MoneyMarketing January 2025

WHAT’S INSIDE YOUR JANUARY ISSUE:

SETTING FINANCIAL GOALS

Now is the time to work with your clients to plan their financial futures. These tips will ensure you take all their needs into consideration.

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SOFTWARE

Choosing the right software empowers you to streamline operations, enhance client engagement, ensure compliance and make data-driven decisions. Here’s what you need to know.

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RETIREMENT

What’s in store for the retirement insurance industry in 2025? We look at the impact of the two-pot system and investigate where to next.

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TAX UPDATES

We update you on the tax issues that are most likely to be in the spotlight in the year ahead.

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What lies ahead for 2025?

Four economists share their views on what investors can expect in the year ahead. While they aren’t expecting it to be as unpredictable as 2024, some significant challenges remain.

Ultimately, I am far less concerned than I was this time last year. While some risks remain, they’ve clearly decelerated, significantly reducing the probability of a negative outcome. From a return perspective, there’s still meaningful upside. Overall, we’re in a much better position, which is encouraging. The South African market is the most exciting part of the portfolio right now. The rand still has room to recover, and with the dollar remaining strong, offshore holdings are slightly less attractive in the near term, as a stronger rand could erode returns. Patience will be key for offshore investments, but for now, South Africa offers a promising investment landscape.

We see South African equities as a broad opportunity, with share prices catching up to earnings after prolonged pressure, particularly in the banking sector. Even bonds offer potential, with room for yields to decline. Much depends on February’s National Budget

Speech, and we remain hopeful it avoids shocks that unsettle rating agencies. While not broadly negative on the offshore environment, we are focused on the US. China offers opportunities but requires careful assessment of risk-adjusted returns. The UK, however, stands out as an overlooked market.

Like South Africa, retail investors have shifted capital toward the US, chasing its recent returns. As the cycle turns and investors reassess valuations more rationally, we expect some of that capital to flow back, unlocking potential opportunities in the UK market.

Global government debt, the risk of inflation and excessive asset valuations will be challenges going forward. US government debt levels have created a headwind by borrowing heavily against future growth. Taking on debt is essentially a bet that growth will outpace the rise in debt costs. If that growth fails to materialise, escalating debt and funding costs can become a significant burden. Persistent inflation is concerning.

With interest rates remaining high, the government’s annual interest bill on bond issuance now exceeds $1tn,

Adriaan Pask, CIO at PSG Wealth

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Continued from previous page burdening taxpayers and diverting funds from productive economic investments. Valuation risk in the US has been a long-standing concern, even as markets surge, detached from fundamentals. Current behaviour shows signs of excessive speculation, with retail investors driving activity, obscure cryptocurrencies soaring and leveraged ETFs on unconventional assets emerging. This abundance of speculative capital is often a precursor to economic trouble.

Many private equity firms, flush with capital, now face significant reinvestment risk. As their earlier investments mature, they are pressured to deploy capital, often into lower-quality opportunities with near-term challenges. This cycle of forced reinvestment into suboptimal assets is a key concern moving forward.

Citadel Chief Economist, Maarten Ackerman

While interest rates and inflation are easing in SA and globally, economic growth is likely to stay below capacity for the next two to three years. Europe, the UK and Japan face weak growth, with a slight slowdown expected in the US, while some emerging markets may see moderate growth.

President-elect Donald Trump’s policies, including trade tariffs and immigration crackdowns, are likely to disrupt free trade and labour markets, stoking inflation and dampening growth. His fiscal reform faces revenue challenges as Republicans push for tax cuts for corporations and high earners. The US may experience sticky inflation, slower rate cuts and growth challenges. Retaliatory trade tariffs could worsen global trade struggles, adding to the slowdown and affecting net exporters. Global growth presents a mixed picture. The US is slowing toward its 2% trend growth, while other developed markets struggle to stabilise. If the US achieves a soft landing and

China revitalises growth, recovery in developed markets is possible. Conditions are better than a year ago when fears of a global recession loomed. Stable consumer confidence and a strong US labour market could help avoid a recession entirely.

Other developed markets face tougher prospects. Export-reliant nations will battle geopolitical upheaval and supply chain disruptions. Diverging growth trends are evident, with the US growing steadily while Europe, the UK, and Japan slip into recessionary territory, following early policy normalisation and rate cuts.

In SA, real GDP growth is estimated at just 1,1%, with medium-term growth expected to average 1,8% over three years. Finance Minister Enoch Godongwana emphasises improving macroeconomic stability, structural reforms, infrastructure investment and state capacity to achieve higher inclusive growth. Real growth above capacity could be seen in three to five years. Bright spots for SA include the formation of a Government of National Unity, improved energy security, lower inflation, and strong performances in equities, bonds, and the rand, placing SA among the top emerging markets. Inflation control supports further rate cuts, increasing the potential for a global soft landing and capacity growth over the next three to four years.

Schroders Capital

Johanna Kyrklund

We think there are return opportunities to be had, even after the gains of 2024. But investors may need to look beyond recent winners. Equity investors have grown used to a small number of large companies

ED'S LETTER

New Year to all our readers. I hope you’ve had a relaxing break and are ready to face an exciting year ahead. We asked some economists what they think 2025 holds in store, and the good news is everyone tends to be feeling more positive than they were at the start of 2024. South Africa’s outlook has improved, and while there is still global uncertainty around a second Trump presidency and ongoing wars, not just in Ukraine and Gaza but now in Syria as well, the overall feeling is still one of hesitant optimism.

There’s nothing like a new year to inspire you to make some changes in your business, and one of the most important

powering the stock market’s gains. But that pattern was already changing during 2024, and we think there is potential for markets to broaden out further. Different sectors and different regions may start to appear more attractive. An active approach will be needed to avoid overexposure to previous top performers, and to capture new return opportunities as they emerge.

Equity market valuations do not look expensive outside the US. And an environment of positive growth and lower interest rates should benefit corporate earnings, which is what drives shares over the long term.

We continue to view bonds favourably for the old-fashioned reason of income generation, the importance of portfolio diversification in terms of ensuring resilience amid ongoing geopolitical uncertainties and the significance of decarbonisation as a key investment theme.

Nils Rode

We anticipate 2025 to be an attractive environment for new private market investments, offering potential for both return and income generation as several cycles align favourably. These include the private market fundraising, technological disruption and economic cycles. Simultaneously, considering ongoing geopolitical tensions and the elevated risks of escalating conflicts, the role of private markets in providing portfolio resilience remains crucial. Meanwhile, and despite political changes in the US, we expect the trend towards decarbonisation to persist, with private market investments playing a significant role in driving the global energy transition.

The small/mid-buyout and venture capital space are the most attractive in private equity, with real estate also expected to enjoy a good vintage year, while the private debt premium remains attractive across several strategies.

things you could do is to upgrade your software – or installing a new package altogether. It can be a daunting prospect, but Francois du Toit from PROpulsion has some wise advice you can follow.

Cybersecurity is more important now than ever, as a data breach could result in significant financial losses for clients, irreparable damage to the firm’s reputation, and potential regulatory penalties. Additionally, as the financial industry increasingly adopts digital tools and platforms, the risk of cyber threats like phishing, ransomware and data theft continues to grow. Ensure your systems have the best cyber protection available – the investment will be worth it in the long run. Stay financially savvy.

Schroders Group Chief Investment Officer (CIO), Johanna Kyrklund, and Nils Rode, CIO for Private Markets at

Sandy Welch Editor, MoneyMarketing

Dawid Balt Portfolio Manager, Sasfin Wealth

How did you get involved in financial services – was it something you always wanted to do?

My interest in financial markets was awakened by my grade 8 economics teacher. He arranged a school trip to Absa’s dealing room in Marshalltown. The moment I stepped into the dealing room, I was hooked by the organised chaos. The ringing telephones, shouting dealers, television sets broadcasting breaking news, and computer screens flashing thousands of numbers in all the colours of the rainbow. It was an adrenalin rush of note. From that day I knew exactly what I wanted to do.

What was your first investment, and do you still have it?

It would have been a penny stock and no, I don’t have it anymore. It probably went bust. When you are young and ignorant, and you buy a stock purely because it trades below 10 cents – it’s a recipe for wealth destruction. But these ‘go big or go home’ trades played a pivotal role in

What have been your best – and worst – financial moments?

The 2007 - 2008 Financial Crisis was a horrible time in the financial industry. Very few people today truly understand the severity of the situation the world faced. If President George W Bush did not sign the Emergency Economic Stabilisation Act on 3 October 2008, the world would have been a very different place today. I experience my best moments every day. It is a privilege to show clients that they have achieved or surpassed their long-term financial goals that they identified five, 10 or 15 years ago.

What are some of the biggest lessons you have learnt in and about the finance industry?

The power of compounding. Successful investors understand this concept and, more importantly, they understand that it takes a lot of patience to reap the benefits. So many miss out on this basic investment principle because of a world that chases immediate gratification. Then, if it sounds too good to be true, it probably is. Use your common sense when deciding if you should entrust your life savings to someone that promises a risk-free high investment return. There is no such thing.

“Use your common sense when deciding if you should entrust your life savings to someone that promises a risk-free high investment return. There is no such thing”

Always check if the product and the person selling the product is regulated by the Financial Sector Conduct Authority.

What makes a good investment in today’s economic environment?

The economic environment should not impact your investment methodology and approach. Peter Lynch, an American investor and mutual fund manager, said, “If you spent over 13 minutes a year on economics, you’ve wasted over 10 minutes.” My apologies to all economists out there! Invest in companies with management teams that are good allocators of capital. I’m always on the lookout for management teams with a track record of

consistent above-average returns on the capital they have invested. These teams have the experience to circumnavigate any economic environment on behalf of their investors.

What finance/investment trends and macroeconomic realities are currently on your watchlist?

Again, you should not allow the macro environment to change your investment approach. There is always something happening somewhere in the world that could increase short-term market volatility. The return of President Donal Trump to the White House is perceived to be good news for the US stock market. I don’t think it is as clearcut as that. He might implement policies that could fuel inflation, meaning that interest rates stay higher for longer. Higher interest rates equal higher cost of capital, which could squeeze company profit margins. The first time in more than a decade, US Treasuries are trading at very attractive yields. For the lower risk profile investor, this could be a great portfolio diversification opportunity. I also subscribe to the Ivy League universities’ approach to allocate capital in their endowment portfolios to alternative and real assets. Done correctly, investors could decrease their investment portfolio’s volatility and increase long-term returns by allocating capital towards these asset classes.

What are some of the best books on finance/investing that you’ve ever read, and why would you recommend them?

I’ve just finished The Changing World Order by Ray Dalio. I’m probably biased as Dalio is one of my investor ‘mentors’, but this is a must read for someone that believes in the principle of history repeats itself. And a firm favourite of mine is The Intelligent Investor by Benjamin Graham. There are so many great enduring principles and investment insights in this book.

By Wayne Epstein Head of Standard Bank Personal & Private Banking Moonshots

How diversity and AI drive business success

The past few weeks have undeniably been some of the most eventful of the year. The reelection of Donald Trump as President of the United States has prompted discussions worldwide, as his return to office will certainly have global implications, including in South Africa. As the old saying goes, “When America sneezes, the world catches a cold.”

Regardless of one’s feelings toward him, it’s evident that his perspectives and policies are deeply polarising. One of the most debated has been his stance on Diversity, Equity, Inclusion, and Belonging. I’d like to make a case for diversity requirements from a purely business perspective, advocating that all organisations – regardless of political views – can benefit from embracing these values. As a committed capitalist and someone responsible for building new business lines and products within Standard Bank’s Moonshots division, I consistently find that the diversity principles can enhance the major aspects of business and product development. These are particularly evident in some of the key elements we consider, namely: sourcing skilled talent for required business objectives; designing and delivering compelling products, propositions, and solutions; and optimising sales and distribution. When these principles are applied, each of these elements can become stronger and better positioned for success.

“Businesses should therefore view AI as a supplement rather than a substitute for diverse perspectives”

Finding the right people: attracting the best talent is the foundation of any successful business venture. A few fundamentals I have discovered in my career is that the team is more important than the individual (think about the league-winning Leicester football team of 2015/2016), and employee job satisfaction and workplace culture are key ingredients for success.

Diversity initiatives are therefore not just ‘nice-to-haves’ – they can be strategic ingredients that enable business success. Creating an environment where employees feel valued and heard is directly linked to productivity, employee engagement, and innovation. When people feel safe bringing their unique perspectives to the table, they

contribute more actively and passionately, which enhances performance across the board. A diverse workforce inherently brings a wide range of perspectives, which is invaluable in designing products that truly meet customer needs. It enables us to view challenges through multiple cultural and social lenses, which can reveal insights we might otherwise miss.

Without these differing viewpoints, our understanding of customer issues and our ability to create effective solutions may be limited. Developing products that cater to diverse cultural nuances can make the difference between success and failure in new markets. As an example, Stanbic’s Dada offering in Kenya was borne from understanding the challenges that women face in accessing financial solutions. A wellrounded approach ensures that products are inclusive, relevant, and commercially viable, thereby increasing their appeal and acceptance among customers from various backgrounds.

One of the most effective sales strategies is the concept of the ‘empathetic sale’, which requires sales teams to deeply understand and identify with a customer’s problem. Diversity fosters the mindset to analyse, appreciate, and empathise with varied perspectives, helping salespeople better connect with customers at all levels. This empathetic approach strengthens trust and builds long-term relationships, which are key to successful sales outcomes and customer retention. In a large corporation like Standard Bank, we see the benefits in action daily, but a common question arises: How can small businesses without the same scale or manpower leverage these advantages? Additionally, how can businesses gain insights about new markets and audiences when resources are limited?

This is where Generative Artificial Intelligence can become an invaluable tool. The major applications (like those owned by Google and Microsoft, among others) have datasets that incorporate apparently trillions of parameters that, when prompted appropriately, can return human-like responses to questions posed. Therefore, small and mid-sized businesses can now access anything from how a 60-year-old male in Kampala, Uganda, would feel about funeral insurance, to what may be the appeal for rainbow-coloured candies among children aged six to nine based in a favela in Sao Paulo, Brazil.

The advent of this technology now allows business leaders to gain a preliminary understanding that can be used to build indicative business cases, in many instances for free. It is, however, essential to acknowledge that while Generative AI can simulate perspectives, it cannot replace genuine human experiences.

Businesses should therefore view AI as a supplement rather than a substitute for diverse perspectives. Engaging directly with target audiences and cultivating a diverse internal team are still optimal to authentically understanding different viewpoints and developing products that resonate.

