SA Business Integrator - Volume 6 l Issue 2 September 2020 by Media Xpose

A B U S I N E S S I N T E R A C T I O N P U B L I C AT I O N

Volume 6 | Issue 2 | September 2020

How to

kick-start

a sustainable business strategy

Pandemic amplifies

challenges confronting the transport sector

sabusinessintegrator.co.za

Current Affairs

COVER STORY

Sentech: The impact on our digital economy post COVID-19 Call for partnerships to deliver more, differently and faster

Economic Development

Business Integration

Do your clientsâ&#x20AC;&#x2122; retirement funds measure up?

Nowadays, retirement fund members expect more. Value at retirement is just not enough. They want value throughout their working lifetime. The FundsAtWork Umbrella Funds are redefining the value that members receive from their retirement fund. Let’s talk about: • Flexible retirement and insurance solutions. • Digital solutions to help employees make informed choices. • Regular engagement to help employees understand their benefits. • Additional benefits that add regular value to employees’ lives. • Unsurpassed fund governance by the FundsAtWork trustees. • Unique rewards that enable your clients to invest more in their employees.

Shouldn’t you be partnering with the retirement fund that works harder and gives more? Contact your Momentum Corporate specialist. momentum.co.za

Momentum Corporate

Momentum Corporate is a part of Momentum Metropolitan Life Limited, an authorised financial services and registered credit provider. Momentum Metropolitan Holdings Limited is a level 1 B-BBEE insurer.

ADVERTORIAL: MOMENTUM CORPORATE

Is your preferred retirement fund geared for millennials? Characteristics that will shape the retirement funds of the future Millennialsâ&#x20AC;&#x2122; (25 to 34-year-olds) representation in the workplace is growing rapidly and this group is expected to make up almost a quarter of the global workforce this year. Based on data analytics, Momentum Corporate is already seeing the generational shift in the profile of the retirement fund membership â&#x20AC;&#x201C; with just over 50% of members being millennials, up from 39% in 2013. To keep up with the changing world of work, the retirement fund industry needs to reconsider its offering and adapt. The shift in our member profile has given us unique insight into this important demographic, which is set to shape the workplace for many years to come. Shaeera Essop, the Strategic Client Engagement Manager at Momentum Corporate believes that it is critical that employers, consultants, principal officers and retirement fund trustees understand the psychographics of this generation.

Below are some of the broad millennialsâ&#x20AC;&#x2122; characteristics which must be considered in order to keep up with a rapidly-evolving workplace:

# 1 Health, wellness and technology

Millennials are value-based and therefore prefer to pursue their dream careers with employers whose mission matches their values. They also place a high premium on their health and wellness and having a healthy work-life balance. Millennials embrace technology in every sphere of their lives and expect highly personalised customer experiences from the brands they interact with. In the

Millennials access their retirement savings to pursue their international travel dreams.

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ADVERTORIAL: MOMENTUM CORPORATE

This group is expected to make up almost a quarter of the global workforce this year. workplace, this implies that employers cannot regard millennials as just another employee number.

#2 Job-hopping impacting retirement outcomes

Millennials change jobs every two to three years. Jobhopping is the norm for them, unlike baby-boomers and previous generations before them. Millennials seek immediate gratification and view retirement as a transition phase and not necessarily a set end date of their formal working careers. This means that they access their retirement savings more than once during their working careers to pay off debt or to pursue their international travel dreams. This behaviour severely compromises the likelihood of millennials maintaining their standard of living during retirement.

At Momentum Corporate we believe that it starts with financial education, which is vital for reducing millennials’ financial vulnerability. Retirement funds should offer financial education and benefit counselling through a multi-channel approach, which includes digital platforms, such as access to live webcasts or video content, to cater to millennials. It is not only about what you provide but also about how you engage. It is imperative that retirement funds offer smart, intuitive and personalised digital services across a range of touch-points, from medical underwriting to assistance to members when they change employers. It is particularly important that these smart digital platforms facilitate more informed decision-making at the time of resignation. This increases the probability that millennials will preserve their savings, ultimately helping them to be financially independent when they retire. Retirement funds that offer millennials a programme that rewards their healthy lifestyles, creates platforms for meaningful engagement and ultimately demonstrates value, will be successful in attracting Millennial members. Our new buzz word at Momentum Corporate is #YORO – You Only Retire Once. We cannot stress the importance of planning for retirement enough and we want Millennials to understand why it is never too soon to start. Trustees, principal officers and consultants have an important role to play to ensure that the retirement fund solutions available to millennial employees are appropriate. They must ensure that communication about the value of retirement savings is engaging and meaningful. One size has never fit all, and it definitely is not going to in future. 

#3 Low levels of financial literacy and savings drive high financial vulnerability The Momentum/Unisa Consumer Financial Vulnerability Index revealed that for the last two years, South African consumers’ finances have been under severe pressure. While millennials are the most financially vulnerable age group, a lack of financial literacy is a key driver of continued financial vulnerability in addition to low savings (see #2) and high debt levels. These factors are all exacerbated by a very weak local economic environment. The lack of financial literacy is of particular concern. Momentum Corporate’s employee benefits terminology research revealed that only 16% of millennials understand the concept of a retirement replacement ratio and less than 44% are aware of investment-related terminology such as investment allocation, future contributions and fund credit.

Our new buzz word at Momentum Corporate is #YORO You Only Retire Once.

Retirement funds need to be geared for millennials

This growing demographic will require flexible and innovative product solutions from retirement funds to address their specific needs. In addition, service experiences and engagement must create tangible value in the eyes of the millennial in the present.

MOMENTUM CORPORATE https://www.momentum.co.za/momentum/ business-home.

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Editor's Note

COVID-19 and its economic effects is a devastating pandemic which is undeniably the hardest time most of us have ever had to endure, and we don’t know when things will actually return to normal. Or is starvation and uncertainty our new normal? This pandemic has had its negative affect on all of us, whether it is individually or business related. So unexpected and unpredictable, it has caused a lot of distress amongst families and businesses. Jobs have been lost, livelihoods have been affected, people have lost their lives and hunger has struck like never before. Meanwhile, corruption hasn’t stopped. The billions of Rands made available by government in aid of the pandemic was just another opportunity for corruption. Once the reality of hunger and job losses surfaced, one would have thought that top priority was to curb the spread of the virus and to provide relief to citizens suffering from financial distress. However, it has turned out to be the exact opposite. There have been price increases on necessities while the 'black market' has thrived, not least because of the illegal sale of cigarettes and alcohol. Since we have moved into Level 2 of the lockdown, business has slowly picked up but it remains very difficult to secure business opportunities, especially with many decision makers still working remotely and people still struggling to keep their heads above water. Meanwhile, some people are working on short time because companies just cannot afford their salaries, which results in a major slowdown in production and productivity. Where is this going to end? I don’t know. What I do know is that corporates and government have to support small businesses to ensure a speedy increase in re-employment and economic welfare. Sit back, relax and enjoy the ride is something of the past. From here on it’s hard work. Get stuck in and spend your money wisely. Nothing is certain any longer. Nothing is guaranteed. Together we can make a change. Let’s not forget where we come from and let’s make sure to move forward with those who have been part of our support system, even during these unprecedented times. On behalf of the team at SA BUSINESS INTEGRATOR, I would like to thank each editorial and advertising contributor for their support in this edition. Without your support we are nothing. On another note, we are happy to tell you that we have made a strategic decision to increase our print frequency to quarterly as from 2021, for the mutual benefit of both our advertisers and readers. Enjoy the rest of the year and make the best of what is left of it. Regards

Elroy van Heerden editor@sabusinessintegrator.co.za

sabusinessintegratrator.co.za

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Contents COVER STORY:

Sentech – A leader in South Africa’s digital economy

INFLATION OUTLOOK

The question is not whether the MPC will cut interest rates – but by how much?

INTELLECTUAL PROPERTY

Public – private partnerships boost connectivity, aid the fight against COVID-19

ADVERTORIAL: MTN SA Foundation – Uplifting and empowering our youth

HUMAN SETTLEMENTS

Business rescue & liquidation have consequences for IP

Call for partnerships to deliver more, deliver differently, deliver faster

ADVERTORIAL: Citiq Prepaid – Staying nimble. Staying ahead. Changing the property conversation

ADVERTORIAL: Gauteng Partnership Fund - catalyst in the delivery of integrated human settlements in Gauteng

FUND MANAGEMENT

BUSINESS SUSTAINABILITY

Right-sizing: The ‘Goldilocks dilemma’ for business under COVID-19 pressure

COMMERCIAL PROPERTY MARKET

COVID-19 and the commercial rental market in SA

CUSTOMER SATISFACTION

COVID-19 – key insights for fund managers

ADVERTORIAL: Futuregrowth – rising to the challenge of what it means to be a responsible business

INVESTING

Investing during the pandemic – the year unexpected

South Africa’s fuel stations shine a light on customer satisfaction 38

LIFE INSURANCE

INTERVIEW: Petroleum Agency SA – Brulpadda discovery and ongoing exploration have put SA on the international investment map 44

EMPLOYEE HEALTH

TRANSPORT

Pandemic amplifies challenges confronting the transport sector

BUSINESS FINANCING

Scania supports logistics industry with new finance model

ENTREPRENEURSHIP

How well are employee benefits in the public sector measuring up?

Supplier development drive can get SME sector and economy back on its feet

SUSTAINABLE BUSINESS STRATEGY WATER MASTER PLAN

90 sabusinessintegratrator.co.za

SMALL BUSINESS

South Africa’s quest for universal water access

Life insurance – demonstrating value in a post-pandemic economy 80

How to kick-start a sustainable business strategy

When the going gets tough entrepreneurs get going

DIGITAL TECHNOLOGY

INTERVIEW:

City of Johannesburg – Finance at the heart of the City of Gold

ADVERTORIAL: ZADNA - .Za is safe, resilient & robust and complies with international best practice

Credits

A B U S I N E S S I N T E R A C T I O N P U B L I C AT I O N

South African Business Integrator

South African Business Integrator @ SA_Business_Mag

VOL 6 ISSUE 2

A B U S I N E S S I N T E R A C T I O N P U B L I C AT I O N

September 2020

Volume 6 | Issue 2 | September 2020

EDITOR How to

kick-start

a sustainable business strategy

Pandemic ampliﬁes

challenges confronting the transport sector

sabusinessintegrator.co.za www.sabusinessintegrator.co.za

Current Affairs

COVER STORY

Sentech: The impact on our digital economy post COVID-19 Call for partnerships to deliver more, differently and faster

Economic Development

Business Integration

Photography: Sentech Image credits: 123rf.com

Distribution:

Elroy van Heerden editor@sabusinessintegrator.co.za

COPY EDITOR

Tessa O’Hara tessa.ohara@gmail.com

AD TRAFFIC CONTROLLER

Wadoeda Adams artwork@mediaxpose.co.za

EDITORIAL CONTRIBUTORS

Dr Adrian Saville Bernadette Versveld Sonja Cilliers Richard Walker Minister Fikile Mbalula Minister Stella Ndabeni-Abrahams Minister Lindiwe Sisulu Dov Grinun Daniel Kibel Shaeera Essop Dylan Baxter Bongiwe Mbunge

GRAPHIC DESIGNER

Anja Bramley artwork1@mediaxpose.co.za Published by:

ADVERTISING SALES MANAGER

Rashiedah Wyngaardt rashiedah@sabusinessintegrator.co.za

SOCIAL MEDIA COORDINATOR

Kyla van Heerden social@mediaxpose.co.za 6 Carlton Crescent, Parklands, 7441 Tel: 021 424 3625 Fax: 086 544 5217 E-mail: info@sabusinessintegrator.co.za Website: www.mediaxpose.co.za Disclaimer: The views expressed in this publication are not necessarily those of the publisher or its agents. While every effort has been made to ensure the accuracy of the information published, the publisher does not accept responsibility for any error or omission contained herein. Consequently, no person connected with the publication of this journal will be liable for any loss or damage sustained by any reader as a result of action following statements or opinions expressed herein. The publisher will give consideration to all material submitted, but does not take responsibility for damage or its safe return.

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DISTRIBUTION & SUBSCRIPTIONS

Shihaam Gyer distribution@mediaxpose.co.za

CHIEF FINANCIAL OFFICER

Shaun Mays accounts@mediaxpose.co.za

RECEPTION

Daniëla Daniels receptionist@mediaxpose.co.za

Smart Revenue Management with our Smart Water Management Device

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COVER STORY

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COVER STORY

Sentech:

A leader in South Africa’s digital economy SA BUSINESS INTEGRATOR spoke to Mlamli Booi, CEO of Sentech, about the future of South Africa’s digital economy and ICT industry. The global Covid-19 pandemic has disrupted all sectors globally. What plans does Sentech have to reshape the digital economy of South Africa? Sentech has digitized its broadcasting platforms, allowing its customers to stream their content to their audiences and receive digital broadcast content terrestrially and via satellite. We have invested in an OTT platform that will allow digital content delivery to anyone, anywhere in the country on which ever device they will be receiving this content. We have also enabled the delivery of education content to the learners during the COVID-19 restrictions. Sentech will use the pandemic as an opportunity to accelerate its digital strategy around building a data centre and high-speed communication infrastructure and computation cloud platform for Government initiatives in education, health, rural development, and economic stimulant zones.

Sentech’s role on the retail side is to provide platforms so its customers can provide services to the end user. What platforms are currently in place and how will they benefit and be costeffective to the end user? We have over the years, provided retailers, and will continue to do so, with what we call Business Television and Radio for broadcasting to their end users. In line with the NDP goals ‘Internet for All’ by 2020, Sentech has installed 11 free Wi-Fi spots across the country for the benefit of communities.

As a broadcasting and connectivity specialist, what are the focus areas to optimise and improve on processes and service delivery when it comes to investing in the latest technologies like 5G? We need more sites and spectrum for 5G.

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COVER STORY

Fortunately, Sentech is able to use a spectrum that no other operator is able to use immediately due to the need for coordination. We have already engaged ICASA for this spectrum, at least for pilot sites. We also need collaboration with mobile operators on 5G business and infrastructure development. At the moment we are exploring a collaboration opportunity for the development of 5G for business. We are creating strategic relationships with leading suppliers and global players.

is where the Sentech strategy comes to the fore, deploying wireless broadband services.

What effect does digital transformation currently have on our communities and SMEs, while bearing in mind that not everyone is fully equipped with or informed about the current technologies in place?

Sentechâ&#x20AC;&#x2122;s first 5G sites went live on 26 March 2020, just before the national lockdown. With 5G now the next-generation standard of mobile communications, there have been some concerns globally. What are the pros and cons of 5G among communities?

It provides opportunities for easy access to information, services, and the market. We sometimes underestimate the amount of knowledge and exposure our citizens already have. The problem is not knowledge, but rather access to information because of the lack of financial resources and infrastructure where people live. For example, there is so much fibre in the suburbs and nothing in the townships. This

We are looking at making Sentech Academy activities available to benefit the public.

sabusinessintegratrator.co.za

Is there a plan to educate and empower the end user via Sentechâ&#x20AC;&#x2122;s resources about access to internet connectivity and broadband services? We have developmental programmes for ourselves and the public at large. We are looking at making Sentech Academy activities available to benefit the public.

The main advantage of 5G is that it has a speed comparable to fibre. It allows the user to use one high speed internet for data, video and voice. The same network can be used for industry and the Internet of Things (IoT). The concern for incumbents is that it is a completely new network, replacing everything they have had before. They have to re-invest in the new 5G technologies. For Sentech, it will be a green-fields network which will make it easier to implement There have been health concerns around 5G based on radio radiation. The World Health Organization (WHO) has rejected such claims outright. However, we acknowledge the continuing research on the impact of high frequency, high power and densely clustered base stations as in the case of 5G. As a state-owned entity, we believe that we have an opportunity to deploy wireless broadband to close the access and service gap for all broadband services. Our role is to collaborate with any public and private entity in closing the broadband gap. ď&#x20AC;ź

INTERVIEW: COUNCILLOR JOLIDEE MATONGO, MMC FINANCE FOR CITY OF JOHANNESBURG

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INTERVIEW: COUNCILLOR JOLIDEE MATONGO, MMC FINANCE FOR CITY OF JOHANNESBURG

Finance at the heart of

the City of Gold Several months back, President Cyril Ramaphosa spoke of an opportunity to reset the economy in the wake of the serious economic damage caused by the overarching coronavirus pandemic. Can the economic hub of South Africa heed this call and come up with programmes that can be implemented within the medium term to benefit those who most need it?

SA BUSINESS INTEGRATOR spoke to Councillor Jolidee Matongo, member of the Mayoral

Committee for Finance, a key portfolio which

impacts on the full spectrum of municipal services and programmes, about the scope of the City’s

socio-economic revival programmes post-COVID. South Africa’s City of Johannesburg Metropolitan Municipality is positioned as the economic heartland of South Africa and has over many decades been known as eGoli, the City of Gold. Geographically, the municipality covers an area of

Infrastructure development: Focusing the large numbers Major investment for infrastructure to the level of R1.1 billion is targeted at regions A and G, which are areas identified by the poverty/deprivation map developed by the City. This includes the building of homes, provision of water, tarring of roads and the upgrading of water and sewer systems; also creating jobs. In addition to this, there is a further R800 million allocated in the medium term budget for the procurement of new buses for the Rea Vaya Bus Rapid

1 645km2, stretching from Orange Farm in the south

Transit system which was designed to enable residents to

to Midrand in the north. The city is organised into

easily move across the City to access opportunities. “The

seven regions, named Regions A - G, which have

new buses will resolve the current demand pressure on

varying degrees of socio-economic development,

the existing fleet, and make sure that the city continues

reflective of the people living within their suburbs and

to offer residents an affordable and reliable public

the legacy of the apartheid system. Of these, regions

transport system,” Matongo explains.

A and G are the most urgently in need of social development and upliftment. The City has projected high impact programmes and financial investments into these regions to revive socio-economic development, especially in the

A medium-term operating budget of R12.8 billion is being rolled out over three years so that the City can continue to provide water, electricity and sanitation services across the City. “All City residents will be targeted by these particular

wake of the COVID-19 pandemic which has targeted

investments into infrastructure”, he adds. A good

all South Africans, but especially the poor and

example of such a new project is the large investment to

unemployed.

upgrade the northern sewer works.

sabusinessintegratrator.co.za

INTERVIEW: COUNCILLOR JOLIDEE MATONGO, MMC FINANCE FOR CITY OF JOHANNESBURG

Comprehensive response to COVID pandemic A dedicated budget has assisted an approved health

Making a difference to the people: Free wi-fi R45 million has already been committed to the

response to COVID-19, including screening and testing

free wi-fi service across the metropole. However, the

of citizens and the continuation of municipal services

pandemic and lockdown has further stimulated the

during lockdown. As a result of the spread of the virus

need for such a service, not least of all enabling office

among City staff providing certain key services, the City

workers to work from home.

has provided a programme where service providers can

In a bid to bridge the digital divide in mostly

step in and provide vital services in cases where a critical

disadvantaged communities in Johannesburg,

service facility has been shut down due to workers falling

Matongo says a significant additional investment of

ill from COVID-19.

