BusinessBrief
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/Henley Business School – Africa
DRONES
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@HenleyAfrica
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December/January 2016/2017 Vol 21 No. 6
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BusinessBrief
CONTENTS
December/January 2016/2017
COVER STORY
30
DRONES DAWN OF A NEW WAVE OF DISRUPTION?
DRONES
FEATURE
DAWN OF A NEW
WAVE OF DISRUPTION?
14
PROFESSIONAL EDUCATION & CAREERS
TRAVEL & LEISURE
FOUNDERS LODGE THE LEISURE TRAVELLER
GIVEAWAY
EPSON DS-30 PORTABLE SCANNER
FEATURE
PROFESSIONAL EDUCATION & CAREERS WHY KING IV? ANTI-HATE SPEECH BILL RISKS! THE UNIVERSITY CONUNDRUM? STICKS, CARROTS & FREE SPEECH QUALIFICATIONS OF DIRECTORS!
December/January 2016/2017 Vol 21 No. 6
R54.00 (incl. VAT)
Other African Countries R47.40 (excl.tax)
REGULAR SECTIONS VIEWPOINT
30
n D RONES – DAWN OF A NEW WAVE OF DISRUPTION?
n HEDGE FUNDS VS UNIT TRUSTS 36
BANKING & INSURANCE
nQ UALIFICATIONS OF DIRECTORS!
nB ANKS CAN HELP ENTREPRENEURS?
n THE MYTH OF GLOBALISATION
n RETIREMENT SAVINGS COSTS
EDUCATION & TRAINING
56
n WHY BUY NEGATIVE YIELD?
n STICKS, CARROTS & FREE SPEECH MANAGEMENT
ASSETS & INVESTMENTS
40
60
MARKETING & SELLING
64
nT HE UNIVERSITY CONUNDRUM?
n A UDIENCE MEASUREMENT THROUGH MOBILE TRACKING
n SKILLS FEEDBACK LOOP?
n BRAND ACTIVATION FOSTERS ENGAGEMENT
LEGAL
44
HUMAN CAPITAL
68
n ANTI-HATE SPEECH BILL RISKS!
n ECONOMIC RETRENCHMENT DEBATABLE
n BEWARE OF EXCLUDING LIABILITY
n THE AGILE WORKFORCE
TAX 48
INFORMATION TECHNOLOGY
72
n TAX OMBUD COMPLAINTS
n TECHNOLOGY IS CHANGING WORKFORCE RULES
n INDEX TAX
n PREVENT EMPLOYEE IT THEFT!
FINANCE & EQUITY
52
PROCESS & OPERATIONS
76
n WHY KING IV?
n THE FUTURE OF ROAD-BASED TRANSPORT
n BBBEE VS REAL TRANSFORMATION
n GO PAPERLESS!
SEMINARS & CONFERENCES
5
n ALL THE LATEST EVENTS BRIEFCASE nA LL THE LATEST GADGETS, GIZMOS AND OFFICE MUST-HAVES
TRAVEL & LEISURE
10
nE XQUISITE LOCAL EXPERIENCES 6
CONTRIBUTORS 80 nC ONSULT OUR CONTRIBUTORS DIRECTLY FOR PROFESSIONAL ADVICE
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PUBLISHER’S NOTE
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Compliance Institute Southern Africa
Contact Centre management group
Financial Planning Institute of Southern Africa
The Institute of Certified Bookkeepers and Accountants
Institute of Credit Management of South Africa
Institute of Directors Southern Africa
Institute of Management Consultants of South Africa (IMCSA)
Institute of Marketing Management
Institute of People Management
The Institute for Public Relations and Communication Management (South Africa)
Marketing Practitioner South Africa
South African Auditor & Training Certification Authority
South African Board for People Practices
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South African Institute of Tax Practitioners
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Southern African Society for Quality
contributors on page 80
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4
EDITOR’S NOTE
BusinessBrief
December/January 2016/2017
E
P
olitical and social instability accompanied by rising nationalism, de-globalisation trends reflected by declining global trade, economic pressure, recessionary fear, volatile exchange rates and technological disruption, portray our times! Our world is experiencing change at an everincreasing rate. Man’s knowledge growth is exponential. The old order is being called to question and is being tested at every turn. Our traditional values and expectations from leaders are altering rapidly and a new age of political leadership both locally and globally is now at our doorstep. What will this all bring? With the above in mind, this edition of BusinessBrief, carries a broad range of articles from academics, professionals and consultants who have shared their thoughts and insights so that we can have a little more understanding. In this edition, our cover story, Drones: Dawn of a new wave of disruption?, summarises the current rules and regulations that provide the framework that affect the opportunities that this new technology is creating. Our Feature, entitled, Professional Education and Careers, looks at the issues that surround a career choice leading to becoming a
professional. The professional of tomorrow needs to be equipped today in order to deal with the challenges of tomorrow. The Prevention and Combating of Hate Crimes and Hate Speech Bill has been tabled by the Minister of Justice and Correctional Services. In our Legal section, the article entitled, Anti-hate speech bill risks!, looks at some of the issues that corporates need to be aware of when dealing with this important piece of new legislation once it has been passed. Why King IV? explores the thinking behind the development of the latest report on Corporate Governance. The latest report addresses a broad range of issues that had not been addressed adequately by the previous reports. The National Infrastructure Plan (NIP) will play a vital role in the development of capacity for future transport. Added to this are advancements in technology which are paving the way for a revolution in transportation. Our article entitled, The future of road-based transport, looks at the role that autonomous vehicles will play in future-proofing transportation beyond 2030. We welcome the Contact Centre Management Group as the latest professional body to accredit BusinessBrief for the purpose of Continuing Professional Development (CPD). With the above and more in mind, may we build on the challenges that we have faced in 2016, and prepare for the opportunities that 2017 offer. We wish all our readers well over the Festive Season.