Therefore, in my view, while diversity has historically been framed as an ethical or social issue, it is also a powerful business strategy. Organisations that prioritise it can gain a competitive edge, improving not only internal dynamics and customer connections but also their overall bottom line.

With the emergence of advanced AI tools, the benefits of diversity are within reach for businesses of all sizes, from global corporations to local startups. Embracing it is not just about doing what’s right; it’s about doing what’s smart for sustainable business success.

By Ettienne Bezuidenhout Wealth Manager at Alexforbes

IThe importance of having a will in South Africa

n South Africa, the need for a will is often overlooked, particularly by younger individuals or people who believe they lack substantial assets. However, regardless of financial situation or age, having a will is crucial for ensuring your wishes are carried out after death.

Legal framework governing wills

In South Africa, wills are governed by the Wills Act No. 7 of 1953, which stipulates the legal requirements for creating a valid will. For a will to be legally binding here: It must be in writing (either typed or handwritten).

• The testator (the person making the will) must be 16 years or older. The testator must sign the will at the end of the document in the presence of two witnesses.

• The two witnesses must also sign the will, and they must not be beneficiaries or spouses of beneficiaries in the will.

Failure to comply with these requirements could result in the will being declared invalid, meaning the deceased’s estate would be distributed according to the rules of intestate succession.

“By carefully drafting a will and considering estate planning, the tax burden on the estate can be minimised”

Ensuring wishes are honoured

A will allows a person to choose exactly who inherits their assets, including property, money and personal items. Without a will, their estate is distributed according to the Intestate Succession Act, which may not align with their preferences.

Minimising family disputes

The absence of a will often leads to confusion and conflict among surviving family members. Disputes over inheritance are common, especially if there is uncertainty about the deceased’s wishes. Having a clear and legally sound will helps prevent such disputes by

providing clear instructions on how assets should be distributed.

Without a will, families can end up in prolonged and expensive legal battles, potentially damaging relationships and depleting the estate in the process. A well-drafted will can prevent this by clearly stating intentions, reducing the risk of conflict and protecting your family’s future.

Appointing guardians for minor children

One of the most essential functions of a will is the ability to appoint legal guardians for minor children in the event of a parent’s death. In South Africa, if a parent dies without a will and there is no surviving parent, the court is responsible for appointing a guardian. While the court aims to act in the best interests of the child, it may not always align with what the parent would have wanted.

The listed guardian still has to be appointed as a guardian. It helps to nominate a South African guardian as it minimises the legal requirements and disruptions for the minor.

Tax efficiency and financial planning

South Africa has estate duty, which is a tax on the deceased’s estate. By carefully drafting a will and considering estate planning, the tax burden on the estate can be minimised. Proper estate planning, often done in conjunction with a financial adviser or estate planning expert, can help structure assets to reduce estate duties. This ensures that more assets go to beneficiaries rather than the state.

In addition to tax efficiency, having a will also ensures that assets are distributed efficiently and without unnecessary delays. The presence of a will streamlines the process of winding up the estate, making it easier for loved ones to access their inheritance without lengthy legal procedures.

Flexibility and control

A will offers flexibility in terms of how and when beneficiaries receive their inheritance. Trusts can protect the interests of minor children or manage complex family dynamics, such as ensuring that an inheritance is used responsibly or where

there are children from different marriages involved. Using a trust can protect the minor’s inheritance from abuse by their guardians, such as where the guardians could spend all the inheritance before the child becomes an adult.

Wills can be updated or changed at any time, as long as the person is mentally capable of doing so. This ensures that the will always reflects their circumstances and wishes. If the beneficiaries in a will are changed, retirement fund nominees as well as beneficiaries on life policies must be changed too.

Appointing an executor

The executor of the deceased estate must be named. It’s not always a good idea to nominate a family friend, spouse or even an adult child, as it could potentially lead to complications and delays if they are not experienced. If this is the case, the Master will appoint a professional executor. If the idea is to appoint a professional as the executor, it’s better to stipulate this in the will. It also affords the opportunity to discuss any wishes with the executor, and to fix the executors’ fees, as some professionals will allow a discount from the standard 3.5% (ex VAT) fee, depending on the size of the estate.

Common misconceptions

Many people believe that wills are only necessary for wealthy or elderly people. The reality is that anyone with assets –no matter how modest – should have a will. Even personal items such as family heirlooms, sentimental possessions or bank accounts should be accounted for in a will to avoid complications later. Retirement funds do not form part of an estate.

Another common misconception is that a surviving spouse automatically inherits everything. In reality, the rules of intestate succession can result in the estate being divided between the spouse and children, which may not align with the deceased’s wishes.

It’s important to seek assistance to ensure that wills are valid and comprehensive. Taking this simple step can save your loved ones from unnecessary stress and provide clarity in a time of emotional difficulty.

A new digital platform homes in on unclaimed benefits

Unlocking unclaimed benefits has the potential to release R90bn back into the South African economy. Robin Hood, in partnership with Standard Bank’s OneHub, is a digital platform created by a group of entrepreneurs, business leaders, and industry experts to transform the process of reconnecting unclaimed assets with their rightful owners. By teaming up with corporate institutions and administrators, Robin Hood efficiently and costeffectively traces, verifies, and distributes assets to beneficiaries. MoneyMarketing asked Rowan Gordon, CEO of Robin Hood, to go into more detail about the offering.

What’s the thinking behind Robin Hood?

The team behind Robin Hood is deeply committed to addressing societal challenges. Unclaimed benefits emerged as a clear starting point – a significant societal issue, plagued by credibility issues which, until now, has lacked the technological innovation needed to develop a scalable solution. By partnering with Standard Bank, Robin Hood aims to bring credibility, along with bank-level governance and security, to the platform. Unlocking unclaimed benefits has the potential to release R90bn and benefit the South African economy on a similar scale to the two-pot system.

Who can benefit from this platform?

• All South African citizens who are owed unclaimed assets. The Robin Hood solution utilises multiple databases to digitally match South African citizens with their unclaimed asset. Any citizen that we are not able to digitally match will be able to use the Robin Hood mobile app (to be launched in Q1 2025)

to search for their benefit and start the digital claiming process.

• All corporate institutions who are custodians of unclaimed assets and need to trace beneficiaries. These institutions have a duty to reconnect unclaimed assets with their rightful beneficiaries, but the traditional process is manual, expensive, and prone to credibility challenges. Robin Hood streamlines this process by efficiently and cost-effectively digitally tracing, verifying, and distributing even the smallest benefits.

What success rate have you had to date?

We are constantly enhancing our success rates by refining and expanding our data-matching capabilities. A major challenge lies in the poor quality of basic data for many unclaimed benefits, which can make tracing beneficiaries difficult. As a result, our success rates vary depending on the quality of the initial data. To date, we have been able to trace between 30% and 55% of beneficiaries.

What success rate are you anticipating in the future?

Our estimate is that the industry's current solve rate is between 6% and 8% annually. Robin Hood would at least like to triple this annual rate. While solving the problem entirely would be an incredible achievement, our immediate focus is on reuniting living South African citizens with their rightful benefits.

How does SA compare in terms of unclaimed benefits with the rest of the world? Unclaimed benefits are a global challenge,

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primarily driven by outdated contact information, lack of beneficiary awareness, and complex regulatory environments. In South Africa, this issue is further compounded by its unique socioeconomic factors, including labour migration and historical gaps in record-keeping. Different countries have adopted various mechanisms to address this issue. For example, countries like the United States and Australia have established centralised databases and proactive tracing systems to manage unclaimed assets. In contrast, in South Africa, the responsibility for tracing and managing unclaimed benefits falls on individual corporate institutions, resulting in a more fragmented approach.

How could Robin Hood assist financial advisers in terms of educating their clients?

Financial advisers can play a crucial role by guiding their clients on how to check for unclaimed assets and encouraging them to regularly update their personal details, as well as the information of any named beneficiaries. Unclaimed benefits often stem from outdated contact information, and Robin Hood is here to help beneficiaries reconnect with their lost funds. We are actively onboarding additional corporate institutions holding unclaimed assets to create a unified search portal for beneficiaries.

Please stay updated by following our LinkedIn page for the latest information: https://www.linkedin.com/company/robinhood-unclaimed-benefits/

By Karen Rimmer Head of Distribution at PSG Insure

Cover for alternative energy sources and power outages

Eskom is proposing a 36% power tariff hike for 2025, which means South Africans could soon see a steep rise in electricity costs. For this reason, many home- and businessowners are still seeking alternative energy sources. Solar power remains a popular choice, but it’s important to remind clients there are insurance implications to consider. Homeowners should ensure that their property values are adjusted in line with the installation cost. It’s also crucial to use a qualified and compliant installation company. This will ensure all regulations are met, and reduce the risk of malfunction.

For businesses, these adjustments are equally important. Installing solar panels

By Laurence Rapp CEO, Vukile Property Fund

Wcan be a considerable investment, adding substantial value to the premises. Any new addition like this should be communicated to your insurance adviser, who can accurately reflect these improvements in your policy. It’s important that power supply plans are factored into business processes, to ensure that all staff know how to operate and maintain new devices. In addition, solar panels are being increasingly targeted by criminals, so it’s important to take preventative measures with anti-theft mechanisms and to consider additional security enhancements.

Is additional cover for other alternative power sources necessary?

Inverters, battery packs, generators, and solar systems can be life savers during

power outages, but they need to be factored into policies to avoid unexpected costs.

What about power surges?

In areas where load reduction is still prominent, power surge protection, including insurance, is advisable. Policies previously automatically covered power surges up to a certain limit, but this is no longer standard. Today, surge cover generally incurs an additional premium. Help your clients to review and understand these options to protect against unexpected repair costs from surges or power inconsistencies. Fires are a common concern when there is a power surge, which is why it’s important to have property fully insured from the structure to the contents inside.

Specialisation vs diversification: Why you don't have to choose

Conventional wisdom pits diversified property funds against specialist ones. But, as Vukile shows, a well-crafted specialist fund can also reap the rewards of diversification for its investors.

hen researching investment in real estate investment trusts (REIT), you've likely read that you must choose between diversified and specialist funds. But is this really an either-or proposition? Yes, investing in a diversified REIT offers a shortcut to cross-sector diversification. However, companies excelling in their specialised areas often yield superior results. Private investors may benefit from building their own diversified portfolios by selecting top-performing sectorspecific funds. At Vukile Property Fund, we believe that with the right approach, you can get the best of both worlds in one fund. Our model combines retail real estate sub-sector specialisation with geographical diversification across South Africa and the Iberian Peninsula.

Mastering our niche

As a specialist fund focused on retail property, we've found that deep expertise in a specific sector can be a powerful driver of value. Concentrating efforts and resources on what we know best achieves a level of insight and understanding that more generalist funds simply can't match. This drives the ability to identify opportunities, manage risks, and drive returns in ways that would be impossible with a more scattered approach. Take Vukile’s scalable consumer-led business model. By understanding

our shoppers’ needs, we create experiences at our shopping centres that exceed expectations. This leads to increased time and spending at our centres, and builds loyalty. Our customercentric approach drives value creation for all our stakeholders. Our model is scalable and relevant to each community and country where we invest.

Multi-layered diversification

But specialisation doesn't have to mean putting all your eggs in one basket. At Vukile, we've built a diversified portfolio that spans South Africa and the Iberian Peninsula in Spain and Portugal. We further diversify across regions and retail property types, encompassing everything from large malls to smaller convenience centres, as well as retail brands and, finally, individual shop units. A single shop closure has minimal impact on the overall portfolio. This diversification provides a robust foundation, spreading risk and increasing the potential for consistent returns over the long term.

Disciplined dealmaking

Of course, diversification is only as good as the quality of the underlying assets. That's why we're so selective about the properties we bring into our portfolio and our value-adding developments. Strong capital allocation lies at the heart of our strategy, and this is where our

specialisation truly comes to the fore. Every potential acquisition is subjected to rigorous scrutiny. We're not interested in simply chasing yield and growing for scale’s sake – our goal is to build a portfolio of truly exceptional properties that are strategically aligned and financially accretive in our core markets of Spain, Portugal and South Africa.

A consistent track record

Combining a specialist's focus with the benefits of diversification provides a strategic approach to capitalise on retail property sector opportunities while mitigating its challenges.

Over the past 20 years, Vukile has delivered consistent dividend growth (bar one Covid-19impacted year), outperforming the SAPY Index and industry peers. This is a testament to the power of a specialised yet diversified model, clear strategy, best-of-breed governance, robust financial management, and strong, skilled teams that operate on the ground, locally.

With our proven business model and performance record, our investors continue to demonstrate confidence that their capital is in good hands.

Get the best of both worlds

So why choose between specialisation and diversification when you can have both? At Vukile, we're redefining what's possible for REIT investors. We believe there are exciting returns and opportunities to be found in the world of retail property and across our core markets of South Africa, Spain and Portugal – and we look forward to unlocking them.

OUR 220 MILLION SHOPPER VISITS A YEAR CREATE SUSTAINABLE GROWTH AND SUPERIOR VALUE .

This is Faith M, aged 55. She shops weekly, mostly mid-morning when the roads are quiet. It’s a short drive, and this is her favourite community centre close to home.

She used to shop monthly, but now enjoys doing more frequent top-ups. She likes to spend time in the centre and will often arrange to meet a friend at the local coffee shop.

Faith and her husband like to pop in at the centre over weekends, especially when there’s a spice festival or other community event, or when they’re with their grandchildren in the school holidays.

We know all this and more about Faith M and our other visitors, too. Our multi-faceted consumer behaviour research, combined with our deep understanding of the needs and desires of the communities we serve, leads us every step of the way.

Our unique focus on a superior customer experience ultimately benefits all our key stakeholders, including our tenants and investors.

As a Vukile stakeholder, you too will benefit from our extensive analysis of shopper behaviour and the factors that drive continuously evolving retail trends.

There’s never been a better time to invest in people like Faith M.

BUILDING COMMUNITIES, GROWING VALUE.

Is South Africa back on track?

South Africans are generally optimistic, but the long, dark years of state capture and loadshedding have weighed heavily on the national psyche. With an energy availability factor hovering in the mid-fifty percent range in 2023, South Africans braced themselves for stage 7 or higher loadshedding as winter approached. The electricity crisis acted as a permanent handbrake on our economy, leaving consumers and businesses idling in the parking lot of SA Inc.