R40 million has also been made into the extension of

“For instance, a depot may have to close because workers contract COVID-19 and the staff are sent home,” Matongo explains. “We must admit there has

the Joburg Free Wifi hotspots to high student volume areas, hostels and BRT stations. “This is in addition to the wifi hotspots that can

been a decline in the roads infrastructure because the

already be accessed in some of the city’s clinics,

Johannesburg Roads Agency (JRA) services have not

customer service centres and libraries. Our July

been classified as essential under South Africa’s State

budget has committed the further R40 million to

of Disaster regulations during Levels 5, 4 and 3 of the

ensure that employees of the City, any employed

pandemic. For example, there are traffic lights not

person of critical importance, and students, can work

working, and potholes have not been attended to for the

from their homes during lockdown. The free wifi

longest time. Now under Level 2 regulations, the JRA is

will also help the unemployed to search online for

permitted to go back to work.”

job opportunities without having to buy data. For

Construction and completion of clinics In addition to the infrastructure upgrades, the existing

example, the Braamfontein Mesh, servicing the area where I work, assists students at the university and technical colleges within the City, as well as people

70 - 80 City clinics have been insufficient to cope with the

living in the suburbs. The new budget will ensure that

COVID pandemic, so these are being augmented under

at least 70% of the City’s wards are covered,” says

the budget. A good example is the Orchards Clinic, a

Matongo.

state-of-the-art primary health care facility that will offer greatly improved health care services to residents of Orange Grove and neighbouring suburbs.

Mass transport investments For over a decade, the Rea Vaya bus rapid transport (BRT) service has assisted hundreds of thousands of commuters get to work and back home. With dedicated road lane privileges, the journey is much quicker, safer and also cheaper. Therefore, as

A dedicated budget has assisted an approved health response to COVID-19

citizens return to work, this service will receive 200 additional buses by April next year. “Phase 1C of Rea Vaya will be activated right along the Louis Botha corridor to Sandton and the building of the infrastructure, consisting of lanes and stations, is already underway, including wi-fi services,” says Matongo.

sabusinessintegratrator.co.za

INTERVIEW: COUNCILLOR JOLIDEE MATONGO, MMC FINANCE FOR CITY OF JOHANNESBURG

“SMME involvement is also stimulated by this

that over the next few years that the whole of the City

process by our requiring sub-contracting (by the larger

should be supplied by City Power via Egoli Gas, solar

companies) to larger service providers, expanded public

and other forms of energy”.

works programmes and also the provision of security, wi-fi and cleaning services for the bus services. We will ensure that overall, SMMEs get a 30% share of the planned R1.1 billion investments into regions A and G.”

Pikitup system - ward-to-ward waste management Matongo says Pikitup’s budget will employ at least 15 people per ward to clean the City’s streets and also embark on civic education programmes about the

City Power needs to be an energy company of the City that provides not only electricity but gas and other forms of energy to the residents. - Councillor Jolidee Matongo

environment. This will also stimulate the SMME sector and promote employment opportunities. “Employees of the Pikitup system will also identify hotspot areas where people are dumping illegally. The budget for this is around this R170 million,” he adds.

Service augmentation from ward to ward employment opportunity Ten individuals per ward (1 350 in total) will

Longer term: Housing development and upgrades “We are identifying mega-investments for housing

shortly be employed as augmented service workers to supplement the work by City departments and agencies. These will include emergency traffic management, and cleaning services, and identifying

and will strive to integrate communities,” says Matongo.

households in distress from a social welfare

“The City’s Southern Farms Development just outside

perspective.

Eldorado Park, is one of the key projects. In that huge

“We expect these augmented service workers to be

space, we aim for 20 000 housing units - R30 billion over

the eyes and ears of the City relating to service delivery

the next 10 years. Half a billion rand is also being spent

failures. Their efforts will be coordinated by the City of

over the short term in preparing the land.”

Johannesburg's Relationship and Urban Management

“We will also ensure those SMME contractors who have been part of the programmes and have moved up

(CRUM) personnel within the City’s administration,” Matongo concludes. 

the CIDB scales from Level 1 to Levels 5 or 6, will get a share of the action,” he adds.

Electricity maintenance and refurbishment Matongo explains that one of the problems is that the supply to 40% of the city’s population who live in Soweto is undertaken by Eskom directly. “The City is hence working with Eskom, seeking to ensure the continuous supply of power to the residents, investing in electricity infrastructure and also trying to increase the output from the independent Kelvin Power Station to supply additional kilowatts. It is our desire

T 0860 562 874 W www.joburg.org.za sabusinessintegratrator.co.za

INFLATION OUTLOOK

but

The question is not whether the MPC will cut interest rates â&#x20AC;&#x201C;

by how much?

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By Dr Adrian Saville

INFLATION OUTLOOK

A sharp fall in the rate of consumer price inflation has defanged what was initially paraded as ‘aggressive’ monetary policy action intended to stimulate the floundering economy. Given a muted inflation outlook, and the depressed economic setting, the question is not if the South Africa’s Reserve Bank’s Monetary Policy Committee (MPC) will cut interest rates, but rather by how much? In January, the MPC cut the repo rate by 25 basis points (bps) in response to the domestic economic recession of the second half of 2019, a backdrop of a subdued outlook for consumer

price inflation and an anaemic growth forecast. Since January, and in direct response to the impact of COVID-19 on the economy and financial markets, the MPC has announced three further interest rate cuts, for a cumulative total of 2.75% this year. However, ahead of the last MPC meeting in May, the inflation outlook – which is the primary consideration in the SARB’s decision framework – remained subdued and, if anything, faced a risk of falling through the bottom of the 3-6% inflation target. In fact, this risk has since transpired, as South Africa’s inflation rate has fallen to 2.1% in May from 4.5% in January this year. Notably, this 2.1% inflation marks a 15-year low and is also below already-muted expectations. Meanwhile, the SARB's MPC 2.75% repo rate cut makes for a real rate cut of just 0.35% (2.75% interest rate decline less 2.40% inflation rate decline). In other words, the sharp drop in inflation has essentially mitigated the impact of interest rate cuts.

• Extended economic weakness and • An oil price that has dropped to $42/bbl from $60/bbl at the start of 2020. As a consequence, consumer price inflation is likely to hug the bottom of the SARB’s 3-6% tunnel, and to end the year at 3.3%. Seen together with the current bleak economic setting, the consensus view is that the MPC will announce a further rate cut. Some analysts are pointing to the possibility of a cut as deep as 50ps (0.5%) on top of the 275bps (2.75%) already seen so far in 2020. However, South Africa’s Forward Rate Agreement (FRA) curve is pricing in 35bps, which can be interpreted

Subdued inflation outlook Numerous factors at work mean that our inflation expectations remain muted, such as: • The recent strengthening in the rand, which has since climbed to R16.60/$ from R17.60/$ at the time of May’s MPC

Dr Adrian Saville, Chief Executive, Cannon Asset Managers

sabusinessintegratrator.co.za

INFLATION OUTLOOK

as a 100% likelihood of a 25bp cut, and a lower probability of a 50bp cut. Additionally, a Reuters’ poll of analysts expects the SARB to cut rates by 25bps to 3.50% from the current 3.75%. Overall then, the SARB is likely to cut 25bp this week, with a small risk of a 50bp move.

Additional key market focal points Alongside the announcement on interest rates, the market is likely to pay careful attention to updates on the SARB’s expectations for economic growth and consumer price inflation. In the last MPC statement, the SARB noted that gross domestic product (GDP) was expected to contract by 7.0% in 2020, compared to the 6.1% contraction forecast in April. Whilst this would represent the deepest economic contraction that we have on record, the SARB’s estimate remains light compared to private sector forecasts that point to a contraction in double-digit territory. In sympathy, we would not be surprised to see a further downward revision to the SARB’s economic growth outlook. At April’s emergency meeting, the SARB’s forecast for consumer price inflation stood at 3.6% for 2020, rising modestly to 4.5% for next year. In May these figures were revised downward to 3.4% and 4.4% respectively. We expect the SARB to lower their inflation forecast again in the July MPC statement. As an aside, it is worth noting that the domestic interest rate curve is among the steepest in the world. The 10-year bond yield is 9.3%, which is

5.5% above the central bank rate. By comparison, the United States’ 10-year government bond has a 0.59% yield which is just 34bps above the Fed rate of 0.25%. Read this way, this suggests significant market scepticism about the durability of SARB’s easing. However, we are of the view that the muted inflation outlook and depressed economic setting means that monetary policy is likely to remain well-anchored for the foreseeable future. If anything, the growth-and-inflation cocktail supports further interest rate easing over the second half of 2020, with potentially as much as a further 50bps in easing. 

A member of the Bidvest Financial Services Group, Cannon Asset Managers has built a reputation for results since the company’s founding in 1998. We are true investors, seeking out the best investment opportunities across all asset classes locally and internationally. Through our rigorous research process, we look to buy the right assets at the right prices, rising above speculative thinking, with the knowledge that a sound philosophy, patience and resilience are rewarded.

Cannon Assets T +27 (0)11 407 3530/3533 W www.cannonassets.co.za

Disclaimer The contents of this article do not consider the individual needs or circumstances of any person, and do not constitute investment advice. While all opinions expressed herein are based upon our research and all information is accurate to the best of our knowledge, Cannon Asset Managers does not accept any liability whatsoever for any loss arising from reliance on this article. Individuals seeking to invest should first consult a professional financial advisor before taking any decisions. Cannon Asset Managers’ is committed to fairness and integrity in all investment activities and attempts to align the interests of its investment team with clients. Consequently, members of the investment team may have a personal interest in the shares or portfolios mentioned within this article. Cannon Asset Managers Proprietary Limited (registration number 2000/025176/07) is licensed as a financial services provider in terms of the Financial Advisory and Intermediary Services Act, 2002.

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INTELLECTUAL PROPERTY

Business rescue

liquidation have consequences for IP By Bernadette Versfeld

Intellectual property is often overlooked when a business is compelled to seek business rescue or liquidation, but it may form a valuable asset, requiring decisions to be made on whether to sell it or maintain it.

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INTELLECTUAL PROPERTY

In the current economic climate, many businesses will find themselves in the unenviable position of having to decide between business rescue and liquidation. Whatever the decision, it is important for any business rescue practitioner or liquidator to carefully assess the companyâ&#x20AC;&#x2122;s intellectual property (IP) assets, which are often overlooked in these proceedings.

of the most valuable trade secrets in the world, and it owns a tremendous amount of know-how in the operation of its business around the world. Whether IP is registered or unregistered, businesses have a monopoly over those rights and own a valuable asset which can be commercialised in a number of different ways.

Registered and unregistered IP

A business rescue practitioner should carefully consider the business's IP and whether it can

First, the basics. No business operates without IP that describes an umbrella of rights which fall into two categories: registered and unregistered. The registered IP of a business may include patents for chemical compounds in medicines, trademark registrations for valuable brands such as Apple, or registered designs such as the Coca-Cola bottle. It may also include plant breeders' rights, which allows agricultural companies to protect plant varieties, for example, those that grow at a faster rate. Unregistered IP may include copyright, trade secrets and know-how. It is often more difficult to establish what unregistered IP a business owns, but this exercise must be undertaken as a business may own some very valuable unregistered IP which can be monetised. For example, a business like Coca-Cola owns copyright in the artistic and musical works in its advertising. Its recipe is probably one

It is important for any business rescue practitioner or liquidator to carefully assess the companyâ&#x20AC;&#x2122;s intellectual property assets, which are often overlooked in these proceedings.

IP can be restructured to increase revenue or decrease liabilities

be restructured to increase revenue or decrease liabilities. If any IP is not used by the business and there is no intention of using it in future, the business rescue practitioner can either license it to a third party to generate revenue or have it valued to sell it. If the IP is already licensed, there may be restrictions on its further exploitation. If the business is paying license fees for IP which it no longer uses, then the termination of the license should be considered. An IP portfolio can be extremely large, with many registered rights, resulting in ongoing maintenance costs for the business. Generally, trademarks are renewed every 10 years and patents and designs are renewed annually. If IP is not being used, these registrations should possibly be abandoned to reduce the business's liabilities. Another possibility is collaborating with third parties to resuscitate the IP of a business for purposes of providing the confidence lenders require to raise capital for the business.

IP does not lose value on liquidation It is a misconception that IP loses value upon liquidation. IP is critical to the operation of any business, especially if it is technology-based, like one that relies heavily on software. On liquidation, all property including IP is sold and distributed among creditors with secured, preferred and concurrent claims, so it is vital for a

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INTELLECTUAL PROPERTY

liquidator to identify and value that IP before it is sold. IP is often overlooked in a liquidation, which is unfortunate since it can considerably increase creditor returns. We frequently find valuable registered IP remaining in the name of a liquidated business at the Companies and Intellectual Property Office. It is critical to appreciate that after liquidation, it is no longer possible to secure ownership of this IP, so whatever IP the business owns must be investigated and appropriately dealt with before the liquidation process is finalised. As already observed, if it is still possible to commercialise this IP as the liquidator can have it valued and sold.

What happens to an IP license on liquidation? The rights and obligations of the licensee and the licensor in relation to IP assets are governed by a contractual agreement, whether oral or in writing. Licensor obligations could include the obligation to maintain or develop an IP asset or continue to pay registration expenses to preserve its value. In general, contracts not completed by the insolvent licensor are not terminated or suspended and the liquidator can choose whether to abide by them or repudiate them. This election must be exercised on the instruction of the creditors of the insolvent estate since the liquidatorâ&#x20AC;&#x2122;s actions must be in the interests of the joint creditors. The consequence of a liquidator's repudiation is that a licensee cannot claim specific performance, but all other breach remedies remain available. If the licensee refuses to accept the liquidator's repudiation of the agreement, he/she will perform in terms of the agreement and become a concurrent creditor in the insolvent licensor's estate with a claim for damages. If the licensee accepts the liquidator's repudiation of the agreement, all performances rendered by the licensee and the licensor up to

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Bernadette Versfeld, partner at Webber Wentzel

that point must be returned to the other (provided no forfeiture clause exists in the agreement) and the licensee will have a concurrent claim for any additional damages suffered. The consequence of a liquidator's election to abide by the contract is that the liquidator steps into the shoes of the insolvent licensor. The licensee will be entitled to receive full performance in terms of the agreement and will be obliged to render full performance in return. The liquidator will be obliged to take over the whole agreement and may not amend any of its terms. The costs of performing under the contract come out of the insolvent licensor's estate. If the insolvent estate has insufficient funds to facilitate performance, creditors with proven claims will need to contribute any shortfall. IP is a valuable asset for a business. Since no business is immune to the ravages of an economic slowdown, it is very important to understand long before business rescue or liquidation, how the businessâ&#x20AC;&#x2122;s IP assets and licences may be impacted by the event. ď&#x20AC;ź

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ADVERTORIAL: CITIQ PREPAID

Staying nimble. Staying ahead. Changing the property conversation Only developers and property owners with flexible and relevant offerings are likely to stay ahead in a very competitive and demanding market. The 2020 pandemic has done more than change the way people work; it’s changed the way they live and what they expect. The business of owning, developing and renting

property has been severely affected by the pandemic. People don't want to share spaces with strangers or take unnecessary risks, or invest when markets are challenging. Household names like Airbnb, Hertz and Sandton City have been hit hard. However, as restrictions lift and markets recover, it has become critical that the commercial and residential property markets look to new ways of capturing customer attention and developing offerings that are relevant and engaging. “With people thinking twice about investing and three times about developing, it’s time for the market to look at the must-haves for tenants and how to add value,” says Michael Franze, Managing Director at Citiq Prepaid. “The property industry is not alone in looking for sustainable answers to complex questions. Rental rates and occupancies have dropped significantly. There has been an increase in vacancies and rental arrears. Companies are looking for fresh ideas and approaches to shore up sustainable foundations within the current market.”

A nimble approach to the business of property There are examples of how companies have made impressive shifts in their approaches to property development. One example is where retirement homes have attached basic healthcare services to

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their property rental services and have made it easier for retired tenants to pay for utilities and manage their admin. This takes the market’s specialised needs into consideration which, in turn, increases occupancy and how desirable the property is for the occupants. “It’s all about taking a nimble approach to the business of property,” says Franze. “It’s about looking at existing assets and value-added services and refining them to meet specific market requirements. It also allows for organisations to recoup the losses incurred from arrears and lost business during the pandemic and to adapt to the new needs of customers. People want safety, health, access, and limited contact with the outside world. They want their processes online and their experiences streamlined.”

Adapt to the post-pandemic era It’s also about choice. Property owners and developers can choose to continue with traditional approaches to tenant, market and solution, or they can adapt to the post-pandemic era. The question is – how? “People have recognised that there are things that they don’t actually need or want in their lives right now,” says Franze. “Their spending patterns have changed and their approaches to personal safety and wellbeing have altered their behaviour and investment patterns. This is the new normal. This is the wall that the property market has to climb.”

ADVERTORIAL: CITIQ PREPAID

It’s important to become agile, nimble and adaptable to cope with the future. Property owners need to look at simple solutions to legacy problems and find innovative ways of dealing with them. Utilities are often the most painful part of any tenant and property owner’s life. They are complicated, difficult to manage, cause tension, impact on budgets, and add admin. Often, properties share utilities from one meter across multiple properties and this can cause conflict if tenants disagree with how the billing is managed or split. These conflicts then impact on tenant budgets and time, estate

their meter usage and payments. It offers everyone a pay-as-you-go solution so the tenant can pay, use and repeat in alignment with their budgets and their requirements. It’s far less time consuming and expensive than disputes.” In addition to simply removing the obstacles that lead to disputes in utility billing, prepaid sub-metering minimises conflict and relationship damage. Tenants don’t argue with one another or management, and everyone just pays for what they use. The other advantage of using a prepaid submetering solution like the one provided by Citiq

manager admin and expenses and they’re not the most effective use of time or money. It also won’t endear the customer to the developer or owner. “The 2020 pandemic is defined by change, awareness and accountability,” Franze. “Tenants don’t have money. Budgets and time are tight. People aren’t keen on unnecessary physical contact or engagement so they can pay bills or manage their admin. What they want is clean premises, accessible utilities and reduced touchpoints.”

