions impact on the people of South Africa. I want them to look at the practicalities of what it means to be a public servant.’ For me, a statement that sums up Thabo Owen Mokwena came at the end of our interview: ‘It’s not about how much money we have, it’s about the quality of life. If we have a quality of life where our kids are educated, people have job opportunities, and the services are flowing and infrastructure is growing, South Africa will be a far better place. And I believe we’re not far from that.’ He concludes by saying: ‘It’s our responsibility to get it right and leave a lasting legacy for generations to come.’ n
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BANKING
Protecting ATMs and point-of-sale terminals Kaspersky Embedded Systems Security, from Kaspersky Lab, is a targeted enterprise-grade solution designed to protect ATMs, point-of-sale systems and point-of-service machines. Aimed at protecting a diverse variety of Windowsbased platforms handling the most sensitive financial operations, Kaspersky Embedded Systems Security offers world-leading detection capabilities and new specialised security options.
ATM threats: physical and virtual Financial organisations report that the most prevalent threats targeting their ATM fleets are of a physical nature, including skimming and ATM theft. However, cyber threats or attacks on a software level are catching up: banks are reporting an increasing number of incidents involving ATM malware. This aligns with Kaspersky Lab’s threat intelligence dating back to 2009. The most recent example actually replaces hardware card skimmers, but also allows attackers to force the infected ATM to dispense cash. One of the most damaging cybercriminal campaigns between 2014 and 2015, known as Carbanak, also included cash dispensing functionalities. This year Kaspersky Lab has observed the rapid development of these high-tech bank robberies.
Hardware and compliance specifics Although ATMs and point-of-sale (POS) terminals are diverse, they share similar qualities. Typically, these machines are dedicated to one specific task and carry limited software. It is likely that ATMs connect to networks via slow 3G and wireless channels and are always geographically scattered. This presents additional security and management challenges. At the same time, compliance requirements are broad and do not necessarily bring the required level of protection. This landscape calls for a specialised solution.
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Product highlights ‘The first challenge we had to solve was to squeeze the most up-to-date security technologies into a product designed to run on machines with limited capacity,’ comments Dmitry Zveginets, Kaspersky Embedded Systems Security Solution Business Lead, Kaspersky Lab. ‘Upgrade cycles for ATM and POS fleets are slow, and it is not uncommon to find a perfectly working machine that was built more than ten years ago, running similarly outdated software. We’ve created a new product compatible with seven generations of computer hardware that protects the system, even without an internet connection, and is highly flexible to meet the distinctive demands of financial organisations and relevant regulations. Additionally, we have included advanced protection technologies that bring financial security to a higher level.’ Besides ATMs and POS terminals, Kaspersky Embedded Systems Security, with its high reliability and low footprint, also protects ticket dispensers from threats. It supports all Windows versions – from Windows XP to Windows XP Embedded, Windows Embedded 8.0 Standard and Windows 10 IoT. The solution has the lowest system requirements and can run using just 256MB of memory and just 50MD. Kaspersky Embedded Systems Security brings centralised reporting and management as well as a special Default Deny mode that blocks attempts to run any unauthorised executable code or drivers on ATMs and POS terminals. The solution is also integrated with the cloud-based Kaspersky Security Network to provide the most up-to-date threat intelligence and quickly respond to the latest attacks. For more information, visit www.kaspersky.co.za. n
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COMMUNICATION
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Don’t get taken for a PR ride Stop being taken for a ride by your public relations company or social media agency, and stop throwing exorbitant amounts of money at communication efforts that are not well planned or strategically sound. workshop on what it takes to enhance and improve your reputation, and will guide delegates on how to develop their own reputation strategies and plans. ‘After the session, delegates will have a comprehensive idea of what they need to do to take their company’s reputation to the next level,’ adds le Roux. ‘Collaboration and agility is the new communication frontier in business,’ says Carol Allers, IABC Chairperson. ‘At the conference we’ll be bringing together thought leaders from across the communication spectrum to engage, collaborate, network and most importantly to share their knowledge of business communication.’ The IABC Conference takes place from November 2 to 4, 2016 at the Vineyard Hotel and Spa in Cape Town. For information about the conference, visit http://www.iabc. co.za/2016/02/17/iabc-africa23rd-annual-conference-2016registrations-are-now-open/. n
Photo credit: Reputation Matters
According to Regine le Roux, Managing Director of Reputation Matters, a press release is not a silver bullet that is going to magically solve your sales problems, nor is a beautiful Facebook page. ‘When it comes to your organisation’s reputation, every aspect of the business contributes to how it is being perceived. While perceptions may not necessarily be correct, they are somebody’s reality and do need to be managed,’ she insists. ‘Only once you understand exactly what these perceptions are, and which areas of the business are important to which stakeholder groups, can you effectively put a reputation management strategy and communication plan in place,’ explains le Roux. ‘Too often business owners think that a clever press release or quirky marketing campaign is going to increase their sales. You can spend a ton of money on a fancy communication campaign but if your internal business building blocks are not in place, you may actually do a lot more harm than good. These building blocks include having the right processes, people and pricing principles in place; all of which need to be glued together by a strategic internal and external communication plan.’ In November, le Roux is presenting a reputation management master class at the upcoming International Association of Business Communication (IABC) conference in Cape Town. She is facilitating an interactive
Regine le Roux is the Managing Director and founder of Reputation Matters. She holds an M Com degree in Communication Management from the University of Pretoria. She is a corporate reputation specialist and handpicks and manages several teams that conduct reputation research studies and implement business communication strategies. Le Roux is the author of: Reputation Matters, Building blocks to becoming the business people want to do business with. For more information, visit www.reputationmatters.co.za.
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BUSINESS INTEGRATION
The natural order of things Sham Moodliar, CEO of Datonomy Solutions, founder of ApeTown skate clothing, and initiator of the HambaSafe app, believes that Connected Value Creation (also known as creating shared value) is the answer to a fresh business paradigm that dispels the shareholder-only focus. He explains to Emma Dawson how radically reinventing collaboration across the value chain can ensure shared value for all stakeholders.
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BUSINESS INTEGRATION
Perhaps this begins with quantum physics, but it does encompass corporates that are in a powerful position to begin shifting the dialogue. Consider these questions: How much value have you added for your customers this year, and what was the knock-on effect for our country? What have you done to really develop your people? And what have you done to add value to society (and we’re not talking about the budgeted 5% you donated for tax purposes)? To explain the philosophy of CVC you have to start at the beginning, from a point that scientists will confirm is fact: everything is connected. Just think of the trouble we’d be in if bees disappeared... However, there’s a societal intent not to believe that everything’s connected. ‘It’s not a conspiracy but rather a matter of convenience. If you do believe that everything’s connected then you have to hold yourself accountable and will have to ask yourself, how can I do this to myself? How can I do that to a system of which I am a part? It’s easier not to feel the connection and to distance yourself from the plight of others,’ Sham insists. ‘If this wasn’t true, how else do you explain the huge disparity in our nation or on our planet?’ In a corporate environment, the question around most boardroom tables is, ‘how can I make as much money as possible as fast as possible?’ However, Sham points out that what we should be asking is, ‘how can we achieve more together?’ And not about more together for me, but more together for each other because we’re all part of one system. So the question then is, how can we find new systems or paradigms for working together so that it’s not about CSI spend at the end of the financial year? If you agree with the principle of adding value to all stakeholders (customers, employees, society), then you will also realise that the process is as important as the outcome. ‘It’s the process of doing business – the drivers, not the outcome – that adds the value,’ Sham explains.
What does CVC look like?
This isn’t a topic reserved for the realm of hippiedom. As an expert on business transformation with 21 years of international experience with firms such as Shell, Accenture, FedEx and Red Bull, Sham is no stranger to the corporate world. But, yes, this article is about out-of-the-box thinking and, yes, it does have to do with a belief that we’re all connected and how important this is for society. Connected Value Creation (CVC) is about considering why we’re all here and how we can make a difference. ‘This isn’t a cult thing,’ Sham is quick to point out. ‘It’s about creating a dialogue so that people can do things in a connected way and move away from an attitude of me, me, me.’
Sham’s definition of CVC is: ‘From a point of connection to create value for all stakeholders – not just at the end, but in the process of the production of goods and services.’ A few tangible examples of how Sham is putting this philosophy into action are: • A t Datonomy: Operating a management consulting company where Connected Value Creation is at the heart of everything that they do – from dynamically staying connected to what is value for their clients and their unique ability to positively impact the drivers of that value, to building deep relationships, identifying opportunities to add greater value and delivering exceptionally together. Simultaneously ensuring that adding value to all employees is embedded through entrepreneurial plans and mentors. • A t ApeTown: Running a clothing company where the product, supply chain and manufacturing uses sustainable processes. Uplifting the community and generating financial value at the same time.
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BUSINESS INTEGRATION
Photo credit: Danie Nel
Sham Moodliar, CEO of Datonomy Solutions, founder of ApeTown skate clothing and initiator of the HambaSafe app.
• W ith the HambaSafe app: Taking a stand against social ills that threaten to further polarise our communities by getting people to come together and work on a solution that encourages even more people to come together.
The transformation to CVC Most companies focus on financial/shareholder value. When it comes to customers, companies will sell whatever customers are willing to buy so they can get their money. The attitude towards employees is that they’re assets to be sweated to make as much money as possible. ‘If you focus only on the short-term, how can you create future value? And, if you focus on financial value, what you’re saying is: “How do I keep harvesting what I’m doing now, and how do I keep sweating my asset?”,’ Sham explains.
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This is where BBBEE currently falls short. Instead of encouraging a tick-box approach and compliance to a disconnected grading system, what we really need is intrinsic change.”
‘By switching the dialogue to, “how do we create future value?”, you have more chance of creating a sustainable future. Not only are you harvesting, but you’re also creating employees with skills and knowledge needed for creating products and services for the future. It’s win, win, win all the way.’
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BUSINESS INTEGRATION
This is where BBBEE currently falls short. Instead of encouraging a tick-box approach and compliance to a disconnected grading system, what we really need is intrinsic change.
So how do you do this? If you don’t know what value is, ask your stakeholders what value means to them. ‘Once you have the answer, take a long, hard look at your organisation and ask if you’re adding value. Then work to understand what the drivers of those values are, and how you’re uniquely placed to deliver them. Embed delivering value in everything you do so that you also account for the dynamic nature of your business. Finally, reward everyone in the organisation for delivering that value so that everyone is winning.’ Sham notes that to add value for customers you need to understand their environments, determine what value means for them, and identify opportunities to add this value. You also need to build authentic relationships with your customers and deliver exceptional products and services. For employees, the driver of value is what Sham calls the Entrepreneurial Plan. ‘I believe that everyone is an entrepreneur. Otherwise, what chance does a company have if personnel have an employee mindset – “I’ll get my salary anyway”? This isn’t charity work but you do need to make sure your people can be entrepreneurial within your organisation. At the heart of entrepreneurs is seeing a demand and fulfilling that demand. Value is the same thing.’ He adds: ‘I want to understand, empower and unlock value for my employees. In turn, I’m looking for equal measures of IQ (skills and knowledge), EQ (emotional resilience to handle the environment), and WEQ (the ability to collaborate with others and increase collaboration in a team). Our personnel are expected to add value to themselves.’
Working with the multiplier effect Uncovering employee value per person is a process, and the output is an Entrepreneurial Plan – a driver of the organisation’s value. ‘In our company, mentors are assigned to each employee to discover what the person is really passionate about,’ Sham explains. ‘You’re looking at the entire person and what’s of value to that person.’ Once you’ve created a new mindset for your employees, you can implement performance measurement structures to support the understanding of what’s of value to your customer. Then, you’re able to take the knowledge of your customers – generated by employees – and combine that with the knowledge of your employee and what his/her passions are, to find the overlap. The overlap is the goal in CVC – it’s where everything connects and where the Entrepreneurial Plan focuses on increasing the person’s ability to add value to all stakeholders.
‘Sadly, managers and business owners often don’t want to invest in training because it costs money. In many organisations it’s about sweating the people – use their skills, offer the bare minimum in training, and find someone else when there’s a skills shortage. However, with the CVC model, employers hold their personnel accountable to match their skills to the demand,’ Sham enthuses. ‘The beauty here is because you’re doing all this in the overlap, there’s the multiplier effect – for the customer, for the company, and for the employee. If everyone in the value chain connects in the way they do things, then there’s a multiplier on each side of the process. Imagine the change you can make then!’
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If everyone in the value chain connects in the way they do things, then there’s a multiplier on each side of the process. Imagine the change you can make then!’
CVC beyond the boardroom ‘People need to understand that they won’t lose anything from doing this – rather, they can gain more for longer, and so will everyone else. It’s all about values and taking the road less travelled in a game that’s rigged for greed.’ We’re entering an Age of Transcendence where people are searching for higher meaning in their lives. ‘It’s not about corporate social responsibility. It’s about building companies that can sustain success. It’s about how to earn the powerful connection and engagement that enables truly breathtaking performance. It’s about aligning stakeholders’ interests, not just juggling them. It’s about building companies that leave the world a better place,’ Sham concludes. n
Ed: Sham is so passionate about this need for a paradigm shift that he’s offering his time, free of charge, to assist any business to take the first step towards Connected Value Creation. If you’re interested in getting the dialogue started, contact Sham privately on +27 079 658 7072 or sham.moodliar@gmail.com.
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CORPORATE GOVERNANCE
Executive pay must be linked to value creation The Institute of Directors in Southern Africa (IoDSA)’s Remuneration Committee Forum’s fifth position paper, Value Creation And Executive Pay, highlights practical measures that boards should take to link executive pay with the value they create for the company and all its stakeholders. ‘Executive pay is one the most visible and criticised aspects of corporate governance,’ says Ray Harraway, Director: Remuneration Services at EY and Chair of the Remuneration Committee Forum. ‘I don’t think anybody really objects to high executive pay as long as it is directly linked to the value that executives create for the company and its stakeholders. However, getting the link between pay and performance right is extremely difficult.’