Wanita
bbrief.co.za is a portal where business decision makers can access business resources in South Africa that effect their decision making ...
SEMINARS & CONFERENCES
BusinessBrief
5
December/January 2016/2017
INSIDE COCA-COLA, BOOK REVIEW
EXCEL DASHBOARDS & REPORTING
Sandton Convection Centre, Sandton
6 December 2016
WORKSHOP
Liz: info@energyindaba.co.za
Melrose Arch, Johannesburg
8-9 December 2016
+27 (0)71 844 2569
Phethiwe: phethiwe@vividengage.co.za
The Hilton Hotel, Sandton
+27 (0)11 025 8296
Nozipho: nozipho@encorelearning.co.za
A breakfast followed by Mark Sham’s
Dashboards provide at-a-glance views
concerned citizens who come together
insightful book review of “Inside Coca-
of KPIs (Key Performance
to seek solutions for Africa’s energy
Become part of Africa Energy Indaba. Be one of the growing number of
Cola” - a CEO’s life story of building the world’s most popular brand.
Indicators) relevant to a particular
future. Sign up to participate in this
objective or Business process
important process that is shaping the
(e.g.Sales, Marketing, HR, or
future of Africa.
Production). FINANCIAL MODELLING 2016 7-8 December 2016
8TH ANNUAL WOMEN IN MINING
The Holiday Inn Sandton
CORPORATE TAX BOOT-CAMP
CONFERENCE
Mduduzi: info@ftramsconsulting.co.za
9 December 2016
22-24 February 2017
+27 (0)11 071 1169
Deloittes Offices, Durban
Gallagher Estate, Midrand
dsot@deloitte.co.za
Zakhele: zakhele@intelligencetransferc.
Financial Modelling contains a high
co.za
level of practical work, backed up by
The workshop will address the tax
lecture and discussion, to provide the
principles regarding leased assets and
most valuable and intensive learning
common mistakes made in practice
Pertinent issues to be discussed include
experience. Participants will be
regarding the tax accounting of leased
advancing the mining industry by
provided with a laptop and software.
assets, as well as key relevant capital gains tax principles to apply.
+27 (0)11 326 2501
investing in the research, development and training of women, and encouraging women to report sexual
PROFESSIONAL PRESENTATION
violence with accuracy and in
SKILLS, PUBLIC SPEAKING &
VAT BOOT-CAMP
COMMUNICATION WORKSHOP
13 December 2016
7-8 December 2016
Deloitte Place, Building 33, 20
Pheasant Hill, Midrand
Woodlands Drive, Woodmead, Sandton
INTERNATIONAL FINANCIAL
merle@thecommunicationacademy.
dsot@deloitte.co.za
REPORTING STANDARDS 2016
turn provide a supportive environment.
23-24 February 2017
co.za +27 (0)86 111 6121
A practical workshop that includes as
Birchwood hotel, Johannesburg
many examples as possible of practical,
California: california@thehillinstitute.
The purpose of this two-day training
day-to-day transactions and decisions
com
course is to teach the delegates the
that a VAT vendor would encounter.
+27 (0)11 025 1252
skills required for giving a confident and successful presentation. Focusing
This in-depth and highly interactive
on how we present our thoughts,
AFRICA IN 2017
workshop will delve into all key
perceptions and ideas in retrospect to
25 January 2017
IFRS pronouncements, with detailed
what we present.
Deloitte Place, Building 33, 20
explanations, examples and practical
Woodlands Drive, Woodmead, Sandton
exercises presented by an expert
Ross: roparker@deloitte.co.za
facilitator.
ARTIFICIAL INTELLIGENCE & HR TECHNOLOGY CONFERENCE
With the global macro environment
8-9 December 2016
remaining largely unfavourable, African
CFO WORK SMARTER NOT HARDER
Protea Hotel Balalaika, Sandton
economies now need to work to grow.