Prepaid is that it provides trackable data via the online portal. This is secure and accessible and it provides managing agents and property owners with reports that help them to analyse purchases and plan accordingly. By tracking purchases owners can adjust lease agreements over time so that their pricing remains competitive and secures long-term occupancy. “Property owners and developers should consider investing in prepaid sub-metering solutions not only because they cut out conflict, but because they minimise touchpoints for customers,” concludes Franze. “With our prepaid sub-metering solutions, people can make use of online platforms and mobile devices to purchase their tokens so they don’t need to stand in queues or go to physical stores to manage their utilities.” Citiq Prepaid works with property owners, developers and managing agents to create prepaid sub-metering solutions that add value, deliver exceptional service and transform engagement. We have reliable solutions, a sterling market reputation, and we know what you need to build the property experience of the future. 

One very simple solution – prepaid sub-metering Unfortunately, one of the biggest headaches for most property owners and managing agents is the management and collection of utility bills. The municipal utility bills are often based on estimates rather than actual readings and they can be out of step with the billing cycle and therefore payment collections. The monthly variance in bills and invoicing dates can make budgeting extremely difficult for tenants. And if they fall behind the payments or withhold them due to a dispute, then the owner is out of pocket because they still have to pay the bills to ensure that everyone else continues to receive their utility services. “The answer to most of these challenges lies in one very simple solution – prepaid sub-metering,” says Franze. “Prepaid sub-meters cut down on disputes because the tenant retains control over

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BUSINESS SUSTAINABILITY

Right-sizing:

The ‘Goldilocks dilemma’ for business under COVID-19 pressure By Sonja Cilliers

Down-sizing may present a short-term solution to survival for businesses under the pressures of the coronavirus pandemic, but right-sizing – checking the relevance of value propositions, repurposing resources and filling gaps in customer needs – should not be overlooked as a route to longerterm sustainability.

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BUSINESS SUSTAINABILITY

“We all know the fairytale where Goldilocks is faced with three steaming bowls of porridge – they all looked appetising but on closer inspection, one proved to be too hot, one too cold and only one was just right,” says University of Stellenbosch Business School (USB) managerial accounting senior lecturer, Sonja Cilliers. “For business, these challenging times call for creative solutions to cost and relationship management that are neither too hot or hastily imposed, nor too cool and distanced from the customer, but just the right size.” “There cannot be a blanket assumption that business will return to normal post-coronavirus,

slightly under lockdown level 4, mounting cash flow problems still appeared to threaten survival, with only a third of businesses confident that they had the financial resources to continue operating through the pandemic, says Cilliers. “If the issues faced are of temporary nature and the company finds itself in a position in which it

and without strategic thinking and planning, a real danger exists that short-term solutions to alleviate the pressure cooker of the present may negatively impact medium- to long-range decision making,” she warns. Business survival is top of mind worldwide, with daily announcements of leading companies in trouble – multi-national corporations such as car rental giant Hertz, $18-billion in debt, and retail chain JCPenney ($4.2-billion debt) filing for Chapter 11 bankruptcy protection in the USA in May alone. Locally, Edcon filed for business rescue in April, with revenue losses of R2-billion, Comair followed in May (R3.4-billion in debt), and Massmart announced in July that up to 1 800 employees in its Game stores could be retrenched. The challenges are clear in the second Stats SA survey of the impact of COVID-19 on business, published in mid-May, indicating that 9% of the 2 182 businesses surveyed across various sectors had already closed down permanently by 30 April, almost half had ‘paused trading’ under Level 5 lockdown in April and 30% said they would not survive a month without any turnover.

cannot meet its financial obligations, then a process such as business rescue may be a viable option. “For those companies that have some leeway in terms of cash management and therefore the luxury of time to plan, it would be sensible to consider two aspects: First, to deal with the immediate threat to continued operations and, second, critical analysis of the sustainability of the business model and the continued relevance of the value proposition to the customer,” adds Cilliers

Only a third of businesses have financial resources to continue operating through pandemic Although the follow-up survey published at the end of June showed that pressure had eased

Challenge is whether the company’s business model is still valid While an application for business rescue or bankruptcy protection doesn’t mean a company will necessarily be liquidated, and corporations such as General Motors and Delta Airlines have regained profitability after bankruptcy reorganisations, she says “the challenge in the wake of the Covid-19 pandemic is to determine whether the business model followed by a company is still valid”. Cilliers adds that cost-cutting measures to deal with immediate cash flow problems should be done with a clear view to the direction in which the company is headed, and “where possible, organisations should aim towards a right-sizing rather than a down-sizing orientation”. “Right-sizing requires that resources be repurposed to where the needs gap is manifesting currently. It may very well be that right-sizing

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BUSINESS SUSTAINABILITY

the organisation may lead to increased activity in certain aspects of the business, for example products that fulfill basic needs of customers may see an increase in demand in these times. The challenge then becomes how to repurpose resources, which may range from redeployment of the workforce to the reorganisation of a production plant.” Cilliers points to the example of US supermarket group Whole Foods which has turned some of its physical store locations into ‘dark stores’, repurposing them into semi-warehouses for

company, but the entire value proposition to the end user. The loss of key supply partners “may prove to be as catastrophic to the business as is the loss of customers”, she comments, pointing to the Stats SA survey which indicated that 53% of businesses had been unable to obtain the materials and supplies required to continue operations. The pandemic environment means companies will have to revise forecasts and adjust budgets on a rolling basis, even though assumptions about future revenue that underlie budgeting are particularly

online order fulfilment to meet a massive increase in demand for grocery deliveries and curbside collections as customers seek physical distancing. “The customer needs gap is filled while also providing the store with a greater margin of control over the current bottlenecks and delays suffered by delivery services.”

challenging with customer spending patterns impacted by decreased income, changing needs and physical impediments to purchasing. “Revenue assumptions drive production or service costs and in many cases, these costs are fixed over the short term. Even where costs are seemingly locked in, managers will have to think about renegotiating terms, repurposing and rescaling activities. If businesses can access their relationship capital without resorting to a formalised business rescue exercise, they may be able to garner a larger amount of control and flexibility as to the way forward,” Cilliers concludes. 

Relationship management throughout the value chain is critical She added that relationship management throughout the value chain will be a critical success factor to ensure the survival not only of the

Sonja Cilliers holds a BComm LLB (Stell) BCompt Hons (Unisa) and is a Chartered Accountant (SA). She is a certified International Coaching Federation (ICF) accredited coach with the Associated Certified Coach (ACC) designation. She is also an executive board member of the ICF Chapter South Africa and a senior lecturer at the University of Stellenbosch Business School in Managerial Accounting, having previously lectured at the University of Stellenbosch School of Accounting and Law Faculty. Cilliers is currently enrolled in the Masters (Phil) Coaching programme at the University of Stellenbosch Business School and her research interest is the promotion and development of emotional intelligence in an organisational context.

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Weâ&#x20AC;&#x2122;re in this together.

Extraordinary times require an extraordinary response. Our people and partners have responded by dedicating time and resources to various initiatives. Find out how a weekly mindfulness practice has helped Futuregrowth employees during this crisis. Visit:

www.futuregrowth.co.za/newsroom

Futuregrowth is a licensed Financial Services Provider.

COMMERCIAL PROPERTY MARKET

COVID-19 and the commercial

rental market in SA By Richard Walker

The commercial property market is facing some challenges in South Africa right now: physical distancing means less foot traffic; the recession means more business closures. Richard Walker, Director of Risk Advisory Services at BDO, looks at some of the prevailing issues at the midpoint of 2020.

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COMMERCIAL PROPERTY MARKET

Like many industries, real estate and construction has been hard hit by the effects of COVID-19 and the national lockdown after a year of a solid growth of 9% in 2019. Distributable earnings from the sector continue to diminish, with many REITs withholding their dividends as they focus on preserving liquidity. Many tenants will have had their sales impacted by the economic and trading restrictions of lockdown, leading to requests for relief in the form of payment holidays, rental reductions and deferrals.

Payment arrangements Organisations like the newly formed Property Industry Group, an alliance of retail property landlords, have tried to guide the sector on how payment relief should be applied to SMMEs, but this guidance has not always been taken. And when both tenant and landlord become bullish about who should pay what and when, relief and goodwill become difficult, even as legal experts urge parties to demonstrate ubuntu as a recognised principle of doing business. Landlord cashflows will need to be remodelled in light of weaker expected rental collections. Property portfolios with a good mix of government and municipal tenants may fare better with collections, but the state’s coffers are not endless there may be future payment delays. Luthuli House, for instance, announced late salary payments for June as a result of the national crisis. Valuations become difficult in this environment. Does rental on a per square metre basis still make sense at a time when tenant turnover is so unstable? Rentals are only material if they’re actually being paid and in a recessionary environment (GDP has already fallen by 2% in the first quarter of 2020) landlords may prefer a tenant who negotiates terms rather than vacates a space altogether.

The impact on vacancies The South African Property Owners Association’s (SAPOA) latest Office Vacancy Report shows that the national vacancy rate is 11.6%, which is 60bps higher on the previous quarter. A small increase,

to be sure, but SAPOA says these figures are purely a result of South Africa’s fragile economic environment rather than the impact of COVID-19, which will take several quarters to filter through into the office sector’s vacancy rate. But rental growth already shows signs of significant decline (0.7% compared to 2.5% in December 2019) and we know anecdotally that consumers and businesses are facing intense pressure to meet their debt commitments in a deteriorating national economy and a zerogrowth environment. Businesses are in distress (especially in sectors like hospitality), and job creation and retention remain uncertain. Additionally, many companies are reconsidering the role of the office in their operating structure: the rise of flexible workspaces and a decentralised workforce will only dampen the commercial rental market further.

Effects on dividend distributions All of this naturally affects dividend distributions. We expect a number of JSE-listed REITS will want to distribute less than their 75% mandatory minimums as they prioritise liquidity and try to consolidate weaker balance sheets. The JSE needs to be approached directly for a relaxation here, and this may require a legislative change. Alternatively, REITS may try to raise provisions in their balance sheet before dividends are declared. From a corporate governance perspective, boards must discharge their duty to ensure that the businesses under

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COMMERCIAL PROPERTY MARKET

their care remain a going concern, even as lower distributions affect shareholder confidence and impact income-sensitive consumers like pensioners who have historically relied on REITS for their dependable performance.

Looking to the future We expect very little commercial development uptake in the near term for rental and construction SMMEs. Any opportunities that arise will be for the large corporates to consider. For now, the most urgent risk for the sector is the effect of

Richard Walker, Director of Risk Advisory Services at BDO.

We expect a shift in the way rental agreements are structured, with tenants asking for shorter leases with more flexibility.

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decreasing property values on loan to values ratios. Although the repo rate reductions should unlock some liquidity for landlords, the relief will be diluted since it is common practice for REITS to hedge their credit risks through floating and fixed interest rate agreements. We also expect a shift in the way rental agreements are structured, with tenants asking for shorter leases with more flexibility. This is not to say landlords have no bargaining power. There is still strong investment interest in certain segments of the market like healthcare and logistics assets. Consumers may be shopping online, but stock is physical and has to be stored in warehouses and facilities. The overall risk landscape of property companies may not change within the near future, but certain risks would have accelerated the run rate, such as the degree of operational resilience to the current pandemic. The challenge is to anticipate future risks and determine a consistent and effective management approach. For example, a shift toward shorter leases with more flexible may mean a greater emphasis on Know Your Customer (KYC), which will in turn change operating models, business processes and supply chain reliance. The most important thing is to be adaptable to the changing needs of the consumer and corporate markets. ď&#x20AC;ź

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CUSTOMER SATISFACTION

South Africa’s

fuel stations shine a light on customer satisfaction South Africa’s top five fuel station brands – BP, Caltex, Engen, Sasol and Shell – are leading the way in the customer satisfaction stakes, with one of the highest industry customer satisfaction scores across 10 sectors polled in the South African Customer Satisfaction Index (SA-csi), conducted by Consulta.

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CUSTOMER SATISFACTION

This is the first time that fuel stations have been included in the SA-csi, the first independent, comprehensive national customer satisfaction index with international comparability in South Africa which has collected data from more than 400 000 consumers since its inception in 2012. “The overall customer satisfaction score for the industry is high at 80, however, there is no outright leader in the customer satisfaction stakes, which leaves the field open for a brand to take the lead in providing a differentiated customer experience,” says Ineke Prinsloo, Head of Customer Insights at Consulta “Fuel, as a product, is a commodity and aspects such as quality of fuel is essentially a hygiene factor, and not a differentiator. Most consumers have no understanding of fuel quality at brand A versus brand B and expect that they will get a product of appropriate standard at every fuel station. However, what is not a commodity is the customer experience and the choice that consumers have – here the stakes are high to attract the patronage of customers who are prepared to go out of their way to use a specific brand because of the experience and perceived value they get at a particular fuel station,” she explains. The 2019 SA-csi for fuel stations provides highly scientific insights into the overall level of satisfaction of customers of South Africa’s top five fuel station brands. The 2019 SA-csi polled 1 600 fuel station customers during the last quarter of 2019.

Key take-outs of the 2019 SA-csi for fuel stations 1. Customer satisfaction – overall index

• All fuel station brands perform on par (79.6) in terms of overall customer satisfaction scores, with the exception of Caltex which is below par. While all brands perform at a high level in terms of customer satisfaction, there are no outright leaders. This suggests that while fuel

station brands deliver a high-quality experience for customers, it is largely an undifferentiated experience. An ‘on par’ score refers to the fact that there is no statistical difference compared with the rest of the industry. • Engen (80.8) and Shell (80.3) lead by small margins, followed closely by BP (79.2) and Sasol (79.2) – all on par – followed by Caltex (77.2) below par. • In terms of global comparisons, South Africa’s fuel station brands outpace the US-csi score of 74 by a significant margin. However, the service dynamics are quite different. In the US, a fuel purchase is typically a DIY process where you fill up your vehicle yourself, whereas in SA customers would be assisted by forecourt employees. It is easy to see why employee attitude and service ethic can play a make or break role for fuel stations and customer satisfaction in SA.

2. Customer expectations and perceived quality • BP, Engen, Sasol and Shell all perform on par in terms of customer expectations and perceived quality, while Caltex comes in just below par. • All fuel station brands however have a positive expectation-quality gap, which means that they all exceed customer expectations. Engen is best at exceeding customer expectations. • When customers were asked what the most important aspects were that fuel stations needed to improve on, the top five mentions were service experience, staff attitude, rewards and value for money, skills and knowledge of staff and cleanliness.

3. Perceived value • Perceived value is a measure of the quality, relative to the price paid. The perception of value for money is a strong predictor of future usage and company growth.

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CUSTOMER SATISFACTION

• All fuel station brands perform on par (74.6) in terms of perceived value. However, given that fuel is a highly inelastic product which means demand does not change significantly with any change in price, typically because it is deemed an essential product, service and reward addons and overall customer experience in the forecourt play a big role in the perceived value that customers enjoy. The product - fuel - in and of itself has few differentiating qualities – which is why the customer’s experience in the forecourt and with frontline employees plays a crucial role in overall customer experience. • Value for money will also play a much bigger role as the economy bites, and here fuel stations that have tied up with loyalty/reward programme partners will likely have an advantage such as BP with Pick ‘n Pay’s Smart Shopper, Discovery fuel rewards with BP and Shell, and FNB eBucks at Engen.

While convenience plays a big role in terms of customer choices, it is not a substitute for a bad experience in the forecourt with staff and other aspects such as cleanliness and safety.

4. Perceived value • All fuel stations are on par (74.6) with perceived value. • Perceived value is a measure of quality relative to the price paid.

5. Complaints incidence and resolution • In terms of complaints incidence and handling the industry average of complaints incidence is 8.7/100 and complaint handling is

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45.0/100, which puts the industry on par with international standards in terms of how well issues are addressed. • Sasol has the lowest complaint incidence (6.4) of all fuel station brands, and an equally impressive complaint resolution score (55.9) – both scores are significantly better than the industry par. This means that Sasol has a low incidence of customer complaints and is also best at resolving them. • It is important to note that of the complaint types, 80% of complaints relate to the ‘human’ aspects such as staff skills and knowledge, attitude of staff, responsiveness, and service. This emphasises the importance of customer service training and developing a customercentric mindset and processes among employees who are the ultimate delivery mechanism of customer satisfaction.

6. Customer loyalty • Across the board, customer loyalty scores are high, and outpace the industry par scores of most other industry sectors polled. Fuel stations have a high customer loyalty par of 81.3% which suggests that customers are loyal to their chosen fuel station brand. • Engen has the most loyal customers at 84.5% which is also significantly higher than the industry par. • BP follows at 80.7%, Shell at 80.4% and then Sasol (78.8%) and Caltex (77.6%) coming in below par. • All brands enjoy a remarkably high percentage of brand loyalists. However, there is some complication in determining whether this is driven by the rewards programme that the customer subscribes to.

7. Net promoter score • Net promoter score measures the likelihood of a person recommending a brand. The industry

CUSTOMER SATISFACTION

par score is 48.4% • Engen has the highest NPS score at 59.5% which is well above industry par, and also has the highest number of customers who are actively recommending the brand at 70%, well above the industry par of 62%. • BP (43.8%) and Sasol (39%) follow below par on NPS score, while Caltex (34.9%) comes in with the lowest NPS score. • Caltex and Sasol have the lowest scores in terms of promoters, both at 53% and also the highest percentage of detractors at 28% and 33% respectively. “While fuel in of itself is a commodity product, customers still have a wide choice of brands to choose from. Fuel station brands spend tremendously on advertising and marketing activity to attract consumers to their fuel stations versus their competitors. Factors such as advertising, marketing, customer experience and corporate social responsibility play a big role here, as well as how consumers perceive them in terms of the cleanliness, safety and convenience of their facilities, the friendliness and service ethic of their staff, other value added services at their forecourts such as food convenience stores and so on,” says Prinsloo. “Another big driver that fuel companies have tapped into is that of loyalty programmes and rewards – most brands have tied up with partners

such as Discovery Miles, Pick ‘n Pay Smart Shopper and eBucks as one way to differentiate and attract consumers to their service stations by offering customers points/rewards on their chosen loyalty programmes,” says adds. Prinsloo says that while convenience also plays a big role in terms of customer choices, it is not a substitute for a bad experience in the forecourt with staff and other aspects such as cleanliness and safety. “In this regard, the people factor is fundamental to the patronage that a fuel station enjoys. Maintaining high service standards and a customercentric philosophy is key for fuel station owners. However, since fuel stations typically operate on a franchise model, it can be challenging to establish maintain consistency across different fuel stations even within the same brand or group,” she adds. A sharp focus on customer satisfaction and continuous improvement throughout all areas of the customer journey is critical for success. The training and onboarding of employees is also crucial factors, as are the operational systems and processes that make for a quick, pleasant, and efficient customer experience. Finally, there are also macro trends at play that will radically reshape the forecourt of the future - environmental concerns, price pressures, electric vehicles and the retailing/merchandising aspects of the forecourt are all important aspects that will shape customer experience in future. 