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At the heart of this problem is the difficulty in understanding value creation. Before anything sensible can be said about executive remuneration, boards and their remuneration committees have to understand what, for the organisation, constitutes value – and how the company creates value. Once that is understood, the remuneration committee can begin to establish what the desired outcomes are and what drivers are important in achieving them.
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CORPORATE GOVERNANCE
A major stumbling block is that, according to 2013 research by McKinsey, only 34% of directors surveyed agreed that the boards they served on fully understand their companies’ strategies. This understanding is a prerequisite for considering what value creation looks like and, ultimately, how executives should be incentivised. ‘Over emphasis on outcomes at the expense of drivers is one of the common shortfalls of executive incentive schemes,’ Harraway says. Outcomes may take years to achieve, so they are an inadequate measure of executive performance over the short term, whereas drivers – those actions that lead to the desired outcome – can be better indicators of progress in the short term. To be effective, incentive schemes need to be multifaceted. Both outcomes and drivers should play a role in the design of the schemes, as should a balance of short-term financial performance and long-term sustainability. For example, while a rise in the annual share price is obviously important, it should not be at the cost of investment in R&D and training, which are vital to the company’s long-term sustainability. And profitability cannot be the sole financial measure used – the return on capital has to form part of the equation when assessing executive performance and how it contributes to value creation. Parmi Natesan, Executive Director at the IoDSA and a member of the King IV drafting team, adds that one of the fundamental shifts in King IV is to make the performance/ value creation aspect of governance more explicit. ‘Setting remuneration levels is never going to be an easy exercise, nor will it ever be a simple matching of actions and results. The remuneration committee will always need a certain amount of business acumen and discretion. Nonetheless, if the value-creation levers are well understood, the committee will be better placed to incentivise the right kind of executive behaviour,’ Harraway adds. ‘For instance, if there is a conflict between actions that might result in lower profits in the short term but are likely to drive long-term value, the incentives should default in favour of the latter.’ The paper, Executive Pay and Value Creation Pay, can be downloaded at http://bit.ly/29jnAG6. n
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Photo credit: IODSA
Ray Harraway, Chair of the Remuneration Committee Forum at the Institute of Directors in Southern Africa.
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CORPORATE GOVERNANCE: ADVERTORIAL
A global leader in corporate governance The dangers of mindless compliance and embracing corporate governance through compliance mechanisms and tick-boxes. ‘For many years, South Africa has been ahead of the curve in terms of corporate governance yet, in practice it reminds me of a well-known Monty Python movie,’ says to Daniel Malan, Head of the Centre for Corporate Governance in Africa (CCGA) at the University of Stellenbosch Business School (USB). ‘There is a sense that the country is perhaps better at setting excellent standards while not always living up to them but there is no doubt that the country is acknowledged as a global leader,’ admits Dr Malan. This position is likely to be further entrenched in November with the launch of the fourth King Report
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on Corporate Governance for South Africa (King IV). It is expected that good governance will once again be positioned as something that is integral to business success, as opposed to a compliance issue. ‘In addition, the ethical underpinning of the governance concept will be maintained and the applicability of governance for organisations of all types and sizes will be emphasised,’ notes Dr Malan. He also points to the inherent contradiction posed by the existence of governance standards such as the King codes. On one hand the code warns about the dangers of mindless compliance while on the other many companies embrace the code through compliance mechanisms and tick-boxes. ‘What is required is consistent internal organisational rewards and behaviours, not external regulation,’ comments Bob Garratt, Chairman of the CCGA. This is part of the philosophy of the Africa Directors Programme of the USB and INSEAD Corporate Governance Initiative. The practice of corporate governance in South Africa reminds Dr Malan of a scene in Monty Python’s Life of Brian: Brian tells the crowd that they are all individuals and different. They respond enthusiastically but as soon as someone says, ‘I’m not’, he is hushed by the crowd!. n
Centre for Corporate Governance in Africa University of Stellenbosch Business School T 27 021 918 4242 W www.usb.ac.za
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ENTREPRENEURS
Scaling up your business: When is it the right time to expand? The urge to convert and scale up a small business to a medium to large enterprise is one of the most common goals among business owners. However, contrary to popular belief, scaling up a business is not just a goal for most entrepreneurs but also a necessary step to running a business successfully.
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ENTREPRENEURS
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Once a business has grown to a certain size, the owner must consciously choose to scale up rather than simply reacting to a growing market share.”
mind makes internal and external changes less distracting from the broader business goals,’ he adds. Botes provides four key aspects for business owners to keep in mind before committing to an expansion plan: 1. S et goals: Business owners should create a list that details why they have made the decision to scale up their business. These should also be linked to the business’ goals, with at least one overall long-term goal (achievable in 15 to 25 years), as well as shortterm goals (achievable in 3 to 5 years) that will serve as tangible measurables for the long-term goal. 2. Have an implementation plan: This plan should list actions that must be taken with responsible people allocated to each action. Empowering the team of staff to manage their own tasks and responsibility is vital, and business owners should take heed to equip staff to effectively work toward one collective goal. 3. Analyse the finances: Before embarking on an expansion journey, entrepreneurs are advised to increase their financial reserves. Each business’ cash conversion cycle should provide a good indication of how long an investment takes to convert into a return – the shorter this timeframe the better. 4. Communicate: One of the most important aspects during an upscaling journey is to communicate with staff throughout the process. Business owners should keep the whole team informed of the vision, strategy and steps of the process. This will ensure that all parties feel involved and are encouraged to work towards achieving this one common goal. n
Christo Botes, Executive Director, Business Partners Limited
Photo credit: Business Partners Limited
According to Christo Botes, spokesperson for the 2016 Entrepreneur of the Year® competition sponsored by Sanlam and Business/Partners, many entrepreneurs incorrectly believe that their business will grow organically and that the necessary resources can simply be added to match current demand. He explains that once a business has grown to a certain size, the owner must consciously choose to scale up rather than simply reacting to a growing market share. When facing this cross road, Botes explains that the entrepreneur should first consider the true reason for wanting to scale up before doing so. ‘Businesses often want to scale up to become self-sustainable. However, starting this process without the necessary preparation and research can be detrimental for a business as growing too fast can backfire. ‘Upscaling a business is a lengthy procedure that involves complex introspection at almost every level. Business owners should be cautioned against the temptation to grow too quickly, and should rather aim to grow sustainably to ensure that the business continues to be a viable operation. As part of this sustainable growth there should also be a good balance between the management of regular operations and the expansion.’ Apart from the various processes and measures that need to be put in place to grow a business, it is crucial that business owners also adapt their mind-set. ‘Small business owners need to stop thinking and acting like a small business and rather as a medium-size business. They should also be cognisant that forward planning and measures – from anticipated turnover and management structure, number of jobs that can potentially be created and improving business processes – will need to be addressed to achieve the business results needed to run and maintain a larger scale business. Planning for revenue growth is a good example of the necessary forward planning required as growing revenue by 10% is considerably easier with an annual revenue of R10 million compared to turnover of R30 million.’ Botes adds that entrepreneurs need to carefully assess their execution strategy. ‘While a brilliant product or service can increase competitiveness and grow market share and revenue, a clear and achievable execution strategy will ensure ongoing success. A business owner needs to deliver on his intent of taking the business from a small operation to a mid-sized business.’ Cash flow is another consideration. ‘The business owner must have a clear idea of cash flow and have accurate forecasts in place. With growth and expansion, larger volumes of money and transactions will need to be closely managed.’ However, most importantly is the need to return to the original vision of the business. ‘Having a clear vision in
Business Partners Limited is a specialist risk finance company for formal small and medium enterprises (SMEs) in South Africa, and selected African countries. The company actively supports entrepreneurial growth by providing financing, specialist sectoral knowledge and addedvalue services for viable small and medium businesses. For more information, visit www.businesspartners.co.za.
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ENVIRONMENT
Photo credit: REDISA
The future of recycling isn’t what you think Our dominant linear ‘take-make-consume-dispose’ economy is unsustainable. Dwindling natural resources and growing demand are inescapable. It is only a matter of time before certain resources are no longer available as virgin commodities. So, what is the difference between a circular economy and a recycling economy, and why should we care? Circular economy thinking moves away from waste: it looks at preventing the waste rather than managing it. The recycling economy on the other hand focusses on recycling waste so that it doesn’t end up in landfills, but is reliant on waste to survive. So which is the best approach to tackle the severe environmental and socio-economic issues we face, and drive much needed new industry development while ensuring that manufacturers’ bottom line goals are achieved? ‘In a recycling economy, little attention is paid to the manufacturing or design stage. However, as long as the recycling process is independent of the design stage, it
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cannot address the long-term challenge of incentivising manufacturers to change their processes. This would mean using less raw material, reducing energy use, and making products that have a reduced negative impact on the environment,’ says Stacey Davidson, Director at REDISA (Recycling and Economic Development Initiative of South Africa). The circular economy promotes a sustainable industry where product design is influenced to make environmental and economic sense for manufacturers. ‘The main difference between the circular economy and the recycling economy is that manufacturers are incentivised to change and develop better design
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ENVIRONMENT
processes. This is becoming a reality in South Africa through an approach that was lauded by the World Economic Forum in Davos in 2016 as a successful model,’ she adds.
as REDISA. Those products that obtain a poorer environmental rating will pay higher fees – thereby driving the shift to greater sustainability in the South African economy,’ Davidson maintains.
Integrated Waste Tyre Management Plan
Environmental insurance Manufacturers are happy to make products, consumers are happy to buy products, but the full monetary cost of a product is not being taken into account because it excludes the cost of remediation. At the end of a product’s life, there is no-one to take responsibility for it and it becomes waste that is dumped. ‘Consumers are inadvertently paying the price and subsidising manufacturers who are not forced to develop better processes to manage their products’ end-of-life and to reduce emissions and reliance on raw materials. We pay indirectly through air pollution, environmental degradation, landfills filling up and resultant health impacts. What we need is an insurance policy for the environment, one which ensures that those who create the end environmental problem pay to fix it and factor the cost into their cost of manufacture. The lower the environmental impact of a product, the less environmental ‘insurance’ the manufacturer will need to pay in the long term,’ she insists. ‘At REDISA we recognise the possibilities that lie in circular economies, specifically for all those willing to look at waste not as waste but as a commodity. Through its recycling processes, REDISA enables socio-economic transformation by generating jobs, empowering the informal sector and creating sustainable businesses, as well as protecting the environment,’ Davidson comments. ‘South Africa is the only country in the world that has made this a reality with 100% industry participation using the tyre industry as a proof of concept. Since 2013, the environment has been ‘insured’ against the negative impact of waste tyres.’ For more information, visit www.redisa.org.za. n
Photo credit: REDISA
It is estimated that there are 60-million waste tyres lying in stockpiles around the country, many of which are illegal and unsafe, or simply dumped in open fields. REDISA’s Waste Tyre Management Plan defines a unique approach to waste stream management that is a world first, developed in South Africa and making the local tyre industry a national and world leader in recycling. The REDISA Integrated Industry Waste Tyre Management Plan (IIWTMP) was approved by Environmental Affairs Minister, Edna Molewa, and published in the Government Gazette in November 2012. It supports and promotes tyre recycling, providing the collection and depot infrastructure required to collect waste tyres from across the country and deliver them to approved recyclers. ‘Tyre producers (manufacturers and importers) are charged a waste management fee on every kilogram of new tyre rubber produced. The funds collected are then applied to developing and supporting the collectors, storage depots, recyclers, and secondary industries that make products from recycled output,’ Davidson explains. REDISA is, and is required to remain, independent from the tyre industry and from the tyre recycling industry. This avoids conflicts of interest and allows REDISA to make decisions in the interests of the country as a whole rather than of specific industries or industry participants. ‘In South Africa through legislation and regulation, the tyre industry has ensured that tyres, severely damaging to the environment, do not become waste at the end of life. In line with promoting a circular economy, manufacturers will be incentivised to shift their product’s design to cradle-tocradle manufacturing techniques,’ Davidson points out. Another of REDISA’s current projects is the funding of a Product Testing Institute to be completed by 2017 that will provide an environmental rating system. The rating system will promote the development of tyres that, when considered over their entire lifetime from manufacture to end of life disposal or recycling, have minimal environmental impact. These tyres will of course be able to be recycled, but the focus goes far beyond only recycling. ‘A better product will obtain a better environmental rating from the Institute, and this in turn will mean that manufacturers pay a lower waste management fee to extended producer responsibility organisations such
Stacey Davidson, Director at REDISA
Stacey Davidson is a director at REDISA. She supports South African communities and the economic empowerment of the previously disadvantaged. She has volunteered at community based organisations such as NICRO, CAFDA and Triple Trust Organisation. During her 23-year career, and as a volunteer and political activist during the 1980s, she has developed a network of political and business associations that allow her to focus on her passion of socio-economic development through environmental remediation. Stacey’s current role enables her to pursue this passion, overseeing the roll-out of the development of the new tyre recycling industry, and to focus on developing entrepreneurs and SMMEs through the training, support and education required to develop a successful business.
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FINANCE
Choosing an accountant: proficiency over prestige By Faith Ngwenya, Technical Executive, South African Institute of Professional Accountants (SAIPA)
Choosing an accountant based on prestige rather than proficiency can sometimes have expensive and risky results. A common misconception is that the term ‘accountant’ encompasses a small – although significant – set of skills that deliver basic financial management. Another incorrect assumption is that areas of specialisation in the accountancy profession follow a superiority ranking, or the notion that some accountancy designations are better than others. There is no designation that is superior to another when it comes to accountancy. Rather, the value of the accounting service performed is not dependent on title or designation but on the relevance of knowledge and experience according to what the client or employer needs.