WORKSHOP
Mlamuli Nkomo: +27 (0)87 700 4856
Global headwinds include China’s
14-15 March 2017
growth “rebalancing” away from being
Alex: avangroningen@cfo.co.za
Artificial Intelligence (AI) and
commodity-intensive towards services;
+31 (0)20 639 0008
Technology is definitely changing the
a lack of a recovery in the EU economy
Dealing with a limited amount of
face of HR. With a strong reliance
and the potential impact of BREXIT.
attention defines your success. Avoid
on data AI will help leaders identify
stress, procrastination, interruptions
challenges. AI will provide insights and
and trivial distractions.
empower managers by providing more
AFRICA ENERGY INDABA
data.
21-22 February 2017
Subscribe to BusinessBrief online: www.bbrief.co.za
follow:
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6
BusinessBrief
December/January 2016/2017
BRIEFCASE
LG V20 The LG V20 is LG’s best phone to date and crams the latest technology in a polished premium feeling package. A 5.7” high brightness IPS screen with a dual top notification screen sets the V20 apart. An Extended life removable battery makes the V20 unique and gives you all day stamina. A top grade dual rear camera with High Fidelity Quad DAC audio system sets the V20 apart in a world of similar devices. Android 7 Nougat is standard and offers a smooth, slick user experience. In many respects, this is the best Large screen smartphone of 2016. Available from Vodacom on attractive packages for more information www.vodacom.co.za
DELL XPS15 Dell has introduced the most portable 15.6” laptop available, with the new 2016 XPS 15. A high-resolution 4K touch enabled Infinity, edge to edge, screen packed into a thin, sleek Aluminium and Carbon Fibre body. A range of the latest Intel processors and hard drive options take the XPS 15 from incredible to amazing. The XPS 15 features all the ports and slots you could need for your business. The battery can last up to 17 hours. The XPS features expandable main memory and a range of accessories to complete your computing experience. For more information www.dell.com/ za/p/xps-15-9550-laptop/pd
HISENSE 55” ULED CURVED – T910 The Hisense 55” T910 packs four times the number of pixels into the same screen sizes as traditional 1080p HDTVs, enabling stunningly realistic picture quality and beautifully natural motion with incredible detail. A gentle curve adds to the viewing experience and the smart features make Netflix and web browsing a snap. This next generation TV is bright colourful and easy to watch. Competitively priced and available across South Africa For More information www.highsense.co.za
BRIEFCASE
HP Z2 MINI WORKSTATION If you want it small and powerful, the next gen HP Z2 Mini delivers server-grade power in a 5.8 by the 21.5-centimeter package. The HP Z2 Mini workstation is a beautifully designed high power solution to any high power business computing needs. Next Generation Intel Xeon processors Nvidia professional graphics and HP Z Turbo Drive. This elegant, powerful desktop will make any task a cinch
BusinessBrief
7
December/January 2016/2017
GIVEAWAY For a chance to receive a Epson DS-30 Portable Scanner, please send an email or postcard (one entry per person) with your name, physical address and telephone number marked “EPSON”. Please note that these giveaways are only open to our South African readers. Email: editor@bbrief.co.za Postcard: P.O. Box 1546,
Available from HP dealer countrywide prices vary by specification for more information http://www.hp.com/eu/Z2mini
Parklands, 2121 Closing date: Monday, 16 January 2017 Congratulations to last edition’s entrant: • Craig Harris – Fitbit Charge 2
GIVEAWAY EPSON DS-30 PORTABLE SCANNER
The Epson WorkForce DS-30 is a lightweight, easy-to-use mobile scanner for business people on the move, letting you capture, store and share crystal-clear high quality scans at the push of a button. Powered by USB 2.0 and PC/MAC compatible, the DS-30 allows you to copy and scan on the go.