As a strategic tool for gauging the competitiveness of individual firms and predicting future profitability, an organisation’s customer satisfaction performance, as measured by the SA-csi methodology, provides a predictive indication of how well the firm will perform in terms of future revenue and earnings growth. Supported by both the scientific and practitioner community, the SA-csi is the first independent, comprehensive national customer satisfaction index with international comparability in South Africa and has collected data from more than 400 000 consumers since its inception in 2012. The SA-csi forms part of a global network of research groups, quality associations and universities that have adopted the methodology of the American Customer Satisfaction Index (ACSI) via its Global CSISM programme.

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INTERVIEW: PETROLEUM AGENCY SOUTH AFRICA

Brulpadda discovery and ongoing exploration have put SA on the international investment map SOUTH AFRICAN BUSINESS INTEGRATOR spoke to Dr Phindile Masangane, CEO of the South African upstream oil and gas regulatory authority, Petroleum Agency South Africa (PASA), about what is required to secure stability and security of energy supply.

Dr Masangane was appointed as Chief Executive Officer of PASA in May 2020. Before that, she served as an executive at the South African stateowned energy company, CEF (SOC) Ltd, the holding company of PASA. In this role, she was responsible for clean, renewable and alternative energy projects. In partnership with private companies, Dr Masangane led the development of energy projects including the deal structuring, project economic modelling and financing on behalf of the CEF Group of Companies. Her responsibilities also include supporting the national government in developing energy policy and regulations for diversifying the country’s energy mix. In 2019, Dr Masangane was appointed Head of Strategy for the CEF Group of Companies, where she led the development of the Group’s long-term strategic plan (Vision 2040+) as well as the group’s gas strategy.

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INTERVIEW: PETROLEUM AGENCY SOUTH AFRICA

Between 2010 and 2013, Dr Masangane was a partner and director at KPMG and was responsible for the Energy Advisory Division. In this role she successfully led the capital raising of $2 billion for the Zimbabwe power utility (ZESA/ZPC)’s hydro and coal power plants expansion programmes.

Tell us about the role of PASA and its mission and vision. Petroleum Agency SA is South Africa’s national regulator for the upstream oil and gas industry in South Africa. PASA licenses and regulates exploration and production activities of oil and gas both onshore and offshore. PASA has three main functions: 1. The first is to attract investment to South Africa’s oil and gas upstream industry via investment into exploration and production of oil and gas in South Africa. We have a team of geologists and geophysicists who interpret data gathered through past exploration activity to determine prospectivity and use this to attract exploration companies to South Africa. 2. The second is to regulate the upstream industry in terms of the Mineral and Petroleum Resources Development Act, its regulations and other applicable legislation. PASA has staff responsible for ensuring legal, technical and environmental compliance as organisations enter into contracts with the state to explore for oil and gas. 3. The third function is to act as the national archive for all data and information produced during oil and gas exploration and production in South Africa, and to curate and maintain this data for use and distribution. Other functions include advising government on any issues pertinent to oil and gas as well as carrying out any special projects, as directed by government. For example, we are currently studying the geology of the Karoo Basin to quantify the shale

gas potential that we have. We are also studying the ground water availability (quality and quantity) so that we have a baseline against which we can monitor shale gas activities in the future.

What is required to secure stability and security in the sector? The oil and gas exploration industry has always been extremely volatile, being subject to global economic forces and highly dependent on the fluctuating oil price. In addition, oil and gas exploration is exceptionally risky in terms of initial, upfront capital investment with long periods before any return on investment and profit generation. To counter this, oil and gas exploration companies require equitable terms, and especially long-term stability and consistency in contractual terms together with political and independent judicial stability. Coupled with this would be a government that is committed to ease of doing business and to facilitating entry into the upstream space. Local expertise in servicing the industry’s requirements in terms of human resources and services is also a strong advantage. A developed industrial economy offering opportunities for local monetisation of gas discoveries would also assist.

Where do the opportunities lie in this sector? South Africa has a good petroleum resource prospectivity which remains unexplored. The country is highly dependent on imported crude oil and in recent times South Africa also started importing finished product (petrol and diesel), which is not good for our balance of payment as a country. The opportunities are massive for the country to unlock its petroleum resource endowment to meet its energy needs. The development of the stand-alone Upstream Petroleum Resources Development legislation and its accompanying regulations will further

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INTERVIEW: PETROLEUM AGENCY SOUTH AFRICA

support a conducive environment for oil and gas development. This rewriting of the legislation governing oil and gas exploration and production gives South Africa a chance to address the requirements of the industry (as above) while also ensuring an equitable deal for the South African state and meaningful participation of South Africans in the industry. The recent Brulpadda* discovery and ongoing exploration in the area, as well as the potential for shale gas have both put South Africa on the international map in terms of a destination for investment. The oil price is making a slow but steady recovery from the recent crash caused by the price war between Russia and Saudi Arabia and further exacerbated by the drop in energy demand because of the COVID-19 pandemic.

What are the challenges facing this sector? Challenges facing the South African upstream industry include the low oil price (now steadily recovering), uncertainty regarding terms and legislation (now being addressed through the UPRDA), environmental concerns and misplaced public negativity regarding fossil fuels, and the perception that we lack the specialised skills. A further challenge is to diversify the industry and make it more inclusive in terms of South African companies undertaking exploration in South Africa. Transformation of the upstream oil and gas industry and making sure that the industry is inclusive is essential. The upstream oil and gas industry is highly capital intensive, high risk in the early stages and requires highly specialised skills. So local small and medium companies tend to find it difficult to source funding to participate in the industry. Our challenge is that as a regulator acting on behalf of the government and the people of South Africa, we have to find solutions to these challenges so that South African companies can meaningfully participate in this strategic industry.

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How big a role does PASA play in the renewable energy sector, and how will you be advancing this agenda? Oil and gas are fossil fuels and by definition, not part of the renewable energy sector. The South African energy transition is from a high coal reliant energy mix with a high carbon footprint to a cleaner energy future with mainly gas/renewable energy. Renewable technologies cannot provide a reliable baseload supply of electricity. The flexibility and load following capability of gas technologies makes gas-to-power an essential technology to combine our renewable energy programme with. South Africa is currently heavily dependent on coal as a primary energy source and the substitution of natural gas for some percentage of electricity generation, as envisaged in the National Development Plan, could assist with the country reaching its goals in terms of lowering the carbon emissions. PASA's main role in this is to attract and facilitate the activities of explorers for indigenous gas.

How important is policy and legislation decision-making in informing how PASA undertakes its operations? Policy and legislation are of utmost importance in how PASA operates. The main purpose of PASA is to implement and apply policy and applicable legislation to the upstream industry on behalf of government. Its mandate is 100% driven by policy and legislation. Its close contact with the diversity of exploration companies puts it in a unique position to be able to advise government in the formulation of policy.

Where are the new SA oil and gas explorations? Currently there is ongoing exploration offshore of the prospects close to the Brulpadda discovery. Odfjellâ&#x20AC;&#x2122;s Deepsea Stavanger oilrig is on its way to South Africa from Norway and should arrive around

INTERVIEW: PETROLEUM AGENCY SOUTH AFRICA

12 August. It will drill the Luiperd (more correctly the Luiperdpadda) prospect which is the second of five prospects in the group. There is an option to retain the rig in South Africa for further drilling. The Brulpadda well discovered light oil and gas condensate, but the phase in the other prospects can only be determined through drilling. Future development of the discovery is highly dependent on the success of this further drilling. Other exploration offshore is the planned drilling of the Gazania -1 well off the west coast to test a prospect close to the A-J1 oil discovery made

Africa's east coast. Current estimates indicate the potential for billions of barrels of oil and multi Tcf (trillion cubic feet) of gas yet to be discovered. Onshore, PASAâ&#x20AC;&#x2122;s estimate for shale gas is 205 Tcf recoverable while coal bed methane and biogenic gas represent a further multi-Tcf potential resource.

in 1988. African Energy Corporation has entered into a partnership with Azinam and Panoro in this block (still to be approved by the ministry) and have identified numerous prospects in the block. Aziman will become the operator. The well will test the Gazania and Namaqua prospects. Drilling is expected to start during the first quarter of 2021. Off the east coast, ENI and partner Sasol, have identified potential drill prospects in deep water, but the testing of these by drilling has been delayed due to various issues including the COVID-19 pandemic and its effect on the oil price. Once the UPRDA and its accompanying regulations are finalised, we can expect the initiation of active exploration for shale gas onshore. The true potential of this resource will only become known through drilling and production testing, but this may certainly represent a major economic boost for the economy of South Africa.

a vast array of skills and services to the upstream industry, as represented by the membership of SAOGA. What South Africa does not have is specialised skills such as qualified rig crews, as the local industry is too small to sustain such specialisation. Specialised crew and tradesman trained to service the upstream industry have to be equipped with skills that can be applied crossindustry to ensure sustainability. Professional skills such as reservoir engineers, petroleum geologists and geophysicist are also in very short supply locally, for the same reasons.

Do you know what the onshore and offshore potential is of these explorations? PASA has a team of geoscientists which determines the potential to attract explorers, ensure that exploration is properly managed, and advise government on the potential indigenous resource to help develop energy and development policy. Offshore is for the most part underexplored, for example, there are only four wells drilled off South

What skills and upskilling of expertise is still required to ensure stable and thriving on- and off-shore exploration? South Africa already has the ability to provide

What is the future for gas-fired power stations? Will this provide more stable power generation, and how far away is SA from introducing this? South Africa already has legislation in place allowing for independent power production and this will most probably lead the way to gasfired power stations on a large scale. Explorers for coal bed methane onshore have reported discoveries that could sustain gas fired stations of possibly co-firing supplement to coal. We are expecting the first procurement of gas-to-power generation capacity to be launched anytime now â&#x20AC;&#x201C; the procurement approval has been granted by both Minister Mantashe and the energy regulator (NERSA) under the 2000MW emergency power procurement determination. During the year

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INTERVIEW: PETROLEUM AGENCY SOUTH AFRICA

we expect another 3000MW of gas-to-power generation capacity procurement to follow.

How would you describe the current state of SA’s petroleum industry? South Africa imports more than 95% of the gas used in the country. We have almost no crude oil production so we import that as well. Recently, we have also started importing refined petroleum products as our refineries have not made the required investments to meet demand. So we are too reliant on imports, yet we have good petroleum resource prospectivity as a country that is underexplored.

How is the COVID-19 pandemic affecting the petroleum industry and PASA in particular? COVID-19 has caused serious disruptions to the industry and PASA. Exploration and production of oil and gas have a significant presence of international oil companies who from time to time bring their experts into the country to manage projects. With the restrictions on travel, major projects have been put on hold as equipment and people cannot enter South Africa. Fortunately, in Level 3 of the lockdown regulations, the Minister of Mineral Resources and Energy has passed regulations that opened the exploration and production of oil and gas to go ahead. For PASA, the pandemic has made us accelerate the implementation of the digitisation programme wherein we are automating our processes, including the online application for oil and gas permits.

industrialisation of our economy and can create many permanent jobs. Gas is part of South Africa’s energy transition to a cleaner energy future, yet we don’t have domestic production of gas in spite of having good gas resources.

How will the merging of PetroSA, the Strategic Fuel Fund and iGas (to form the National Petroleum Company) impact the petroleum industry? The petroleum industry is not just an economic industry but it is about security of the country. You can see that in all countries the state always has a part in the petroleum industry. Bringing the three entities together is about making sure that the three SOEs can pull their resources together to optimise the state participation in the petroleum industry. This is in line with the upstream petroleum resource development legislation that is being developed.

In terms of executive positions, you work in a male-dominated sphere. However, studies show that diverse work environments hold many benefits. As a woman, how can your background and lived experience benefit PASA? I believe that some leadership qualities which come naturally to women are what make women better leaders. For example, women are naturally long-term visionaries and I will use my experience in government policy development to focus PASA on delivering government’s long-term objectives for the sector.

What are your long-term goals for PASA?

You have a PhD in Chemistry. Where does your love of chemistry and science in general, come from?

In the long term, we want to see a diversified and fully developed upstream oil and gas industry that produces at least 50% of the country’s petroleum needs. Indigenous production of oil and gas supports security of energy supply and enables (re)

From an early age I was very strong in maths and science. I was fortunate and I was given opportunities to pursue studies in science (Chemistry) to the highest level (PhD) and I really enjoyed it. 

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TRANSPORT

Pandemic amplifies

challenges confronting the transport sector The outbreak of the COVID-19 pandemic has had a devastating effect on South Africaâ&#x20AC;&#x2122;s economy and the transport sector has not been left unscathed. We have seen the disruptor effect of this pandemic not only in our way of life, but also in the delivery of services to the populace.

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TRANSPORT

Transport is undoubtedly the golden thread that binds all the elements of the economic value chain together. Without transport, workers will not be able to report for duty to engage in economic activity. Without transport, finished products will not be able to leave the factory floor to reach markets. Without transport, consumers will not be able to access retail outlets to buy the goods. This pandemic has further amplified the challenges confronting the transport sector, particularly public transport. The divide between the poor who rely on mass transit public transport and those who have access to private vehicles, has been laid bare by the current circumstances. It is for this reason that the Department of Transport made a strong case for the taxi industry to be among the stakeholders that are assisted by government, as an industry that is the major mover of the country's people.

Intensifying investments in infrastructure Equally so, the Department is mindful that intensifying its investments in infrastructure will add momentum in returning SA's economy to a stable footing quicker. To that effect, the Department has advocated for the support of our major entities, such as the Airports Company of South Africa (ACSA), the South African National Roads Agency Limited (SANRAL) and the Passenger Rail Agency of South Africa (PRASA) in forging ahead with their infrastructure projects. The Department is equally aware of the urgent task to investigate the rationalizing of some of its entities as part of streamlining its approach to service delivery. This is a matter that the Department has flagged in its priorities as part of re-imagining safety and security in the transport sector. The Department is hard at work aligning entities with similar mandates to realise better value and more efficient service delivery.

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As part of this, the Department of Transport will begin the process to prepare the Ports Regulator for integration into the Transport Economic Regulator, which will be given legal effect once the Bill currently before Parliament has been passed into law. Simultaneously, the Department of Transport is aware that South Africa’s urban areas are hubs of economic activity and that it is crucial that they maintain optimal functionality and remain engines of socio-economic growth. As a result, the Department continues to prioritize integrated public transport networks, ensuring that they remain central to the functioning of these hubs as they provide sustainable, affordable and functional transport solutions to urban commuters.

Reprioritize resources and defer milestones and targets As can be imagined, the lockdown has significantly delayed planned programmes, projects and expenditure in the sector. As a result, departments, provinces and municipalities, in their revised budget allocations for 2020/21, have had to reprioritize resources as well as defer milestones and targets. The Department of Transport is no different; it too has had to make adjustments to the budget it presented in February 2020, to better prepare it not only in fighting the pandemic, but in ensuring that the economy stays afloat. An amount of R9.6 million was shifted from the Department’s savings on the programme’s goods and services to fund shortfalls in distressed entities and for the procurement of PPEs for the public transport industry. The Department has also downscaled targets for the filling of vacant posts, and recruitment and placement of interns to accommodate delays occasioned by the lockdown. Rail transport’s programme has had to be reduced to the tune of R1.012 billion. These reductions include baseline reduction of the PRASA Rolling Stock Renewal Programme, reprioritisation of funds from savings on the Taxi Recapitalisation Programme

TRANSPORT

to fund revenue shortfall of the Railway Safety Regulator (RSR), and additional reprioritisation from savings on goods and services. An amount of R1.260 billion has also been reprioritised from PRASAâ&#x20AC;&#x2122;s capital budget to its operations budget to fund the revenue shortfall as well as COVID-19 related expenditure within the programme. To that effect, due to the inherent delays in milestones for the current financial year, the target to develop the National Rail Bill this financial year has been deferred. The output is impacted by the anticipated non-approval of

Department of Transport to respond better to the impact on the sector and on its entities.

the Rail Policy in the current financial year, which remains a critical milestone towards the drafting of the National Rail Bill. Road transport has not been spared. In total, the programme has been reduced by an amount of R2.551 billion. This reduction constitutes a baseline reduction from the SANRALâ&#x20AC;&#x2122;s nontoll capital, reprioritisation of funds to fund the Gauteng Freeway Improvement Project and R309 million to cover the COVID-19 revenue shortfall. The Provincial Road Maintenance Grant (PRMG) has also been reduced by R1.756 billion, and funds reprioritised from savings in goods and services and the Taxi Recapitalisation programme to fund the CBRTA and RTIA. Where civil aviation is concerned, the target to submit the Air Services Bill to Cabinet this financial year has been deferred. Targets for the development of the South African Search and Rescue (SASAR) Amendment Bill and Aviation Safety Investigation Board (ASIB) have also been deferred. In total, the public transport programme has been reduced to the tune of R1.008 billion. With baseline reductions to items such as the Taxi Recapitalisation Programme to the tune of R250 million. Targets for the Shova Kalula Bicycle distribution programme were also downscaled. The above-mentioned re-arrangement of the deck chairs was necessary to enable the

it has defined for itself. These priorities are the vehicles through which the Department deliver on the seven apex priorities of the 6th administration. At the centre of these priorities is the reimagined safety strategy, built on the foundation of a seamlessly integrated value chain that incorporates all the law enforcement and prosecution authorities. It equally takes a holistic view of safety across modes. Carnage on our roads remains unacceptably high and interventions to arrest this trend must be based on collaborative efforts. This work continues with the required urgency to realise the goal of a safe and secure transport environment. Public transport is one area in the Department of Transport's work that directly touches the lives of the vast majority of South Africa's people. The Department's interventions will therefore be implemented with renewed vigour, not only to unravel apartheid spatial planning but to also to stimulate the economy. Each one of us has a critical role to play towards the realisation of an efficient, safe, reliable, affordable and integrated public transport. We must all play our part, be it organs of civil society, arms of the state or spheres of government. This is a promise we all must deliver on, working together to build a public transport system responsive to the needs of our people. ď&#x20AC;ź