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To gain the most benefit from their accountancy service, organisations need to understand exactly what type of accountant is the right fit for them, specifically, and why. Many people find it surprising that there are a number of designations and regulatory bodies in the accountancy space. In South Africa, professional designations are formalised and regulated by the South Africa Qualification Authority (SAQA) through a stringent process. While some of the accountancy designations require only a university degree, many require additional studies and practical work, or articles, to be completed before the professional designation can be awarded.
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FINANCE
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To gain the most benefit from their accountancy service, organisations need to understand exactly what type of accountant is the right fit for them, specifically, and why.
Once a designation has been registered with SAQA, these marks of professional competency are regulated by specific professional bodies. These institutes take on the role of awarding professional competency recognition to people who have proven their competencies in their specialised areas of expertise. In addition, the institutes are then responsible for ensuring that professionals who use these designations adhere to a strict set of rules and professional conduct.
Saving businesses time and money While the title allocated to an accountant might sometimes allude to the type of function in which each designation is competent, a deeper understanding of the areas of specialisation can save businesses a lot of time and money. It is worth visiting the websites of each regulating body to discover whether the competencies and experiences of a relevant accountancy designation hold relevant value for a specific type of business. Accountants can perform numerous functions and issue reports in terms of the Companies Act, Close Corporations Act, micro lending industry regulations, Sectional Titles Act, Non-Profit Organisations Act, Income Tax Act, Schools Act, and various other Acts. From a business value point of view, an accountant can – dependent on a specific combination of knowledge and expertise – add value to the performance or compliance of any business in the following ways:
Creator of business value As a creator of business value, some accountants can drive strategy and design business models. In this role, an accountant needs to be capable of focused decisionmaking and have a clear understanding of financial statements and how they impact the business. In this area, the accountant might perform the role of CEO, strategic manager, business advisor/consultant, due diligence consultant, financial manager, or business analyst.
Enabler of business value In the space of acting as an enabler of business value, an accountant can become involved in financial decision making for the business – often the role is that of the company CFO, or an official of the treasury department. This role focuses on performance and assessment of cost and management requirements, playing the role of internal auditor and even systems analyst towards a deeper understanding of business process and performance. Accountants in this role are often the financial manager and/or general business manager as they understand the overall value of the business.
Preserver of business value As preserver of business value, an accountant becomes involved in functions such as interpretation and analysis of financial information, internal auditing, risk management and business rescue. It demands an understanding of the importance of compliance and the role it plays in perpetuating growth and a sustainable business. Here, an accountant may take on the role of business analyst, business risk manager, systems analyst and even financial manager. They are an advisor and a consultant, someone who can guide and support a business in its growth and development over the long term.
Reporter of business value Some accountants specialise in reporting the value of a business through an involvement in both financial and non-financial reporting. A great example is legislators, or practitioners preparing financial statements and independent reviews. They are aware of compliance, can plan ahead, forecast the financial future of a business, and hold a managerial role in the financial department.
An invaluable asset An accountant, regardless of specialised designation, has to provide a business with the support it needs to drive it forward, create employment and ignite growth. If they can create and enable value while managing risk and reporting, then they are an invaluable asset to any organisation. Finding the right accountant is more than the sum of their qualifications, it is a blend of training and insight that has the potential to support a business. A firm hand and a sound background will see any accountant become a trusted advisor and reliable partner in any enterprise. Choosing an accountant based on proficiency, rather than prestige, is the start of a valuable partnership. n
SAIPA, a Professional Accountancy Organisation boasting a membership of more than 10 000 members, is a full member of the International Federation of Accountants (IFAC) and the Pan African Federation of Accountants (PAFA). SAIPA qualifications are nationally recognised at Level Eight by the National Qualifications Framework (NQF) in terms of the South African Qualifications Authority (SAQA). It is one of the Professional Accountancy Organisations in South Africa that sets mandatory requirements for its members with regard to Continuing Professional Development (CPD). For more information, visit www.saipa.co.za.
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INSURANCE
Insurers critical in reviving SA’s economy The South African insurance sector needs a thriving economy in which to grow. Insurers need to work with government and business to revitalise our economy while ensuring that projects and organisational risks are adequately protected to provide a much-needed safety net.
risk management and insurance on major projects. Transparency and openness in this area is part and parcel of restoring investor confidence in our economy.’ A below investment grade sovereign rating must be avoided as it will significantly affect the insurance industry. The sovereign rating of South Africa affects the rating of insurance companies and this means that local insurers may not be able to place complex local or external insurance risks, such as engineering projects, if they have a sub-investment grade. ‘As it is, insurers in South Africa are already feeling the effect of a downgraded sovereign rating as global businesses and financiers often insist on an A+ rating. At times they do not even consider parental guarantees for international companies operating in South Africa, which results in local entities losing out to companies operating outside of the country,’ Maïdou concludes. n
Global Corporate & Specialty Africa CEO and President of the Insurance Institute of South Africa (IISA), Delphine Maïdou.
Photo credit: Allianz Global Corporate & Specialty
According to Global Corporate & Specialty (AGCS) Africa CEO and President of the Insurance Institute of South Africa (IISA), Delphine Maïdou: ‘Insurance companies operating in South Africa have a critical role to play in protecting the current and future publicprivate projects aimed at reviving the South African economy.’ She said this while addressing insurance professionals about what the industry needs to do to strengthen its role in understanding plans aimed at stimulating the country’s economy, so they can underwrite the risks adequately. Government’s increasing focus on investment in infrastructure, energy, transport and logistics, water and sanitation, land and agriculture, and telecommunications, to name a few, needs the insurance sector to know and understand the risks associated with each of the projects to ensure the effective management, control and reduction of risks – wherever and whenever these occur. ‘We believe that a collaborative approach – harnessing the combined inputs of all parties – offers the best response to risk challenges, and that the majority of losses can be avoided through diligent risk management and sound insurance solutions. Insurance companies operating in South Africa are well capitalised to support the economic and infrastructure development the country sorely needs. However, they must to be brought on board early by both government and businesses, and be relied upon to provide trusted risk management guidance and insurance coverage,’ she adds. ‘The South African economy is going through trying times and the country cannot afford below par
Allianz Global Corporate & Specialty (AGCS) is the Allianz Group’s dedicated carrier for corporate and specialty insurance business. AGCS provides insurance and risk consultancy across the whole spectrum of specialty, alternative risk transfer and corporate business: marine, aviation (including space), energy, engineering, entertainment, financial Lines (including D&O), liability, mid-corporate and property insurance (including international insurance programmes). Worldwide, AGCS operates in 29 countries with own units and in more than 160 countries through the Allianz Group network and partners. In 2015, it employed more than 5 000 people and provided insurance solutions to more than half of the Fortune Global 500 companies, writing a total of €8.1-billion gross premium worldwide annually. For more information, visit www.agcs.allianz.com.
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HUMAN RESOURCES
HIV/AIDS discrimination in the workplace By Ayanda Ngubo, a Partner in the Pro Bono Practice at Webber Wentzel
Where employers have HIV positive employees on their staff, can they use competence as a measure to dismiss an employee on that basis alone? No. Yet, being HIV positive has become a dismissible offence according to the modern day employer. The stigma is far-reaching and the workplace is yet another arena where HIV positive employees are victimised. People living with HIV constitute a minority. Society responds to their plight with intense prejudice. They are subjected to systemic disadvantage and discrimination. They are stigmatised and marginalised. They are denied employment because of their HIV positive status without regard to their ability to perform the duties of the position from which they have been excluded. Society’s response to them forces many not to reveal their HIV status for fear of prejudice. This in turn deprives them of the help they would otherwise receive. Notwithstanding the availability of compelling medical evidence as to how this disease is transmitted, the prejudices and stereotypes against HIV positive people still persist. The impact of discrimination on HIV positive people is devastating, especially when it occurs in the context of employment. It denies them the right to earn a living. For this reason, they enjoy special protection in our law. Employees often disclose their status to the employer out of fear of losing their job, or when faced with an employer’s questions about why they need a day off each month to collect medication. On the other hand, they disclose their status in an attempt to retain their jobs. Employees are then faced with fierce discrimination, marginalisation, prejudice and ultimate dismissal in the workplace.
Discrimination and the law Discrimination occurs when a person is treated differently from others because of prejudice. The Constitutional Court has mentioned that the basis for the prohibition of unfair discrimination is the recognition that all human beings regardless of their position in society have equal dignity. This dignity is impaired when a person is unfairly discriminated against. Prior to 1998, employees relied on the provisions of Section 187(1)(f) of the Labour Relations Act 66 of 1995 (LRA) that provided various grounds on which a dismissal
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could be deemed unfair. Employees also relied on Section 9(3) of the Constitution, which sets out grounds upon which a person may not be discriminated against. The problem was that HIV/AIDS in both the above pieces of legislation was not a listed ground. This necessitated the introduction of laws to prevent and/or address discrimination against people living with HIV in all areas of life including the workplace. The Employment Equity Act (the EEA) No 55 of 1998 was among some of the pieces of legislation introduced to deal with discrimination against HIV infected employees. Section 6(1) of the EEA provides that no person may unfairly discriminate directly or indirectly against an employee, in any employment policy or practice on one or more grounds including amongst others a person’s HIV status. Section 7 of the EEA prohibits medical testing of an employee unless it is permitted by legislation and if it is justifiable in light of medical facts, employment conditions, social policy and the fair distribution of employee benefits or the inherent requirements of the job. This section provides further that testing of an employee to determine their HIV status is prohibited unless such testing is determined justifiable by the Labour Court in accordance with these criteria. The definition of testing in the EEA is quite broad. Often employers design questionnaires that are couched in ambiguous terms to try and ascertain the medical condition of employees. The above section renders these questionnaires unlawful unless an employer obtains the permission of the Labour Court to do this. In the event that the court agrees to this, it may direct that pre or post counselling be offered to employees and that the employers keep the information obtained confidential.
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Discrimination occurs when a person is treated differently from others because of prejudice.”
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HUMAN RESOURCES
Nonetheless, employers are sometimes faced with a situation where an employee cannot continue doing the same duties because of illness. The Code of Good Practice on Key Aspects of HIV/AIDS, which was introduced in December 2000, as well as the revised Code provides that employers have to accommodate employees as far as possible. This includes restructuring positions where they will be expected to do less strenuous duties, as opposed to merely dismissing them or medically boarding the employees. If an employee cannot perform his/her duties an employer is entitled to institute an incapacity inquiry, which can be the basis for dismissing an employee. Steps to take after an unfair dismissal based on HIV/AIDS: • Refer the matter to the Commission for Conciliation, Mediation and Arbitration (CCMA) within 30 days. • If the matter is not resolved at the CCMA you should refer the matter to the Labour Court within 90 days from the date of conciliation.
• A n employee who is unfairly dismissed on the grounds of HIV is eligible to apply for damages and/or reinstatement under both Section 187(1)(f) of the LRA and the EEA. • Employees dismissed on the grounds of HIV who have no resort to legal assistance can seek free legal advice at the HIV and TB helpline operated by Legal Aid SA on 0800 110 110. I would recommend that employees familiarise themselves with the above legislation to ensure that their rights are not infringed upon and, in the event that their rights are infringed, to urgently contact Legal Aid SA to receive legal advice. Employees should know what steps to take when their rights are infringed upon. Similarly, employers and trade unions should develop appropriate strategies and policies to understand, assess and respond to the impact of HIV/AIDS in their particular workplace and sector. n
Webber Wentzel is a leading South African law firm providing clients with innovative solutions to their most complex legal and tax issues. With a staff complement of approximately 800 people, including over 400 lawyers, and offices in Johannesburg and Cape Town, Webber Wentzel’s market-leading position is reinforced by a number of accolades and achievements. The firm’s collaborative alliance with Linklaters provides clients with market-leading support across sub-Saharan Africa and beyond through Linklaters’ English Law, New York Law, Anglophone, Francophone and Lusophone capability. Webber Wentzel’s offering is enhanced by its network of best friend law firms across sub-Saharan Africa, and its associate membership of the Africa Legal Network, an integrated network of 13 African law firms. For more information, visit www.webberwentzel.com.