There’s nothing like a crisis to force change

Most of the required reforms to alleviate loadshedding were already enacted at the peak of the electricity crisis. The President’s establishment of a ‘war room’, in the form of the National Energy Crisis Committee (NECOM), allowed government, business and consumers to all play a pivotal role in finding ways out of the energy crisis. Since late March this year, we’ve had no loadshedding, and the energy availability factor is above 70%. Businesses and households have invested substantially in renewable energy, resulting in reduced demand on Eskom generation. It has also allowed the national power utility to perform critical maintenance at its power stations. Renewable energy has become a much larger component of the energy mix, effectively doubling from around 10% of installed capacity to 20% over the last two years. The huge acceleration of private-public partnerships means that NERSA-registered projects are sitting at 9.7GW,[1] with their capacity close to Eskom’s Medupi and Kusile power stations. Additionally, rooftop solar energy has almost trebled over the last two years to 6GW.[2] While rapid growth in energy generation is helping to get South Africa back on track, we are also seeing much-needed transmission reform.

Rand bouncing back

Substantial improvements on the electricity front have helped the rand to recover. A staggering 75% of the rand’s underperformance over the last two years can be attributed to loadshedding. Figure 1 shows how the gap between the currency’s expected return and actual return widened dramatically as SA reached record-breaking levels of loadshedding in 2023. The peak of the rand’s underperformance was in May last year, but since then, the discount in the rand has steadily closed.

By Malcolm Charles Portfolio Manager, Emerging Market Fixed Income, and Sisamkele Kobus Economics Analyst at Ninety One

With the SA election out of the way and no loadshedding since late March, the rand looks fairly valued. We expect the currency to be more stable than in the past. Improving terms of trade, softer oil prices and stronger commodity prices also support the rand.

Infrastructure spend to provide much-needed ‘juice’ to SA economy

The government of national unity (GNU) delivered a pragmatic medium-term budget, vowing to get the debt-to-GDP ratio under control. This was in line with the fiscal consolidation path that National Treasury committed to ahead of the 2023 medium-term budget policy statement (MTBPS). In last year’s MTBPS, significant spending cuts were pencilled in to address revenue slippages. Ahead of the election, there was scepticism about whether politicians would give National Treasury the necessary space to maintain fiscal prudence. The GNU medium-term budget has stayed the course, with debt consolidation an essential strategy for putting government finances on a healthier footing. While the government will have to do some tap dancing to keep investors, rating agencies, and public sector unions happy, a better growth rate will go a long way to help South Africa out of the debt hole.

Finance Minister Enoch Godongwana outlined additional reforms to support public and private investments in growth-boosting infrastructure, with the MTBPS dedicating a chapter to this important issue. The GNU’s strong commitment to infrastructure investment was evident in the MTBPS. The

second phase of Operation Vulindlela[3] will build on this foundation, targeting critical infrastructure bottlenecks that stem from municipal capacity constraints. Areas of focus will still be along the broad categories of energy, transport, digital infrastructure and water. These initiatives will not only be a ‘life saver’ for communities and businesses but will serve as an important engine of growth.  While public infrastructure spending has been largely absent over the last few years, the South Africa National Road Agency (SANRAL) has been carrying the infrastructure torch. The parastatal has reached for its wallet, allocating R26bn to essential road upgrades from its R42bn cash pile. Further tenders are in the pipeline. SANRAL’s infrastructure projects are already having a powerful multiplier effect across the broader economy, supporting job creation, local businesses, and community upliftment.

Can the GNU deliver growth?

It’s too early to tell whether the GNU has moved the growth dial. While there are some policy disagreements among the GNU parties, they are united in getting growth going. Our new system of governance has sparked competition and cooperation among ministers, which should ultimately benefit SA Inc. Some ministries now have a DA minister paired with an ANC deputy minister, and vice versa. They must cooperate to get results. But the GNU ministers are also in competition mode, as they need to sell their party’s service delivery success to voters in the next local and national election.

Figure 1: Loadshedding was the key driver of rand weakness

Source: Ninety One, Bloomberg and Deutsche Bank, 5 November 2024

This situation has created some healthy competition, and like fund managers, ministers must now worry about relative performance – how are they faring relative to their peers? Some ministers are already hogging the limelight. For example, Home Affairs Minister Leon Shriver is spearheading visa reforms to boost growth, while Trade and Industry Minister Parks Tau is forging a closer relationship with business, focusing on policy reforms that will help attract investments into the economy.

Benign inflation outlook and rate-cutting cycle bolstering the economy

Growth has been limping along this year, but decelerating inflation and a lower interest rate environment are helping to lift business and consumer confidence. Two-pot withdrawals are also providing a short-term boost to households. CPI inflation has remained comfortably within the target band, and we expect it to move lower, averaging less than 4% over 2025. This should give the South African Reserve Bank room to continue cutting interest rates. SA is now aligned with the global economic cycle for the first time in many years, which bodes well for local assets. Against this backdrop, we anticipate economic growth of 1.7% next year.

By Steven Amey Head: Intermediate Distribution, Ashburton Investments

A

supportive

environment for SA bond market

The favourable outlook for the rand, inflation, interest rates and growth supports our bond market. We believe the high yields on SA bonds sufficiently protect against the risks and represent good value over the medium to longer term. Income will remain an important driver of returns, with high yields offering investors the opportunity to earn returns well ahead of inflation.

In conclusion, South Africa is in a much better place than a year ago, but the GNU needs to ensure it delivers on its promises. Now that the electricity handbrake is being lifted, there’s every chance that South Africa will get back on track.

1 Ninety One and NERSA, September 2024.

2 NERSA and Eskom, July 2022 to June 2024.

3 Operation Vulindlela is a joint initiative of the Presidency and National Treasury to accelerate the implementation of structural reforms and support economic

Is my money still safe in South Africa? A resounding yes!

In the current economic climate, many locals may be wondering if their investments are safe in South Africa. Such concerns are understandable, given negative news reports about the South African economy, the rising cost of living for consumers, and large volumes of investment flowing out of the country.

The question to be asked is: Is South Africa still a safe place for regular South Africans to invest for their retirement? The answer is yes, it can be. There are challenges, but we see a lot of investment opportunity in South Africa. The sentiment may be surprising considering Ashburton’s recent announcement of a partnership with global investment powerhouse Morgan Stanley Investment Management to strengthen its global capabilities. The company, which is the Asset Manager of the First Rand Group, also recently made headlines for its strong performance on local equities through its purely South African equity fund. Only 62 local funds out of about 1 852 domestic unit trusts or Collective Investment Schemes (CIS) are 100% invested in local stocks.

There is reason to be positive about investing in SA right now

Investment sentiment is positive in SA at the moment. A global survey from Credit Suisse Group AG and the London Business School recently revealed that South Africa was the global leader in equity returns over a 117-year period, from the year 1900 to 2016, due to its commodity-rich nature. And while past performance is not always a predictor of future performance, we have many reasons to feel positive about investing in South Africa into the future.

Firstly, local interest rates were reduced in September and November, echoing similar cuts by the US Federal Reserve. Secondly, South Africa has had more than six months without loadshedding, and the local renewable energy industry is showing good growth – all of which is good news for producers who boost our economic development. Thirdly, we are seeing positive moves towards more privatisation in South Africa, especially with struggling stateowned entities like ESKOM and Transnet. In the local mining sector, we’ve also seen more than R170bn worth of new deals, mergers and acquisitions. Consumer confidence also

reached a five-year high, as the economy continues to recover from the COVID pandemic. And finally, it is very positive to see that 140 local CEOs recently committed to support the government’s economic reform targets.

The recent introduction of the two-pot retirement system, which allows South Africans to access the savings portion of their pension funds to provide relief from financial distress, was also good news for local pension fundholders, as it gives some financial flexibility to individual investors.

Achieving alpha with SA-only equities

The Ashburton Equity Fund, which has had a healthy exposure to smaller and mid-cap stocks over the past three years, managed to deliver 95bps per annum of positive alpha over the benchmark FTSE JSE Capped SWIX. The Fund is invested in companies such as Grindrod, AlexForbes, Massmart, Raubex and WBHO.

In general, we are very positive about the long-term investment prospects of our local equities. We have also made the decision to pivot our strategy, with our equity fund now being 100% invested in SA equity in 2024.

Figure 2: More rate cuts are on the table SA inflation and interest rate expectations

Forecasts are inherently limited and are not a reliable indicator of future results.

Source: Ninety One, October 2024

recovery. Operation Vulindlela aims to modernise and transform network industries, including electricity, water, transport and digital communications.

Social protection was always meant to be in the plan – where did it all go wrong?

Acritical regulatory gap is undermining the risk-pooling principles that medical schemes are built on – principles designed to maintain affordable membership fees through crosssubsidisation and social solidarity. “Medical schemes, as not-for-profit entities, operate under tight constraints to meet members’ healthcare needs. Over time, regulations supporting the Medical Schemes Act 131 of 1998 have either failed to materialise or become outdated,” says Naidoo. “As a result, the 9 million South Africans funding their healthcare through medical scheme contributions are struggling to afford this cover.”

Childs notes that schemes face financial risks because reforms intended to accompany the Act were never implemented. “Since 2000, attention has been diverted to the NHI, overshadowing reforms in the current system that could reduce costs and extend private healthcare access to millions, well before the NHI can deliver these crucial services,” he says. “The principles of open enrolment and community rating were meant to ensure equitable protection for all members, guaranteeing access to Prescribed Minimum Benefits [PMBs],” Childs adds.

“What we are seeing in medical scheme increases for 2025 so far reflect the cumulative effect of regulatory neglect since 2000”

By Barry Childs Actuary at Insight Actuaries and Consultants, and

Insight Actuaries and Consultants found that over 22 years, Gross Contribution Income (GCI) per life per month for schemes rse by 8.2% annually, compared to a 5.5% annual increase in the Consumer Price Index (CPI). Keeping contributions in line with CPI would have made schemes 43% cheaper today.

The impact of Covid

Christoff Raath of Insight Actuaries has observed that a contributing factor to 2025’s contribution increases stems from the Covid era, when medical schemes experienced surpluses due to decreased utilisation. In accordance with the Medical Schemes Act, schemes temporarily lowered contributions or enhanced benefits to return these surpluses to members. This led to deliberate losses, as trustees worked within legal constraints to ensure reserves were gradually redistributed. By 2022, schemes’ finances began normalising, with losses reflecting this strategy. Although data for 2023 is not yet public, most schemes are back to pre-Covid reserve levels, resulting in schemes having to adjust contribution increases in the interest of sustainability, according to Raath.

Furthermore, data indicates that when healthcare consumers eventually returned to healthcare facilities post-Covid, they were often in poorer health, leading to significantly higher treatment costs. Various healthcare studies, such as those from the South African Medical Research Council (SAMRC), have reported this phenomenon.

The result of regulatory neglect

The other major contributor to this gap is the regulatory limitations that prevent medical schemes from being able to contain the utilisation increases of a medical scheme population that is ageing, and this drives up costs that in turn discourages new entrants from joining the scheme.

“Late joiner penalties are among the measures designed to protect the interests of the members who contribute throughout their working lives, thereby supporting the intended social solidarity framework; however, even these measures have not been adequate.” Childs points out: “Anti-selection is a major cost driver for medical schemes, because

Thoneshan Naidoo Chief Executive Officer of the Health Funders Association (HFA)

the lack of regulatory completeness does not adequately deter people from joining medical schemes only when they need to access high-cost treatments, then leaving the scheme having used more funds than they contributed. For this reason, many open schemes must apply underwriting – that is, waiting periods for new applicants before they can claim for certain categories of benefits, within the regulated constraints.

“Had a risk equalisation fund been established, as intended to help schemes offset costs for sicker and higher risk members, this would have served as a buffer against the high contribution increases that deter younger members,” Childs says. “What we are seeing in medical scheme increases for 2025 so far reflect the cumulative effect of regulatory neglect since 2000, when a change in policy direction meant that the much-needed remaining pillars of social solidarity were never implemented.”

Urgent changes needed

The overdue regulatory reforms and lack of regular reviews of PMBs have escalated costs for all members. Despite this, medical scheme benefits remain invaluable for families and alleviate pressure on the public health sector. “Social security is the backbone that health funding seeks to achieve, fully considering the economic importance of promptly available quality medical care for the workforce, extending into retirement. In the private health funding realm, medical scheme members support each other by paying contributions, and the country by funding public health services they do not use, freeing up capacity for those reliant on the state,” Naidoo says.

“The implementation of the Health Market Inquiry’s recommendations, which identified opportunities to address inefficiencies that inflate costs and promote affordability, would attract young, healthy members to help balance the higher healthcare costs of older members. This would reduce membership costs for everyone, extending private healthcare benefits to more South Africans,” Naidoo notes. “The HFA continues to advocate for urgent progress to address regulatory gaps, restore affordability, and uphold social solidarity principles to positively impact healthcare for all South Africans,” he concludes.

As an independent DFM, we empower you to prioritise your clients and business growth with our optimised, advice-led solutions.

Guide your clients to set effective financial goals

By Sandy Welch Editor, MoneyMarketing

Solid financial goals are one of the key steps to achieving financial stability and long-term prosperity. As a financial adviser, your role in this process is pivotal. You act as a guide, mentor and strategist, helping clients identify their aspirations and map out realistic plans.

1 Understand your client’s values and priorities

Every financial goal is tied to personal values and life priorities. Before diving into the numbers, spend time understanding what matters most to your client. Is it financial security for their family, early retirement, travelling the world, or building a business? Encourage your clients to think deeply about their ‘why’. Why do they want to save? Why is financial freedom important? This conversation helps ensure that their goals are meaningful and aligned with their life aspirations.

2 Conduct a comprehensive financial assessment

Before setting goals, it’s crucial to understand your client’s starting point. Conduct a thorough financial review that includes:

Income and expenses

Savings and investments

• Debt levels

• Insurance coverage

• Retirement savings.

This assessment not only highlights gaps but also identifies opportunities for improvement. For instance, if a client’s expenses exceed their income, focusing on budgeting and debt reduction might take precedence before setting long-term savings goals.

3 Encourage SMART Goals

The most effective financial goals are SMART: Specific, Measurable, Achievable, Relevant and Time-bound.

• Specific: Goals should be clear and welldefined. Instead of saying, “I want to save money”, a specific goal might be, “I want to save R500 000 for a down payment on a house”.

• Measurable: There should be a way to track progress. For example, if the goal is to save R500 000, clients can track monthly or yearly contributions.

• Achievable: Goals should stretch clients but remain realistic given their financial situation.