Five strategic priorities As the Department traverse the path towards economic recovery, it is confident that its entities will recover sufficiently to continue undertaking the critical service delivery mandate necessary to support the resumption of economic activity. In infusing the Khawuleza ethos in delivering services to its people, the Department's work as a sector is guided by the five strategic priorities

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BUSINESS FINANCING

Scania supports logistics industry with new finance model

Many operators are hesitant to purchase new trucks as an uncertain business environment threatens confidence. Unprecedented economic challenges are forcing fleet managers and business owners to rethink their traditional purchasing cycles. In response, Scania South Africa is rethinking its business model to make upgrading financially easier. “We understand that trucks need to be working for companies to make a profit,” says Mark Erasmus, General Manager: Sales. “It’s now that the improved efficiencies leading to vital cost economies, offered by our New Generation Trucks, will really make a difference.” Putting these cost efficiencies into the hands of businesses who could benefit from the cost-savings but don’t have the appetite for large capital expenditures in these difficult times has required

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Scania South Africa to look for optimal financing agility. “We understand our role as equipment providers and the value chain we need to provide to make our equipment relevant in a tough economy,” explains Nomonde Kweyi, Marketing Director, Scania South Africa. “To this end we have developed industryleading financial offers that allow our customers to work with and use our world-class technology and performance, backed by our extended warranty and

BUSINESS FINANCING

coverage plan, while also benefiting from financially agile repayment models.” Scania’s new all-inclusive monthly payment offer includes maintenance, repairs, insurance, and extras, with the option to upgrade or purchase after 36-months. “It gives operators a bundled offer that covers the essentials at an unbeatable monthly rate”, explains Kweyi. The New Generation Scania trucks and services have been engineered to perfection with the goal of improving fuel efficiency. Through improved aerodynamics, new engine concepts together with intelligent support systems, such as eco-roll and active prediction, the new generation Scania trucks are making huge strides towards reducing fuel consumption. Connectivity is also highlighted as a valuable cost-cutting tool. “Our connected services deliver it all – from automated tachograph reporting to remote diagnostics and driver coaching. Our systems are also uniquely easy to use so they are used more often, leading to greater insights that translate into long-term cost efficiencies,” explains Erasmus. Connected technologies are used to manage entire fleets, maximising uptime, and productivity. Scania is also setting new standards in maintenance plans using several operational factors and vehicle specifications to offer a continuously updated and flexible maintenance plan that minimises downtime

to the lowest possible cost. “Factors such as topography, fuel quality and stop-and-start frequency all affect the level of maintenance needed,” says Erasmus. By individually optimising the different modules in the maintenance plan, such as air filter and gearbox, Scania ensures that downtime is planned and only occurs when necessary. For each maintenance event, timing and content is calculated based on factors such as cost of spare parts and labour. This way, an optimised maintenance interval can be adapted to suit a particular business operations schedule. Even when things don’t go according to plan, Scania provides operators with a complete back-up system designed to minimise downtime and keep a vehicle on the road. Scania Assistance is an essential support service that is available 24/7/365. For Scania South Africa, it’s about supporting their customers. “To keep businesses sustainable, we need to play a role in ensuring they have access to the latest technology, best performance and most cost-effective aftersales services. However, to get them into that value chain, we needed to make affordability a focus,” says Kweyi. “Scania South Africa is ready to play a pivotal role in ensuring businesses have the best-in-class equipment and support to confidently recover and thrive, not just in the short term but in years to come.” 

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ENTREPRENEURSHIP

By Dov Girnun

When the going gets tough entrepreneurs get going Last year, I wrote an article calling on South African entrepreneurs to rediscover our optimism. I talked about how we had been letting the country’s challenges get to us, and that we were undervaluing ourselves. “It’s time to rediscover our positivity muscle, and reawaken that famous South African grit and optimism,” I wrote. 54

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Little did I know that only a few months later, South Africa’s small business sector would be facing its biggest challenge yet. The COVID-19 disaster has swept the world and our country, like a wildfire, leaving unthinkable human and economic devastation in its wake. Many small businesses will take months to recover if they recover at all.

ENTREPRENEURSHIP

And then, as the storm raged around us, it struck me: if ever there was a time to rediscover our legendary optimism, it is now. In South Africa, turbulence has always been the standard climate for local entrepreneurs. Let’s not forget that we went into this pandemic already in a technical recession, downgraded to junk bond status. The pandemic just gave us the final nudge. While we don’t have the trillion dollar stimulus packages that we’re seeing in first world countries, what we do have is grit, optimism and creativity in spades. And we have the ability to find opportunities in the chaos.

Sure, it won’t be easy. As entrepreneurs, we all know too well that starting a business is incredibly difficult. And these challenging times can create even more obstacles between you and success. But that’s what we do. We’ve always thrived on adversity. The pandemic has levelled the playing field again. Before COVID-19 struck, the small business sector was a tough place to be. Competition was rife, margins were under pressure and clients had lots of choices. I saw it in my own industry, which focuses on alternative lending solutions, and many industries around me. Now there’s a lot more white

The best businesses are often built out of the greatest turmoil. Look at some of the companies that were founded after the global recession of 2008/9: WhatsApp, Uber, Airbnb, Pinterest. They were all built by entrepreneurs standing in the wreckage of the financial crisis and looking around for an opportunity. That’s what entrepreneurs do. They separate their emotions from their thinking. They find solutions to problems. And if the chaos of the COVID-19 pandemic has done anything, it’s created new problems. Problems that didn’t even exist six weeks ago. If ever you wanted a blank canvas to create new solutions, products, and services, this is it. The businesspeople and entrepreneurs who succeed in the coming months and years will be those who solve the problems of what people are calling ‘the new normal’.

space emerging for audacious entrepreneurs who are natural risk-takers, to recalibrate their businesses and cut through the clutter. We’re in uncharted territory right now. So it’s time for us to not only rediscover our optimism, but to remember what made us entrepreneurs in the first place. To tap into that spirit that made us strike out on our own. To lean into the obstacles and create opportunities in places others haven’t even thought of, or thought were too difficult. If anything, as others run away from the chaos, there will be more opportunity than ever to deliver real value to the world. I’m devastated at the impact of COVID-19 on my industry, my sector, my loved ones, my colleagues, my country. But I’m hopeful too. I can’t wait to see the next generation of businesses that will be born out of this turmoil. What a time to be alive. 

Entrepreneur, Dov Girnun, founded Merchant Capital in 2012 with start-up funding of R3 million. Since then, the Johannesburg-based fintech company has enabled the growth of South African SMEs by providing over R1 billion worth of quick, simple access to unsecured working capital. Merchant Capital was created to provide funding in the largely under serviced small business finance sector. Girnun created a business model with his founding partners to address this challenge. The fintech provides qualifying merchants with an upfront lump sum in the form of a cash advance in exchange for a small fixed percentage of future turnover.

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ADVERTORIAL: ZADNA

.ZA is safe, resilient & robust

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programme aims to unlock the economic potential of local SMEs in the domain name registration business, and accelerate the creation of new players within the Internet Service Provider (ISP) industry. When should brands and businesses secure their online presence? A domain name registration should be part of a businessâ&#x20AC;&#x2122;s trademark protection process and it is for that reason the .ZA Domain Name Authority (ZADNA) has partnered with the Companies and Intellectual Property Commission (CIPC) to enable businesses to register their domain name and business name simultaneously. This domain name registration method is not only limited to new business registration but is an option that is available to all CIPC registered businesses/account holders. We have over 500 .ZA-accredited registrars which can be contacted for .ZA domain name registration inquiries. How does the .ZA Domain name Authority ensure that domain name holders are protected? .ZA has a proven alternative dispute resolution (ADR) against cybersquatting and intellectual property abuse in co.za, net.za, org.za and web.za domains. The .ZA ADR Regulations provide for an alternative domain resolution process in respect of co.za, net.za, org.za and web.za. In terms of the regulations, a complainant can lodge a complaint against a domain name registrant if the complainant believes that the domain name is abusive or offensive. Such a dispute may be lodged through a ZADNA accredited ADR service provider.

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Web Hosting (home garden)

Internet (street)

The ADR process was established with the intention of creating an alternative to the courts at a potential lesser fee. The parties also have an option between a single adjudicator and three adjudicators at a cost of R10 000 for a single adjudicator and R24 000 for three adjudicators. The ADR process has been found to be expeditious and cost-effective. The amended ADR regulations also provide for mediation which is facilitated by ZADNA. The ADR provider is required to refer the matter to ZADNA once both parties have responded in an attempt to resolve the matter prior to adjudication. Whilst the mediation process is still relatively new, it has been found to yield fruit in terms of engagements and possible resolution. What do you define as domain name abuse? It is a domain name registration that is registered to take unfair advantage of another person’s/brand’s rights; or to be detrimental to; or infringing another person’s/brand’s rights.

that someone has registered a very similar domain name (www.joecompany.co.za), with the intention of pretending to be you, then you can pursue a domain dispute with the relevant domain name authority. For a South African domain name (one ending in .za), the .ZA Domain Name Authority administers an Alternative Dispute Resolution Process: https://www.zadna.org.za/content/ page/%20za-adr-process/ designed to resolve domain disputes. There is a cost associated with this process, as an accredited dispute resolution provider will need to review the matter. However, ZADNA runs a financial assistance programme for those unable to pay these fees. Where and how do you report .ZA domain name abuse? .ZA Take-Down Notice: If you have discovered a South African website that appears to be fraudulent, you may be able to lodge a TakeDown Notice to have that site removed from the Internet. A Take-Down Notice can be lodged on Internet Service Providers' Association (ISPA) website: https://ispa.org.za/tdn/ .ZA Domain Name Complaint: The ZA Central Registry (ZACR) is the custodian of the largest South African subdomains (those ending in .co.za, .org.za, .web.za and .net.za). If you are aware of one of those domains being used for malicious or fraudulent purposes, then you can report that to the ZACR using this complaints form: https://www.registry.net.za/downloads/u/ COMPLAINTS_FORM.pdf which should be sent to complaints@registry.net.za 

What are the steps to be taken by brands and businesses when somebody is using a domain name pretending to be a brand or business that they are not? If your company has an online presence (www.joescompany.co.za) and you discover

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DIGITAL TECHNOLOGY

Public-private partnerships boost connectivity, aid the fight against COVID-19 The broadband connectivity to various critical health centres is moving ahead swiftly, with 26 sites connected early in August. The Department of Communications and Digital Technologies has established public and private partnerships to provide fast broadband internet connectivity to approximately 480 COVID-19 mission critical health centres across the country at no cost.

According to the Minister of Communications and Digital Technologies, Stella Ndabeni-Abrahams, this fast connectivity (10MB per second) will enable remote health facilities to transfer patient files and carry out statistical reporting and medical analysis, and consult quickly and effectively. It will also support critical health centres in enhancing the patient experience of care, quality, access and reliability. Brokered by the Ministry of Communications and Digital Technologies, the partnership is their effort to assist government in meeting the key objective of slowing the spread of the coronavirus pandemic.

Part of COVID-19 interventions In response to direction by the Minister, the regulatory body ICASA (Independent Communications Authority of SA), assigned temporary radio frequency spectrum to mobile network operators. This is to ensure that all citizens are able to

The coronavirus pandemic has accelerated the digitalization of many businesses and services, and introduced teleworking and video conferencing systems in and out of the workplace.

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DIGITAL TECHNOLOGY

access ICT services and government programmes and have the necessary information to protect themselves against the pandemic. "I firmly believe that the increased access to information is at the heart of our department's direction. The realities of inequality are such that not everyone can simply move online. All successful licensees for temporary IMT spectrum assignments are required to support and create virtual teaching and classrooms as determined by the Department, in alignment with the Department of Basic Education," said Ndabeni-

technology solutions such as Artificial Intelligence, high performance computing, robotics and the Internet of Things, to be explored," she added. Meanwhile, the Department of Communications and Digital Technologies has entered into a Memorandum of Understanding with Department of Cooperative Governance and Traditional Affairs to facilitate the temporary rapid deployment of electronic communications and facilities within municipalities across the country. ď&#x20AC;ź

Abrahams. The companies have approved hundreds of local websites to be zero-rated for educational purposes while South Africa deals with the pandemic. The zero-rated websites include, among others, TVET colleges, universities, basic education sites as well as sites that provide information which can help South Africans mitigate the risks that come with COVID-19.

Additional sites will be zero-rated In addition to the 990 sites, which are already zero-rated, there are additional sites which are pending approval. Zero-rating of telecommunications and data services for specified public services like health, education and public service pronouncements is an important intervention to empower society and the youth, in particular. â&#x20AC;&#x153;We appreciate the good gestures from the mobile network operators, but I believe together more can be done,â&#x20AC;? said Ndabeni-Abrahams. "The coronavirus pandemic has not only put a sharp focus on the ICT sector, it has also accelerated the digitalization of many businesses and services, and introduced teleworking and video conferencing systems in and out of the workplace. "I believe, COVID-19 provides an opportunity for affordable ICT infrastructure and digital

Minister of Communications and Digital Technologies, Stella Ndabeni-Abrahams

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ADVERTORIAL: MTN SA FOUNDATION

Uplifting and

empowering our youth The MTN SA Foundation is MTN’s primary vehicle for contributing to transformational social change. Through it, MTN is able to deliver a number of structured corporate social investment interventions and contribute to the development of South Africa in an effective manner. While there are many varied ways of tackling the pressing social issues facing South Africa, the MTN SA Foundation’s approach is to use technology to create shared value in its focal area of education. This flagship programme is complemented by a number of carefully selected themes and interventions designed to allow the MTN SA Foundation to be responsive in delivering solutions to the most marginalised among us. These include digital inclusion, with a view to equipping young people with the ICT skills they need to cope in a rapidly changing world.

Tackling the digital divide and equipping young people for the future The youth of our country are amongst the most powerful drivers of social change and the MTN SA Foundation wants to harness that spirit to help create the business leaders of the future. ICT in education is vital as it delivers specific scholastic content to individual learners, adapting to the learner’s needs. By harnessing the power of information and communication technologies, learner outcomes can be improved and students adequately prepared to play a meaningful role in the digitised world. We know that while South Africa has made notable strides in broadening access to telecommunications and technology, the country continues to be characterised by a deep digital divide. This perpetuates unequal access to opportunities, making it harder for historically disadvantaged youth to benefit from employment and entrepreneurship opportunities. We know that while young people are often considered “digital natives", the majority of them do not possess sufficient digital skills required for them to succeed in the workforce. Given the right support and resources, young people can drive growth and innovation using ICT. As a major player in the telecommunications industry and employer of a large workforce, MTN believes it has an important role to play in providing youth with opportunities to enhance their ICT skills and long-term career prospects. MTN also has a role to play in creating an enabling environment for innovation, entrepreneurship and job creation in the digital economy. The MTN SA Foundation’s interventions are designed to respond to this challenge. 60

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ADVERTORIAL: MTN SA FOUNDATION

All the initiatives the MTN SA Foundation support in enterprise skills development will ensure that the next generation of entrepreneurs are equipped with the skills needed to grow and sustain their businesses and become the business leaders of the future. At school level, the MTN SA Foundation supports the Students for the Advancement of Global Entrepreneurship programme (SAGE), which targets teenagers (13 - 19 years) across the country. The programme is aimed at inspiring and educating teenagers about the fundamentals of entrepreneurship and the exciting opportunities that exist therein. The programme’s vision is to raise the next generation of teenagers whose innovative ideas address the world’s most pressing challenges as envisaged in the United Nations’ Sustainable Development Goals (SDG’s). These challenges include unemployment, poverty and environmental protection. In partnership with the University of the Free State, learners are mentored by trained program alumnus who are available throughout the year to assist them with the program business requirements as well as other business-related queries. They also receive assistance in identifying and starting up real businesses that solve critical problems. Learners furthermore compete against each other at different levels (regional, provincial and finally on a national level) where they have the opportunity to showcase their businesses or business ideas through live presentations to community leaders and industry leaders and ultimately to be crowned South African Teen Entrepreneur of the year. The winners of the national competition then proceed to represent the South Africa at the SAGE World Cup. At university level, the MTN SA Foundation partners with Enactus South Africa to deliver business training and mentorship to tertiary students across the country. The programme culminates in an annual youth entrepreneurship development competition. Through it, young people are challenged to design projects that demonstrate their entrepreneurial skills and aptitudes. Through the National MTN ICT Challenge, MTN collaborated with Enactus South Africa and challenged University teams to come up with innovative ideas to address social challenges under the categories of Agriculture, Health and Education. 12 universities in South Africa will be funded by MTN SA Foundation to develop and launch their mobile app solutions. In 2020, 23 universities were involved in the Enactus initiative, with a total of 2 590 students participating. Following their crowning as South African champions, the team from the University of KwaZulu-Natal (UKZN) will represent South Africa in the World Cup finals which will be hosted virtually through an online platform as a result of Covid-19 and international travel restrictions. This global stage will provide the students an opportunity to go compete with their peers from around the world at the Enactus World Cup. To support SMMEs, the MTN SA Foundation has partnered with Datacomb Development Hub, the University of the Free State and Hodisang Dipeu Holdings. By supporting this initiative, MTN contributes to the creation of businesses that are robust, innovative and able to develop solutions that address the challenges facing our communities.

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HUMAN SETTLEMENTS

Call for partnerships to

deliver more, deliver differently, deliver faster By Minister Lindiwe Sisulu

Twelve months ago the Department of Human Settlements had many plans. We were going to upscale the delivery of houses and declare 94 priority development spaces for human settlements development. We were going to empower people to build their own houses through stokvels. We were going to do all of those things that we knew after 25 years in government was achievable and urgent. We were all geared up by what was to be done and in what time it would be achieved. Minister of Human Settlements, Water & Sanitation, Lindiwe Sisulu, says the advent of COVID-19 changed much of that. It changed the way we lived and worked; it changed our tempo. It agitated for solutions here and now. The crisis it wrought drove creativity and innovation. It created an unprecedented urgency around making sure people are protected from the elements and consequently most of the plans we laid out had to be delayed. But these plans have been replaced by an even greater drive to deliver more, deliver differently, deliver faster. Motivated by our determination to keep our nation safe from the pandemic, what we have

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Minister of Human Settlements, Water & Sanitation, Lindiwe Sisulu

HUMAN SETTLEMENTS

been able to achieve in the past few months may not have been part of our original plans, but it demonstrated our collective ability to respond to any situation as it unfolded.