8
BusinessBrief
December/January 2016/2017
BRIEFCASE
THE NEW MANAGER HOW TO BECOME A LEADER IN 52 SIMPLE STEPS By Steven Jacobs How do you cope if you are new to your management position? How do you lead well? What principles must you apply? You need help and you need it fast! This simple book will: • provide you with all the necessary leadership principles to enable you to face your own unique challenges in leading your team; • advise you on how to get the best out of your staff, as well as out of yourself; and • equip you with the necessary skills to not only manage, but to lead. In this book, written by an author with years of experience in management, you will find solu¬tions to typical workplace challenges through practical examples of what other leaders have faced in similar situations. As you work through daily issues in 52 easily accessible steps, you will build leadership skills in a concrete and lasting way. At the end of each chapter there are reflection questions to help you identify your current leadership approach. For more information, contact +27 (0)21 460 5462 / sjoubert@penguinrandomhouse.co.za / www.penguinrandomhouse.co.za
SHAPING AFRICA’S TALENT Edited by Terry Meyer For Africa to realise its potential and create the socio-economic conditions that its people aspire to, it needs organisations that can compete in a fast changing, complex global environment. This will only be achieved if African organisations grow their talent and leadership skills to add to the pool of skills and talent on the continent. This book provides insight into what leading thinkers and organisations do to build, develop and retain talent. The contributors comprise academics, consultants and organisational leaders, all of whom have a wealth of expertise and experience in talent management. The contributors provide high level strategic frameworks as well as practical tools to implement talent management processes. Shaping Africa’s Talent is a “must read” for executives, leaders, HR professionals and academics who are responsible for building the continents next generation of organisations and talent. For more information, contact +27 (0)21 460 5462 orders@knowres.co.za / www.kr.co.za
LEADERSHIP PERSPECTIVES FROM THE FRONT LINE Edited by Theo H Veldsman and Andrew J Johnson Two internationally recognised thought leaders on leadership teamed up with over 80 contributors to produce the most comprehensive and “biggest” business leadership book ever published in South Africa. With 89 contributors, 56 chapters, 1000+ pages and featuring a foreword from Advocate Thuli Madonsela in hard cover, the book addresses Leadership from every possible angle. The leadership education and development industry is worth over R500 billion worldwide. Yet, despite the vast amount of money invested, trust in leaders is at an all-time low. Research has shown that the primary reason for leadership failure is a lack of contextual perspective. This is where Leadership: Perspectives from the Front Line is different to the thousands of other leadership books available. It provides cutting-edge thinking about leadership. It synthesises the latest insights from SA’s top leaders and experts on leadership – offering readers practical tools they can implement immediately. For more information, contact +27 (0)21 460 5462 / orders@knowres.co.za / www.kr.co.za
BRIEFCASE
BusinessBrief
9
December/January 2016/2017
ORIGO - XO TABLE The name behind the XO table is derived from its different viewing angles. When viewed from the front it resembles an X, whilst when viewed from above it is round like an O. This theme runs throughout the XO range of products, from the XO side table to the XO lamps, all following the same simple design principle. The XO coffee table is manufactured locally in Cape Town from mild steel and coated with a ferrograin powder coating to give the popular matt effect to the finish. For more information, contact +27 (0)72 286 8181 / chris@origo.co.za www.origo.co.za
BOLLE EARTH By Gallotti & Radice Floor lamp with halogen point light, transparent blown glass spheres and metal parts in hand burnished brass. Due to this craft made processing, each product is unique and exclusive. Dimmable light upon request. For more information, contact Casarredo +27 (0)11 786 6940 www.casarredo.co.za
CREMA DESIGN – NUBE ARMCHAIR The design of the Nube Armchair comes from the combination between the flat orthodoxy of the contemporary spaces with the curves of the human body. While the outside lines of the Nube armchair are made of flat parallel surfaces – the space where you can sit is curved and cosy, like a nest. Instead of a solid block, the design of Nube allows you to see the back part of the armchair. Nube has a square upper view. Chairs can be linked with a simple metallic piece that screws to the lower part of the chair. For more information, contact +27 (0)21 448 7775 carolynn@cremadesign.co.za / www.cremadesign.co.za
10
BusinessBrief
December/January 2016/2017
TRAVEL & LEISURE
The Leisure Traveller By Robert Nienaber | Chief Marketing Officer | CT City Accommodation |robert@capetowncityaccommodation.com | @cyaccommodation
With the cost of living on the rise, the leisure traveller will be looking for downtime with a capital ‘D’ during their limited days of leave.