• Relevant: Ensure the goal aligns with their broader life priorities and values.

• Time-bound: Every goal needs a deadline to create urgency and accountability.

4

Categorise goals by time horizon

Help clients organise their goals into shortterm, medium-term, and long-term categories.

• Short-term goals (1–3 years): Examples include building an emergency fund, paying off highinterest debt, or saving for a vacation.

• Medium-term goals (3–10 years): These might include saving for a child’s education, buying a home, or funding a significant life event.

• Long-term goals (10+ years): Common longterm goals include retirement planning, wealth accumulation, or creating a legacy.

Breaking goals into these time frames helps clients prioritise and manage their resources effectively.

5 Create a personalised financial plan

Once goals are established, the next step is creating a financial roadmap. This plan should outline the steps, timelines and resources needed to achieve each goal. Key elements of the plan might include:

• Budgeting: Ensure clients allocate funds toward their goals. A ‘pay yourself first’ strategy can help prioritise savings.

• Debt management: Help clients reduce high-interest debt, freeing up resources for future goals.

• Investment strategy: For medium- and longterm goals, create an investment plan that aligns with their risk tolerance and time horizon.

• Insurance and protection: Ensure they have adequate insurance to safeguard against unforeseen risks.

6

Discuss flexibility

Life is unpredictable, and financial goals may need to be adjusted over time. Whether it’s due to unexpected expenses, a job loss or new opportunities, it’s important to remind clients that flexibility is a key part of financial planning. Encourage clients to regularly review their goals and progress. Reassess their financial situation annually or after significant life changes, such as marriage, the birth of a child or retirement.

According to Momentum Financial Adviser, JJ van Wyk, establishing a routine to assess financial progress is essential. That means regular reviews, either monthly or quarterly, to ensure plans align with financial goals and current reality. “Annual reviews and a financial needs analysis with a financial adviser are a must,” says Van Wyk.

“Provide education, break big goals into manageable steps, and celebrate small wins along the way”

7

Address emotional barriers and mindset

For many people, achieving financial goals is as much about mindset as it is about numbers. Fear, procrastination, or a lack of financial literacy can prevent clients from taking action. As an adviser, you can play a critical role in building their confidence and overcoming these barriers. Provide education, break big goals into manageable steps, and celebrate small wins along the way. Additionally, encourage clients to avoid lifestyle inflation – the tendency to increase spending as income rises. Remind them of their long-term goals and the importance of staying disciplined.

8

Leverage technology and tools

Technology can be a powerful ally in helping clients track and achieve their financial goals. Introduce them to budgeting apps, investment platforms, or financial management software that simplifies the process. Many tools allow clients to automate savings, set reminders and monitor their progress in real-time. Automation, in particular, is a game-changer – it reduces the temptation to spend and ensures consistency.

9

Measure progress and celebrate milestones

Regular check-ins with your clients are essential. Review their progress, adjust strategies as needed, and celebrate milestones. Achieving even small goals can provide a psychological boost and motivate clients to stay on track. For example, if a client has successfully built an emergency fund or paid off a credit card, acknowledge their accomplishment. Positive reinforcement can strengthen your relationship and inspire them to pursue bigger goals.

10 Emphasise long-term benefits

Remind clients of the long-term benefits of setting and achieving financial goals. These benefits go beyond monetary gains – they include reduced stress, financial independence and the ability to live a life aligned with their values. By consistently reinforcing the ‘big picture’, you can help clients stay focused and motivated, even when challenges arise.

Remember, your role extends beyond numbers – it’s about inspiring confidence, fostering discipline and helping clients achieve their dreams. It’s an opportunity to build trust and loyalty, ensuring a lasting and successful partnership.

By Michelle Noth Head: Financial Intermediaries Channel, 10X Investments

Financial planning in focus

At 10X, we recognise that financial advisers are under pressure. Running a successful, independent financial advice practice involves carefully striking a balance between seeing and advising clients, and managing and growing the business. The former is what generally attracts people to the industry. The latter is becoming more challenging due to multiple factors like increased regulation and the need to adopt technology to remain competitive.

“We’re all struggling with the same things when it comes to practice management,” Elke Zeki, director at Foundation Family Wealth, said during a panel discussion at the 10X Think Investing convention 2024. “What’s breaking the camel’s back is the combination of all of them. They take a lot of time and effort. A lot of independent advisers are owner-managed, and that means you end up spending time and energy doing something you are not, typically, good at. I often find that sometimes more than half my time is spent working on the business as opposed to working in the business, and that’s not sustainable.”

DFMs are looking at how they can help practices to thrive.

Kathryn van Dongen, Group COO of Carmel Wealth, said that the industry needs to find innovative ways to address these challenges.

Carmel Wealth’s approach is to invest in a diverse range of reputable, independent practices and offer them quality business support. “The business model is to respect the independence of the advisers as sacrosanct,” Van Dongen said. “We create very tailored solutions based on what a practice needs and how we can help. We do that without comprising independence when it comes to product choice, losing brand identity, or the adviser’s ability to run their own business.” She said that the biggest practice management challenge IFAs encounter is around succession planning.

“I think that’s because it’s really hard to get right,” Van Dongen said. “It can be complicated, take a very long time, and there isn’t a one-sizefits-all solution. Every independent FA practice is like an evolving living organism with different aspirations, and a succession plan needs to be fitted to that specific business.

“Most of the options available to solve for succession planning needs haven’t fitted independents very well. The current models tend to rely very much on vertical integration into a larger, product-led organisation, meaning that to find succession or growth capital comes with some form of compromise to independence.”

A second significant issue she has seen is the massive growth in the need for advisers to have proper tech enablement, where one such example is having proper cybersecurity protections in place. “Even really good practices don’t necessarily have good enough cybersecurity infrastructure,” Van Dongen said. “We recently assisted in addressing this for one of the companies 100% owned by Carmel Wealth, and it took significant research to figure out what a good standard and operating model looks like.

“We had to navigate providers, do due diligence on them, negotiate pricing, and implement the solution. The bill came to a few hundred thousand rand, but the cost wasn’t the biggest issue. It was the time involved. When do the leaders of these practices, who are often attracting and retaining clients themselves, find the time to address something as complex as cybersecurity?”

This challenge is precisely why independent firm Galileo Capital made the decision recently to hire an experienced chief operating officer. “For a small business, it’s phenomenally expensive if it’s a good resource, but it’s an investment in the future of the business,” said Warren Ingram, co-founder of Galileo Capital.

Many independent advisers are also finding support from discretionary fund managers (DFMs), who are increasingly offering a range of services beyond their core investment expertise. These including marketing, compliance and technology.

“For us, it is about time and expertise,” Zeki said. “We are very good at building relationships with clients and helping clients understand what their needs are. For us to spend our days understanding funds and doing due diligence on managers is just not conducive to building sustainable business.”

Ingram added that Galileo Capital had shied

away from using a DFM for some time because they viewed it as an additional cost to the client. But with DFMs reaching scale and being able to negotiate better fees with managers, that is less the case.

“I think that DFMs are starting to add value,’ Ingram said. ‘The ecosystem they can provide in addition to the pure multi-management function is valuable.”

Van Dongen said that there has clearly been an evolution within the industry, with DFMs now looking to enable advice practices to scale up and be more efficient in the planning process.

“It’s not just investment management anymore,” she said. “DFMs are looking at how they can help practices to thrive. But what’s important is that those peripheral services shouldn’t come at the cost of the clients’ investment outcomes. Because if a client could get a better investment solution somewhere else, but the practice is getting all the benefits of the DFM’s business support, you have a moral dilemma. How do you replace your DFM if your practice is operationally reliant on them, but your client is not getting what you deem to be the best investment solution for them?

“It’s clear there is an acute need that has been solved. It is so expensive and time consuming to run a practice that doesn’t have scale. Independent advisers need support, and DFMs have offered one way of doing that. But I think we also need to look at innovative options for solving that need in different ways.”

10X Investments takes pride in being a trusted partner to financial advisers, providing low-cost, high-quality funds designed to support their vital work. By offering efficient and reliable investment solutions, 10X empowers advisers to focus on what they do best: guiding their clients toward a secure and prosperous financial future.

By

Choosing the right CRM for your financial advisory business

Choosing the right Customer Relationship Management (CRM) system for your financial advice business can feel overwhelming. With so many options available, it’s easy to feel lost in the jargon and features. However, finding the right fit isn’t about chasing the fanciest tool on the market. It’s about understanding your business and choosing a CRM that helps you achieve your goals.

Recently, I had a conversation with a financial adviser who had spent considerable time reflecting on their business and technology needs. This clarity allowed them to select tools that worked for their team and supported their vision. Inspired by this discussion, I’ve put together a guide to help you think through the important questions.

Start with your business needs

Before diving into the world of CRMs, it’s essential to understand your business. Think about:

• What do I need the CRM to do? List your nonnegotiables such as client management, data tracking, or seamless communication.

• What’s my work style? Do you need a system that accommodates remote work, integrates with existing tools, or provides a collaborative platform?

• What’s critical for my success? Pinpoint the features that will genuinely make a difference versus those that are nice to have.

Clarity about your business will help you evaluate CRMs based on what truly matters.

Focus on collaboration

For many businesses, collaboration has changed significantly in recent years. Teams often work remotely or in hybrid setups, making

it critical to consider how you and your team will work together. Think about:

• Document sharing: Do you need realtime collaboration on documents? Some CRMs allow multiple users to edit and view documents simultaneously.

• Communication: Does the CRM offer tools for easy team communication? Features like inplatform messaging or task assignments can be valuable.

• Integration: Will the CRM work seamlessly with tools like email or file-sharing platforms? Having everything in one place can simplify workflows.

By having a clear picture of your ideal way of working, you can choose a system that supports effective teamwork.

Consider record-keeping

A CRM’s ability to handle records is crucial. But it’s not just about storing information; it’s about maintaining and using it effectively. Think about:

• What do I need to record? Consider the types of client information you handle, such as contact details, meeting notes, or financial goals.

• How will I use this information? Will it feed into reports, client communications, or compliance checks?

• Is it easy to update? Ensure the system allows for quick and straightforward updates, so your data stays current and accurate.

A well-organised CRM can become the backbone of your client interactions.

Simplify communication management

One common frustration among advisers is juggling emails and client communications across multiple platforms. A good CRM can help consolidate and organise this. Think about:

• Email integration: Does the CRM integrate with your email system, whether it’s Outlook, Gmail, or another platform?

• Tracking conversations: Can you easily log and retrieve past communications with clients?

• Notifications: Will the CRM remind you of follow-ups or upcoming tasks?

Streamlined communication management can save you time and ensure a professional experience for your clients.

Ensure secure access to information

Client data is sensitive, and keeping it secure should be a top priority. When assessing CRMs, consider:

• Access control: Can you limit access to specific information based on roles within your team?

• Data security: Does the CRM provide encryption or other measures to protect client data?

• Compliance: Is the system compliant with South African data protection laws?

These features are particularly important if your team works remotely or if multiple users need access to the CRM.

Understand industry-specific needs

Not all CRMs are built with financial advisers in mind. If you rely on platforms like Astute, you’ll need a CRM that integrates with it. This might rule out popular systems like HubSpot or Zoho. By understanding your requirements (nonnegotiables), you can focus on options that genuinely meet your needs.

Remember, the goal isn’t to find the flashiest CRM but one that aligns with your business and supports your growth. There’s no single ‘best’ CRM – only the best one for your business. Stay curious!

Francois du Toit CFP® PROpulsion

You are the gatekeeper

Compiled by Sandy Welch

According to the World Economic Forum Global Risks Report 2024, cyberattacks now rank fifth in the global risk landscape, at a staggering 39%. The cost of global cybercrime is expected to reach $9.5tn by the end of this year, according to Cybersecurity Ventures. Small businesses are particularly vulnerable, with nearly half of all cyberattacks targeting this sector, many of which do not survive the aftermath of a breach.

The Mimecast’s 2023 ‘State of Email Security’ report identifies data breaches as a bigger risk than climate change, with South Africa ranking sixth on the list of countries most affected by cybercrime. Interpol’s African Cyberthreat Assessment Report 2022 revealed a total of 230 million cyber threats were detected in South Africa, out of which 219 million, or 95.21%, were email-based attacks. And businesses –regardless of size – are alive to the threat. The 2023 Santam Insurance Barometer Report showed a 12% increase in the number of commercial respondents who cited cybercrime within their top five risks.

Cybercrime expert Dr Craig Pederson says, “In the last seven years, we’ve seen a dramatic increase in both the volume of cybercrimes and the variety of types of cybercrime perpetrated in South Africa. In fact, South Africa is very close to being considered the cybercrime capital of the world.”

Cybersecurity is essential for a financial adviser’s software systems because it protects sensitive client data, ensures regulatory compliance and maintains trust. As your business handles highly confidential information such as personal identification, income details, investment portfolios and banking data, a breach could expose this data to theft or fraud, causing significant financial and reputational damage.

For clients, trust is paramount. Any lapse in cybersecurity undermines confidence in the adviser’s ability to safeguard their financial interests. Implementing strong cybersecurity measures – like encryption, multi-factor authentication, regular updates, and employee training – ensures a secure digital environment, safeguarding both the adviser’s business and their clients' financial wellbeing.

Joe Szemerei, Chief Operations Officer (COO) of financial services provider Indwe Risk Services (Indwe), emphasises the growing risk: “Businesses need to be more vigilant now than ever, as cybercriminals are increasingly finding new and innovative ways to bypass security measures. Cybersecurity should be a priority for every organisation, regardless of size, and it requires proactive risk management.”

“As African markets continue to evolve, grow, and become highly digitalised throughout the customer journey, we see the imperative for businesses to integrate advanced fraud prevention mechanisms to safeguard both their operations and their clients,” says Grozdana Maric, Head of Fraud & Security Intelligence, EMEA Emerging and Asia Pacific at SAS. Employees are also increasingly targeted by scammers who use a variety of methods to manipulate them into revealing sensitive information, says Pederson, granting unauthorised access, or making payments to fake accounts. For instance, many businesses have reported scammers impersonating legitimate vendors that the company regularly deals with, submitting fake invoices or altering banking details on actual invoices. This often results in funds being transferred into scam accounts.

Regulatory frameworks like GDPR, POPIA, and others require stringent data protection practices. Non-compliance can result in hefty fines and legal consequences, making robust cybersecurity measures non-negotiable. Additionally, cyberattacks such as phishing, ransomware or malware can disrupt operations, leading to downtime and loss of productivity.