Working to achieve a more equitable social order Today we are celebrated at international forums for the innovative ways we have used to house our people, notably the community of Wilgeheuwel in Roodepoort. In less than three weeks we were able to provide 70 families with decent shelter, water, and sanitation. We are also onsite in Duncan Village in Buffalo City in the Eastern Cape and other provinces. Where much has been lost for this year in terms of delivery as we re-directed our efforts to mitigate the impact of the coronavirus pandemic, much has been gained in establishing the capability and credibility of the institution. We are building the trust and confidence that our people and the private sector have and share in our vision and commitment. The Dept of Human Settlements has the greatest ability to ignite our economy once we have the pandemic under control. We have shown the private sector, we have shown the donor community and we have shown our people that we are a dependable team. We would like them to invest in us, support us and join us in our work to achieve a more equitable social order. A great deal of how we have done things differently has revealed what is possible and it has also indicated to us that as the world moves on, new ways of delivering services and opportunities will be the dominant feature of our work for the next two years. Now, more than ever we need to focus on supporting people to do things for themselves. We can harness the energy, the values, the success and long held capacity of our people, especially women. Women have been building homes and homesteads for generations. It is our purpose to

bring to bear the full might of our resources and institutions to help people help themselves and to create wealth with their own hands. Thus, apart from releasing serviced sites, we are bringing partners to assist people and expand their efforts. We are fast-tracking the release of serviced stands, because in that way we will have greater yield and less possibility of the temptation to sell or rent out the houses we provide. When people have built with their own hands and have created their own wealth, they are less likely to act irresponsibly with the asset. Ours would be to provide the infrastructure, the services, and subsidies and to bring partners on-board to assist.

Rethinking and re-imagining the FLISP The banking sector has expressed renewed energy and commitment to our Financed Linked Individual Subsidy Programme (FLISP), housed by the National Housing Finance Corporation (NHFC) as the department’s implementing agent responsible for administering, and facilitating delivery and access to FLISP. They have committed rethinking and re-imagining to the FLISP so that it can be more easily accessible to qualifying applicants and achieve more than it has over the past. In respect to the Zenzeleni programme, the banks will develop a new regime of building bonds for low-income earners. With this programme, we aim to deliver billions of Rands in home assets over the medium term. The Zenzeleni programme has the potential to deliver wealth of as much as R140 billion into the hands of beneficiaries. The model assumes: • 100 000 serviced stands a year over the medium term 2020/21 – 2022/23 • Well located land in the hands of both the Housing Development Agency and the Department of Public Works is made available • The NHBRC ensures the safety and quality of the products. We have re-kindled our engagement with the

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HUMAN SETTLEMENTS

Banking Association South Africa (BASA) to strengthen partnerships within the banking sector and expect this to yield positive results in the near future.

Priorities will address challenges that impede delivery of human settlements With the budget allocated to us last year, although limited compared to the housing and settlements needs facing us, through the human settlements projects of provinces and municipalities, we have been able to deliver over 69 600 new houses and over 51 000 serviced stands. During this financial year (2020/2021) our priorities will focus mainly on the following: • Together with provinces, we will work with communities and municipalities to incrementally upgrade over 300 informal settlements and improve living conditions of households. We have allocated R2.4 billion and R2,2 billion for provinces and metros respectively in the current budget towards upgrading of informal settlements. • Increase the provision of emergency housing assistance through alternative and affordable building technologies. There are far too many families whose housing circumstance are more extreme in vulnerability. R831 million is provided for in the current budget.

Now, more than ever we need to focus on supporting people to do things for themselves. We can harness the energy, the values, the success and long held capacity of our people, especially women.

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• Introduction of COVID-19 impact relief measures to enable the sector to survive the serious shocks and constraints brought about by the pandemic. These measures consist of: • Friendly and developmental rearrangements for loan repayment for affordable housing lenders who are indebted to the NHFC. This includes penalty-free capital loan repayment holidays for up to six months. • Rental relief to tenants in affordable rental housing who face financial distress due to COVID-19 pandemic. This rental relief is solely aimed at assisting tenants in formal affordable rental housing to meet their monthly rent obligations. Means testing will form part of necessary criteria to determine those who can be assisted. • Deliver subsidy housing opportunities for serviced stands, houses, and selfbuild options using alternative building technologies. Over R12 billion is allocated to provinces and a further R8 billion is allocated to metros for this purpose. For capital projects that deliver social rental housing, over R725 million is allocated to the SHRA. We are all aware that the effects of the COVID-19 pandemic will remain with us in the short term. This coupled with the current housing backlog, which is estimated at 2.6 million across the country, calls for us to not only redouble our efforts, but to be bold and innovative in implementing the policies and political decisions we have already taken. Our solutions must address persistent challenges that impede our delivery of human settlements in a way that spatially transforms our society and provides security of tenure on a broad level, and that ensures our people are living in safe and healthy environments as we continue to battle to overcome the COVID-19 pandemic. 

INTERVIEW: GAUTENG PARTNERSHIP FUND

Gauteng Partnership Fund -

catalyst in the delivery of integrated human settlements in Gauteng Traditionally associated with the funding and implementation of social housing projects, rental housing and off-campus student accommodation opportunities, the Gauteng Partnership Fund (GPF) has strategically repositioned itself to include its existing role, and implementation agency role for mega projects.

The Gauteng Partnership Fund (GPF) is a schedule 3C

Public Entity founded in 2002 and is 100% owned by the Gauteng Department of Human Settlements within the province.

SA BUSINESS INTEGRATOR interviewed Acting CEO of the GPF, Daniel Molokomme, the Investment Officer for the organisation, Shiraaz Lorgat, and Marketing and Communications Manager, Ntombenhle Gwina, about these changes and the standout progress that the Fund has made in recent times. “With the GPF’s experience in leveraging funding, we became the implementation agent for the Gauteng Department of Human Settlements for mega projects. We traditionally provided mezzanine funding for perpetual rental programmes. To illustrate the funding agency model simply, we work on a 10% equity basis, 30% from GPF and 60% from a senior funder," explains Lorgat. Senior funders include organisations such as the Public Investment Corporation (PIC), the Trust for Urban Housing Finance, the National Empowerment Fund and the Futuregrowth Asset Management. Molokomme adds: “The GPF sees itself more lately as taking on the role of catalyst in the delivery of integrated human settlements in Gauteng. This means bringing developers onboard and project-managing the construction part. The Department of Human Settlements (Gauteng) makes a budget available for us to develop mega-projects”. Empowerment of emerging members of the property development value chain

An additional and consequential key benefit of the GPF’s operations is the empowerment of emerging developers, Daniel Molokomme, Acting CEO, of Gauteng Partnership Fund

contractors and other members of the property development value chain in Gauteng, including the provision of employment

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INTERVIEW: GAUTENG PARTNERSHIP FUND

inside the affected communities. “Mega projects aim to stimulate the local economy in the area of the development and to make sure that

Due to the comprehensive and integrated nature of this development, the project has been hailed as a success. Named after well-known anti-apartheid activist and

the residents within the project have access to social

Cosatu founding member, Elijah (Oom Bari) Barayi, the

amenities such as schools, other relevant social amenities

GPF is project and financing agent for this burgeoning

and also access to transport," says Molokomme.

project, at present under development by Gauteng-based

“In terms of zoning, these mega projects include multi land use, for example, land for economic development,

CALP Investment (Pty) Ltd. The development is planned to deliver approximately

sites for schools, and land for development of commercial

12 491 housing units, social amenities and schools as well

use or light industry. This includes multi-typology housing

as commercial developments when completed.

consisting of a mix of fully subsidised housing for lower

With informal settlements at various areas within

income groups, and others that will have finance-linked

the Merafong City Local Municipality, and the current

individual subsidy programme (FLISP), and also bonded

housing shortage, Elijah Barayi will contribute to the

stock. The reason we develop the project this way is to

gradual eradication of the informal settlements. To date,

make the project viable and the community viable so that

the project has delivered 2 318 units at 95% completion

there is a symbiotic relationship between different types

and 587 at 100%, with more houses currently in different

of income groups. For example, some residents will then

stages of construction. The project has made significant

have access to domestic work opportunities (for homes

economic impact within the community by creating jobs

within the complex); while others may find jobs within the

and supporting local suppliers as well as local SMMEs.

construction part of the project. “Our mandate comes from the Department of Human Settlements strategy for mega projects. The GPF is seen

For example, says Molokomme, the Elijah project has created local labour opportunities in terms of the building materials used on site.

as quick and agile in project implementation compared

The GPF says it will continue to work closely with

with the government and is able to use expertise from

CALP Investment (Pty) Ltd to facilitate funding for the

within the market to manage the construction. Final

development of other components of the mega projects,

approval, however, regarding approval of the standard

including the commercial, social housing and bonded

and quality of the housing stock delivered prior to the

houses.

developer being paid, rests with the Department," adds Molokomme. “In addition, there is input from the local authority/

Molokomme says that the term social housing includes persons earning up to R15 000 per month, since rental stock available in the (commercial) market is beyond their

municipality which has to approve development plans, issue rezoning approvals, provide bulk infrastructure, and finally issue certificates of occupancy for the housing stock. The enablers, as bulk infrastructure, are funded by government direct to the metro or the municipality in various forms”. The Elijah Barayi mega project - West Rand The Elijah Barayi mega project was one of the projects assigned to the GPF. The proposed Khutsong Elijah Barayi/Varkenslaagte mega project falls within the Merafong Local Municipality’s Spatial Development Framework.

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The Elijah Barayi mega project - West Rand

INTERVIEW: GAUTENG PARTNERSHIP FUND

income affordability. “Entry level for this stock is R1 500 per month, up to R15 000 per month. That mandate, however, is not given to GPF, it is given to the Social Housing Regulatory Authority (SHRA)," he says. The SHRA is an agency of the national government.

quickly facilitated by the GPF for the various stages. This also serves to stipulate the life of the emerging new 'city'. Molokomme reinforces the role that the interest-free funding is playing in the process as key. “This is what makes our approach different to the commercial banks and other funding entities," he says. "We are different to the other mezzanine finance

Developing the developer The GPF has a programme called the Empowerment of Entrepreneurs to enable qualifying property developers to participate in the affordable rental development space. “The Entrepreneur Empowerment Property Fund (EEPF)

providers who charge prime plus interest. We charge prime minus interest,” adds Lorgat. “For a senior funder, this is attractive because we are mitigating the risk with effective funding of 45% of the project. This makes it easy for the senior funder and

enables 100% black-owned developers to participate in

signals our uniqueness. We very seldom get refusals for

the programme,” says Lorgat.

senior funding applications for our qualifying applicants

“The idea was to bring in first-time property developers who want to start a portfolio of rental-stock property developments in line with (national) government’s transformation programme within the sector. “Equity is a problem for black entrepreneurs, so we

into rental housing projects. This is how the GPF is different. “We partner with the PIC, the Trust for Urban Housing Finance organisation, the National Empowerment Fund and Futuregrowth, especially with regards to the rental

made the programme accessible by not structuring the

housing projects and also student accommodation in the

equity requirements too high. The Public Investment

case of the latter. In fact, GPF relies heavily on strategic

Corporation (PIC) has entered the programme as senior

relations with other institutions so we can leverage

funder with the objective of providing affordable interest

funding. That’s our role," adds Gwina.

rates to the more high risk case developers. In fact,

Molokomme says that when the GPF was initially

we turned the risk model around. The more risky the

established, it had a one-off capital injection from the

applicant, we put mitigating factors in place and then offer

Department of Human Settlements (Gauteng).

market-related interest rates. This is the enabling factor

"We then played an implementation role in the mega

to bring black entrepreneurs into the rental market. We

projects for the Department, for which we charge a

even provided interest-free funding so that it would aid the

management fee for the services provided. This is normal

feasibility of the project," adds Lorgat.

for any environment where you facilitate and projectmanage development," he adds.

Benefitting the developer at all levels In addition, the agility of the organisation is highly

In terms of vision, the organisation sees the way forward in the creation of 'new cities' in the making.

beneficial to the developer in terms of the speed in which

Over the years, the project will become a substantial

payments on the project can be made. Lorgat comments

development and achieve city status. 

that while the Department pays in excess of 15-30 days, the GPF normally pays within seven days. “Cash flow is critical for developers and this also eases the strain on cash flow for the developer on mega projects,” he says. BNG (breaking new ground) projects are the easiest way for a developer to gain entry into the process. Very little capital is needed from the developer and payment is

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FUND MANAGEMENT

COVID-19 â&#x20AC;&#x201C;

key insights for fund managers

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COVID-19 has and will continue to impact the private equity industry. Webber Wentzel and BLC Robert have joined forces to answer some key questions which, based on their combined experience, are of particular relevance to fund managers.

FUND MANAGEMENT

What has been the impact of COVID-19 on existing fund structures? There are certainly increased opportunities in the market for fund managers to make new investments. In relation to existing portfolio companies, however, we have found that many funds require additional capital, either to manage short-term instability and/or to take-up well-priced follow-on opportunities. Where a fund does not have sufficient undrawn commitments to deploy in those portfolio companies, fund managers may approach investors for additional capital and/or may request additional recycling powers to free up reserved capital. If this is not practical, fund managers may consider establishing ‘annex funds’ or ‘top-up’ funds as variations of existing fund structures to make such investments. The other option is to establish co-investment vehicles for selected investors to co-invest with funds in one or more identified opportunities.

Should managers be reviewing existing provisions in their fund documentation and, if so, which ones? Given the delay in finalising deals, some fund managers may find it difficult to close deals before the end of their commitment periods. Fund managers should ensure that their fund documents allow them to complete deals that are in-process after the end of their commitment periods. Depending where they are in the cycle, they should consider requesting an extension. Funds nearing the end of their term should consider seeking extensions to provide portfolio investments with ample time to recover from shortterm depreciation in value and to prepare these investments for exits. Many fund managers are revisiting their investment guidelines to enable them to focus on opportunities in particular sectors or geographies or consider sectors that are not as hard hit by the

pandemic. Also, revisiting their guidelines helps to ensure that all portfolio company funding and other interventions are permissible. It is important to revise the conflict of interest policy to deal with the potential conflict that invariably arises as managers recommend various unprecedented and unforeseen actions. Amendments to the fund documents and/or investor consents may be required for the fund to incur additional indebtedness (or longer-term indebtedness). Considering the liquidity pressure some investors will experience, it may be worth reviewing the provisions related to transfer of investor interests to ensure that transfers can be carried out quickly and economically. Review reporting obligations to investors and deadlines for compliance to assess whether the manager needs to engage with investors about any delays or the inability to provide a report on certain matters following, for instance, delayed provision of information by a portfolio company. Generally managers should ensure that contingency plans are in place if investors are unable to meet obligations. In certain cases, it may be necessary to defer distributions.

To what extent do managers need to amend their marketing material and disclosures in light of COVID-19? Managers should review their disclosure materials and ensure that they include additional disclosures and risk factors to address COVID-19 and any other communicable diseases. These revisions should include enhanced disclosure about past performance figures.

What fundraising challenges have fund managers experienced? Investors have delayed or reduced commitments, as they try to assess the impact of the economic fallout on their own balance sheets.

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FUND MANAGEMENT

Fund managers will not be able to meet with prospective investors in person for the next few months or use networking at conferences to find new sources of capital.

How can these fundraising challenges be tackled? Use this time to discuss insights and forecasts with prospective investors, to keep in contact with them and prepare to capitalise on opportunities as soon as the restrictions lift. Offer investors benefits such as â&#x20AC;&#x2DC;early bird

What logistical support can fund managers and investors provide to portfolio companies? Fund managers should aim to provide portfolio

discountsâ&#x20AC;&#x2122; on management fees and preferred coinvestment rights. Include greater flexibility in the fund documents around the fundraising period. What strategies are being adopted by managers in the middle of transactions to ensure these are effectively concluded? Managers who are currently deploying capital and negotiating legal agreements may find it difficult to consummate transactions in jurisdictions where regulators and deeds offices are closed or working shorter office hours. This difficulty should be properly catered for in the conditions precedent to the transaction. Where possible, managers can make documents and information available in virtual data rooms and through video facilities, so that commitments can be advanced subject only to completion of the in-person due diligence. Managers also need to make sure that they have good in-country contacts to assist with physical due diligence and inspect operational facilities.

companies with access to a condensed bank of relevant government and legal information. This will help portfolio companies to respond quickly to any government relief efforts and other interventions they can apply for and ensure they are complying with all relevant regulations when resuming operations. Fund managers should assist portfolio companies with managing leases and other material contracts and negotiating with counterparties on, for example, triggering force majeure clauses. A template playbook with scenario stress testing for each portfolio company will assist in daily monitoring and implementing responses. This will assess business continuity, operations, revenues, the supply chain, and cash flows. All previous downturn planning will be reviewed beyond previous worst-case scenarios.

What challenges are portfolio companies experiencing?

Funds may inject capital into portfolio companies through making follow-on investments in the form of shareholdersâ&#x20AC;&#x2122; loans and/or equity subscriptions. Alternatively, managers may consider taking advantage of current low interest rates by arranging funding directly for the portfolio companies through banks and providing whatever security is required.

COVID-19 has had and will continue to have a severe impact on many portfolio companies as a result of, inter alia, suspended operations in countries under lockdown, an absent workforce, liquidity pressures on listed companies in light of covenant breaches and similar factors. The

extent of the impact will obviously vary, depending on the sector in which the portfolio company operates. While the travel and tourism sectors have been decimated, the environment has posed new opportunities and revenue sources for the telecommunications, digital, delivery/courier, pharmaceutical and healthcare sectors.

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How can financial support be provided to the portfolio companies?

FUND MANAGEMENT

How are managers dealing with valuations in this environment? Historic valuations of portfolio companies may need to be revisited, given current market volatility. If fair value is not accurately determined, risk assessments will be misinformed, potentially having a significant impact on investment decisions. Recent transaction prices, especially those predating the COVID-19 outbreak, will not have as much weight in determining fair value.

Many fund managers are revisiting their investment guidelines to enable them to focus on opportunities in particular sectors or geographies or consider sectors that are not as hard hit by the pandemic.

The International Private Equity and Venture Capital Valuation has released special valuation guidance for fund managers and investors when calculating and reporting 31 March 2020 valuations. These include general guidelines as well as particular factors to be considered for equity and debt investments and limited partnership interests.