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HUMAN RESOURCES
Helping staff to retire more comfortably Tax laws around retirement funds now enable most employees who are members of a company retirement fund to make bigger tax deductible contributions into their fund every month, which will ultimately boost their retirement savings. Romeo Msipha, Senior Consultant at Old Mutual Corporate Consultants, says that employers should make it as easy as possible for employees to make bigger tax deductible contributions to their funds every month to maximise their retirement outcomes. In March 2016, the tax laws around retirement fund contributions changed significantly, with the main changes impacting how much employees can contribute and deduct from their taxable income. ‘Employers’ contributions to employees’ retirement funds will now be taxed as a fringe benefit,’ explains Msipha. ‘However, employee members do not need to be overly concerned about this because these employer contributions are now viewed by the taxman as employee contributions for the purposes of claiming deductions. Employees’ contributions are now tax deductible up to a
maximum of 27.5% of the greater of taxable income or remuneration, with a maximum fund contribution of R350 000.’ For most employee members of pension and provident funds, the fringe benefit inclusion in respect of employer contributions is more than off-set by the newly increased deductions claimable by these members. Msipha shares an example where the employer contributes 10% and the employee member contributes 7.5% of pensionable salary. However, because this amount is now seen to have been contributed by the employee member, and the maximum contribution deduction from March 1, 2016 is 27.5%, the member is able to claim the full 17.5% (10% employer contribution + 7.5% employee member contribution) as a deduction. This offsets the fringe benefit inclusion. In fact, in this example, assuming the member
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HUMAN RESOURCES
makes no other contributions to any other retirement funds, the member may contribute a further 10% to the pension fund and still enjoy a deduction (17.5% + 10% = the maximum yearly limit of 27.5%). ‘Making it easy for an employee to contribute more towards their retirement savings is one of the best ways an employer can help their employees save more towards their retirement in the most tax efficient manner.’ To achieve maximum retirement outcomes, employers need to offer employees the opportunity to change the amount of money that they can contribute towards their retirement funding. Here are six simple steps: Step 1: Assess current minimum contribution Assess the current compulsory minimum contribution and look at the total contribution of both the employee and employer. Consider whether this minimum contribution will realistically ensure the majority of employees will be saving enough to enjoy a comfortable retirement. Fund members should invest a minimum of 15% of their monthly income over their working lifetime from the age of 25. However, this amount will vary depending on each person’s personal circumstances and the age at which they started saving for retirement. Step 2: Define a flexible contribution scale that works for employers and employees Choose a range of contributions that allows employees the flexibility to contribute more to their fund without it becoming an administrative challenge for the HR department. To do this, choose manageable contribution increments (for example 2.5%) to prevent too wide a spread of options. The maximum total contribution should be more than the tax deductible amount of 27.5% of income because members close to retirement may find this attractive as they will be able to deduct any undeducted amounts when they access their retirement benefits. In this regard, these undeducted contributions will firstly be applied to reduce the taxable amount of any lump sum accessed and thereafter be applied to any compulsory annuity income received by the member. Step 3: Negotiate and update employment contracts Have conversations with your employees that centre on the value of the new, flexible contribution structure and the way it allows them to take advantage of the new
increased tax deductions to contribute more and grow their retirement savings. If the minimum contribution rate is going to be increased, employers should be sensitive to the possible impact on the take-home pay of some employees. If the previous contributions were part of employment contracts, these will need to be amended. Also, the new higher contributions rates may only be implemented for new employees and are voluntary for existing employees to ensure smooth implementation. Step 4: Find out if changes need to be made to the fund rules Employers need to confirm if the Master Rules of their retirement fund make provision for additional voluntary contributions. This will remove the need to make any changes to their Master Rules or Special Rules. Step 5: Partner with employees to help them make the right choices There are a few ways businesses can help make this process easier for employees: • Give employees easy-to-understand guidelines on the contribution rates that would lead to a comfortable retirement. This could include face-to-face workshops and presentations so members understand the impact of contributing more. • Use ‘triggers’ to prompt them to take the right actions. This could involve reminders about the value of increasing their contributions with their benefit statements or when they get their increases or bonuses. • Make sure every employee fully understands the default contribution rate and that they will be paying that minimum if they don’t specifically choose another rate. • Make it easy for employees to communicate with HR or payroll about how much they want to contribute. Also ensure that they know when they can change this rate and the frequency. • Give employees easy access to financial advice, through workplace advisers or consultants. Step 6: Adjust the contributions on monthly payroll submission Employers will need to adjust their monthly payroll file submission to their pension or provident fund administrator so that this includes any additional contributions chosen by the employees. n
Old Mutual Corporate is a leading South African provider of retirement fund solutions through their award winning umbrella platform, pre- and post-retirement investments, group risk solutions, financial education, and balance sheet solutions, including a holistic Employee Benefit consulting capability through Old Mutual Corporate Consultants. These are provided to a broad range of public and private organisations and institutions from SMEs to large Corporates. For more information, visit www.oldmutual.co.za/corporate.
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SABI Vol 4 Issue.indd 40
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HEALTH
Encouraging a healthier lifestyle Established in 1980 as a non-governmental, non-profit organisation, the Heart and Stroke Foundation South Africa (HSFSA) plays a leading role in the fight against preventable heart disease and stroke. The HSFSA aims to reduce cardiovascular disease (CVD) and ultimately the burden on South Africa’s health care system by empowering people to adopt healthy lifestyles and make healthy choices, and to seek appropriate care and encourage prevention. HSFSA’s CEO is Dr Vash Mungal-Singh, a zealous advocate for health. He also serves as vice-president of the World Heart Federation and sits on the NonCommunicable Disease (NCD) Global Coordinating Mechanism working committee of the World Health Organisation (WHO). ‘We continually build and reinforce our national and international relationships to rally global support for the fight against NCD’s,’ says Dr Mungal-Singh. ‘As an established support base for CVD sufferers and the general public, we offer support through awareness, education and screening. Our offerings include established and developing community programmes to promote healthy environments and ultimately healthier lifestyles. We focus on all the major means of support via groups, screening tests, electronic newsletters, and our health line that allows the public to access information directly from our registered dieticians. We also provide those who have suffered a CVD episode or event an opportunity to share their story on our website.’
Be Smart@Heart by getting tested During September, Heart Awareness Month, the HSFSA wants all South Africans to be Smart@Heart by making a
donation toward saving the lives of children, and getting tested to find out their risk. Celebrated annually, Heart Awareness Month is dedicated to raising awareness about heart disease in South Africa, highlighting the importance of a healthy lifestyle and appropriate treatment. This year, funds raised will go towards the purchase of pulse oximeters (a machine that measures the oxygen in a baby’s blood) to help in the early detection of congenital heart disease (CHD) in babies. The World Health Organisation (WHO) recommends that ‘pulse oximeters should be in every health facility worldwide’. In countries such as America this is standard practice. However, many hospitals and health facilities in South Africa don’t have the pulse oximeters, the staff training or policies in place to make this happen.
Knowing is empowering Start by getting screened for free at your nearest Dischem pharmacy during the month of September to find out your blood pressure, blood sugar and weight status, as well as if you are at risk. Don’t fall prey to those famous last words: ‘I feel fine. It won’t happen to me.’ Getting tested can be the best few minutes spent investing in yourself. To donate, SMS ‘SMART’ to 38502 at a cost of R10 per SMS. For more information, call 0860 1 HEART (43278) or visit www.heartfoundation.co.za. n
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INFRASTRUCTURE DEVELOPMENT
ICC Platform and basement excavation.
The important role of SMEs in public/private partnerships Slower capital inflows moderating growth in developing economies means fewer funds for infrastructure development. However, small and medium enterprises can contribute to infrastructure development by forming private/public partnerships in the construction industry. During current market volatility as experienced by developing economies, private/public partnerships in construction enable governments to deliver infrastructure that will assist in growing their economies. Frans Pienaar, Chairman of Inyatsi Construction, explains the role small and medium enterprises (SMEs) can fulfil in public/private partnerships in the construction industry. SMEs provide a means of entry into the industry for start-ups and can be a major driver to develop and grow key skills. Owner-operated businesses are much more efficient than more mature businesses where overhead creep removes the competitive pricing edge. SMEs usually operate with very low overhead costs. The reputation of a business is important – a core (intangible) asset that creates barriers to competitive threats. Reputation can have positive and negative effects on the overall market value of a business and its returns.
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It goes without saying that reputation is of cardinal importance in public/private partnerships. Public/private partnerships can also alleviate the market volatility experienced by developing economies. There is a trend in developing countries to incorporate the expertise of the private sector into infrastructure projects traditionally carried out as public projects. This is done based on a proper demarcation of roles and risks between the public and private sectors.
Incentivised skills Private business adds incentivised skills to a project. Government employees often do not benefit directly from their inputs, but employees of private entities directly benefit from their contribution to success. This can be done in the public sector, as seen in the massive success of the SA Revenue Service over the last decade, which can be linked to incentives that
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INFRASTRUCTURE DEVELOPMENT
Investing in infrastructure
directly benefitted employees. However, it is very difficult for government to incentivise employees. This is where private enterprises can contribute an edge to a public/ private partnership project. The projects are usually quite large and long-term, creating stability and predictability in the business landscape, removing the hit-and-run aspect of outsourced business and bringing a longer horizon. The construction of infrastructure can be an enabler for SMEs to invest in African countries because the entry level of skills required in infrastructure projects usually provides easy entry for start-ups. In addition, SMEs can quickly mobilise large numbers and spread the wealth and opportunity much wider than organised business.
Public sector infrastructure spending is normally a good indicator of the construction industry’s performance. Governments are the biggest investors in infrastructure and government spending enables private enterprise to unlock business potential. It is up to government to create the environment conducive to business to ensure investment in long-term business. Private sector funding now accounts for a large portion of the funds entering developing countries from developed countries. The activities of the private sector in developing countries have been expanding and are focusing on new areas, such as public/private infrastructure projects, base of the pyramid businesses and corporate social responsibility activities. These efforts have contributed to creating employment opportunities and human resource development, as well as improving technology. With a global failure rate for new businesses at 50% and a rate of failure of eight out of 10 SMEs within the first three years, these enterprises struggle to stay afloat against corporates. By giving SMEs access to public procurement contracts, the set failure rate can be improved. Public/private partnerships and turnkey-type projects can ensure that risk is managed by the parties best suited to do so. The New African Contract could be replicated for these partnerships to involve a team of professionals for technical design, technical advisory and management. Relevant authorities in South Africa should consider mobilising knowledge, skills and capacity in the private sector. Government entities should look to the private sector to implement projects on a government-funded turnkey basis, while the New African Contract can assist the industry in overcoming challenges, such a lack of capacity in government and professional structures tasked to implement infrastructure projects, the substandard quality of products, a drop in infrastructure development and the monopoly in the market that follows. n
Large enterprises often employ personnel and teach them skills. However, at the end of the project this person is unemployed again, virtually in the same position as before. On the other hand, when a SME provides this opportunity, the enterprise also learns the skill of tendering and procuring work for the future to create more potentially sustainable employment. SMEs also have the benefit of total cost to company for an employee that is less than the cost for the overhead structure of big enterprises, making it possible to offer the same product at a lower price.
Photo credit: Inyatsi Construction Group Holdings
Skills retention
Frans Pienaar, Chairman of Inyatsi Construction Group Holdings.
Inyatsi Construction Ltd was first registered in Swaziland in 1982, and Inyatsi Construction Group Holdings (ICGH) was formed in 2007 as the holding company of Inyatsi and its regional subsidiaries. The company has operations in Swaziland, South Africa, Zambia and Mozambique, as well as registered companies in Botswana and Namibia. Inyatsi and all its subsidiaries are ISO 9001:2008 certified and completed the NOSA 5 Star Audit and has been awarded four Platinum Stars. For more information, visit www.inyatsi.net.
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SABI Vol 4 Issue.indd 45
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SECURITY: ADVERTORIAL
Expert risk management services and solutions Secur provides risk management services and solutions, including technical consulting for South African organisations. Sucur’s service offerings are designed to strengthen an organisation’s security and compliance posture in cyber space. Not only do we offer services, we also distribute and resell best of breed security solutions. Our vendors include Cybereason, Datalocker, Iron Key, Intellinx, Checkpoint, Flir, Rapid7, Acunetix, Barracuda, Palo Alto, Airwatch, Drivelock, Cellopoint, Morphisec, Cellebrite, Checkmarx, Silent Circle, Immunity, Tera Mind, SecurEnvoy, Magnet Forensics, Elcomsoft, Passmark, Symantec, Panoscan, and many more. Additionally, our EC Council-certified ethical hackers and forensic examiners are some of the best in the industry. Computer forensics We provide affordable and professional computer forensics services to individuals, companies and law enforcement agencies worldwide. We can perform our work at your location or in our labs. We are flexible, friendly and ensure the job gets done and no shortcuts are taken. Penetration testing Secur evaluates the security of a computer system or network by simulating an attack from a malicious source (hacker). The process involves an active analysis of the system from the position of a potential attacker for any vulnerability that could result from improper system configuration, outdated hardware or software flaws, or operational weaknesses in process or technical counter measures. POPI consulting Secur offers a turn-key POPI compliance service. Our experts assist small and large organisations get around the complex nature of POPI compliance. They also assist your organisation with composing a sound approach towards POPI compliance. Employee background screening As part of its risk management services, Secur offers due diligence investigation services. These services assist our clients to make more informed decisions when hiring new employees. Due-diligence, when provided to a human resources department, allows it to vet new hires. Our reports include educational qualifications, SAPS criminal record history, past employment, driver’s license verification, work permits, ID verification, credit checks, address verification, bank accounts, lifestyle probes, and integrity and experience reports, among others.
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Products offered • Bomb and chemical detection solutions • Data destruction (including classified information) • Full disc encryption (DriveLock, Symantec, Checkpoint, and many more) • Secure communication (Blackphone 2, UnaPhone and custom encrypted communication) • Morphisec APT protection (100% protection against hackers) • Encrypted storage (FIPS 140-2 Level 3 Certified, suitable for storing classified information) • Dedrone (drone detection solutions) • Perimeter security solutions (intelligent fencing) • Military (rugged laptops, radars and storage devices) n
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SABI Vol 4 Issue.indd 46
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INVESTMENT
Man vs machine: Managing your investment risk for the future By Roland Rousseau, Head of Barclays Risk Strategy Group
Technological advances are disrupting business models in various sectors around the world, and the investment industry is no exception. At the annual Eastern and Southern Africa Pension Fund Conference held in Botswana earlier this year, the role of technology in assessing and managing risk was hotly debated. The investment industry has reached a new era that can be compared to the Information Age when technology bolsters human processing power, providing more insight
into investment risks than previously possible. In this new era, successful fund managers will be those who harness technology to cut costs and manage investors’ multidimensional risks. They will be guided by analytical tools rather than by subjective opinion. In the past, markets were deemed to be rational and efficient. Today, research increasingly highlights that
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INVESTMENT
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The fund managers of the future will be rewarded for aligning their interests with your interests.”
markets are biased by human irrationality and that major crashes are much more likely to occur than rational market expectations assume. As a consequence – given the 1998 Emerging Market crisis, the 2000 Tech bubble, and the 2008 Financial Crisis – the latest research now shows that the investment industry has not always managed clients’ risk effectively. Both active and passive investing focused on returns and costs, not on risk.