T
he 2014 Traveller Research Study, undertaken by Google, reports that up to 63% of leisure travellers need to budget on their holidays, making them considerably more price sensitive than business travellers – for whom an employer tends to pick up the tab. Social media parade Because word-of-mouth feedback from other travellers remains an important consideration in this travel category, don’t underestimate the importance of your Facebook or Twitter profile. The stats from the Research Study show that 82% of leisure travellers take reviews into account when booking their next trip. An excellent idea is then to request that your guests post a short review on social media – tagging you. As the owner, you’re then in a position to respond to the negative feedback, promising to improve on these areas in the future, as well as to thank past guests for their positive feedback. Well-managed profiles and the personal touch are of the essence here! Have license, will drive While only 22% of leisure travellers seem to consult online car-rental sites or apps (as opposed to 44% of business travellers), this is still more than one fifth of the entire category. Business travellers need to get from the airport to their meetings without a hitch, most likely booking a 2WD sedan, while a selfdrive safari in a comfortable 4WD may present a romantic prospect to leisure travellers. Don’t fall into this trap! A selfdrive trip, especially in Africa, requires a great deal of planning and/or knowledge. Further the frills What add-ons does your establishment offer that makes it more desirable than another accommodation or transport option in the same area or working a similar route? Make sure that these perks are mentioned not just on your own website, but on social media and in your profile on booking sites too. A descriptive
sentence – for example, ‘Private plunge pool per cottage, masseuse on site, serviced on request’ – is sure to bring in just the sort of guests you’re looking for. Robert Nienaber, the chief marketing officer at City Accommodation, recommends that aside from free Wi-Fi (sought after by an increasing number of leisure guests for social media posts and photo uploads), other desirable ‘frills’ may include: • top-notch swimming facilities (think clean, cool/heated, a nearby bar, towels and deck chairs); • an extensive choice in TV channels (sport, lifestyle and movies being the biggies); and • scenic walks around the premises. Underscore the specials Be sure to capitalise on the reasons travellers might use your services or stay with you. Demand-generators may include sports matches and music concerts, tourist attractions, weather, natural beauty and proximity to wildlife. Package deals may work in your favour here, or discounts for accommodation and travel linked to events in your area. Added to the social media, website and booking-site presence you have online, a newsletter that goes out to all past guests is a great way to promote specials to your target market without the need for costly advertising. Inspiration in motion The 2014 Traveller Research Study points to tourism businesses needing to create and share motivational video content, to attract their target audience. This relates back to the trend in which digital is the primary source of travel inspiration, at a time when 65% of leisure travellers make decisions based on social/video sites and search engines; and when 42% of leisure travellers heed the get-up-and-go factor of YouTube. It’s worth getting a professional to create the content for you, to ensure quality and that desirable ‘wow’ factor. Value for $$$ A last great tip to steer leisure travellers in your direction, is to launch a supporters or loyalty club. ‘This ties in with price sensitivity,’ says Robert, ‘where maximising the distance one’s rands and cents can go, through specials, loyalty points or discounts that travellers can use at a later date, is sure to bring them back again to use your service or book in at your accommodation. n
TRAVEL & LEISURE
BusinessBrief
11
December/January 2016/2017
Founders Lodge
Just 75km from Port Elizabeth in the Eastern Cape, Founders Lodge is situated on 400 hectares of land, 50m adjacent to the Shamwari Game Reserve. Once the private home of Adrian Gardiner, Founders has undergone extensive renovations to enable Gardiner and Mantis to convert it into a self-contained commercial lodge.
P
erfect for private business conferences, Founders Lodge offers 6 suites either off the courtyard or forming part of the home, all allowing access to the many luxuries on offer. These include a library and business centre, a gym with steam room, a lounge replete with billiards, bar and fireplace, a formal lounge in the manor house plus a choice to dine on the superior cuisine either formally inside, or more casually on the dining terrace. Daily game drives with professional guides provide countless sightings of diurnal (day-time) animals, while the more elusive nocturnal animals are discovered during the evening drives. Sundowner drinks at sunset and coffee/tea at sunrise add an extra special touch. There are two swimming pools on the premises, and a boma for those magical African fireside nights. With Spectacular
views, the ambience is one of a lush, warm and inviting visit to a happy family home of undisputed good taste. About The Mantis Collection It is a family run collection of award winning, privately-owned, five star properties located around the World. Divided into five distinct groups, its specialist areas include Boutique Hotels, Game Reserves, Eco Lodges, Ski Lodges and Chalets and Yachts. All of the properties represent the finest example of its kind and celebrate the culture, gastronomy, architecture and nature of the locations in which they are found to offer guests a truly authentic experience. Officially founded by Adrian Gardiner in 2000, Mantis is committed to the spirit of conservation and restoration, and each property is sensitive to its surroundings in respect of the building, environment and local community. The diverse portfolio of handpicked properties link up to create journeys, which offer guests the ultimate life experience and the opportunity to experience the essence of the location. Whilst every property is unique, being part of the collection ensures that the quality of the facilities, service and overall experience is consistently 5 star and guests can always expect personal, friendly service. Reservations: http://mantisownerscollection.com/property/ founders-lodge/ n
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TRAVEL & LEISURE
Risk mitigation for travelling employees Globalisation and the search for new business opportunities is forcing organisations to send more and more employees into Africa and abroad. However, the social and ethical dimension of responsible travel management, goes beyond sustainable procurement.