The rise of cyber threats

In 2024, Business Email Compromise (BEC) tops the list of cyber threats, with a 20% rise in BEC scams this year, Szemerei says. AI-generated BEC content is responsible for nearly 40% of such attacks, with fraudsters increasingly using artificial intelligence to impersonate internal communications and deceive employees.

Cloud-based systems, while highly beneficial, are another area of vulnerability. Cybercriminals can easily penetrate weak firewalls, exposing sensitive information. Additionally, the rise of AI tools – many available on platforms like GitHub – makes it easier for attackers to automate phishing, malware, and Distributed Denial of Service (DDoS) attacks.

Common cyber threats

Szemerei says in this ever-evolving cyber landscape, attackers are increasingly using AI tools to create sophisticated and adaptive attack vectors to target businesses. These include:  1. Phishing and social engineering: AI-powered phishing attacks have become increasingly sophisticated, capable of generating nearly indistinguishable emails and social engineering schemes from legitimate communications. These highly convincing messages pose a significant threat to organisations, as a single compromised

account can lead to both reputational damage and substantial financial losses.

2. Malware: Attackers can use AI to create new kinds of malware that can evade traditional security measures.

3. Vulnerability checks: AI tools can be used for automating and accelerating the discovery of possible entry points by analysing datasets to recognise vulnerabilities in systems or networks.

4. Deepfakes: Deepfakes pose a significant security threat, enabling attackers to create highly convincing audio and video impersonations of trusted individuals. By manipulating these deepfakes, malicious actors can gain unauthorised access or manipulate targets into revealing sensitive information. The increasing realism of deepfakes makes them a particularly dangerous tool in the hands of cybercriminals.

5. AI poisoning: Cyber-attackers can influence the training data of AI models to introduce biases or vulnerabilities, in turn compromising the integrity of the AI-based applications.

Measures to protect your business

There are multiple, easy-to-implement measures that businesses can take to mitigate their risk of cyberattacks. These include:

• Implement strong password protection policies with multi-factor authentication.

• Regularly upskill employees through training and awareness programmes.

• Keep security software up to date with autodownload options for updates.

• Conduct regular security audits and have detailed incident response plans.

When it comes to making any decision on purchasing or upgrading software for your business, ensure that cybersecurity is a big consideration. Robust cybersecurity measures not only protect client assets and confidential information but also demonstrate a commitment to fiduciary responsibility and compliance with regulatory standards, fostering long-term client confidence and business resilience.

By Bradley Elliott CEO of Anti-Money Laundering (AML) platform RelyComply

Six trends to watch in RegTech in 2025

Financial crime and regulations are evolving rapidly, but so are the Regulatory Technology (RegTech) providers helping the financial sector stay compliant and prevent nefarious activities. With the global market expected to reach $25.19bn by 2028, here are some key RegTech trends to watch in 2025.

1. AI adoption keeps accelerating

Expect AI to become even more central in RegTech. For anti-money laundering and countering terrorist financing (AML/CFT), AI-backed automated monitoring can detect behaviour patterns in real-time to flag anomalies indicating financial crime. It can compile reports quickly and lower pitfalls resulting from manual errors, like high false positive rates.

2. Better understanding of digital assets

Financial institutions (FIs) have minimised exposure to blockchain cryptocurrencies, virtual currencies, the metaverse and digital assets because of the need for regulatory clarity. Given the risks of money laundering and other fincrime, we expect to see more regulations introduced to recognise and classify digitalised assets and currencies.

By Roger Eskinazi Managing Partner at Tickmill

This could lead to higher adoption of crypto and other digital assets. By 2027, the World Economic Forum predicts that tokens stored on the blockchain could make up 10% of global GDP. Flexible RegTech platforms will help FIs manage the risks associated with digital assets and currencies in line with existing AML processes.

3. Putting protection first

The EU-wide Markets in Financial Instruments Directive (MiFID II) and the General Data Protection Regulation (GDPR) encourage standardised, transparent ways to protect sensitive customer data. RegTech platforms and AML/CFT protocols must be underpinned by robust data privacy, cybersecurity infrastructure, and strong risk management programmes. Effective due diligence on customers and their networks will require innovation in verification techniques during onboarding.

4. Adapting for quick-fire risk in the cloud FIs must adopt a risk-based approach to AML compliance to monitor high-risk individuals or payments continuously. Migration to the cloud supports adopting a real-time, riskbased framework that manages compliance and reporting more efficiently, drives down costs, and mitigates regulators’ concerns. With the cloud, regulatory data can be stored securely and analysed in one place, scale to

the changing demands of regulations, and integrate easily with legacy systems.

5. Maintaining sustainability

Environmental, social and governance (ESG) principles matter more than ever for FIs. Sustainable finance comes with regulatory trapdoors, where falling foul of ESG risks can harm an FI’s public reputation. Organisations can use cutting-edge RegTech solutions to identify, analyse and report data to assess their ESG commitments.

6. Cross-border and private-public cooperation efforts to redouble

In line with the Financial Action Task Force’s (FATF) recommendations, we can expect closer cooperation across the ecosystem to manage a connected world's compliance and fincrime risks. Such links enable institutions to standardise their processes to adhere to global regulations and regulators and governments to combat fincrime.

The trend includes deepening partnerships between financial houses and RegTech providers to improve control over compliance, data management, AML, cybersecurity, and more. In addition, we can expect to see greater cooperation between governmental bodies, regulators and businesses to strengthen the world’s AML/CTF protections.

Enhance your trading decisions

Technical analysis enables traders to make informed decisions by using data-driven insights to anticipate price movements and time trades effectively. With the right tools and strategies, Roger Eskinazi, Managing Partner at Tickmill, says that traders can use historical price patterns and indicators to identify promising investment opportunities.

“Unlike fundamental analysis, which is based on a company’s financial statements and economic indicators, technical analysis focuses on trends in a stock’s pricing and trading volume and uses charts and patterns to transform this data into actionable insights for trading decisions,” explains Eskinazi.

He goes on to list some common patterns like ‘head and shoulders’ and ‘double tops and bottoms’, which highlight potential trend reversals. “A head and shoulders pattern, for example, typically signals a reversal from an

uptrend to a downtrend, guiding traders to consider selling positions. In contrast, triangle patterns – where price points converge – often point to a continuation of the existing trend.”

For charting tools, Eskinazi recommends Tickmill’s Advanced Trading Toolkit, which offers enhanced charting capabilities on the MetaTrader platform, enabling traders to observe these patterns in real-time.

Using indicators for market signals

Technical indicators are the mathematical calculations that form the basis of technical analysis. “A moving average (MA), for instance, smooths price data over a specified period, revealing a stock’s overall trend direction. And when a short-term MA crosses above a longterm MA – known as a golden cross – this is seen as a bullish signal, prompting traders to buy. Conversely, a death cross suggests a downward trend.

“Tickmill’s Acuity Trading Tool offers an additional layer of AI-driven insight by scanning market sentiment from news sources,

complementing indicator-based analysis. This gives traders a real edge over the markets.

Timing trades strategically

Combining chart patterns and indicators within a trading strategy enables precise timing of trades. “One of the most widely used approaches is the trend-following strategy. By identifying and following an established trend – whether up or down – traders align their trades with market direction, supported by MAs and the relative strength index (RSI) for trend confirmation. Tickmill’s Signal Centre simplifies this process by offering readyto-trade ideas based on expert analysis, which traders can access directly on their MetaTrader platform,” says Eskinazi.

For more active traders, he suggests Tickmill’s Capitalise AI tool, which enables traders to create customised, rule-based strategies in simple English. “Without any coding, traders can create AI-driven strategies to enter and exit trades with precision.”

By Siobhan Cassidy MoneyMarketing contributor

Two-pot roused slumbering retirement savers

The introduction of the Two-Pot Retirement System on 1

September fulfilled expectations that it would set in motion an unprecedented run on what little savings South Africans have; it also precipitated a spike in engagement among retirement savers that could impact the national saving trajectory positively over the long term. In the first couple of months after implementation, the South African Revenue Service (SARS) reported “an unprecedented and steady increase in tax directive applications”. Millions of withdrawal requests were submitted, and billions of rands were withdrawn by savers. While lamenting the savings (and future growth) lost to their clients, industry experts welcomed a new level of interest in a topic that South Africans have previously avoided like the plague.

“From an investment market perspective, the introduction of the two-pot system doesn’t seem to have had any impact whatsoever,” says Rob Southey, Head: Asset Consulting at Momentum Corporate. “There were no market liquidity issues, and none of the fund managers we engaged had held additional cash in preparation for 1 September 2024 – hence no cash drag would have been experienced on members’ investments.”

In giving members access to a third of their retirement savings, purportedly for emergencies, the two-pot system seemed to declare open season on savings. The other part of the new legislation, however, closed down (by two-thirds) an access point that has long been the downfall of retirement savers: cashing out on leaving a job. Under the old system, savers could withdraw all their savings from their corporate fund on leaving a job, denying themselves the benefit of compound growth, and sometimes exhausting their lifetime allowance of tax breaks on lump sums.

Under the two-pot system, two-thirds of all savings must stay in the system until retirement, and then be used to buy an annuity that will pay an income in retirement. It is well known that cashing out has been a key contributor to South Africa’s retirement

savings crisis. The importance of stopping this gap cannot be overestimated in a time of what looks like extreme job-hopping to older generations, who could realistically hope to be employed by one business for life. In a statement released with financial results for the six months to 30 September 2024, Alexforbes says the two-pot retirement system, which “represents the most significant change in the history of South Africa’s retirement funding landscape … was projected to improve long-term retirement outcomes by up to 2,5 times current levels, resulting from the impact of compulsory preservation”.

John Taylor, Head: Investment Products at Liberty Corporate Benefits, says “greater benefits at retirement will take some years to show, as the retirement pot will need to build up over time, especially to an amount exceeding the de minimis amount of R165 000 at retirement, but there is evidence that this is occurring”.

Alexforbes says an underappreciated impact of the two-pot system was that members would now have to make an active decision regarding the compulsory preservation of their retirement pot upon changing employers, whereas most would have previously elected to withdraw their entire fund value in cash. The implication is that members will have to be more engaged with their retirement funds and their options at exit.

This talks to an issue that is often blamed for South Africans not saving enough for retirement and dipping into those savings when given a chance: a lack of engagement with what is required to preserve one’s lifestyle in retirement and how to get there.

Unexpected benefit

As the dust settled on the introduction of the two-pot system, one of the biggest, largely unexpected wins came around engagement of fund members. Elana van den Berg, Legal and Consulting Manager at Momentum Corporate, says there has been “much more member engagement”. She says members have been “taking ownership” of their retirement savings and asking more questions. Alexforbes says they had seen more than 4-million logins to the AF Connect member portal in the two months from

“There are lingering concerns that savers will treat the accessible pot of one-thirds of their retirement savings as their emergency fund”

1 September. This compares with 1,5 million logins to AF Connect in total for the 12 months prior to 1 September.

Jonathan Sierra, Wrapped Product Specialist at 10X Investment, agrees with this assessment, saying one of the immediate benefits noticed was that younger people were engaging with their pension affairs for the first time.

Vickie Lange, Head: Best Practice at Alexforbes, agrees, adding that member engagement will “continue to be far more prevalent under the two-pot regime relative to the old regime”. She adds that it was still “too early to establish whether members would increase contribution rates to their retirement funds because of this change that allows them some access”.

There are lingering concerns that savers will treat the accessible pot of one-thirds of their retirement savings as their emergency fund, with many people potentially drawing down that third every year. Momentum’s Van den Berg expresses concern that from next year we could see “much higher withdrawals, so much higher leakage from retirement system as members take a third of 12 months’ worth of contributions”.

Continued on next page

Continued from previous page

10X’s Sierra says: “Ultimately, whether members choose to access their savings pots in the next tax year will depend heavily on their level of financial literacy, and the industry’s ability to effectively communicate the implications of doing so.”

A focus on educating members has already borne fruit, according to EasyRetire CEO Deresh Lawangee, who says the business observed a lower-thanexpected volume of claims when the twopot system took effect. He attributes this to “intentional and robust communication strategies around the implications of making withdrawals. Retirement funds that conducted on-site seminars and partnered with service providers to educate members on the implications of withdrawing their two-pot savings saw a noticeably lower proportion of claims,” Lawangee adds. “Members were informed about the tax implications (e.g. income tax charges and the settlement of outstanding tax liabilities like IT88 orders) and the potential for worsened retirement outcomes, resulting in more informed decision-making.”

By Stian de Witt Head of Financial Planning at financial advisory firm NMG Benefits

10X’s Sierra concurs, saying: “We found that a good portion of our clients who used the two-pot calculator developed as part of the withdrawal application journey decided not to proceed when they saw the long-term impact of withdrawing.”

In an update after the first wave of withdrawals, SARS noted that 28 525 directives had been cancelled by taxpayers who had changed their minds.

Building momentum

There is consensus around the importance of building momentum on increased levels of engagement among retirement savings fund members. Liberty’s Taylor describes “a surge towards using digital platforms and increasing the ease with which customers can deal directly with providers on their benefits”. Momentum’s Southey says education and advice is key. He describes a tool built by Momentum that shows the impact on member’s retirement benefits from withdrawing from the

Getting aggressive with pension portfolios pays off

As retirement approaches, many people reduce their risk profile by shifting their pension investments to more conservative assets like bonds and money market. However, this traditional strategy, though designed to protect against market volatility, can diminish the future growth potential of retirement savings. Especially considering that most of the growth in your retirement fund occurs in the last five years. Maintaining a higher level of risk may be the smarter choice for a longer, more prosperous retirement.

Rethink risk with living annuities

Retirees have historically reduced their risk profile to safeguard against market downturns. However, with the introduction of living annuities, they now have the option to stay invested in more aggressive portfolios (with higher allocations to equities and property) that give their funds time to recover from any market corrections. Unlike life annuities, which lock income and portfolio structure in on retirement, a living annuity allows flexibility and continued growth potential, helping savings to last longer.

Time the market to ride out volatility

A key benefit of staying invested in higher-risk assets is that, when markets dip, these portfolios typically recover and even exceed their initial value, offering better overall returns compared to more conservative allocations. For those with sources of income over and above their annuities, waiting for markets to recover can significantly benefit the value of their investments.

Combat inflation

Moving savings into conservative, lower-risk investments, like cash and bonds, limits growth and may not keep up with inflation. In turn, this can cause a gradual erosion of purchasing power. Retirees need to ensure that their investments grow faster than inflation, even after accounting for taxes and fees. Maintaining a higher proportion of equities enables the higher returns needed to combat inflation and help sustain the desired retirement lifestyle.