Traditional tracking The latest findings demonstrate that by trying to beat benchmarks, traditional active management has, in many cases, resulted in higher risk, inflated costs and what economists call principal-agent conflicts (ie fund managers only participate in gains, not in investors’ downside). Similarly, research now also shows that traditional passive tracking of the market has indeed lowered fees for investors but certainly has not effectively reduced risk from all their portfolios. Equity markets are even more highly concentrated with nearly 50% of the total value contained in five to ten stocks in South Africa. Tracking the market index is far from buying a well-diversified portfolio.
Data-savvy technology The investment management industry is finally entering a period where risk management is recognised as the central purpose of delivering value to clients.
Markets are driven much more by non-financial and non-economic data than previously thought. For example, some data-savvy technologists can already predict earnings growth for a large listed company, long before the company selling the goods even knows. By monitoring the searches from search engines such as Google, and tracking online sales from vendors such as Amazon, we can get a detailed head start about which products are selling the fastest right now and which companies will triumph over their competitors, long before the earnings reports are audited and made public.
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In this new era, successful fund managers will be those who harness technology to cut costs and manage investors’ multi-dimensional risks.”
Fund managers of the future Given the above considerations, who today is managing your investment risk in your best interest? We have demonstrated that neither traditional active management, nor standard passive market tracking is adept at doing what end-investors really, really need. It was clear during the conference in Botswana that the investment industry is now coming to terms with this changing landscape. Those who will survive this shift will leverage a very different approach than in the past. The fund managers of the future will not try to outperform their peers, nor maximise your returns by delivering excess risk in a zero-sum game. Instead, they will be rewarded for aligning their interests with your interests. Their skill will be demonstrated not by outperforming arbitrary benchmarks, but by leveraging technology to lower investment costs and removing unnecessary risk from your portfolio, growing your wealth more efficiently. n
Roland Rousseau is the Head of Barclays Risk Strategy Group. He presented on the Four Forces Disrupting Investment Management at the Eastern and Southern Africa Pension Fund Conference.
Photo credit: Barclays Risk Strategy Group
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The future of effective risk management lies with those who invest in analytical tools to analyse big data and monitor changes to risk appetite.”
The future of effective risk management lies with those who invest in analytical tools to analyse big data and monitor changes to risk appetite. We expect major disruption for existing fund management businesses that still rely on traditional valuation models and subjective decision-making, using stale financial or economic data. The Nobel Prize winner, Eugene Fama, famously demonstrated that more than 80% of excess portfolio returns are due to excess risks and not fund manager skill. In fact, it is not difficult to show that good risk management, coupled with lower returns (eg minimising exposure to crises), is better for long-term wealth generation than trying to do the impossible by constantly attempting to beat benchmarks through higher risk.
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INVESTMENT
Reason for optimism: Further rand strength likely Maarten Ackerman, Citadel Advisory Partner and Investment Strategist, unpacks the election impact for investors. In a set of results that has delivered a very strong message to the ruling party, the 2016 local government elections saw the ANC’s worst showing ever in both national and municipal elections. Although the party has still come in with a majority, at under 54% it is substantially below expectations of around 58% and puts it in the weakest position we have seen.
In addition, the ANC failed to secure a majority in five of the country’s eight metros, a significant loss that includes the economic powerhouse of Gauteng, the seat of parliament in Cape Town, and the hotly contested Nelson Mandela Bay. Quite clearly, people on the ground are unhappy with the status quo and have voted to show this. It has been suggested that this was more of an antiZuma vote than an anti-ANC vote, a demonstration of
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INVESTMENT
dissatisfaction with party leadership rather than with the party itself. However, we will need to wait and see how the ANC will react to this possibility. Cyril Ramaphosa has already made moves to allay fears and has indicated that the party will ‘do its own analysis of its performance, listen to the people and self-correct’. This business-friendly election result has been welcomed by the investment community with the rand reaching R13.67/$ on August 5, 2016. Let me put this into context: bumper US employment figures were published on August 5 revealing an additional 255 000 jobs and boosting the US dollar. In spite of this, the rand rose against the dollar and was also stronger against the cross rates.
A few green shoots A strong rand should provide inflation relief, reducing the likelihood of further interest rate hikes this year. A further cut in the fuel price can be expected in September after the generous cut in August, which will provide the consumer with urgently needed relief while also boosting sentiment. While the South African economy is certainly weak, we can see that a few green shoots are beginning, which points to the possible bottoming of the current weak cycle. Since February, government finances have been improving and the fiscal deficit is moving in the right direction. Better mining and manufacturing figures have been posted and trade stats are also looking up. While this won’t propel us into a high-growth phase yet, the signs are certainly encouraging. Combine these factors with a business-friendly election result and the prospect of a sovereign credit rating downgrade in December starts to recede. The South African economy does remain fundamentally weak, and a downgrade at some stage remains on the table, but it is increasingly likely that we can stave this off in December. Different management in some of the municipalities, and far greater control in others where the ANC will be forced to enter into a coalition, is likely to find favour in the markets and we believe that there could be further rand strength for the balance of 2016.
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While the South African economy is certainly weak, we can see that a few green shoots are beginning, which points to the possible bottoming of the current weak cycle.”
entry point. Many foreign shares are trading at a discount to local counters and in many other global economies there are better growth prospects compared to South Africa. But investors will need to be nimble – we do not see this window being open forever as South Africa essentially requires a weaker currency to ensure global competitiveness. Cash should be used only to cover any short-term expenditure requirements, given that we envisage very modest or no interest rate hikes for the balance of 2016. Local bonds should experience some price strength as yields drift lower after a favourable election outcome as foreigners regain trust. Also, unlike many first world economies, SA bonds are offering handsome real yields enhancing their attractiveness for foreign investors. Local bond investors should use this opportunity to lock in profits. With confidence up in the wake of the 2016 local government election results and the possible beginnings of a bottoming in the economic cycle, the rand can enjoy further support creating some exciting investment opportunities towards year end. n
Any rand strength will provide investors with an excellent opportunity to diversify offshore. On a valuation basis, foreign equities currently offer better value relative to local equities and a stronger rand will support an attractive
Maarten Ackerman, Citadel Advisory Partner and Investment Strategist
Photo credit: Citadel
A need to be nimble
Citadel is a specialist wealth manager with over 20 years’ experience in providing bespoke solutions for high net worth individuals. Through character-rich engagement and building strong relationships based on mutual respect and trust, Citadel enables its clients to explore the true potential of their hard-earned money. The best fiduciary, risk and asset management expertise is used to strategise, implement and manage a financial roadmap for its clients and their families. Kindly note that this article does not constitute financial advice. All information and opinions provided are of a general nature and are not intended to address the circumstances of any individual. For more information, visit www.citadel.co.za.
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MANUFACTURING
Industry 4.0: The next step to leapfrogging African manufacturing into a competitive position? Results of a South African manufacturers’ survey revealed that the adoption level of smart technologies remains at a foundation stage in African manufacturing industries. However, as it accelerates, it holds the promise to reverse the dwindling contribution of manufacturing to the South African Gross Domestic Product (GDP) case – currently 12% compared to 25% in the 1960s. Subsequently, Deloitte has released a report called INDUSTRY 4.0 – Is Africa Ready for Digital Transformation? The report, focusing on manufacturing in Africa/South Africa, is based on a survey undertaken between October 2015 and January 2016, which involved interviews with leading role players in manufacturing, such as the CSIR-Meraka Institute, Department of Science and Technology, IDC (International Data Corporation) and Manufacturing Circle, as well as with executives from manufacturing and
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other companies such as CAD House, Ford, Hulamin, Nampak, Nissan and Toyota South Africa.
Collaboration at its core Karthi Pillay, Africa Manufacturing Industry Leader at Deloitte, explains that, at its core, Industry 4.0 is a coming together of a different layer of businesses, data, technologies and the recognition that your competition today may not be your closest rival but rather one from Silicon Valley. ‘It is about creating new ecosystems, working with partners in different sectors of the economy, combining research and development and universities with the public and private sectors in non-competitive ways of partnership to improve the ways in which products are manufactured,’ he points out. ‘A broader Industry 4.0 adoption is hindered by a general hesitance to significantly invest in new knowledge and technologies within government and industry as
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MANUFACTURING
the current economic environment forces South African manufacturers to save costs first and spend less on innovation. Although there are some global Industry 4.0 applications that are leveraged by global manufacturers operating in South Africa, not many local applications have been developed yet. More innovation still needs to happen first before widespread adoption will occur,’ the report states.
Investments in Industry 4.0 Pillay says that while ‘a general hesitance’ exists, his primary concern for local manufacturing is that South Africa is currently overly focused on issues, albeit important, that concern only the here-and-now. A focus on low-skill mass production is becoming obsolete in global terms and may see the country lose touch with developed economies within the medium term. ‘There have been some welcome investments in Industry 4.0 by the CSIR and government. However, a larger budget allocation would certainly aid its development and the country’s competitiveness. As a country, we need to have a future Industry 4.0 strategy and a here-and-now strategy running in parallel – but we cannot ignore the emergence and significance of Industry 4.0. People have to start being educated to have the right skills (a combination of analytics and engineering), because it will require a collective of business, government, universities and labour. It also requires policy implementation in vital areas such as protection of information, 3D printing, and cyber security,’ says insists. He adds that the first step lies in changing mindsets and it is to this end that the Deloitte report was published. ‘The pace of change can, and probably will, be quite phenomenal. One needs only to look at the impact of smart phones to see how innovation can change the face of society at almost breathless speed. The data already exists – it is now simply about using it more appropriately in manufacturing innovation.’
Key challenges for manufacturing The study sets out the key challenges the South African manufacturing industry faces in the fourth industrial revolution and points to opportunities for manufacturers to achieve a successful digital transformation toward Industry 4.0. Pillay explains that the implementation of advanced digital technologies in South African manufacturing is still in its foundation phase: ‘While growing usage of
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Industry 4.0 is a coming together of a different layer of businesses, data, technologies and the recognition that your competition today may not be your closest rival but rather one from Silicon Valley.”
advanced analytics exists within the automation and automotive sectors, the real opportunities of advanced analytics in other sectors are generally not yet being explored by manufacturers. Usage of robotics is mostly at an automated stage and not yet at a smart or advanced stage. There is also no widespread adoption of 3D printing yet, although awareness of the significance and the potential of this exponential technology is high.’ The report states that a majority of interviewees believe that Industry 4.0 will have a strong impact in the coming years on Africa/South Africa in general and especially the South African manufacturing industry. The current adoption and impact of Industry 4.0 in Africa/South Africa is still relatively low, compared to the rest of the world. ‘Manufacturing in South Africa remains a major player within the economy, despite struggling to make a bigger impact on the GDP. The question we have to ask ourselves is how do we complement our here-andnow emphasis with the necessary focus on the future as defined by Industry 4.0 or even 5.0, thereby enabling us to create a niche for South Africa within Africa and the global economy? If we fail to proactively select our place within the global manufacturing industry, we run the risk of continuing on this path of deindustrialisation.’ He adds: ‘To reverse the relative decline of manufacturing in South Africa will require a meeting of the right minds to define where manufacturing is going. South Africa is not short of capability within the private and public sectors, but it needs to become a collective effort.’ Pillay believes this can be achieved by following a threephase plan to address industry 4.0: ‘We need to find out what Industry 4.0 is, decide how South Africa fits into Industry 4.0, and we need to decide on South Africa’s niche and how to capture it. China’s shift in recent years from a manufacturing-intensive “made in China” economy to an innovation driven “designed in China” economy illustrates that emerging countries can also become early adopters of the industry 4.0 trend and increase their global competitiveness.’ n
Deloitte provides audit, consulting, financial advisory, risk management, tax and related services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries and territories, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. For more information, visit www.deloitte.com.
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RMI members have provided quality products and superior motoring services to the consumer for more than 100 years. The RMI provides effective consumer complaints facilitation between RMI-affiliated members and the motoring public with a quick turn-around time and a resolution success rate in excess of 95%. Quality and standards guaranteed – RMI members must adhere to strict minimum membership accreditation criteria and standards. Members also subscribe to a Code of Conduct, ensuring that consumers receive professional services and quality products.
www.facebook.com/retailmotorindustry Retail Motor Industry Organisation - RMI @AutomobilSA
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he RMI is a proactive, relevant, retail and associated motor industry organisation recognised as the leading voice in South Africa’s automotive aftermarket, serving the daily needs of its members and playing a key role in enabling motor traders to deliver top class service to motoring consumers. Here are the associations which fall under its umbrella‌
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Associational accreditation ensures on-going development and implementation of commercial value propositions specific to the association.
www.facebook.com/retailmotorindustry
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Retail Motor Industry Organisation - RMI
@AutomobilSA
2016/08/29 4:14 PM
OIL & GAS: ADVERTORIAL
Total lifecycle solutions for oil, gas and chemical sectors Clients in the oil, gas and chemicals sectors are on the lookout for smarter, more efficient ways to produce, process and deliver products to market, as well as for assistance with environmental and sustainability considerations. AECOM is able to offer comprehensive services to these sectors over the entire lifecycle. While AECOM has a strong presence in Africa, it is also one of the largest multinationals in the world, enjoying strong relationships with most of the major oil and gas companies. ‘As a company, we have a very good understanding of the industry and its role players. Thanks to AECOM’s size and diverse nature, we are one of a few companies that can offer a total solution,’ comments Africa Oil and Gas Business Line Leader, Samuel Du Rand. ‘AECOM believes a strong local industry that delivers services from within each country is essential to sustained success. It is this understanding that will allow us to add great value to the development of the industry on the continent,’ he adds.