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s companies expand into developing environments and business travel becomes an integral part of growth, Jared Higgins, CEO of the Arcfyre Group, a leading protective and risk consulting firm, questions whether the necessary steps are being taken to ensure ‘duty of care’ when it comes to travelling employees. Duty of care “In certain countries ‘duty of care’ legislation holds the business liable for protecting the health and safety of their travelling employees. However, the related wellbeing and ‘duty of care’ aspects for a travelling employee, should not only be linked to emergencies and medical incidents. “Here understanding the impact of ‘duty of care’ and following best practises for protecting an employee is crucial. However, in addition to ensuring their safety and security, companies need to implement the necessary measures to empower themselves to make responsible travel risk management decisions.” Risk mitigation Higgins believes that currently not enough is being done by organisations to not only mitigate traveller risk, but also prepare them for potential life threatening situations that may occur. “The reality is that any country, particularly those where there is political or social unrest, comes with its own unique safety and security concerns. Take Ethiopia for example, where there is currently an extreme risk of armed conflict between the Ethiopian and Eritrean forces, whilst, at the same time, battling the illegal violent protest actions in the country”
By Jared Higgins | CEO | Arcfyre Group jared@arcfyre.com “Despite the extremely risky local environment, we continue to see too many cases where employees are left to handle their own affairs during a crisis, which, in many instances, could have been avoided, had the organisation followed a proper risk mitigation strategy, and taken responsibility for the due diligence that should be carried out before hand,” he comments. For Higgins, in today’s politically tumultuous landscape, opting for a reputable, specialist security service provider, with a proven track record, is no longer a nice-to-have but in many cases a must-have. Protection of employees “In reality, a situation can go from good too bad in a matter of hours. And unless there is a travel risk plan tailor-made to fit an organisation’s specific needs, employees may be forced to rely on local military or in some cases ineffective law enforcement for safe passage. “Having a risk consulting firm to assist in these situations, is not only the responsible thing to do to mitigate potential travel risks for employees and senior level management, but in the long run, will avoid the devastating financial implications, should an employee or high-profile individual get injured, kidnapped or even worse, lose their life,” he stresses. When it comes to the protection of corporates in particular, Higgins says investing in a risk consulting firm that can not only provide a thorough assessment of the environment and the risks relating to the type of travel, but one that also has in-depth knowledge of the local cultural beliefs, traditions and norms, is crucial. Proactive approach “Being cognisant of what is considered appropriate dress, mannerisms and behaviour when it comes to foreign cultures, not only mitigates reputational damage for the individual and organisation, but very often, prevents potential security threats. Ultimately, taking the possibility of damage into account, whether from a personal or corporate perspective, and having a proactive approach to risk mitigation often avoids the need to have multiple reactive crisis management plans. “Even with a strategy in place, you cannot put a price on having an external advisor or consultant on hand to guide you safely through it,” he concludes. n
Pepperclub Hotel & Spa
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ituated in the heart of Cape Town, the five-star Pepperclub Hotel & Spa boasts one of the most unrivalled locations in the city and offers an allinclusive experience of unsurpassed service and ultimate luxury, in close proximity to the city’s top tourist attractions and business districts. Towering 20 floors above the city and boasting 360° views of the surrounds, each of the hotel’s 210 luxuriously appointed suites offer a vantage point of Cape Town’s unique beauty. From family-sized and fully equipped one, two or three bedroom suites, to luxurious studio apartments perfect for the business traveller, Pepperclub Hotel & Spa serves as the perfect base to any travel itinerary. Dining options include the trendy Paparazzi Bar and Piano Lounge, as well as Sinatra’s Restaurant. Whilst Paparazzi Bar offers tapas-style dining, Sinatra’s menu infuses traditional and modern dishes, making use of the very best locallysourced ingredients while emphasising the chef’s seasonal approach to European cuisine. Included in the hotel’s luxurious offering, is the intimate 29-seater Odeon Cinema, award-winning Cayenne Spa on the eighth floor, fully equipped gymnasium and outdoor rooftop swimming pool. For business travellers, the hotel offers fully-equipped tailor-made conferencing, boardroom and banqueting facilities with complimentary Wi-Fi. No matter what the reason for travel, Pepperclub Hotel & Spa guarantees an unforgettable stay in the vibrant Mother City. Reservations: www.pepperclub.co.za n
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FEATURE
“Well, they used to sit and speculate upon their son’s career, A lawyer or a doctor or a civil engineer, Just give me bread and water, put a guitar in my hand, ‘Cause all I need is music and the free electric band”
PROFESSIONAL EDUCATION & CAREERS Professionals are members of a profession who earns their living from a specified activity. Members of a profession must meet standards of education and training in order to have the knowledge and skills necessary to perform the role of that profession. Professionalism has many attributes, including: • • • • • • •
Specialised knowledge Competency Honesty & Integrity Respect Accountability Self-regulation Image
Choosing a career in a particular profession requires hard-work, diligence and commitment, but the benefits are many, including: • Higher Earning Potential • Enhanced Career Path & Opportunity • Peer & Community Recognition & Prestige • Professional Body Support & Networking • Knowledge Access & Lifelong Learning • Employer Recognition • Recognition of Ethical Credentials • Recognition of Competance
J
on Foster-Pedley, Dean and Director of Henley Business School Africa, says that most people think educating people is easy, but to do it well is one of the most challenging. To design learning that is useful, has real outputs and helps people grow and learn, requires enormous imagination and is a detailed and complex process.