What interventions have industry bodies and/or regulators put in place to assist fund managers during this time? The Southern African Venture Capital and Private Equity Association (SAVCA) has launched a small-, medium- and micro-enterprise (SMME)

support platform in collaboration with its membership network. The platform will provide SMMEs with access to industry professionals for free advice on managing the challenges they face in the wake of COVID-19. In Mauritius, the regulatory bodies and the government have taken various measures and amended existing laws (through COVID-19 (Miscellaneous Provisions) Act 2020) to assist companies during the lockdown/confinement period. These measures include: â&#x20AC;˘ during the confinement period (and any additional prescribed period), the duty of a director to declare a company insolvent and place it into liquidation when he/she believes that the company is unable to pay its debts as the fall due is waived. â&#x20AC;˘ extended timelines for calling annual meetings and filing accounts with the Registrar of Companies. The Mauritian Financial Services Commission, which is the regulator for the non-bank and financial services industry, has informed licensees that a flexible approach will be adopted when monitoring compliance and no administrative penalties will be charged for late filing of financial statements and/or annual reports due in April, May and June 2020, provided filing is effected within the extended deadline. Since Mauritius was included on the Financial Action Task Force (the FATF) list of jurisdictions under increased monitoring in February 2020 due to strategic deficiencies in five specific areas, the country has made a high-level political commitment to fix these deficiencies. It has already sent a first progress report to the FATF. Unfortunately, due to the global COVID-19 situation, the FATF has temporarily postponed all mutual evaluations and follow-up deadlines and the progress report could not be assessed. This is likely to cause some delays in the proposed regulatory changes. ď&#x20AC;ź

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ADVERTORIAL: FUTUREGROWTH

Rising to the challenge

of what it means to be a responsible business By Paul Rackstraw, Managing Director at Futuregrowth Asset Management

The COVID-19 pandemic has raised many challenges for companies over the past few months. It has also highlighted the critical role firms play in the broader fabric of society and how much they can, and should, contribute as responsible businesses. From supporting staff and facilitating comfortable remote working conditions, through to providing other stakeholders with a seamless experience of the business through potentially disruptive lockdown conditions, companies have had to step up to the challenge of navigating the changes imposed on them by this unprecedented health crisis. Business responsibility is not a new concept. It is a process and culture in an organisation

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where the management and staff choose to take responsibility for all their actions and ensure that they have a positive impact on everything they do when it comes to: • the environment • the communities within which they operate • transformation • their clients • their staff and shareholders • their suppliers • the industry in which they operate

ADVERTORIAL: FUTUREGROWTH

With a growing proportion of clients and investors now prioritising responsible and ethical behaviour in where they choose to work, companies are coming to understand that they cannot adopt a box-ticking approach and need to embrace being a responsible business in a genuine way.

you can exploit? Are you always looking at what you can get away with as a business, or do you ask yourself the following question: If you read about an action or decision your business had taken in the headlines of the newspaper, would you be embarrassed or proud of it?

It's more than deciding where to spend money

Partner with clients for the long term

Being a responsible business is not only about how you spend your profits but, more importantly, how you make them. Before doing anything, a

To be a responsible business, in our case as an asset manager, you need to view every client investment as a performance promise and a commitment to making a difference in their life

company needs to approach all decisions and actions with the ethical consequences top of mind. If the action or decision has the potential to cause harm to society or the environment in which the company operates then it should be considered socially irresponsible. Looking at the world through a responsible business lens will also guide you in the partnerships you are willing to establish. Being responsible and ensuring the company you run has a bigger purpose than merely generating profits is also about tackling the challenges facing society as a whole. There are a few main areas you need to consider when looking at what it means to be a responsible business. • how you do business with clients • how you can contribute to the betterment of the industry in which you operate • how you should treat clients, staff and shareholders • how you should treat the environment • how you should respond to specific social requirements in the countries and environments in which you operate These are tough asks and have an impact on all aspects of how you do business. For example, how do you approach the rules and regulations that govern your industry? Do you make sure you are always on the right side of the regulations, operating within the spirit of the law, or are you always looking for grey areas and loopholes that

by improving their living conditions, for example facilitating access to water or electricity or enabling them to retire respectably. Several businesses view their clients only as a way of making money, prioritising how much profit can be extracted from each client. This shortsighted approach does not take the long-term best interests of the business or your client into account. Your business is far more likely to benefit from treating each client as a long-term investment and as a partnership with yourself. To establish whether you are treating customers purely as profit generators, you need to ask yourself the following questions: • If there is an error, will you always make good on it for the client, even if they are not aware of it? • If pricing has changed and your client is still paying too much for historical reasons, will you adjust the client fee without being prompted by the client? • If you have underperformed, or have not delivered on your client promises, will you consider reimbursing them a portion of the fee? These are essential questions you need to answer because if your clients don’t benefit from what you’re doing, then your work and your business quickly becomes irrelevant – and so do you. Another crucial question to ask yourself is whether you will take on any client at any cost

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ADVERTORIAL: FUTUREGROWTH

and whether you consider the reputational and ethical risk of doing business with clients that may operate in an unethical manner or in grey areas of the law. As a company, where do you draw the line on whether you are comfortable taking on that business?

Play a role in uplifting the industry as a whole All businesses operate in an industry, and in Futuregrowth’s case, it is in the financial services industry. As an industry player and a responsible company, it is critically important that you play an active role in improving the sector to the benefit of clients and other stakeholders. Business leaders can do this in many different ways. They can participate in industry bodies that press for change, call out unfair business practices and actively promote regulatory changes that will benefit the industry and its clients. Trying to foster change in an industry can be tough, though. You are dealing with many vested interests and, as a result, you will sometimes need to make brave and unpopular moves to have an impact. It is much easier for businesses to operate underneath the radar, rather than spend time and resources on improving the industry to the benefit of clients and investors. Some practical things you can do to improve the industry in which you operate include: • highlighting the areas where regulations and client protections are weak and actively fighting for change; for instance, Futuregrowth has been an active participant in challenging the shortfalls in the JSE bond listing requirements and pushing for these to be changed • standing up when other stakeholders are compromised; for instance, in August 2016, Futuregrowth decided to withhold funding from state-owned enterprises due to the corruption and malfeasance taking place in these entities

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Being responsible and ensuring the company you run has a bigger purpose than merely generating profits is also about tackling the challenges facing society as a whole.

• calling out any malfeasance you see happening in an entity and standing up for what is right, even if it imposes a cost on your business

Taking transformation seriously Black economic transformation is an important initiative aimed at broadening the economic base of the country, stimulating further economic growth, and creating much-needed employment in a country that suffers from massive unemployment and income disparity. As a responsible business, you need to ask yourself the following when you apply the BEE legislation in your business: • Do you pay BEE lip service and skirt around the edge of the regulations? • Do you try to do as little as possible, using smoke and mirror structures to maximise your points by aiming to spend the minimum rand per point? There is another way to approach transformation and that is to tackle it as a responsible corporate citizen of the country. If your goal is to be a responsible business, you need to ask the following questions: • Do you make sure that you never get involved in any tenders that appear to be corrupt? • Do you embrace the spirit of what the legislation is trying to achieve? • Do you encourage your staff to get involved in your company’s CSI projects?

ADVERTORIAL: FUTUREGROWTH

• Are your employment policies and practices set up to ensure that your organisation transforms your staff complement, ensuring there are no unfair biases in your processes? • Do you reach your staff targets by poaching staff from other organisations, or are you actively bringing young students into the asset management industry and giving them opportunities by creating an environment of learning and growth? • Do you make decisions only to score points on a scorecard or are your efforts part of your organisation’s higher purpose of doing business by investing to make a difference in people’s lives and improve our country?

Treating the environment responsibly

Part of being a responsible business also entails being environmentally conscious and investing in its sustainability. You can do this in many ways, including: • investing in, and applying pressure on, investee

companies to be more environmentally friendly • maximising effectiveness when you are engaged in activities that will result in carbon emissions; for example, when you have to fly somewhere on a business trip, you can increase the number of appointments and engagements you schedule so that you minimise the amount of flights you need to take • making recycling available in the office • considering the environment when making investment decisions • using efficient lighting and turning off screens overnight • educating your staff to be environmentally responsible • eliminating plastic water bottles in the office • minimising the use of paper

Treating staff fairly and with respect A crucial part of being a responsible business is treating your staff fairly and humanely – and that

does not mean offering the legislated minimum benefits. It does mean doing what is right for your staff members, including providing flexibility during times of hardship or illness and building a productive and fair work environment for your staff. Measures you should take include: • creating a conducive work environment, with ample resources available to your staff, enabling them to fulfil their responsibilities • implementing fair employment policies • treating people fairly and as part of the organisation’s family when they experience hardship or experience severe illness instead of treating them as a disposable item you can replace • in the COVID-19 environment, making business decisions around your operating practices that prioritise your staff and their families’ health, safety and security

Act as an agent of change Operating as a responsible business does not mean you are running a charity that has no focus on performance. Instead, it means thinking deeply about everything you do and considering whether your actions are adding positively to society, communities, the environment and people. Acting as an agent of change could well pay off even more than focusing on short-term revenue generation because your business will be built on solid, sustainable foundations and benefit from the improvements you make in society, your industry and the country as a whole. 

www.futuregrowth.co.za Futuregrowth is a licensed Financial Services Provider.

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INVESTING

By Daniel Kibel

Investing during the pandemic -

the year unexpected Daniel Kibel, Founder of CM Trading, shares his insights on what the investment landscape has revealed in 2020.

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INVESTING

“When it comes to global markets throwing out curveballs to investors, 2020 has just lobbed out one spinner after the other. The coronavirus pandemic swept the globe, halting trade for many companies without warning and throwing markets into disarray. And it all happened so fast. 2020 has been 'The Year Unexpected'. But in some ways, we are finding our way back to some semblance of normal.

Investing in South African stocks right now is not the safest option

“The investment landscape has changed considerably since the last trends article we shared in December, when there was already a growing degree of wariness in investing in South African stocks. Local stocks are a reflection of what’s happening in the economy – as is, of course, the case with any economy. And the South African economic landscape is far worse off, having already been in trouble before COVID.

stocks (Google, Amazon, Tesla etc), which are doing very well right now. “In a global economy that is on a downturn, investing abroad is the only reliable option at present. Most investors are looking for a relatively stable bet when they put their money down. Risk-free investment is a unicorn, because, of course, 'stable' doesn’t necessarily mean that there’s no risk. There is some risk attached to every investment. And it’s critical that everyone understands that. But there is far less risk in investing abroad – particularly in 'The Year Unexpected'. “When markets are on a downturn, you need to be savvy about what you’re investing in. It’s either super high-risk with potentially super high returns; or stability with slower, steadier yield. Think very carefully about how strong your appetite for risk actually is before making any spur-of-the-moment decisions. “In terms of trading, we are still seeing a lot of high-risk but potentially high-return investment opportunities. But it’s not quite where it was in April and May. Then, across the board, we were seeing extremes – with people either making fortunes or losing fortunes in the blink of an eye. Now, the international markets, for the most part, have stabilised somewhat. And a few major stocks in the United States have soared – as mentioned earlier – like Amazon, Tesla and Google.

It’s a far safer option to look abroad for stability – like with major stocks (Google, Amazon, Tesla etc), which are doing very well right now.

“COVID has exasperated all the issues that were there before and brought a few new ones along with it. With that in mind, investing in South African stocks right now is not the safest option. That doesn’t necessarily mean that it’s completely the wrong thing to do. But there is great risk. People looking to make a lot of money with very high risk investments may want to do it. But it’s a far safer option to look abroad for stability – like with major

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INVESTING

If you’re looking for a standout investment, gold is it “Gold is at an all-time high – at almost 1950.00 – and a lot of investors have made a big profit on the precious metal. If you’re looking for a standout investment, gold is it. It’s a bit baffling, but all the indexes are up at the moment, too, despite the current circumstances. “Though I don’t like sounding like the voice of doom; unfortunately, the outlook for South Africa is a bit grim at this stage. The economy was in crisis pre-COVID and will be even more so post-COVID. Unemployment numbers are massive, and the electricity and corruption issues are major problems that have to be addressed, among other things. So, it’s going to be a long, hard road back after this. “Investors are likely to be hesitant to invest in South Africa for a while. Post-COVID, it’s just not going to be an attractive prospect for regular investors. But this was already the case, to an extent, before the pandemic hit.

Keep looking out for opportunity “That said, the entrepreneurial spirit is strong here, and South Africans have always remained resourceful. There is a big desire among South Africa’s people to do well. So, there is always hope. And ultimately, hope is what drives people to invest. “The beauty of investing, particularly with online trading, is that you can make money when things go up or when they go down. There is always opportunity in the marketplace, no matter how good or bad the global situation may be. So, keep looking out for opportunity, because it is everywhere and never let go of that hope – even when the unexpected happens. 

There is a big desire among South Africa’s people to do well. So, there is always hope. And ultimately, hope is what drives people to invest.

Daniel Kibel, Founder of CM Trading

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LIFE INSURANCE

Life insurance demonstrating value in a post-pandemic economy As South Africaâ&#x20AC;&#x2122;s economy goes into freefall following the financial impact of the COVID-19 pandemic and 10 years of declining economic growth, life insurers will face one of their toughest battles yet to retain and grow market share. Insurers are heading into an environment where consumers will be under tremendous financial pressure and questioning the value proposition of all their financial planning solutions. The sentiments and views expressed by customers in the latest South African Customer Satisfaction Index (SA-csi) for Life Insurance (2019) conducted by Consulta will ultimately feed into how customers respond in a postCOVID economy. Every household expense

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will be scrutinised and customer satisfaction and perceived value for money will be the deal breakers as to who maintains market share and who loses it in the months ahead. Loyalty will be challenged as customers look to value and price above all other measures.

LIFE INSURANCE

The benchmark measurement for Life Insurance (2019) provides important insights into the levels of customer satisfaction of South Africa’s major life insurers – Absa Life, Discovery Life, FNB Life, Liberty, Metropolitan, Momentum, Old Mutual and Sanlam – and will have a distinct bearing on how customers respond in an inevitably tough economy.

Brand loyalty will come under significant strain “For at least the medium term, South Africa faces a heavily constrained economy, high and growing unemployment and technological disruption, all impacting the financial services sector and how it engages with customers," says Ineke Prinsloo, head of Customer Insights at Consulta. "Customer mindsets, approaches to their financial planning products and providers are likely to undergo radical change in a post-COVID economy, as will all consumer discretionary spending. Brand loyalty will come under significant strain as customers scrutinise aspects such as perceived value for money, overall customer experience with their brands, and whether they trust their providers to pay out in their time of need. "If markets were challenging before, they are about to enter unprecedented competition in a recycled and shrinking consumer pool that will demand laser-like focus by insurers on customer satisfaction if they are to keep churn rates in check,” adds Prinsloo. “After the most severe consequence of the Coronavirus pandemic, death, comes retrenchments resulting from a contracting global and local economy. Consumers will be scrutinising every policy and what they are paying for them. The bells and whistles of overly complex benefit designs and loyalty

programmes will be moot in a post-COVID economy, where consumers will be scrutinising the underlying value for money in every policy and programme."

Insurers will be challenged to deliver real, tangible value Prinsloo adds that insurers are going to be challenged like never before to deliver real, tangible value and simple benefit designs and communication on an ongoing basis, and not only at the time of a life claim. "On this point, banks offering credit life insurance, together with traditional life insurance, have an added advantage to demonstrate tangible value right now, where customers are being advised to claim under the retrenchment benefits on these policies to assist with debt repayments during the pandemic crisis. "Across all providers, those who fail to get a handle on complaints and resolution and who are not responsive to their customers are likely to see a greater number of customers go the mercenary route to look for better options." Effective digital delivery, maintaining customer satisfaction and experience will be key for the effective delivery of service and support. Given how quickly and widely South African consumers have had to integrate digital technology into every facet of their personal and work lives, the delivery of insurance products and advice in future is in for a major shake-up.

Key take-outs from the SA-csi for Life Insurance 2019 In the 2019 SA-csi for Life Insurance, Absa Life, FNB Life and Old Mutual all take leader positions, followed by Metropolitan and Sanlam coming in on par, while Discovery Life, Liberty and Momentum all come in below par on overall customer satisfaction scores.

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LIFE INSURANCE

1. Bancassurance is making inroads into the traditional insurer space It is interesting to note that two of the three leader positions are held by banks – Absa Life and FNB Life – and not traditional life insurers. Bancassurance, the process of selling insurance products through banking channels, is making inroads into the traditional insurer space. This warrants attention given the ability of banks to integrate life insurance into trusted and digitised banking systems as part of a more holistic financial services offering, as well as integrate insurance offerings into their customer rewards programmes. This is likely to become increasingly important when customer cash flow is under pressure.

2. Customer satisfaction – overall index • Absa Life (83.2), FNB Life (82.2) and Old Mutual (80.3) are leading the industry. • Metropolitan (79.6) and Sanlam (78.6) both come in on par. However, both brands show a slight decline in their 2018 scores. • Discovery Life (75.7), Liberty (75.2) and Momentum (74.5) all come in below par on overall customer satisfaction scores. Both Liberty and Momentum managed to show improvements in previous scores.

customers, with the exception of Discovery and Momentum. These brands showed the biggest negative gaps, particularly around the reliability of the offering – showing that customers experienced more problems than they expected to. Both these brands come in below par on customer expectations and perceived quality scores. • Old Mutual leads the way on meeting and exceeding customer expectations with a score of 84.1, and a perceived quality score of 84.7. Absa Life also performs well with scores of 82.9 and 85.0 on customer expectations and perceived quality respectively. FNB Life follows with 82.0 and 84.6 respectively; however, it has the biggest gap between customer expectations and actual experience.

4. Perceived value

• Perceived value is a measure of the quality, relative to the price paid. The perception of value for money is a very strong predictor of future usage and company growth. • Discovery Life (75.0), Liberty (76.8) and Momentum (75.1) remain below the industry par (79.9). • Absa Life (86.6), FNB Life (84.8) and Old Mutual (81.7) take the lead on perceived value. 3. Customer expectations and perceived • Effort levels have a big impact on perceptions quality of value, with customers being at risk of moving • All brands met or exceeded the expectations of their cover when it becomes too high (as a result of poor service and Customer Satisfaction Index | 2019 feedback) and benefits not delivering what customers Leader Leader were led to believe. 83.2 Leader On Par On Par 82.2 80.3 79.6 78.6 78.7 Below Par Below Par 5. Complaints incidence Below Par 75.7 75.2 and resolution 74.5 • In terms of complaints incidence and handling, Absa Life has the lowest Industry Absa Life Discovery Life FNB Life Liberty Metropolitan Momentum Old Mutual Sanlam complaint incidence (6.2),

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LIFE INSURANCE

which is well below the industry par (10.6). It also has an exceptionally high complaint resolution rate (70.6). • Liberty also performs well on this front, with a complaint incidence score of 9.2 and a solid complaint resolution rate of 63.2. • Both Absa Life and Liberty show massive improvements in their complaint handling scores, which suggests that this has been a key focus in the businesses since the 2018 index. • Discovery Life performs worst on this measure with a high complaint incidence rate of 10.8

6 points compared with its 2018 score, Discovery has declined by 10 points from its previous year’s score of 29.4. • Sanlam (29.9) also showed a decline in their score compared with 2018.

and the lowest complaint resolution rate of 38.7. Both scores fall well short of the mark in terms of industry par, and both scores have shown significant decline when compared with 2018 scores. • Discovery Life and Sanlam all show a big pickup in complaint incidence compared with their 2018 scores.