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He points out that the biggest factors currently impacting the industry are the oil and gas price, as well as technological development and the costs associated with alternative energy sources. This includes the development of large global unconventional resources such as shale gas, which will impact the long-term development of new reserves. Global oil and gas dynamics, including the shifting political landscape within the oil-rich regions of the Middle East and other areas will also have a major impact. Du Rand predicts that there is likely to be an increased focus on previously untapped and unexplored reserves in Africa, especially southern and eastern Africa. Major oil and gas companies will look to expand their reserves
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OIL & GAS: ADVERTORIAL
Looking at oil-and-gas opportunities in Africa, Du Rand stresses that major discoveries in countries such as Mozambique, Tanzania, Kenya and Uganda have generated a lot of excitement and interest in the region. ‘The development of new reserves has been slow, while the lack of enabling infrastructure such as roads, airports and ports requires a lot of time and major investment to be resolved,’ he argues. ‘However, regulatory requirements are being addressed, with Mozambique, for example, being close to ready for development. Unfortunately, the low oil price is stalling many developments at the moment. It will also be interesting to see how international oil companies will decide to develop new reserves in Africa, and how the cost of creating enabling infrastructure locally compares with other parts of the world,’ Du Rand remarks. South Africa currently has little proven oil and gas reserves and therefore remains a net importer of these resources. There is great interest in shale gas in the Karoo, as well as other potential oil and gas reserves on and offshore of South Africa. ‘The current regulatory environment is not friendly to investment in exploration while there are a lot of environmental challenges to overcome. Significant development of the industry in the short term is probably unlikely. Programmes such as the gas-to-power initiative by the Department of Energy may stimulate development going forward,’ Du Rand predicts. n
in Africa as an alternative supply to the known markets of the Middle East and Russia. In turn, this will enhance trade and investment on the continent. ‘Inter-country infrastructure such as pipelines between Uganda and Kenya or Tanzania, Mozambique and South Africa, for example, are typically very large investments. However, these are game changers in terms of development and macro-economic growth. Unfortunately, in Africa as well as many other parts of the world, the discovery of hydrocarbon reserves has come with conflict.’ With this in mind, developing and implementing legislation and regulations at an early enough stage to adequately address the interests of African countries, local residents and international oil companies is essential for the success of the industry. Du Rand points to numerous global instances of the success of this approach. ‘Norway is often used as an example of a country where wealth obtained from reserves was well-managed. Unfortunately, the development of regulations and preparing for development itself can also lead to long delays in decision making that often hampers the feasibility of projects.’
Samuel Du Rand, AECOM’s Africa Oil and Gas Business Line Leader.
AECOM T +27 012 421 3596 E +27 083 324 2418 W rashree.maharaj@aecom.com
AECOM is a premier, fully-integrated professional and technical services firm. It designs, builds, finances and operates infrastructure assets around the world for public- and private-sector clients. In Africa, AECOM has offices in over 20 countries, including Botswana, Ghana, Kenya, Mozambique, Nigeria, South Africa and Uganda. With top-level professionals in multiple locations, AECOM understands Africa’s specific infrastructure needs, together with the inherent challenges of working on the continent. Its multi-disciplinary teams of award-winning engineers, planners, architects, environmental specialists, economists, scientists, consultants, cost, project and programme managers are committed to delivering projects that improve the quality of life of communities throughout Africa.
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OIL & GAS: ADVERTORIAL
South Africa’s oil and gas regulator for the future Petroleum Agency SA is South Africa’s state-owned company responsible for regulating the oil and gas exploration and production industry. There is ongoing news coverage of South Africa’s shale gas potential and the economic benefits it might bring, as well as concerns regarding the impact of shale gas exploration, particularly hydraulic fracturing, on water resources and the environment. While these issues have been in the spotlight, it is not that commonly known that South Africa has been a producer of both oil and gas for decades, and that local and international exploration companies are actively exploring for oil and gas in our country. Gas production began in 1992 from gas fields south of Mossel Bay and continues to this day, while modest oil production began in 1997. The gas is piped onshore to a gas to liquids (GTL) plant where it is used to manufacture synthetic diesel and other petrochemical products. Oil is sold on the open market. Petroleum Agency SA is South Africa’s state-owned company responsible for regulating the oil and gas exploration and production industry. The Agency reports to the Department of Mineral Resources with responsibilities prescribed through the Mineral and Petroleum Resources Development Act. The Agency, based in Cape Town, employs over 70 people, and is responsible for evaluating our oil and gas resources, attracting explorers in the oil and gas sector, monitoring their exploration and production activities, and archiving data produced from these activities. The Agency is known to some as South Africa’s oil and gas exploration and production regulator, licensing agent or concessionaire. While these terms describe some of the responsibilities of the Agency, its role is more than this.
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The Mineral and Petroleum Resources Development Act formalises the role and responsibilities of the Agency. The first formalised role is the promotion of exploration for and development of South Africa’s oil and gas resources. The Agency is thus expected to act as the national archive for oil and gas exploration and production data, to appraise potential for oil and gas within South Africa, to promote exploration and development of oil and gas resources, and to raise awareness of petroleum resources at national level. It also acts as an advisor to government. In other words, the Agency is instructed to develop, facilitate and regulate the growth of the upstream industry in South Africa. Its vision of a viable, sustainable and responsible upstream industry in South Africa; and mission – to promote, facilitate and regulate exploration and sustainable development of oil and gas in South Africa – are directly concerned with this mandate and reflect the Agency’s commitment to its task, as well as to serving the interests of South Africa’s people. n
Petroleum Agency SA T +27 21 938 3500 F +27 21 938 3520 E plu@petroleumagencysa.com W www.petroleumagencysa.com
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RETAIL & BRANDING
Promotions appeal to price-sensitive consumers The chaotic scenes of frantic shoppers taking advantage of promotions on the opening day of The Mall of Africa in Centurion, Gauteng, was proof that despite South Africa being on the brink of recession, local shoppers retain their appetite for promotions and special offers. The annual Nielsen study of South African Shopper Trends 2015/2016 found that promotion-seeking behaviour among South African shoppers is high, with consumers actively looking for these types of offers within their repertoire of grocery retailers. In terms of their sensitivity to promotions, the highest number (36%) said they seldom change stores but actively search for promotions when shopping, while the second highest number (22%) regularly buy different brands because of promotions.
The strength of the study lies in the fact that it has been carefully balanced to be representative of income, age and gender across South Africa and is drawn from a highly robust, national sample of 2 524 main grocery buyers and influencers and is based on in-depth, face to face interviews. Of the main shoppers interviewed, 68% were women and 32% men, and of the influencers, 64% were men and 36% women. Looking at the study’s results, Nielsen Consumer Insights Director, Esti Prinsloo, says: ‘Consumers have
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always been price conscious but have now become even more so within their choice of stores. Consumers actively search across media platforms, such as broadsheets, and investigate retailer websites for promotions. Given that consumers are pursuing this form of research, there is definitely a big gap in the market for the provision of more information via mobile channels.’
Price awareness remains high Against the backdrop of extremely tight economic conditions, the study found that consumers are understandably exhibiting even more price-conscious behaviour and are likely to notice any price fluctuations among categories they regularly purchase. In terms of how consumers respond to rising food prices, the majority (54%) said they now buy only essentials and have cut down on luxuries; 36% said they buy in bulk to get lower prices, and 30% said they buy less in total. The same figure shows they have switched to cheaper brands; 29% said they buy products on discounted price and 8% seems to living comfortably as they do not see rising prices as affecting them. Overall, spend on food, groceries, household and personal care items, has increased by 6% in the last year from R1 610 in 2014 to R1 702 in 2015.
Consumers make a plan The study also clearly shows that grocery purchases are planned activities, with the highest number of respondents (81%) saying they usually plan what they want to buy before they shop, while 76% often purchase items that they notice in-store that are on sale or promotion. 73% say they buy named brands because they trust them, and 72% have regular shopping routines and buy most products out of habit. 71% say they have a strict budget for groceries and only buy the items that they need.
Back to basics To provide strategies for the path ahead, a key focus concerned the shopping habits of consumers. When asked, ‘which type of stores have you visited in the past seven days?’, the results revealed that despite supermarkets showing a 9% decline from 92% in 2014 to 83% in 2015; they remain the most popular retail channel in South Africa. Spaza shops maintained their usage at 45% in 2015. However, it’s important to note that the results for how often consumers shop on average per month, at the same selection of stores, are markedly different. Supermarkets have seen a decrease in shopper frequency levels from 4.5 times per month in 2014 to 4.3 times in 2015. However, Spazas have risen from 18.2 times per month to 18.4, as have butchers (2.7 to 3.2) and vegetable vendors 4.3 to 5.3. Prinsloo comments: ‘The increased use of more locally-based stores points to a trend towards the
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‘neighbourgoods’ type approach to retail connections. Their close proximity also means welcome fuel savings. In contrast, Hypermarkets declined from 2.8 to 2.0 per month.
Online’s strength is information Looking at the digital retail realm, the study revealed that 7% of South African shoppers have visited a retailer website in the last month, the same figure as in 2014. However, the interesting finding is that consumers mainly use websites for information rather than shopping – 63% of respondents say they check retailers’ websites for special offers; 31% to look up product information; 29% to look up recipes, tips and ideas; 20% respond to a retailer event or competition; and 19% to buy groceries online. Additionally, 18% read product reviews, 16% sign up for a loyalty card; and 10% check their loyalty status.
Looking ahead As a result of the data gathered during Nielsen’s Shopper Trends Study, an accompanying report includes the following points to consider: • E xpect to see shifts between premium, mainstream, and economy brands as consumers are forced to consider cheaper options. • C onsumers will forego larger pack sizes and move to smaller options to maintain their product choice. • C onsumers are likely to shift between branded products and retailer private label offerings if the latter is the cheaper alternative with similar or better quality perceptions. • W hile grocery e-commerce is still small, shoppers – especially the upper income and digital decision makers – recognise the deal-seeking and convenience aspects. Retailers will need to overcome the main barriers of quality/accuracy, in-person experience, and fulfilment to drive scale and growth. • L oyalty programmes with benefits that result in cheaper products are gaining in popularity and in return. Retailers offering these are reaping the benefits. In the shoppers’ quest for better deals, loyalty cards are seen as a way to get the best for their buck. In the current economic climate, the shopper is constantly challenged to trade-off between available budget and what they need on a monthly basis to provide for themselves and their families. Their assessment of essentials vs nice to haves is increasingly critical as it drives their decisions to exclude certain products from their basket to meet their much tighter budget needs. In light of this, consumers are enticed by price and promotion and are willing to go the extra mile to get the better deal. However, quality remains significant and brands that continue to delight their customers will reap the benefit of being chosen – thus the value proposition will always remain more than just the actual price. For more information, visit www.nielsen.com. n
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SCIENCE & TECHNOLOGY
Data leak dangers: Know your weak spots Data leaks and breaches are alarmingly common, but there are still many misconceptions as to how and why they happen. ‘From customer credit card details that ease the flow at online checkouts to employee records that are vital to HR departments, today’s businesses are built on sensitive data. In many ways, it’s the lifeblood that makes the modern company tick. However, if experience is anything to go by, it can also feel like the next big security disaster waiting to happen,’ notes Carey van Vlaanderen, CEO at ESET Southern Africa. Images of attackers cracking into top-secret databases from their darkly-lit bedrooms may be rife in the media, but the real reason sensitive data is made public is usually a far cry from your typical Hollywood hacker movie. The reality is that data leaks can often be traced to company insiders, usually the result of an unhappy accident or structural flaw. It can be anything from basic human error to a ‘bending’ of the rules in your company’s computer network.
Data leak, data breach – what’s the difference? Given such huge disparities between the types of incidents that can result in data being made public, we might separate them into two distinct groups: data breaches and data leaks. With a data breach, attackers typically need to access a server through a vulnerability, or by carrying out the kind of attack that could be prevented with the right security solution in place.
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Data leaks can often be traced to company insiders, usually the result of an unhappy accident or structural flaw.”
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With a data leak, it’s possible that there are no obvious security holes. Instead, the data might have found its way into the wrong hands because of some irresponsible internal action, or, for instance, the malicious actions of a disgruntled employee. The distinction between data leaks and breaches is not universal. Many experts would classify all of these types of data loss as data breaches – after all, they can all be just as damaging to your company. But by separating them here we’re able to break down the issues and better understand why these incidents occur. So, when it comes to data leaks, what are the major weak spots to look out for?
Human error Despite what you may have invested in when it comes to a security solution, human error is the one thing you’ll never be able to account for – at least not entirely. According to PWC’s 2015 Information Security Breaches Survey, 50% of the worst breaches of last year were caused by inadvertent human error. Just a few months ago, for instance, the Federal Deposit Insurance Corp. was left dealing with the fallout after a former employee walked out with a USB drive containing the personal information of 44 000 customers. The data was later found to have been downloaded ‘inadvertently and without malicious intent’. Commenting on the results of another survey that was conducted in 2014, ESET’s senior research fellow, David Harley, agreed that insider threats shouldn’t always be assumed as malicious. ‘A very high proportion of security breaches are caused directly or indirectly by people inside an organisation, whether it’s a matter of human error, susceptibility to social engineering, bad security management decisions, and so on. I’m not convinced that deliberate malicious action from insiders outweighs all those other factors.’ As the famous saying goes, ‘to err is human’, but that doesn’t mean you can’t work to prevent this kind of data leak. According to PWC’s 2015 survey, 33% of large organisations say the responsibility for ensuring data is protected is not clear, while 72% of organisations where security policy was poorly understood had suffered staffrelated breaches.
Theft As much as we’d like to tell you that data is only stolen by criminal outsiders, unfortunately theft from inside your business can also occur. The UK’s communications regulator, OFCOM, discovered this earlier this year when it was made aware that a former employee had been surreptitiously gathering its third-party data over a six-year period. The regulatory body only learned of the data leak after the former employee tried to pass it on to a new employer who alerted OFCOM to the nefarious activity. No company likes to treat its employees with suspicion, but this kind of data leak can be prevented by steering clear of unnecessary risks. Where sensitive documents are involved, make sure you only grant access to those who really need it. Storing all of your company’s data on one giant communal server is never a good idea.