Diversify between local and offshore equity

The importance of balancing a portfolio between local and offshore equities can’t be emphasised enough. I recommend that at least 30-40% of assets are held in offshore equities to ensure geographic diversification. This strategy not only reduces exposure to local market volatility but also provides opportunities

savings pot at different ages, the change in the replacement ratio due to withdrawals, and the difference in investment outcome for different investment strategies between the savings and retirement pots. While there is consensus that it was too early to observe the full impact of the two-pot system, and there has been something of a run on savings, in the words of 10X’s Sierra “all models project a substantial improvement in outcomes for the average retirement saver, along with robust growth for the retirement fund industry as a whole”.

Alexforbes anticipates a marginal impact on GDP growth resulting from two-pot spending, ranging from 0.1% to 0.3% in 2024 and 0.2% to 0.7% in 2025. The company expects that the inflationary impact of such spend will be negligible but that the impact on the fiscus will be more meaningful. Better tax receipts could improve the debt-toGDP ratio by 0.5% to 1.1% of GDP in the 2024/2025 tax year and 0.8% to 2.3% in 2025/2026 tax year.

to benefit from global economic growth, thereby enhancing a portfolio’s resilience.

Mitigate sequential risk

At NMG, we’ve seen that a market crash within the first two years of retirement can reduce monthly income by up to seven years if a portfolio is not well structured. This ’sequential risk’ highlights the importance of maintaining an aggressive portfolio, but adding a ‘cash bucket’ to draw an income to give the aggressive portfolio time to recover from early market dips safeguards long-term income. The past few years’ changes highlights the importance of working with a professional financial planner.

Optimise the tax strategy

While tax implications are often overlooked, they can have a profound impact on one’s retirement income. Smart tax planning can reduce the effective tax bracket in retirement, with potential tax savings of up to 15% translating to an additional two to four years of retirement income. While the traditional approach of reducing risk near retirement may have served retirees well in the past, today’s financial landscape offers new opportunities. By embracing a more aggressive strategy that allows for growth, flexibility, and tax optimisation, retirees can secure a longer, more prosperous future.

By Bjorn Ladewig Head of Distribution and Marketing, Just SA

Retirement incomewhat’s your perspective?

Whether you’re using GPS, a map, or the stars, navigating any landscape begins with knowing where you are, where you want to go, and what your perspective is. It also entails having some knowledge about the contours of that landscape. Is it flat, is it rocky, or a combination of both?

The same concepts apply when choosing a retirement income solution that will see you through the rest of your days.

Could you afford to lose some of your capital in a market crash without it affecting your retirement plan? What is your perspective on leaving a legacy for your children? How long do you think you’ll live? What income do you need and how long do you think you’ll need it for? Does it have to keep up with inflation?

These are some of the questions that impact an individual’s overall perspective on their retirement plan, as well as the type of retirement income product they should choose. In the 2024 Just Retirement Insights tracking study, respondents said that the most important

perspective was having a sustainable income for the rest of their lives.

How is this achieved?

The Financial Sector Conduct Authority (FSCA) has draft conduct standards for default living annuities that recommend drawdown rates based on age.

Then there are income rates for life annuities, also known as annuity rates. These are materially higher than safe drawdown rates, for the simple reason that life annuities can be priced on average life expectancy. Safe drawdown rates, on the other hand, must consider a longer time horizon (age 95 for men and 100 for females are typical) given there is a real chance of living to those ages and the longevity risk is self-insured within a living annuity.

Mapping sustainability

Just SA has analysed more than 30 000 lives on behalf of its partners and clients and developed an overall sustainability map that plots drawdown rates against age. We then divided this into three zones:

• The safe zone – where individuals are drawing less than the FSCA’s safe drawdown rate.

• The risky zone – where people are drawing between the safe annuity rate for living annuities and the life annuity rate.

• The danger zone – where the drawdown rates are above even the guaranteed annuity rate.

For each of these zones there is an optimal retirement income product. Those in the safe zone can afford to invest in a pure living annuity with a high level of confidence that they will have a sustainable income for life. Those in the risky zone should consider a blend of living and life annuities; a strategy that can vastly improve the sustainability of their income at higher drawdown rates. Finally, those in the danger zone are best served by investing in a life annuity to mitigate the risk of running out of money.

How do you know which zone you’re in and what income strategy you need? The first question to ask is, how much income do you need? Once this is established, map how your required income level compares to the safe drawdown rate for a living annuity, and the life annuity rate. This, in turn, will show you which map zone you’re in and thus the optimal retirement income solution to help you navigate the terrain.

Advance

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financial services provider (no. 46423). We are a wholly owned subsidiary of Just Group plc, one of the UK’s leading providers of retirement financial solutions.

By Martin Riekert Chief Commercial Officer at Momentum Investments

Retirement planning after two-pot

The retirement planning process has undergone substantial changes with the introduction of South Africa’s two-pot retirement system on 1 September 2024. The approach separates investments in pre-retirement products, such as retirement annuities and preservation funds, into two parts: a savings component and a retirement component. While the retirement component is kept solely for retirement, the savings component permits withdrawals before retirement. The emphasis now needs to be on assisting clients in successfully navigating this system to safeguard their financial future as the initial thrill has faded.

The savings component of retirement funds receives one-third of contributions and is available under specific conditions, while two-thirds are allocated to the retirement component. A minimum withdrawal from the savings component of R2 000 is allowed once every tax year, and withdrawals are taxed at the client’s marginal tax rate. These rules promote long-term preservation while emphasising the necessity of effective financial planning, discipline, and guidance.

Financial advisers play an important role in helping clients fully understand how the two-pot system works. Clients need to understand the long-term effects of prematurely withdrawing money from the savings component and the purpose and limitations of each component type. Clients frequently ignore the tax implications of taking money out of their retirement savings and underestimate the impact on their retirement income. It is quite unnerving to think that withdrawals from the savings component to date exceed R35bn*, which will almost surely have a negative impact on South Africans’ ability to retire in future. Early withdrawals might undermine their larger financial plan by resulting in unforeseen tax obligations – which are often underestimated

– and missed opportunities, even if they may offer instant relief.

Developing successful retirement strategies requires carefully evaluating a client’s financial circumstances and goals.

Regularly assessing each client’s income, expenses, and debt can help distinguish between short-term and long-term financial needs. This method ensures that withdrawals from the savings component are used smartly and not as a first resort for non-essential expenses, thereby aligning retirement planning with the client’s overall financial picture. When clients require liquidity, retirement savings should always be the last option.

Advisers can also help clients create customised withdrawal plans. The savings component’s flexibility should primarily be used for actual financial emergencies; but as a last resort. Clients must know how to prioritise withdrawals for emergencies and avoid using retirement savings for discretionary spending. Clients might lessen their dependency on their retirement savings by saving and investing in other, more liquid investment vehicles for anticipated significant (shorter-term) needs. Encouraging people to save and invest outside the retirement system is equally important. Although many clients would consider the savings component to be an emergency fund, it is neither adequate nor intended for that use. Creating a specific emergency fund outside the retirement plan eases the strain on retirement savings and adds another degree of financial stability.

An alternative approach can be for clients to increase the overall contribution to their retirement fund to such a level that the retirement component portion is sufficient for their retirement needs. The savings component can, therefore, indeed be used as a vehicle for more liquid, emergency savings. This approach does require a deliberate choice and consequent structuring of a client’s retirement plan.

Maintaining progress toward retirement goals requires ongoing client engagement. Regular reviews help to adjust strategies based on changes in a client’s circumstances, market conditions, or legislative updates.

The two-pot system is still relatively new, and its long-term implications are yet to be fully understood. Advisers who stay informed and adapt their advice as new insights emerge will provide significant value to their clients.

Consistently reinforcing the importance of preserving retirement savings can help clients secure their financial futures. The two-pot system further complicates financial planning, requiring clients to balance immediate needs with long-term goals, a task many may find difficult without expert guidance.

By focusing on education, personalised strategies, and continuous engagement, advisers can help clients find the ideal balance between meeting immediate financial demands and achieving long-term retirement security. People may also be more open to using retirement fund products as part of their financial plan to financially prepare for retirement, knowing they have access to some of their retirement savings for a genuine financial emergency. The success of this system will depend mainly on advisers’ ability to guide clients through its complexities and keep them on course toward a comfortable retirement.

Speak to your Momentum consultant to learn more about what Momentum Wealth offers regarding investment administration, discretionary and retirement products, and access to investment solutions like unit trusts, personalised model portfolios, exchangetraded funds, direct shares and personal share portfolios, or visit momentum.co.za

“Clients need to understand the long-term effects of prematurely withdrawing money from the savings component, and the purpose and limitations of each component type”

Four tax issues to look out for in 2025

Compiled by Sandy Welch

South Africa is projected to suffer a tax shortfall of approximately R22bn by February 2025. With this in mind, there are going to have to be some concessions this year to ensure there’s enough cash in the coffers. These could be the tax measures to watch.

Global Minimum Tax Bill

According to Deloitte, the OECD/G20 Inclusive Framework (Inclusive Framework), formed by the Organisation for Economic Co-operation and Development (OECD) together with the G20 countries, has two pillars. These pillars are aimed at ensuring that multinational enterprises (MNEs) pay a fair share of tax wherever they operate and generate profits. Work under Pillar One focuses mainly on the digital economy, whereas Pillar Two focuses on other base erosion and profit shifting (BEPS) matters, including the introduction of a global minimum tax (GMT). Pillar Two was supposed to be drafted in 2023, but this never transpired. In 2024, South Africa released its Global Minimum Tax Bill, which aims to ensure that tax incentives with limited economic substance do not reduce the minimum effective tax rate corporations pay to below 15%. This is in accordance with the GloBE Model Rules. Overall, Treasury is expecting to raise R8bn in 2026/27.

Wealth taxes

Will they, or won’t they? That’s the question being asked by hundreds of ultra-high-networth individuals, as the issue of wealth taxes gets mulled over again. Is the government going to seriously pursue it in 2025?

The Institute of Economic Justice (IEJ) has been outspoken with regards to its support for a wealth tax, arguing the need for a more equal tax system that uplifts previously disadvantaged communities.

“Economists say a full implementation of this policy could see the wealthy leaving for taxfriendlier shores”

The organisation has recommended several tax reforms, including the introduction of a wealth tax, luxury VAT on high-end goods purchased by the affluent, adjustments to tax rebates for top earners, and increased duties on dividends and estates. Chris Axeslon, acting Head of Tax and Financial Sector Policy at the National Treasury, has not ruled out any of these possibilities, saying the data is currently being reviewed. There are grey areas around this proposal, particularly because the returns generated by the wealthy are already subject to taxes such as personal income tax, capital gains tax and taxes on rentals and interest. Economists say a full implementation of this policy could see the wealthy leaving for tax-friendlier shores, taking their assets with them. Dawie Roodt, chief economist at the Efficient Group, has been quoted as saying he believes a wealth tax could worsen the country’s economic challenges by undermining investor confidence and slowing economic growth.

Removal of medical aid tax credits

Medical aid tax credits have been in discussion for several years, often touted as a solution to the funding of the new NHI Bill. Tax Consulting SA explains that the medical tax credit system was designed to create equitable tax reductions across all income levels and tax brackets. The removal of these tax credits will probably result in lower-income earners who rely on basic medical scheme options or hospital plans feeling the greatest impact. Medical

tax credits significantly reduce the tax liability of these consumers, especially for those earning just above the tax threshold. Without these credits, employees may face higher monthly PAYE deductions, resulting in reduced disposable income. Consequently, some employees might find it challenging to maintain their medical scheme membership, potentially leaving them without healthcare coverage. And this could be a double whammy for the medical insurance industry, already nervous about the proposed implementation of the NHI. To make up for the losses consumers will suffer, the removal of medical tax aid credits would have to be accompanied by a general reduction in income tax, although this seems unlikely. Once again, the burden will fall on the middle-income consumer.

Taxation of alcoholic beverages

The National Treasury’s latest policy review on the taxation of alcoholic beverages offers up several different provisions. One of these includes seeing excise duty on wine products increase from 11% to 16%, from 23% to 28% for beer, and from 36% to 42% for spirits. The government has alternatively proposed building a system that allows excise rates to be adjusted “within the bounds of the expected inflation, as a minimum, with an upper limit of 10%”.

Another option is relooking the calculation of excise, with one proposal being to base tax on alcohol content, instead of the percentage of the weighted average retail selling price. Currently, the tax stands at 11% for wine, 23% for beer and 36% for spirits. However, with duty rate adjustments being higher than inflation, the excise tax is now above the policy guidelines recommended for each category. For example, the beer and spirits excise duty differential has widened by 148%, while for wine and spirits, it has widened by 136%.

Another proposal up for consideration is minimum unit pricing for alcohol, which would set the price floor below which no unit of alcohol should be sold. Treasury believes this will prevent producers and retailers from having to absorb tax increases, as well as reduce the consumption of cheap alcohol. These policies are currently open for public comment but have been met with dismay by producers, with the national trade body South Africa Wine saying it “strongly opposes the government’s proposed excise tax increases on wine, which could see rates rise by up to 80%”. CEO Rico Basson says the proposals could devastate the industry, driving job losses and forcing producers out of the market. He has asked the government to “reconsider these proposals”.

By Rupert Clarey Director of Stonehage Fleming in the Legal & Tax Advisory UK division

UK non-dom regime abolition: Key implications and a to-do list

An estimated

200 000 South Africans living in the UK, and those considering moving there in the next four years, will be subject to significant changes to the taxation of non-UK domiciled individuals, effectively abolishing the preferential, long-standing non-dom regime from 6 April 2025.

This reform, details of which were spelt out by the new Labour government’s first Autumn Budget, represents the most substantial overhaul of the UK's international taxation framework in recent history, with significant implications for non-dom UK residents and those thinking about emigrating to the country.

Many wealthy families and individuals have already moved due to the new non-dom tax regime, and others plan to. An Oxford Economics survey this year found that more than 80% of the non-doms polled said the changes to inheritance tax were a significant reason for leaving the UK for other jurisdictions, like Switzerland, Monaco and Italy, which still offer preferential tax dispensations.

South Africans affected by these changes are advised to begin considering and planning for them because of their significant impact on foreign income and capital gains, non-UK trusts, and the tax implications for inheritances. Below is a summary of the changes, the transition reliefs, and steps SA UK non-doms and other potentially affected South Africans can take.