• Discovery Life (75.9), Liberty (77.7) and Momentum (77.7) are on par with the rest of the industry. The SA-csi for Life Insurance is the most comprehensive survey of customer satisfaction, and is a causal model that links customer expectations, perceived quality, and perceived value to customer satisfaction (the SA-csi score), which in turn is linked to customer complaints (and recovery), and customer loyalty intentions. As a strategic tool for gauging the competitiveness of individual firms and predicting future profitability, an organisation’s customer satisfaction performance, as measured by the SA-csi methodology, provides a predictive indication of how well the firm will perform in terms of future revenue and earnings growth. Supported by both the scientific and practitioner community, the SA-csi is the first independent, comprehensive national customer satisfaction index with international comparability in South Africa and has collected data from more than 400 000 consumers since its inception in 2012. The SA-csi forms part of a global network of research groups, quality associations and universities that have adopted the methodology of the American Customer Satisfaction Index (ACSI) via its Global CSISM programme. 

6. Customer loyalty • Absa Life (75.6%), FNB Life (73%) and Old Mutual (70.3%) have the highest percentage of loyal customers, are above the industry par of 68% and have all shown an improvement in loyalty scores compared with 2018. • All other brands are below par when it comes to customer loyalty.

7. Net promoter score (NPS) • Net promoter score measures the likelihood of a person recommending a brand. • Absa Life with a net promoter score (NPS) at 54.2 and FNB Life at 52.2 have NPS scores much higher than the industry (33.7). • This is followed by Old Mutual at 40.8 and Metropolitan at 35.2. • All other brands score lower than industry average, with Momentum (16.7) and Discovery Life (19.9) falling well below par. While Momentum has shown an improvement of

8. Treating customers fairly (TCF) • The degree to which customers feel they are being treated fairly by their insurer is highest with Absa Life (86.5), FNB Life (85.6), Metropolitan (83.5), Old Mutual (83.3) and Sanlam (82.4) – all above industry par of 81.9.

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EMPLOYEE HEALTH

How well are employee benefits in the public sector measuring up? By Shaeera Essop

Public sector employees deliver a range of important services to South Africans, from municipal services to education to utilities. Employee benefits are a critical aspect of the employee value proposition, says Shaeera Essop, Strategic Client Engagement Manager at Momentum Corporate; however, Momentumâ&#x20AC;&#x2122;s research suggests employee benefits provision in the sector could do with some fresh thinking.

According to Essop, while most employees in the sector have access to the more traditional employee benefits, such as retirement benefits and medical aid, there is a growing need for new types of benefits. Employees also expect more support from their employer when it comes to financial education

and empowerment. More than half of the 657 respondents in the research were women over the age of 35, middle-class and welleducated, with children at home. The sample was spread across a range of public sector workplaces, with 25% of respondents working for state-owned enterprises, 24% for municipalities, 22% for universities and 12% for provincial or national government. Around 80% of respondents received a retirement benefit and medical scheme membership as part of their employment contract. Other benefits respondents could access through their employer included funeral cover (42%), disability cover (28%) and life cover (26%).

Access to less traditional employee benefits deemed important Access to less traditional employee benefits such as a pension-backed home loan or wellness and rewards programmes was a lot lower, at only 18% and 17% respectively. However, respondents felt that these benefits were important, with wellness and rewards programmes topping the list of benefits they believed their employer should be offering. Other benefits which respondents wanted their employer to offer included critical illness, savings for emergencies and value-added benefits. â&#x20AC;&#x153;Employees today expect a lot more than the traditional retirement and insurance benefits. Younger employees in particular expect benefits to deliver more immediate value. Itâ&#x20AC;&#x2122;s not surprising to observe

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EMPLOYEE HEALTH

known South African university. The flexible model gives existing employees the option of staying on the existing standalone fund or moving to the FundsAtWork Umbrella Funds. “The process offered a fresh approach to these types of conversions – with members making the ultimate decision, empowered to make informed choices through a comprehensive engagement programme,” she explains. In this particular example, the umbrella fund’s proposition included access to a wellness and rewards programme as well as a range of valueadded benefits.

Employees want more financial education and advice

Shaeera Essop, Strategic Client Engagement Manager at Momentum Corporate

the growing popularity of wellness and rewards programmes and value-added benefits, or the need for emergency savings, which has been highlighted by the pandemic and the economic realities of lockdown," says Essop.

Growing need from employees for greater flexibility and control There is also a growing need across employees for greater flexibility and control when it comes to their employee benefits. "Fortunately, certain employee benefits models, in particular some of the well-established umbrella funds, offer employees the flexibility they seek, along with the kinds of value-added benefits that employees say are important,” says Essop. Essop says that Momentum Corporate recently pioneered a highly flexible, hybrid employee benefits model for the employees of a well-

The research also shows that the vast majority of respondents (95%) believed that they have a good or fairly good understanding of their benefits. However, nearly 60% indicated that they needed financial education and advice to facilitate a better financial future, and looked to their employer for this support. Essop says access to professional benefit counselling as well as qualified financial advisers is an essential part of any employee benefit value proposition nowadays. "Benefit counselling offers employees a solid understanding of their employee benefits and, along with financial coaching, helps employees master key financial best practices like developing a household budget and a financial plan. Access to the expert advice of a qualified financial adviser is also of critical importance, particularly in uncertain times when many employees may end up making decisions based on fear, scarcity and emotion," she adds. "Many years ago, Bob Dylan sang the classic 'The times, they are a-changin’. The times are certainly changing. The question is how well employee benefits value propositions are adapting in these changing times," concludes Essop. 

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SMALL BUSINESS

Supplier development

drive can get SME sector and economy back on its feet By Dylan Baxter

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SMALL BUSINESS

Big businesses can play a key role in rejuvenating the South African small business sector and in helping the entire economy to recover from the impact of the COVID-19 pandemic by using their enterprise and supplier development (ESD) spends smartly in the coming months.

Giving small businesses the opportunity to become part of larger companiesâ&#x20AC;&#x2122; supply chains will not only help the sector to recover from the economic devastation caused by COVID-19 restrictions but will also create a platform for sustained job creation and growth and contribute to the flagging GDP. At the same time, it will help big businesses meet their B-BBEE targets during an economic downturn. According to National Treasury figures, there are around one million formally registered SMEs in South Africa, which provide about 60% of the countryâ&#x20AC;&#x2122;s jobs. Surveys indicate that 60% of SMEs are either considering retrenching employees or have done so already. This poses a significant threat to the economy with millions of jobs at risk. Every sector of the economy has been impacted by the pandemic. But, right now, thereâ&#x20AC;&#x2122;s a real opportunity for businesses to take a long-term view, both in helping the economy get back on its feet and in achieving their own

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SMALL BUSINESS

ESD objectives and supply chain initiatives. As we emerge from the worst of the restrictions, businesses will need to start delivering on projects and starting up their operations. Using small suppliers to help them do this can play a major role in rebuilding the economy. Most businesses have ESD and inclusive procurement programmes, but we need to step this up if we’re going to get close to creating the job opportunities and economic growth we so desperately need.

Which goods and services can be outsourced immediately to SMMEs? A good starting point for big corporations is to look at which goods and services can be outsourced immediately to SMMEs with little risk to the business, for example, cleaning, courier, maintenance, security and even software development. This should be followed by identifying candidate businesses that have the potential to be included in your supply chain and grooming these businesses for supply chain partnerships. For small businesses, the key right now is determining the new what (product or service), the new how (processes) and the new where (distribution channels) to remain relevant and have the ability to respond to opportunities needed by other businesses. ESD has always been about taking a long-term view, and building capacity in suppliers over a fiveto seven-year period to generate momentum. In this way, you create meaningful and sustainable businesses over the long term. The COVID-19 crisis is the time for businesses to engage SMEs to not only support them, but also to ensure that they are well positioned to answer your supply chain needs quickly. Now, more than ever, ESD is not just about compliance. It’s a chance to add real value to your supply chain and make a difference. 

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Dylan Baxter is the head of sales at Raizcorp. His extensive sales career spans over two decades and he has also experienced his own entrepreneurial journey, during which he started and ran his own successful retail business.

About Raizcorp Celebrating its 20th year in 2020, Raizcorp is, according to The Economist, the only genuine incubator in Africa. It provides full service enterprise and supplier development programmes that guide entrepreneurs to profitability. Raizcorp has created ‘Prosperation™’ – its own unique, worldrenowned model of business incubation. Founded in 2000, Raizcorp has become Africa’s premier business incubator model.

Raizcorp W www.raizcorp.com

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SUSTAINABLE BUSINESS STRATEGY

How to kick-start

a sustainable business strategy

By Bongiwe Mbunge

Having a well-planned and robust sustainability strategy has become increasingly important for businesses in recent years and is essential for long-term success. Not only does it help in the development of your business vision and strategy, but a sustainability strategy will also help to reduce unnecessary costs.

This is according to Bongiwe Mbunge, advisory services partner at Mazars, who says that while robust sustainability strategies can be especially beneficial to medium-sized businesses, they often find it daunting to implement. 90

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"Medium-sized businesses often believe that they lack the needed resources to create a sustainable strategy. This can, however, be overcome by aligning a companyâ&#x20AC;&#x2122;s goals to what sustainability really means. In this way, one can create a strategy that is both achievable and manageable.â&#x20AC;?

SUSTAINABLE BUSINESS STRATEGY

Discuss what a sustainable strategy means for your business The first step, according to Mbunge, is simply to start the conversation. “It’s important to have conversations defining what a sustainable strategy means for your business and assess its business case to optimise your business operations and improve its bottom line. Consider what success will look like and how it will be measured. The most powerful aspect will be embedding the sustainability principles throughout your business," adds Mbunge.

Identify and engage stakeholders The next crucial part is to identify and engage stakeholders, and Mbunge says that one needs a stakeholder engagement strategy that recognises every person, group and company that the business interacts with. “Having a strategy that formalises how the company comments on proposed legislation or how they interact with local universities, colleges or supply chains is essential to building a sustainable business model.” Not only are external stakeholders important, but so are internal stakeholders. Mbunge says that when it comes to influencing a company’s sustainability strategy, its biggest stakeholder is its people. “Having fluid lines of engagement within the business is crucial if they are to buy into the vision and feel empowered enough to act, independently and as a team. If a business has straightforward employee education initiatives, it adds directly to the bottom line and empowers people beyond your business.”

Clear and consistent communication is vital Lastly, Mbunge states that clear and consistent communication is vital. “While putting in place the elements to launch a sustainable strategy is a starting point, clear and consistent communication is an essential component to ensure better chance of success.”

Crucially, stakeholders need to know how the company’s strategy adds value to their business, and a well thought-out communication plan is the best way to unlock the value in this. “Often business leaders tend to look too far in optimising their business. We always encourage leaders to start with what they already have. “Overall, businesses embarking on developing or improving a sustainable business strategy should take a positive approach that breaks those elements down into manageable and achievable actions. It’s a key step in kick-starting any sustainable journey,” Mbunge concludes. 

Bongiwe Mbunge, advisory services partner at Mazars.

Mazars is an internationally integrated partnership, specialising in audit, accounting, tax and advisory services. Operating in 91 countries and territories around the world, it draws on the expertise of 40 400 professionals – 24 400 in the Mazars integrated partnership and 16 000 via the Mazars North America Alliance – to assist clients at every stage in their development.

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WATER MASTER PLAN

South Africa’s quest for universal water access

By Minister Lindiwe Sisulu

The Department of Water & Sanitation’s Water Master Plan has been hailed as a strategic piece of work which has the world’s attention and, with its release, is something that South Africa can be immensely proud of. “We launched the Master Plan so that by the time it is brought to Cabinet and Parliament it represents the views of all stakeholders. I am extremely grateful for the supportive work done by my panel of advisers,” said Minister of Human Settlements, Water and Sanitation, Lindiwe Sisulu. “In my budget speech I said my induction into the department when I took over a year ago was heavy and intense. We came in and found a department that no longer enjoyed the confidence of the people it served, having been eroded by a number of cases of corruption. In essence I was

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told I had inherited a bankrupt department with problems accumulated over many years. The Portfolio Committee on Water and Sanitation instructed me sort out the department and its finances - and I did just that,” she added.

Fighting corruption When Minister Sisulu assumed office the amount of irregular and wasteful expenditure in the department amounted to R16 billion, later revised upwards to an amount of R31 billion. “I have ordered investigations into these matters. Here the Stabilisation Committee served well to ensure that as we proceed with disciplinary cases,

WATER MASTER PLAN

the work of the department continues,” she said. Minister Sisulu has also ordered investigations into the affairs of the Lepelle Northern Water Board in Limpopo, the Amatola Water Board in the Eastern Cape, while a third investigation is underway at Sedibeng Water Board. In the course of the investigations, the Boards of Lepelle and Amatola Water placed their Chief Executive Officers on suspension and have now commenced with a disciplinary process against them. Both executives have received their charges and dates for the hearings were set during for August.

Minister Sisulu said that the work of the SIU, the Hawks and the entire justice system would assist the Department of Water & Sanitation to find closure on all these matters, ensuring that all officials understand that corruption will no longer be tolerated. “The Auditor-General has always complained about the lack of consequence management within the department. We are now saying there is consequence management and we hope this will filter through, also to the service providers who are corrupt. We want to send a public message that

“I considered all the findings and recommendations from the investigations and decided to pursue civil and criminal charges against those implicated in unlawful and corrupt conduct at Amatola and Lepelle,” she explained. “The reports from the departmental investigators into the affairs of both CEOs have been handed over to law enforcement agencies. In both cases we are joined by a number of law enforcement agencies, including the NPA and the Public Protector, while the SIU is continuing a number of investigations at Lepelle. Both the Boards of Amatola and Lepelle have been placed under administration to ensure that we can stabilise them as we continue with the cases.”

we are cleaning up the department,” she said. “We have had to take all these measures to restore the good image of the department. Both the Water and Sanitation Master Plans, we depend a great deal on investments to deliver and for that to happen we have to convince investors that they can rely on us and should invest in us.”

Water access Minister Sisulu said that work is also underway to improve on the water licence turnaround time. “The department has been able to make the necessary changes to its regulatory regime to give effect to the 90-day turnaround time with effect from 1 April 2020. The shift from 300 days to 90

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WATER MASTER PLAN

Minister of Human Settlements, Water & Sanitation, Lindiwe Sisulu days has resulted in significant changes to the business process, necessitating a workshop where the changes are discussed exhaustively with the applicants.” The Department of Water & Sanitation has committed to offering assistance to the black and women emerging farmers to enable them to meet the requirements of the 90-day process. Minister

Sisulu said that catchment management officers will guide each applicant on the process and identify the information required to support the application. The department will also work with other departments and other institutions responsible for farmer support. “I am glad to report that I, together with my counterpart from the Kingdom of Lesotho did a sod turning event that marked the construction of the Lesotho Highlands Water Project Phase II. This project is aimed at achieving water security and at delivering water to South Africa by November 2026,” reported Minister Sisulu. Since the inception of the Regional Bulk Infrastructure Grant programme in 2007, 3.1 million households have benefitted from water and sanitation projects implemented. In this financial year the Department of Water & Sanitation is committing R3 billion (under schedule 6b) to continue with the implementation of 136 bulk water and sanitation projects, and R2 billion under schedule 5b to implement 69 projects. 

Tribute to Andrew Mlangeni “I would like to use this opportunity to pay a special tribute to an outstanding leader, a moral compass, a man of passionate commitment to the liberation of all the people of our country. A man who gave the best part of his life to the realisation of these freedoms that we enjoy. A man who represented all the values of a cadre of the African National Congress. A man who was a member of this House and therefore a former colleague of many of us, Andrew Mlangeni. In the last days of his life he asked for nothing more than this: that he should be remembered as one of those who brought us our democracy. We have a responsibility to live up to the ideals that he fought for. Ideals of integrity and intolerance of corruption. We are enjoined to ensure that we live up to his sacrifices and remove corruption from every corner of this government, especially this department. This is the ideal of an ethical society that he gave up the better part of his life for and I will, in my departments, make sure that we will be counted, finally as having responded to his lifelong dedication to the freedom that we enjoy. The last of our Rivonia Trialists. The end of an era. And now the responsibility rests on us to give back to society the democracy we enjoy today, by having an ethical government, led with integrity. This is the only way we can pay back for the huge sacrifice of his generation. In his honour I hope there will be dedicated legislation that clearly indicates what the fundamentals of this democracy means. A government that leads with integrity and complete intolerance of corruption.” – Minister Sisulu

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SA Business Integrator - Volume 6 l Issue 2 September 2020

Articles inside

WATER MASTER PLAN

SUSTAINABLE BUSINESS STRATEGY

EMPLOYEE HEALTH

ADVERTORIAL: Futuregrowth – rising to the challenge of what it means to be a responsible business

SMALL BUSINESS

FUND MANAGEMENT

ADVERTORIAL: Gauteng Partnership Fund - catalyst in the delivery of integrated human settlements in Gauteng

ADVERTORIAL: MTN SA Foundation – Uplifting and empowering our youth

DIGITAL TECHNOLOGY

BUSINESS FINANCING

ENTREPRENEURSHIP

ADVERTORIAL: ZADNA - .Za is safe, resilient & robust and complies with international best practice

HUMAN SETTLEMENTS

TRANSPORT

INTERVIEW: Petroleum Agency SA – Brulpadda discovery and ongoing exploration have put SA on the international investment map

COVER STORY

INFLATION OUTLOOK

COMMERCIAL PROPERTY MARKET

INTERVIEW

BUSINESS SUSTAINABILITY

ADVERTORIAL: Citiq Prepaid – Staying nimble. Staying ahead. Changing the property conversation

CUSTOMER SATISFACTION