Access misuse Even when the intentions of employees are not malicious, seemingly minor actions can undermine IT network security and lead to data leaks. According to a 2014 report by Cisco, approximately one-fourth of surveyed employees admitted sharing sensitive information with friends, family, or even strangers, and almost half of the employees surveyed shared work devices with people outside of their company without supervision. These behaviours may seem innocent enough, but it takes a company’s sensitive data outside of its control. Security settings and procedure can be introduced to limit this kind of activity, but even these kinds of measures can usually be bypassed. n
Carey van Vlaanderen, CEO at ESET Southern Africa.
Photo credit: ESET
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Despite what you may invest in when it comes to a security solution, human error is the one thing you can never entirely account for.”
Making sure that all employees are ‘cyber-aware’ and that the responsibility of keeping networks secure doesn’t fall on just a few specialists will help keep costly mistakes to a bare minimum.
Since 1987, ESET® has been developing record award-winning security software that now helps over 100-million users Enjoy Safer Technology®. Its broad security product portfolio covers all popular platforms and provides businesses and consumers around the world with the perfect balance of performance and proactive protection. The company has a global sales network covering 180 countries, and regional offices in Bratislava, San Diego, Singapore, Buenos Aires and Cape Town. For more information, visit www.eset.co.za.
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SKILLS DEVELOPMENT & TRAINING
Photo credit: iLearn
Making the most of learnerships In the view of Richard Rayne, CEO of iLearn, companies that are obliged by law to contribute to the country’s Skills Development Fund by paying the mandatory Skills Development Levy will find a number of important benefits if they include learnerships in their annual Workplace Skills Plan. A learnership is a work-based learning programme directly related to an occupation or field of work that leads to an accredited NQF qualification, and are managed by the Sector Education and Training Authorities (SETAs). Businesses looking to undertake skills development – either for their own talent pipeline or to contribute towards education in South Africa – can enter into learnership agreements with their current employers or with unemployed candidates. ‘Considering how skills development has become such an important aspect of the B-BBEE scorecard, companies can use learnerships effectively, not just for talent development and management, but also to boost their B-BBEE levels,’ Rayne points out. Skills development is now a priority element of the B-BBEE scorecard, providing companies with opportunities to earn 20 vital points. A business that
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fails to achieve a 40% minimum threshold of those skills development points is penalised on its rating. Rayne explains: ‘You can claim eight points if you invest 6% (previously 3%) of your payroll on training black people. If you engage 2.5% of your employees in learnerships and internships you can earn four points; and another four points if 2.5% of your workforce is made up of black unemployed learners. An additional five points can be claimed if you employ those unemployed learners at the end of their learnerships programme. It’s important to invest wisely in relevant and quality learnerships that result in the development of specific skills to the level that would be an advantage to your company.’ ‘We are excited about the way that learnerships help to build an effective workforce and connect learning to actual career paths. With talent management and B-BBEE levels so crucial to business, through learnerships you have a fantastic opportunity to groom
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unemployed people for potential recruitment within your organisation.’ Investing in learnerships also provides opportunities to capitalise on various reimbursements, grants and tax rebates. For instance, employers who pay the Skills Development Levy to SARS, who are registered with their SETA, and submit their Workplace Skills Plan and Annual Training Report each year, qualify for further reimbursements on their SDL spend, which can be used towards the cost of the training. These benefits aside, the core purpose of learnerships
The core purpose of learnerships is to ensure that the business is empowered by a relevant skills base over the long term.”
Photo credit: iLearn
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is to ensure that the business is empowered by a relevant skills base over the long term. ‘The distinctive advantage of learnerships is that they are work-based and delivered onsite in a company’s environment. Therefore, they can be specifically and strategically designed and embedded within the context of your organisation’s talent development objectives and goals,’ Rayne concludes. Learnerships are typically implemented over a 12-month period with the learners attending an average of three days’ training each month in addition to completing their assessments. n
Richard Rayne, CEO, iLearn
iLearn offers a wide range of learning solutions including: business skills, learnerships, IT desktop applications, IT technical, design and media, language courses, custom course development and learner management systems. Having worked with over 480 companies in southern Africa, and trained over 100 000 people, iLearn delivers innovative and memorable learning initiatives that have a measureable impact on its clients’ business strategies and objectives. For more information, visit www.ilearn.co.za.
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MARITIME & FISHERIES
Acknowledging transformation in SA’s deep-sea trawling industry More than 60% of South Africa’s most valuable commercial fishery, the deep-sea trawling industry, is black owned. A key finding in a recent study by the independent economic empowerment verification and research agency, Empowerdex, sharply contrasts the widely held opinion that the deep-sea trawling industry, which has annual sales in excess of R5 billion, is largely untransformed. Empowerdex lead researcher, Lister Saungweme, says the study was conducted to understand and verify the extent to which the fishery has transformed in recent years. ‘Our aim was not only to clarify the deep-sea trawling industry’s verified transformation status but to benchmark it against other industries. A significant finding is that the industry is 62.36% black owned and a level three contributor to broad-based black economic empowerment (BBBEE),’ she reports. Rights-holders in the deep-sea trawling industry operate capital intensive businesses that require large vessels and extensive skill to harvest fish about 100 nautical miles from the coast, with nets cast up to 800m deep and vessels sometimes riding 6m swells – fish is regarded as one of the last hunted sources of protein available commercially. The catch is delivered to fish and chip shops in every corner of South Africa, and processed and packaged hake products for local supermarkets. There is also a demanding international market that is supplied with a range of value-added hake products. Collectively, the industry employs 7 050 people at sites in Saldanha Bay, Cape Town, Gansbaai, Mossel Bay and Port Elizabeth. Wages are negotiated at industry level and employees are offered benefits including a variety of training opportunities and scope for career progression. Empowerdex divisional manager, Nazeem Allie, says the transformation achieved by the deep-sea trawling industry should be acknowledged. ‘At the beginning of the study
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we were aware of the widely held view that the industry has to be restructured, but our findings have shown that there has been a significant shift in the transformation credentials of the deep-sea trawling industry. It has a relatively high number of employees and requires very costly equipment and extensive skills to, firstly, go and hunt for the fish and, secondly, extract maximum benefit through a series of complex processes from production to marketing and distribution,’ he explains. Empowerdex noted that the industry’s transformation compares favourably with other sectors of the economy. For example, the deep-sea trawling industry is placed fourth out of 10 when compared with other industries, scores for which were drawn from the top empowered listed companies in each sector. With a score of 79.17%, the deep-sea trawling industry came in after the construction and materials industry (83.12%), the ICT industry (81.90%) and the forestry and paper industry (80.38%). Tim Reddell, chairman of the South African Deep Sea Trawling Industry Association (SADSTIA), comments: ‘It would be correct to say that the deep-sea trawling industry is a transformed industry that has undergone a sea change in the last 25 years. Before 1990, there were a few rights-holders in the fishery – all of them large and predominantly white owned. Today, there are 44 rightsholders and many of them are SMEs that have invested in vessels, factories and other capital equipment, and are operating successfully alongside the large companies that remain in the fishery.’ The deep-sea trawl fishery is certified as sustainable and well managed by the Marine Stewardship Council (MSC), the world’s gold standard of sustainability ratings. Read the full Empowerdex report at www.sadstia. co.za/publications-and-resources. n
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SUPPLY CHAIN & PROCUREMENT
Sourcing and supply chains By Bridget Day, Intertek
Managing supply chain risk and performance on a global level. The demand for compliance and traceability across all points in the supply chain is increasing. Consumers are better educated and informed by media and non-governmental organisations (NGOs). Traditional concerns relating to physical product quality are supplemented by an interest in social, environmental, security, and sustainability issues. As a result, noncompliance within supply chains represents a huge reputational risk and a concern for brand integrity. Consumers, governments, and communities are all under pressure to address supply chain management, the quality and safety of their products, and even how the production of their consumer goods impact the lives of workers, their communities, and the environment. Retailers and brand owners are required to demonstrate good corporate governance across their supply chains, and their suppliers must also be able to prove their capabilities, capacity and performance in these areas.
Import and export challenges We live in a globalised world, which becomes smaller every day. International trade is a complicated affair, with multifaceted supply chains that increase the potential possibility of blind spots for buyers, which in turn results
in significant levels of risk. With today’s regulatory conditions and consumer expectations, international retailers, brand owners and buyers need to understand and control the quality of products being imported. Transparent information is essential for managing risk and ensuring compliance with safety, security, social and environmental standards. As importing countries step up consumer-protection measures, it is critical to ensure the high quality of all products entering the market. Furthermore, retailers, brand owners and consumers need to evaluate supplier manufacturing performance to make informed decisions that will support their business processes and meet customer and industry expectations. To achieve this, they require improved transparency and more reliable data when it comes to their supply chains and product sourcing.
Mitigating risk At the core of sourcing and supply chain management is the principle of mitigating risk. Both buyers and suppliers have to clear major supply-chain hurdles as a prerequisite to bring goods successfully to market. To play in the global marketplace, companies must consider risk management and compliance to minimise their exposure.
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The main areas of risk include: Visibility/transparency Without real transparency in all supply chains, uncontrolled risks can result in claims, product recalls, loss of goodwill and brand reputation. Consumers are more demanding of transparency on issues such as the clear provenance of their goods, sustainability and environmental impact and ethical practices. Factors such as human rights and conflict-free provenance play a far greater role in the sourcing of products than ever before and must be considered when managing supply chains. Traceability As global supply chains become increasingly complex, it is more difficult for companies to keep track of their supplier partners. Companies rely on subcontractors and wholesalers to act as intermediaries and domestic importers, and effective oversight and management is challenging. With increasing consumer demands to know what happens in the sourcing and supply chain, the focus is not only on the origins of products, but on tracing the journey of raw materials from beginning to end within the supply chain, with high emphasis on the chain of custody. Sustainability In today’s global marketplace, manufacturers and consumers are more concerned than ever about the impact of products on the environment. Globally, companies are working to improve environmental practices across their supply chains while improving their bottom line. Reducing costs, improving materials and committing to green manufacturing best practices ensures a safer environment that benefits business and consumers, and better positions brands. Supplier performance Supplier management is an issue requiring a holistic approach, which addresses the collection and validation of general supplier information, including data such as conflict minerals, sustainability, security, social workplace conditions and other reporting due diligence requirements. Verification and audit services are needed to validate supplier practices based on business compliance, social, environmental, quality and security issues, as well as industry standards and second-party customer-specific programmes or requirements. Complexity Supply chain complexity refers to the inter-dependent and inter-connected nature of the elements within a supply chain where a change on one element can have an unforeseen impact on other parts of the supply chain. The more suppliers and sub-contractors used with a business, the more complex this web of elements becomes. Diversity of products and services can result
in an increase in processes, which in turn may require the implementation of multiple management systems. Integrating these in a practical way that is both time and cost-effective is challenging. Costs Cost is a factor that affects the bottom line and businesses can implement cost-reduction strategies that will improve their margins. These strategies can address factors such as reviewing transportation and storage components, optimising supply chain networks, and streamlining of processes to increase efficiencies. Natural disasters (extreme weather, earthquakes, floods) Natural disasters are an area of risk that falls beyond the control of a business. Although these cannot be controlled, or even predicted, they can be mitigated by having strategies in place before they happen. Failure to plan for these eventualities can leave a company open to risk and loss. Therefore, having a crisis control plan with a designated chain of command is vital. Supplier diversity, comprehensive insurance and building redundancies in your operation are just some of the ways to mitigate the effects of natural disasters. Technology In this fast-paced world it is imperative for companies to stay ahead of the technology curve to remain competitive and satisfy their consumer expectations. Implementing the latest technology allows companies to manage their supply chain effectively by identifying issues and addressing risks timeously. Sophisticated monitoring systems can manage supplier information, streamline the purchasing process, track custody, and coordinate key players for increased efficiency. Cyber risks The more reliant we become on technology, the more opportunity there is for exposure through digital channels. Data breaches and intrusions can put a company at massive risk, and systems need to incorporate protection for all parties in the supply chain, including vendors, partners and even customers. CSR/ethical sourcing issues Corporate Social Responsibility (CSR) or the triplebottom line, covers people, planet and profit. Within the context of the supply chain, this relates to human rights and ethical practices. Companies are demanding more effective ways to evaluate their suppliers’ workplace conditions to ensure they are in accordance with accepted best practices and industry standards, and to satisfy consumers’ demands for products that have been made under decent working conditions, without harm to the environment. n
Intertek offers a series of risk-based management tools and audit solutions to assess and benchmark suppliers while helping global companies manage and track the performance in their supply chains. Its supply chain management services measure business risk, capacity and capabilities, workplace conditions, product quality and safety, security and environmental sustainability. This knowledge allows customers to map the risk in their supply chain and track improvements and performance, enabling them to make more informed buying decisions and mitigate against reputational risk. For more information, visit www.intertek.com.
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SUPPLY CHAIN & PROCUREMENT: OPINION
BEE compliance not enough to expand SA’s economy By Donna Rachelson and Shawn Theunissen
A tick-box approach to the scorecard for the Revised Codes of Good Practice for Broad-Based Black Economic Empowerment will not normalise our society and fix past socio-economic injustices with the urgency it requires. Social unrest is a symptom of the vast disparities and the poverty that exists in South African society, and a fixation with compliance to the Broad-Based Black Economic Empowerment (B-BBEE) scorecard will not create the jobs and wealth at a pace and scale that South Africa so desperately needs. Given business’s central role in achieving transformation as a national economic imperative, the Department of Trade and Industry (DTI) would do well to take on a more collaborative ‘carrot approach’ to business versus the ‘stick approach’ that many private sector players have experienced.