New four-year Foreign Income and Gains (FIG) regime

The cornerstone of the new system is the fouryear FIG regime, which replaces the current remittance basis. To qualify, individuals must:

• Be in their first four tax years of UK residence

• Have been non-UK resident for at least 10 consecutive years prior

• Make an annual claim through their SelfAssessment Tax Return.

Those eligible for the FIG regime will not be taxed on most foreign income and gains during the four-year period, whether remitted to the UK or not. However, they will forfeit their personal allowance and CGT-exempt amount. Important exclusions apply to foreign employment income and offshore life insurance policies.

Implications for existing UK residents

For those currently residing in the UK who don't qualify for the FIG regime, the changes are significant:

• All foreign income and gains will be taxable on an arising basis

• Pre-April 2025 foreign income and gains will still be taxed when remitted

• Trust protections will be removed for settlorinterested structures

• UK resident settlors will be taxed on trust income and trustee gains on an arising basis

• Non-UK trusts subject to periodic inheritance tax charges.

Temporary Repatriation Facility (TRF)

A three-year window of opportunity exists for bringing offshore funds to the UK at preferential rates:

• 12% tax rate for 2025/26 and 2026/27

• 15% tax rate for 2027/28

• Available to former remittance basis users

• Applies to pre-April 2025 foreign income and gains

• Applies to certain distributions from non-UK trusts

• No requirement to identify sources in mixed funds

• Payment is required upon designation, regardless of remittance timing.

Capital Gains Tax changes

Significant CGT modifications include:

• Rate increases from 30 October 2024 (18% basic rate, 24% higher rate)

• Rebasing to 5 April 2017 available for qualifying personally held assets

• Trust gains becoming taxable on UK resident settlors

• Anti-forestalling measures for pre-announcement contracts.

Inheritance tax reform

The regime shifts from domicile-based to residence-based testing:

• Long-term resident (LTR) status applies after 10 years of UK residence in the last 20 years

• Longer ‘tail’ period for those leaving the UK; for instance, for those resident in the UK for 20 years, the tail lasts 10 years

• Special transitional rules for those leaving before April 2025

• Modified treatment of offshore trusts based on settlor's LTR status.

Trust implications

The changes significantly impact trust structures:

• Trust income and gains are generally taxable on UK resident settlors

• Non-UK assets in discretionary trusts become IHT-exposed when settlor is LTR

• Pre-October 2024 trusts retain some protection from the reservation of benefit rules

• Exit charges may apply when assets fall out of IHT scope

• Modified rules for Qualifying Interest in Possession trusts.

Planning

considerations before April 2025

1. Immediate actions

• Review existing structures and consider reorganisation before April 2025

• Evaluate opportunities under the TRF

• Consider CGT rebasing opportunities

• Assess trust distributions before the new regime takes effect.

2. Long-term strategy

• Review UK residence patterns and planning

• Consider restructuring of foreign income sources

• Evaluate trust continuation vs. termination

• Plan around the new four-year FIG regime.

3. Trust planning

• Review settlor-interested trust structures

• Consider trust reorganisation before April 2025

• Evaluate the benefits of trust termination

• Plan for potential exit charges.

4. Investment strategy

• Review investment holding structures

• Consider the realisation of gains before rate increases

• Evaluate mixed fund cleansing opportunities

• Plan for ongoing investment management under the new regime.

The abolition of the non-dom regime represents a fundamental shift in UK tax policy. South Africans currently in the UK or planning to move there should seek professional advice to review their structures and implement appropriate planning measures before the changes take effect. The window before April 2025 offers important opportunities for restructuring and tax-efficient repatriation of offshore funds through the TRF. Long-term residents should focus on inheritance tax exposure and trust structures, while newer arrivals should carefully plan around the four-year FIG regime.

Old Mutual leads money market fund growth amid rising investor demand

Old Mutual has demonstrated outstanding growth in the Money Market and Short-Term Fixed Income CIS portfolios space, driven by its Cash and Liquidity Solutions offerings.

Recent statistics from the Association for Savings and Investment South Africa (ASISA) highlight Old Mutual’s success in the competitive money market fund category.

In the quarter ending 30 September 2024, Old Mutual attracted over R8,1bn in money market fund inflows, despite the overall market remaining flat. Year-to-date, its money market funds grew by R9,8bn, outpacing total industry growth of R8,9bn. Over the past 12 months, Old Mutual achieved R12,6bn in growth compared to the industry’s R6,5bn.

“Since we started focusing on our Cash and Liquidity unit trust offering, we have been responsible for more than 100% of the industry growth recorded by ASISA in the money market fund category,” says Sean Segar, Joint Head of Old Mutual Cash and Liquidity.

Commenting on the domestic fixedincome space, Segar noted that Old Mutual boasts a 25-year track record of managing money market funds under the South African Collective Investment Schemes (CIS) umbrella. Its flagship Money Market Fund, launched in August 1998, has grown its assets under management (AUM) to R26bn.

The Institutional Money Market Fund also has a solid record, backed by investments in big 5 banks and RSA treasury bills.

“Year-to-date, its money market funds grew by R9,8bn, outpacing total industry growth of R8,9bn”

The growing role of money markets in the fixed-income universe prompted the launch of the Cash and Liquidity Solutions unit in September 2023. This unit caters to the liquidity needs of institutional and corporate investors, offering solutions built around its money market funds. These solutions typically follow conservative, capital-preservationfocused investment mandates.

All money market funds offered by the Cash and Liquidity Solutions unit provide fixed-deposit-type yields but with same-day access, giving investors the flexibility to manage short-term funds without lock-in periods or early termination penalties.

“The current yields on many money market funds exceed those on a 15-month fixed deposit, with the added benefits of being highly regulated, independently rated, and with same-day liquidity via online portals,” Segar explains.

Clients also benefit from a single-entry point to build a diversified basket of highquality paper issued predominantly by banks and the RSA treasury. According to Segar, large institutional clients often use multiple money market funds to diversify their portfolios, both from an investment and operational risk perspective.

“Old Mutual Cash and Liquidity Solutions is a substantial player in the money market fund space, providing attractive alternatives to bank call accounts and fixed deposits, but with diversification and full liquidity,” Segar concludes. “Our money market fund proposition remains compelling, offering clients fixed-deposit-type yields with callaccount-type access. All our funds are managed by experts, with the benefits of scale passed on to our clients.”

Why AMEFTs should be part of your 2025 portfolio

By Niki Giles Head of Strategy at Prescient Fund Services

Globally, actively managed exchange-traded funds (ETFs) are making waves in the investment world.

In the US alone, the assets under management (AUM) for active ETFs currently stands at an impressive $773bn –up by more than 90% since the end of 2018. This surge in popularity is reflected in the number of new launches. As of 31 August 2024, 309 of the 415 newly launched ETFs were actively managed. Europe has seen its own boost, with actively managed ETFs reaching a total AUM of $49.29bn by the end of the third quarter this year. A landmark was reached when a JP Morgan fund became the first European active ETF to top $10bn in AUM. This shift isn’t just limited to international markets. The Johannesburg Stock Exchange (JSE) introduced new regulations in October 2022 that opened the doors for actively managed ETFs (AMETFs). Previously, only index-tracking or passive ETFs were allowed on the JSE. The first AMETF was listed in May 2023, marking a significant step in South Africa’s ETF market. Today, the number of AMETFs on the JSE is steadily growing, reflecting a broader global trend.

Why the appeal?

So why are AMETFs becoming so popular? Here are some of the main benefits:

through management company platforms or intermediaries like LISP platforms to trade. Once an AMETF is listed, anyone with access to an online trading platform can purchase it, no matter where they are in the world. As Roland Rousseau analogises, "Listing an ETF is like selling your product on Amazon – compared to a mutual fund, which can only be found in a physical store."

3. Flexibility and liquidity: Unlike unit trusts, which can only be bought or sold at the fund’s Net Asset Value (NAV) at the end of the trading day, AMETFs offer real-time flexibility. Investors can trade them throughout the

structure known as the ‘in-kind’ redemption mechanism, ETFs can avoid generating capital gains for investors until they sell their shares, whereas mutual funds may pass on capital gains taxes annually. This tax efficiency adds to the appeal of ETFs in the US, where tax considerations play a substantial role in investor decisions. However, this can’t be seen as a reason for AMETF popularity in Europe or South Africa, as these markets do not offer the same tax benefits.

The local landscape

As of the second quarter of 2024, South African collective investment schemes (CIS) reported R3,64tn in assets under management across 1 852 portfolios, with most of these assets in actively managed funds. The total market capitalisation of ETFs listed on the JSE, including AMETFs, stood at over R180bn as of October 2024, a fraction of the total CIS AUM. But with 22 AMETFs now listed, their presence in the market is growing, though there's still

1. Cost efficiency: ETFs, in general, are perceived as cheaper investment vehicles compared to their unlisted collective investment scheme (CIS) counterparts. This is largely because ETFs have historically been passively managed, resulting in lower management fees. While actively managed ETFs may have slightly higher costs than passive ETFs, they could provide a more cost-effective alternative to traditional unit trusts. The lack of classes for listed AMETFs democratise the cost of investing for retail investors, providing a single standardised cost structure that is accessible to all investors.

2. Accessibility: One of the standout benefits of AMETFs is accessibility. As exchange-traded products, they can be bought and sold as easily as any other listed security. This ease of access contrasts sharply with traditional unit trusts, which require investors to go

4. Regulatory protection: All AMETFs are collective investment schemes and are regulated by South Africa’s Financial Sector Conduct Authority (FSCA) under the Collective Investment Schemes Control Act. This means that investors enjoy the same regulatory protections as they would when investing in unlisted unit trusts.

5. No minimum investment: One significant advantage of AMETFs is that they don’t have a minimum investment amount requirement, unlike many unit trust platforms that often require a sizable initial outlay. This makes AMETFs accessible for smaller investors, allowing them to purchase whole units and build wealth incrementally.

6. US tax advantage: It does need to be mentioned that in the US, ETFs have a tax advantage over mutual funds. Due to a tax

While the potential of AMETFs is undeniable, certain barriers to growth remain.

The adoption of AMETFs hinges on availability. Until there is a critical mass of AMETFs that offer sufficient diversification across asset classes, the uptake will likely remain slow. However, once enough AMETFs are listed, it could spark greater investor interest and spur innovation in accessing the JSE.

2. Lack of choice: Currently, the number of AMETFs available is limited, particularly across different asset classes. As a result, many investors continue to rely on traditional CIS platforms to diversify their investments. Until more AMETFs are launched, the scope for diversification in this space will remain narrow.

The road ahead

The introduction of AMETFs on the JSE has the potential to reshape the landscape of investment in South Africa. With global and local markets moving towards more dynamic, accessible, and cost-effective investment vehicles, it seems likely that AMETFs will continue to grow in popularity. For investors, this presents new opportunities to blend active management with the liquidity and convenience of ETFs –making these products well worth the attention they’re receiving.

By Megan Jarvis Partner at Webber Wentzel, and Jon Forman Partner at Webber Wentzel

How South African sport can benefit from private equity

Private equity (PE) transactions in the sporting world have recently caught the public’s attention. Numerous news reports have noted how several key parties have raised objections to the proposed transaction between SA Rugby and Ackerley Sports Group, with the Springbok brand at the centre of discussions.

This is not the first time we have seen PE transactions in South African rugby, with the Lions, Bulls and Sharks all majority-owned by different parties through PE transactions. Furthermore, PE has long been an important and proven means of enhancing the commercial value of sporting enterprises, especially in the United States and Europe.

Luxembourg-headquartered CVC Capital Partners have a wide range of investments in the sporting sphere. In 2016, they sold Formula One to Liberty Media for $8bn, having purchased F1 in 2006 for $2bn. CVC also has a wide rugby position, holding stakes in England’s Premiership Rugby, the Six Nations tournament, and 28% of the United Rugby Championship, the professional league that the Sharks, Lions, Bulls and Stormers participate in.

In New Zealand, US firm Silver Lakes purchased a 5.7% stake in New Zealand Rugby’s commercial arm for approximately $120m in February 2023. In December of the same year, Silver Lakes purchased a further 1.79% for an additional $37m, which is significant because the initial transaction was met with resistance by provincial rugby unions, the players union and other stakeholders in the game.

Why private equity firms are increasingly investing in sport

Sports has become an increasingly popular sector for PE capital for several reasons:

• The rising value of sports media rights, sponsorship deals and sports franchise merchandise sales, with traditional broadcast rights holders now challenged by streaming services for the right to broadcast games or matches.

Sports fans, broadly speaking, are extremely loyal to their chosen teams and brands, resulting in a built-in market that sports franchises can access, grow, and commercialise. For example, English football club Manchester United generated $384m in commercial revenue in 2023, 46.7% of total revenue. In 2009, commercial revenue only accounted for 23% of the club’s total revenue.

• The global sports industry is reportedly the ninth largest in the world, with a value of $2,65tn, providing PE firms with a large basket of assets they can invest in.

PE investors’ ultimate goal is to receive a profitable return on their investment – a motive that all parties in a transaction are aware of – requiring the selling party to have a clear understanding of their value and the expertise to negotiate a deal that will place them in a sound position post the transaction.

The value private equity firms provide to sports franchises

From a sports franchise perspective, PE investors bring both finance and expertise to the negotiating table and, with that, a prospect for growth. The immediate capital injection offered by PE investors is often supported by access to high-quality skills that can support sports franchises to maximise the tactical and strategic potential of their operations and brands.

In a South African context, the modernisation of sports administration is another string PE firms can add to their bow. Historical and systemic reasons have left South Africa’s sporting landscape pockmarked by sports organisations that may not have the necessary skills or access to capital to professionally administer and commercialise opportunities. Some of the most entrenched interests in South African sports are rooted in historical amateurism. Governance structures empower stakeholders whose presence within the system is often based on political acumen and long-standing patronage networks, which merit a secondary consideration.

These entrenched interests are difficult to overcome because professionalisation means asking these same individuals and institutions to vote against their interests. A recent example

is the Western Province Rugby Football Union (WPRFU), which in March 2024 agreed to sell a controlling stake in WP Professional Rugby (WPPR) to a consortium of PE investors. The sale followed many years of instability, with the WPRFU placed under administration by SA Rugby in October 2021, with WPPR being effectively bankrupt at the time. If the WPRFU had not agreed to the sale, the WPPR and the WPRFU faced liquidation.