Extract from Albert Hammond / Mike Hazlewood. Free Electric Band lyrics © EMI Music Publishing, Warner/Chappell Music, Inc.
A good education “In its deepest sense, education is about transforming and moulding minds rather than just imparting knowledge. It’s about getting minds to forge new pathways to creativity, innovation and understanding. In the context
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of business, a good education shouldn’t just create efficiencies, but should enable the capability to grow new types of businesses and developing new sources of value,” says Foster-Pedley. “Business schools should not be about creating elitist positions, but rather about giving people the skills to build their own businesses and build better organisations, especially in developing economies. And, if it’s about that, should business schools not be doing that for a lot of people, rather than just a few?” I believe these schools need to create models of learning that are accessible and affordable to more people so that business skills can be more widely shared. While there is a place for exclusive programmes, if more people can gain access to quality business skills, their business ventures will be better run and have a greater chance of succeeding. By creating better organisations, we can grow the economy, create employment and offer hope to future generations. Executive skills Foster-Pedley says that business schools also need to evolve to prepare the business leaders of tomorrow. Historically, business has been largely focused on making profits and increasing shareholder value. In
today’s environment this just does not cut it anymore. There has to be an emphasis on shared value creation and the shared value economy. We must prepare people to create businesses that are more communityminded and environmentally conscious, where value is created for employees and their communities, and where employees understand the business imperative to contribute to society. “We see the transformation that happens when the companies we work with place their executives into an NGO context. These executives quickly come to realise that work has meaning beyond just making profits and actually needs to contribute to the growth and development of society and make a difference.” Governments in developing countries rarely have the funds to create the quality education, housing and health facilities they’d like to. Our job in business must be to assist with such development through private sector solutions and by providing executive and managerial skills. We will focus more on skills transfer to the public sector so that public sector projects can run well and contribute to economic growth. Academic standards “For how long will the South African education system perpetuate the myth that a degree is the only pathway to being an educated professional? Also, in the
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context of the National Skill Shortage agenda, industry must realise that not all skills gaps can be plugged by throwing degrees at it,” says Peter J. Jansen van Nieuwenhuizen, CFO, The Growth Institute. Professional bodies have a legacy going as far back as 1894 when the Institute of Accountants and Auditors was founded. There can be no question that, for the last 122 years, professional bodies have been pioneers in the development of professional and academic standards. Only one university existed in South Africa prior to 1894 (UCT, founded in 1829). Massification “Professional bodies (whether Statutory or Voluntary) should be immensely proud of the fact that they are at the forefront of contributing to people development in South Africa. Nowhere else is the marriage between theory and practice as clearly developed as is the case with professional bodies,” says van Nieuwenhuizen. Considering the fact that professional bodies have relativity high pass mark requirements (60% or higher) for theoretical exams must count in favour of professional bodies as an alternative to the ‘sausage machine’ approach that is prevalent among universities. An academic advisory committee highlighted the fact that industry is reacting against the ‘sausage machine’ approach that has been the dominant focus of Government since 2000. “The doctrine of “Massification of Education” does
not produce thinkers. It produces parrots – students who cram facts in their heads, regurgitate it in the exam, and who are not able to apply their theoretical knowledge to real world problems. Most of the education obtained through the programmes at professional bodies, require an inter-mix of theory and the application thereof in the workplace during each study year,” says van Nieuwenhuizen. Those who qualify through the professional body exams do not have the luxury of being given extra marks. If the pass mark is 60% and the student obtained a mark of 59.99%, it is still a fail. This compels industries to consider who to hire at entry level and middle management level. The degreed person that is a 50-percenter, or the professional body diplomat that must pass exams at much higher pass mark? Another myth is that the National Diploma that could be obtained through the professional body’s exams is an inferior piece of paper. National Diplomas are registered by SAQA at an NQF Level 6. Degrees are registered at NQF Level 7. It cannot be said that the professional body diplomat is forever barred from entering university. There are programs that allow the professional body diplomat to work towards a degree or towards a post-graduate professional diploma at university. Professionalism is not found in a degree A professional body candidate may obtain a degree after six to seven years of study. In the words of
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Henry Mintzberg, they will be mature enough to recognise the subtle variances in theoretical themes. They will also be mature enough to apply or restate theories so that it makes the best possible sense for the practical situation that they theory wishes to solve. Professionalism is not found in a degree. It is found in the level of knowledge that a student demonstrated in a final exam. Can industry afford to dismiss the quality of candidates that took the professional bodies’ exams and passed? Career potential According to Devan Naicker, Director of Executive Education, Wits Business School, there have never been more options available for further learning for professionals than today. The ‘explosion’ in the number of executive education courses offered by business schools is testimony to this. From coaching to project management, finance to negotiation, strategy to managing people – these days an executive who wants to achieve his or her career potential is spoilt for choice. All aspects of learning and personal development in the classroom should have direct application in the workplace.