The essence of transformation as laid out in the B-BBEE Act of 2003 – to transform South Africa’s economy and bring about meaningful participation in it by black people – has been side-lined by the technicalities of compliance. This tendency was further entrenched when the B-BBEE codes of 2007 were substantially amended in October 2013 and became compulsory from May 1, 2015. The limitations of a narrow focus on compliance only, has particular relevance for Enterprise and Supplier Development (ESD) for two reasons: • E SD is the main pillar of the codes, making up over
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SUPPLY CHAIN & PROCUREMENT: OPINION
In turn, they are able to identify and build SMMEs that meet the current and future needs of the supply chain. And, they can develop joint B-BBEE scorecards while building strong enterprises and suppliers. To expand the economy meaningfully, strategic supplier development must focus on developing suppliers that add value to the business and not on getting more points. Then, suppliers must be evaluated according to the same criteria and benchmarked against both best practice and each other. No one supplier should be given preference over another. Transformation and business success go hand-in-hand. Transformation is not a business function, it is the future of an organisation; it is not a short-term development intervention, but a long-term strategic business fundamental. It is a pity this ethos did not underpin the DTIs BEE drive with business from the start. It is well accepted, and welcomed, that the revised B-BBEE codes address fronting, which saw a relatively small number of black and white business people benefit hugely through superficially constructed broad-based groups in empowerment deals. We look forward to hearing from the BEE Commission that was set up to monitor and evaluate fronting. We also look forward to seeing big business supply chains sustainably and progressively transformed to reflect the demographics of South African society. n
Photo credit: Growthpoint Properties
Photo credit: Seed Academy
one-third of the scorecard and worth 40 of the 105 total points. • All stakeholders agree that meaningful job creation and economic growth in South Africa will come from the small and medium business sector. Furthermore, because Enterprise Development (ED) is recognised in the codes as 1% Net Profit After Tax (NPAT) and Supplier Development (SD) as 2% NPAT, companies are bringing enterprises as suppliers into their supply chains far too quickly. This practise assumes a steady stream of enterprises that are fully scaled and adequately prepared as suppliers when, in fact, they are not. It has only proved costly, compromised efficiency, placed businesses at risk, and thwarted the success of small and medium black-owned businesses. In implementing ESD, supply chains and business operations cannot be disrupted. This makes it imperative for ED and SD to be considered by a business together. They cannot have different objectives, different measures and different strategies just to meet compliance requirements. This will only see ED and SD go in different directions and compromise the competitiveness of the big business and the success of the emerging enterprises or suppliers. The function of developing enterprises into suppliers must align with the strategic needs of the business. Therefore, ESD must have the full buy-in of company leadership teams. CEOs, CFOs and CPOs need to understand exactly how supplier diversity adds value to their supply chains and makes their business more competitive. It is not something that can be simply delegated. Businesses we work with want their workforce, suppliers and partners to reflect society because they want a strong economy. In embracing the B-BBEE codes, and achieving success in ESD, their focus has been less on compliance and more on building enterprises as a funnel for their supply chains; on building the best suppliers; and on creating supply chains that have the full mandate of their procurement teams. When supplier development is strategically driven, we see ED, SD and procurement teams working together to: • Understand and analyse the business’s current procurement needs • Establish what the specific barriers to entry into their supply chains are • Identify where the future opportunities lie.
Donna Rachelson, Chief Catalyst of Speed Academy
Shaun Theunissen, Head of Corporate Social Responsibility, Growth Point
Donna Rachelson is Chief Catalyst of Seed Academy, a for-profit social enterprise focused on transforming the South African economy through entrepreneurship. She is active in the entrepreneurial ecosystem in South Africa where she has invested in startups, assists entrepreneurs to get traction, and is passionate about the development of women entrepreneurs. Donna is also a branding and marketing specialist, author and a well-known speaker. Shawn Theunissen is Head of Corporate Social Responsibility at Growthpoint Properties and the founder and manager of Property Point, Growthpoint Properties’ enterprise development programme. Shawn’s diverse enterprise development expertise includes designing and implementing business support services, creating market linkages between s and large corporate entities, and providing capacity building support and process and learning journey facilitation. For more information, visit www.propertypoint.co.za.
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TRAVEL & TOURISM
The hotel’s swimming pool is a perfect spot to cool off during the heat of summer.
The 264-seater auditorium adds to the hotel’s impressive conferencing facilities.
The 300-seater Chief’s Boma Restaurant caters for all tastes with over 120 African-inspired dishes.
Home away from home By Emma Dawson
After a brief trip on the Gautrain from OR Tambo Airport and a short drive from Sandton Station, I effortlessly arrived at the Indaba Hotel, Spa & Conference Centre in Fourways, Johannesburg, to review this hotel and its four-star facilities. ‘In the upmarket suburb of Fourways, just north of the fast-paced business world of Sandton, the four-star Indaba Hotel, Spa & Conference Centre is a compelling blend of business-like convenience and efficiency with a warm, relaxing country atmosphere.’ This is what the Indaba Hotel, Spa & Conference Centre’s brochure says, and I couldn’t agree more. Ideally situated near all major highways, business centres, quick travel links to OR Tambo International Airport and 15km from Lanseria Airport, the Indaba Hotel is perfectly located for both business and leisure.
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Designed in keeping with the country-style character of the hotel, each of the 258 en-suite, air conditioned bedrooms offer luxurious accommodation with modern facilities. Guests will find all their needs met with Wi-Fi throughout the hotel, 24-hour room service, a tea/coffee station, safes and hairdryers in each room. With two restaurants on the 17-hectare property there is no need to leave the comfort of the hotel to enjoy world-class cuisine. The 300-seater Chief’s Boma Restaurant, where I enjoyed dinner and soaked up the outstanding African hospitality, caters for all tastes with
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TRAVEL & TOURISM
Conferences at the Indaba Hotel are run like well-oiled machines.
The Epsom Terrace Restaurant serves a full South African breakfast buffet, as well as evening meals and traditional Sunday carvery lunches.
Deluxe bedrooms offer every creature comfort. Mowana Spa swimming pool offers guests a place to relax in complete peace and tranquillity.
Mowana Spa, set in the hotel’s tranquil bushveld gardens, exceeds expectations.
Beautiful garden paths link bedrooms and suites to conferencing areas and restaurants.
over 120 African-inspired dishes ranging from North African Moroccan cuisine to Koeksisters and Melktert from the Cape. The Shisa Nyama grill boasts a variety of game meats that ensures everyone is guaranteed to find a favourite. This open-air restaurant is also a fabulous option for corporate and private functions, and sundowners on the deck overlooking the dam. Breakfast is an equally lavish affair and a hearty start to the day at the Indaba Hotel. A full South African breakfast buffet is served daily between 06:30 and 10:30 at the Epsom Terrace Restaurant. The same restaurant also boasts an evening grill menu and a highly-popular traditional carvery lunch and live music on Sundays. As South Africa’s second largest conferencing and accommodation venue, the Indaba Hotel is suitably equipped for wide-ranging conferencing requirements across 24 dedicated venue options and offers state-ofthe-art equipment and AV equipment specialists on site. And, for the ultimate pamper, the Mowana Spa and Wellness Sanctuary, set in the hotel’s tranquil bushveld gardens, exceeds expectations for those wanting to quietly relax and unwind. Corporate packages are also popular and well catered for. Mowana Spa’s commitment
For something extra special, the hotel offers three Executive Suites.
to service excellence and staff empowerment through training and mentoring ensures that your needs are met and your expectations exceeded as you enjoy a Day of African Rejuvenation with the Mowana Makoya Journey or indulge your senses with the Mowana Time-Out Pamper. Additionally, Mowana on the Move brings ‘wellness to you’ by incorporating relaxing massage techniques into shorter time periods in the comfort of your office environment. The spa’s trained therapists set up a Mowana Relaxation Zone in an area of your choice and offer mini massages including head, neck and shoulder, foot and hand massages to target work stressed muscles. Mowana on the Move means that wellness and relaxation is accessible to everyone. I thoroughly enjoyed my stay at the Indaba Hotel, Spa & Conference Centre, and was impressed with the excellent service during my visit. The attention to detail was faultless, the staff were friendly and helpful and, although there were a number of conferences on the go and numerous guests at the spa and hotel, I wanted for nothing. The Indaba Hotel really did feel like home away from home. For more information, visit www.indabahotel.co.za. n
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WATER & SANITATION
Stainless steel could save SA millions in water costs International market developments reveal the high-value potential of using stainless steel piping for municipal water service delivery. Using stainless steel piping for municipal water service delivery could potentially save millions of rands lost in leakage and filtration costs, and see a reduction in the usage of water per capita. These findings were revealed at a global collaboration between the Southern Africa Stainless Steel Development Association (sassda), the International Stainless Steel Forum (ISSF) and other stainless steel development associations from around the world at the annual ISSF conference recently held in Finland. A 30-year case study presented at the forum and documented in both Tokyo and Seoul, shows how stainless steel piping is non-corrosive, features sophisticated corrugated joints that prevent leakage, and advanced leak detection monitoring systems. Sassda’s Executive Director, John Tarboton, who attended the Federation’s conference comments: ‘The successes of both the Tokyo and Seoul case studies reveal the opportunity of using stainless steel in water distribution and service pipes in South Africa to reduce maintenance costs and preserve our already strained water resources. ‘There is a clear case of cost savings, both on the treatment of water that is lost through
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leakage, as well as water that municipalities are unable to charge service fees for its distribution and use. There is also a finite amount of water we have to use in South Africa, making leak detection and water preservation vital for our future. Another factor is that, globally, 4% of electricity generation is used for pumping water. If leakage can be reduced, electricity can be saved.’
A 30-year success story Facing comparative challenges to South Africa’s water recycling, filtration and distribution systems in the 1980s, Tokyo replaced 27 000km of pipe with non-corrosive stainless steel piping nationally, reducing leakage and losses from 15.4% down to 2.2% in 2013. Total cost reductions in Tokyo’s water distribution system have now reached the US$480m mark with additional CO2 cost reductions in energy required for water recycling and water filtration pumps. The study also confirms that national stainless steel pipe replacements installed 30 years ago show no corrosion relating to chemical components (such as chloride concentrates) in localised soils. Similar studies show total reduction in leakage rates for Seoul by as much as 30%; Vietnam,
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Photo credit: sassda
WATER & SANITATION
Stainless steel service pipe
which has reduced its leakage rate from 13% down to 7%; and Egypt from 29% down to 15% through the implementation of stainless steel piping.
The South African situation Currently South Africa uses PVC and polyethylene piping, which has a lifetime of approximately 20 years; a timeline that South Africa is currently facing as it undertakes a manifold service delivery challenge of leak detection and the replacement of damaged service water pipes across the nation. The importance of tightening up South Africa’s water supply infrastructure comes into sharp focus when one considers statistics cited in a Timeslive.co.za report last year, which stated that, annually, up to 40% of Johannesburg’s water is unaccounted for, costing the city R1.16-billion (year ending June 30, 2015). Of that, about R851-million of water was lost to leaks. Delving into the reasons for these losses, Tarboton says the biggest issue currently causing leakage in municipal water distribution systems is seen via the smaller service pipes that pump water from larger distribution pipes into high-density areas such as cities and communities. It is leakages in this system that are extremely difficult to detect as leakage rates are typically low and go unnoticed.
Tokyo Case Study – Corroded distribution pipe
in reduced energy costs and streamlined monitoring and billing systems. If finance companies could see fit to finance the implementation of stainless steel systems based on the savings gained from wasted and unauthorised water usage costs, a return on investment and total project costs could be built into the financing structure and provide a compelling initiative for South Africa’s water distribution services,’ Tarboton maintains. ‘We also have the ability and the technology available in South Africa to manufacture the specified stainless steel pipes, something that could be a coup for the manufacturing industry both at an incubator level and as a commercial enterprise. If our municipalities are already investing so heavily in leakage repairs and replacement piping, it makes sense to replace outdated pipe systems with stainless steel.’ Currently, the ISSF is embarking on a global awareness campaign following the success of the Tokyo Case Study and is on a mission to find the next country willing to grasp this opportunity, which it plans to actively contribute to, market, and bring exposure to planning departments’ knowledge collateral. n
A flexible alternative Photo credit: sassda
As the Tokyo case study reveals, corrugated stainless steel piping reduces the need for joints in the system as they maintain their strength, improve workability and extend the piping systems’ service life. ‘The implementation costs of stainless steel could also be seen as a cost-saving opportunity where initial outlay would be recouped through the savings gained
Sassda’s Executive Director, John Tarboton.
Established more than 50 years ago, the Southern Africa Stainless Steel Development Association (sassda) is made up of members that distribute, market, manufacture and fabricate products and services relevant to stainless steel. With 400 members in sub-Saharan Africa, the association provides a platform for its members to collectively promote the sustainable growth and development of the industry, with the main emphasis on stainless steel converted within the South African economy. For more information, visit www.sassda.co.za.
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LIGHTING: ADVERTORIAL
For all your lighting needs Made in South Africa for the local market, Antley Lighting has the product range and expert knowledge to meet your requirements. Established in June 2013, Antley Lighting (Pty) Ltd is 100% owned by South African citizens. Antley Lighting is an official distributor of the Envirolight/ Giga Tera LED range and, in March 2015, purchased Light Be Lighting Tooling. The company’s product ranges include: • Steel poles • High masts • Street lighting • Flood lighting • Urban lighting • Commercial lighting • Industrial lighting These ranges of high-quality lighting products use the latest lighting technologies available at the most affordable prices to provide creative and cost-effective lighting solutions to the market. Antley Lighting’s products have been specifically designed and selected to fulfil the requirements of harsh African markets, and have been used extensively
in infrastructure projects such as highways, main roads, residential streets, high-mast area lighting, stadium and sports lighting, urban lighting, commercial, industrial and energy efficiency projects. n
Antley Lighting (Pty) Ltd 585 Chopin Street, Constantia Park Pretoria East T +27 012 998 3869 F +27 012 993 4135 C +27 083 857 8433 W www.antley.co.za
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