Arriving at a fair PE settlement between investor and sports franchise

The ultimate success of PE transactions in the sports sector rests on the nature of the agreement struck, the degree to which the investor and investee trust each other, and the agreement itself being balanced and fit for purpose.

For PE transactions to be effective, there should be an alignment of values and reputation between the negotiating parties. Both sides in a negotiation must understand who they are potentially partnering with. For the rights holder, maintaining a controlling stake in the commercial vehicle the PE investor is buying into is often paramount. In turn, the PE investor is likely considering the different routes available to them to maximise their return and make a profitable exit from the partnership.

In these types of transactions, we have observed negotiating parties rush to the drafting phase of an agreement, negating critical introspection and the thoughtful inclusion of provisions that adequately address their respective interests. Patience and a willingness to engage in hard and respectful negotiation is required. In this context, it is highly recommended to appoint legal advisors experienced in these types of negotiations, given the complexities involved.

Private equity can provide sports franchises in South Africa with vital financing and skills, as PE investors have done worldwide across the global sports industry. However, it is incumbent on South Africa’s different sporting codes, federations, and franchises to recognise the duty of their responsibility to the public at large, and the value of the asset they hold, so that if approached by a PE investor, they are able to conclude a deal that reflects their true value.

By Elmarie de Vos Trust Administrator at Capital Legacy

What about the pets?

Agiant ginger cat called Kevin. A tiny guinea pig named Didi. Cheetah the Doberman. We all have pets we’ll never forget. They love us unconditionally, they are our faithful companions, they help us stick to daily routines, they lower our stress levels and aid our mental health. They just make life better in so many ways. Unfortunately, they also break our hearts when they pass away. But have your clients thought about making provision for their trusty animal friends when they themselves pass away? An estimated 1,4 million South African pet owners do not have a valid will. Part of caring for animals is ensuring they are looked after when we are not around to do so. Elmarie de Vos is a Trust Administrator with leading wills and estates specialists Capital Legacy. Here, she answers five of the most common questions from pet owners, which you can impart to clients.

Can you write your pets’ care into your will?

Yes, in your will you are free to note, for example, that your Labrador, Bella, must be placed in the care of your brother, Brian, but this is only a wish and cannot be enforced by law. Nor can anyone be forced to take on the responsibility of caring for a pet if they are not willing or able to do so. So, in your will you can indicate who you want your fur babies to be placed with in the event of your death, but it is not legally binding. That’s why it is far more important and effective to ask a trusted, animal-loving friend or family member to be responsible for their care, in the event that you pass away (also see next two answers).

Should pets be specified in your will?

Your last will and testament is a legal document that includes your final wishes, to be carried out after you pass away. So, should animals be specifically named in your will? It might surprise you to hear that you should not put lots of detail in your will – the simplest wills are often the best wills because they

“To avoid having to update your will constantly, it is advisable to state simply that your pets should go to whoever you have asked to look after them”

lead to fewer delays in the deceased estate administration process. In a legal sense, for the purposes of drafting your will, it is useful to understand that pets are not considered property, like a residential home or a vehicle. (Unless the deceased was a breeder whose animals were registered, for example with the Kennel Union of Southern Africa or a similar institution. This would enable the executor of the estate to establish the value of such a pet. But this would be the exception, not the rule.) To avoid having to update your will constantly, it is therefore advisable to state simply that your pets should go to whoever you have asked to look after them, without stating the pets’ names, breeds and ages. It is a good idea, however, to name the person who has agreed to look after them. It could speed up their rehoming and enable them to settle in sooner if the executor of your will does not have to track the person down.

Is it sufficient simply to ask a person to care for a pet after an owner passes away?

Yes, it is. In fact, this is crucial to ensuring your pets’ care after you pass away – more so than mentioning them in your will. If you don’t make a practical arrangement with a person who is willing and able to care for your pets, they could end up at an animal charity. If you do not mention your pets in your will, your heirs or beneficiaries will have to make the decisions about what to do with them at a very challenging time in their lives, adding to their emotional trauma. If your loved ones do not know what your wishes are, it could lead to delays, confusion and even disagreements,

compromising the care of your pets. So, even though these conversations may feel uncomfortable, talk to your loved ones and agree who will look after your furry family members if you pass away.

What if no-one can take the pet?

If could happen that a person is willing to take on the responsibility of caring for an animal after its owner passes away, but circumstances could preclude them from doing so. For example, the friend or family member who is nominated in the will resides in a Sectional Title complex where pets are not allowed, or they have moved to a smaller place that is not suited to keeping a large dog or multiple cats. In these instances, and if Capital Legacy has been appointed as executor of the deceased estate in the person’s will, we would ask them to get in touch with the SPCA so that arrangements can be made to rehome the pet. Other animal welfare charities we work with regularly include the Guide Dog Association and Paws.

What’s the best advice for pet owners who want to ensure their pets are looked after?

With pets it’s a lot like being an organ donor: it’s more important to communicate your wishes to your loved ones while you’re alive than to write it down as part of an official document like a last will and testament. The same goes for pets because whatever wishes you put in your will, they are only ever that – wishes – and cannot be enforced by law. So, rather make sure your loved ones know what you prefer and then everyone can enjoy peace of mind.

By Youlon Naidoo Executive Head of Claims and Procurement at MiWay Insurance

Many policyholders worry that their insurance premiums will automatically spike after a claim has been submitted. This common misconception even deters some people from using their insurance when they need it most.  The reality is that not all claims result in increased costs. Premiums are reviewed annually, usually based on which month you took out your policy, rather than being directly tied to whether you've made a claim or not. By better understanding the factors that influence premium adjustments, consumers can make more informed decisions and avoid unnecessary financial strain.

No, premiums don’t always increase after a claim

The role of claims in premium adjustments

While it’s true that claiming can impact premiums, it’s not the only factor. Insurance companies consider various elements, such as the frequency of claims, the nature of the incident, and the overall risk profile of the policyholder.

For instance, a client who claims frequently or for minor incidents may see a rise in premiums over time, as this can indicate a higher risk. It’s not advisable to claim for everything. Even if you’re not directly responsible, like in the case of an accident, submitting multiple claims can still influence your premium. Insurance is designed to protect against significant losses, so it’s wise to consider whether a claim is necessary in each situation.

Mitigating risk and managing premiums

Policyholders should adopt strategies that reduce the likelihood of needing to make a regular claim. Regular maintenance, safe driving habits, and taking precautions to secure property can all help minimise risks. By doing so, consumers can potentially keep their premiums stable. It’s important to align one’s insurance coverage with the current risks they face. Businesses, especially, should conduct regular risk assessments and update their policies to reflect any operational or environmental changes. This proactive approach not only helps in managing premiums but also ensures adequate protection against both existing and emerging risks. Often clients forget to seek out an annual review and opt in for the automated increases on their policies, which are

Dedicated medical scheme for the consumer goods industry

In a transformative move for South Africa's consumer goods industry, employees now have access to a sector-specific medical scheme tailored to their healthcare needs. This initiative aims to enhance the wellbeing of thousands in this key economic sector.

With over 30 years of experience, the rebranded Consumer Goods Medical Scheme (CGMS) currently serves more than 4 500 members and maintains a solvency level above 40%, ensuring long-term sustainability. Initially catering to employees of Tiger Brands, Spar, Sea Harvest, and Adcock Ingram, the scheme, administered by Universal Healthcare, is now open to all companies in the consumer goods industry. Its member-centric approach focuses on affordability, sustainability and evidencebased healthcare services.

“This marks a significant moment for the wellbeing of industry employees,” says Ian Isdale, member-elected trustee of CGMS. "The scheme has been crafted over decades to meet the clinical needs of this sector. Its restricted nature allows for personalised, memberfocused solutions that open schemes may not provide. Expanding access to the broader industry was a logical next step.”

The launch comes at a pivotal time for South Africa’s medical schemes landscape, which has seen substantial consolidation over the last 20 years, shrinking from 144 schemes in 2000 to 71 in 2023, serving 8,9 million members (Council for Medical Schemes Industry Report 2023). Amid this trend, the CGMS launch injects renewed innovation and energy into the market.

Recognising the diverse needs of consumer goods employees, the scheme offers four tailored benefit options. These options ensure that all employees, regardless of income, can access high-quality, affordable healthcare. This design promotes equality and inclusivity, strengthening healthcare access across the industry.

The consumer goods sector, a cornerstone of South Africa’s economy, employs millions and drives national growth. The CGMS is dedicated to safeguarding the health and productivity of this vital workforce, empowering businesses to champion employee wellbeing.

“By addressing the specific health risks and lifestyle demands of the industry, we’ve developed benefits to tackle these challenges head-on,” says Isdale. The scheme’s commitment to sustainability ensures members

often aligned with inflation and other mitigating factors, without assessing if their cover still suits their needs. Insurance is about managing current risks, and by being mindful of your policy anniversary, when and how you claim, you can have more control over your premiums.

Navigating the complexities of insurance

Understanding how premiums are calculated and what factors influence them can help consumers make more informed decisions about their coverage. Alignment between one’s cover and risk profile is key. By doing so, you not only protect yourself or your business against potential risks, but also avoid unnecessarily inflating your premiums. Regular policy reviews, coupled with effective risk mitigation, are critical to maintain both adequate protection and cost-effective insurance.

receive high-value medical cover, supported by a proven track record with some of the sector’s largest employers.

CGMS represents a strategic expansion of industry-specific medical benefits, with potential to shape the future of restricted medical schemes in South Africa. Employers seeking tailored, high-quality benefits are encouraged to join. “By doing so, they can address employee healthcare needs in ways that benefit both parties,” notes Isdale.

“CGMS is transforming the lives of consumer goods employees through innovative, agile healthcare solutions,” he concludes.

“By embracing technology and enhancing benefits, we are committed to sustainable, transformative care. In a landscape marked by consolidation, CGMS signals a refreshing focus on members and innovation.”

Ian Isdale, member-elected trustee of CGMS

Supersized US insurance verdicts have global impact

US juries have ordered a record number of so-called ‘nuclear’ verdicts against companies in recent years. These verdicts have almost trebled since 2020, while the median verdict value has more than doubled. In 2023 alone, the number of nuclear verdicts (>US$10m) grew by more than 27%, while the number of ‘thermonuclear’ verdicts (>$100m) increased by 35%, according to Marathon Strategies, impacting industries ranging from automotive to entertainment to chemicals. Such verdicts are not just a problem for US companies, as they also impact international firms doing business in the US, according to Allianz Commercial, which highlights five liability loss trends firms need to watch in a new report.

“As technology and the world evolve, the insurance market faces a number of new challenges that are leading to increasing liability loss trends,” says Alfredo Alonso, Global Head of Liability Insurance at Allianz Commercial. “These increasing loss trends are influencing insurers’ perspectives on issues such as capacity deployment, especially in the US, and the profitability of both older and future underwriting years. Collaboration among stakeholders is crucial to managing these changes and controlling liability claims costs.”

The rise in nuclear verdicts

Growth in the number and size of these verdicts is down to multiple drivers, including growing mistrust of corporates, the changing tactics of plaintiff attorneys, the erosion of tort reform, changes in jury pool demographics, and the normalisation of such verdicts, including the rise of billion-dollar awards for personal injury. Awards can be driven by a combination of punitive, compensatory and non-economic damages, such as pain and suffering, all of which are increasing.

“Such upwards trends in social inflation are not sustainable for the long term, as the increasing

costs from nuclear verdicts ultimately fall back on businesses, consumers, and insurers,” says Joerg Ahrens, Global Head of Key Case Management, Long Tail Claims, Allianz Commercial.

“Attempts at tort reform, such as caps on non-economic damages, have met with varying levels of success. In the absence of more effective reform, greater cooperation between insureds and insurers, and adopting a tougher stance to settlements, are needed to mitigate the spiralling cost of liability claims.”

Pharma class actions grow more complex and volatile

Recent years have also seen a growing list of pharma, food, and chemical products become the target of billion-dollar class action litigation, including opioids, talcum powder, indigestion remedies, and herbicide. Cancer is increasingly a feature of such litigation. Scientific research, regulatory orders or voluntary withdrawal of products that may be carcinogenic can trigger litigation. Such claims create volatility for liability insurance due to the long latency of cancer symptoms, with risks only understood many years after a product was sold, and the insurance underwritten.

“Product liability claims in the pharmaceutical sector are typically costly and complex, with multiple parties, higher defence costs, and higher awards. Due to the nature of this industry, a harmful product or ingredient can spark multiple actions spanning many producers, resulting in a large accumulation of losses from multiple insureds from one event,” says Arne Holzheuer, a Global Practice Group Head for Liability in the Chief Claims Office at Allianz Commercial.

PFAS litigation mounts

A class of synthetic chemical used widely in industrial and consumer products – such as food packaging, cosmetics and household goods and even firefighting foams since the 1940s – PFAS, also known as forever chemicals

because of their resistance to degradation, have been the subject of mounting litigation in recent years. This has largely been focused on three main areas: environmental pollution; water and waste treatment/contamination; and personal injury, such as people working directly with products, like firefighters. While litigation has so far concentrated on the US – environmental contamination-related PFAS settlements are already in the double-digit billions of dollars – there have also been cases elsewhere, for example in Europe. The extent of future litigation is uncertain, although further regulatory measures may play a part in shaping this.

Collective actions set to rise outside of the US

Social inflation is predominantly a US phenomenon but moves to increase access to justice in Europe could result in a rise in collective actions in future, the report notes. Collective actions are already becoming more prevalent in some European countries, as consumer groups start making use of collective redress frameworks and legislative change to chastise companies and fund remedial work, while consumer protection agencies have already brought claims in areas like water quality and pharma. A record number of class actions were filed in Europe in 2023 (133), up 10% on 2022, according to law firm CMS, with the UK, Netherlands, Germany, and Portugal accounting for over three quarters of these. Product liability, consumer, and personal injury were the largest sources of litigation.

Major causes of liability claims

The report also analyses some of the major causes of insurance industry liability claims over the past five years – defective product incidents account for more than 40% of the value of all claims, with the other most expensive causes of claims including collision/ crash incidents, faulty workmanship/ maintenance, and bodily injury.

Aileen Lamb

COMMERCIAL DIRECTOR: Maria Tiganis

STRATEGY DIRECTOR: Andrew Nunneley

CHIEF FINANCIAL OFFICER: Venette Malone Interim CEO: MEDIA24: Raj Lalbahadur

GROUP ART DIRECTOR: David Kyslinger

DIGITAL MANAGER: Varushka Padayachi

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