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stage executive level to middle management level or senior management. According to Liew, those considering the postgraduate education route should select a qualification within the context of their current careers. “It’s important to carefully consider the applicability and valueadd the postgraduate education will bring to their chosen line of career. Whether it is a more technically aligned or general management focused postgraduate qualification one is seeking, the decision on what course to enrol in should be considered in context of their current role, as well as their aspirational career path for the future.
Current context Just as timing is everything when it comes to many of life’s biggest decisions, enrolling for a postgraduate education should be embarked upon at the right moment in your career, when you stand to gain the maximum return on your investment.
Return on investment (ROI) An auditor or tax practitioner, for example, would be more likely to benefit from a technically orientated postgraduate education such as a Masters in Taxation or Postgraduate Diploma specialising in Auditing. On the flipside, a financial planning and analysis accountant would more than likely be required to add an improved understanding of general management, as well as interpersonal communication skills to their career attributes should they wish to transition to a middle or senior management role. “Asking oneself how a postgraduate qualification fits into one’s existing role, as well as the benefits derived from the envisioned career trajectory is an excellent way to ensure the right selection of a postgraduate qualification,” explains Liew.
Acting Chief Financial Officer of Monash South Africa, Alvin Liew, believes that this ‘right moment’ is usually when one intends to make the leap from an early
The return on investment one can expect from a postgraduate qualification is a key consideration to be taken into account before engaging in this time
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and cost-intensive undertaking. Liew recommends calculating the incremental financial benefit an individual would enjoy for a period of three to five years from the date of completing their postgraduate qualification as a gauge to measure the ROI. The increase in compensation or benefit when accumulated over the aforementioned period of time should exceed the cost implications of a postgraduate degree. One should also be cognisant of any opportunities lost such as time taken off work (whether full-time or part-time) while studying, as another factor when computing the ROI. International recognition When selecting a postgraduate qualification, Liew advises prospective students to gauge potential employability benefits by weighing up the scarcity of the skill sets acquired from the postgraduate qualification against the demand for and relevance of those skills in the local and global recruitment market. The global recruitment market undergoes select hiring trends in accordance with the macroeconomic outlook, which impacts the demand for certain postgraduate qualifications. Possessing the right qualification from
an internationally recognised, accredited tertiary education provider can prove crucial to pursuing an international career. This explains the vast price differentiation in the many available postgraduate qualifications that we see today. However, while cost will always remain a factor, it should not be the key determinant when aiming to maximise the ROI of your postgraduate qualification. Integration of technical colleges with universities Samson Baloyi, Director, Triple E Training says that the education standards set by the various SETAs are not high enough. This is one of the reasons South Africa is not producing young business professionals that can cope with the demands of working life. “The role of the SETAs is to set the education standards whereas SAQA is the custodian of qualifications. When national government brought the SETAs into the picture at the onset of democracy several things changed with regards to education; some for better, and some for worse. One of the things that changed for worse is the closure of training
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“I felt comfortable playing a role model, restoring the confidence of people in themselves and making sure that through education they were better equipped to overcome oppression,” he says of his lecturing days. Prof Wiseman Nkuhlu
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colleges for teachers. The second is the integration of technical colleges with universities,” says Baloyi. Foundation With a growing population, the country’s schools now have fewer teachers than in the past; a direct result of closing the teachers’ colleges. I believe that we are who we are because of a teacher or teachers in our forming years. Teaching on basic education level is not only the most important factor when laying a foundation for a young professional, but it is also a more difficult profession than that of a medical doctor. For example: a doctor chooses the type of patient he or she wants to see by specialising in a field such as paediatric or geriatric medicine. A school teacher must teach each student in his or her class and can’t
choose to only teach children that fits a certain profile. Since there are no longer tertiary institutions whose sole purpose is the training of teachers the teaching profession is dying a slow death.
the correct environment to learn about the world of engineering. With hard work and further courses, they can then progress on the ladder that builds a professional engineering career.
Learning environment Baloyi says, the fees must fall protests are not helping the situation because not everyone can get a degree; some people will be better suited to vocational training, and some will be great teachers.
Lowering standards Although it was a very noble idea of national government to attempt to combine higher education offered by colleges that was once seen as a technical skill with that of the traditional academic approach of universities, this change resulted in the lowering of education standards. By closing the technical colleges government closed the doors to opportunities for all South Africa’s people.
Only a handful of students should be able to study a degree at university. What the students don’t know is that most qualifications at government FET colleges are free! Why then go to university if you can get free education elsewhere? Because everyone wants to be a CEO, CFO, a doctor, lawyer, or engineer. Little do they realise obtaining a qualification in technical drawing will put you in
Future of the SETAs? With the establishment of the Quality Council for Trade and Occupations (QCTO) the future of the SETAs are unclear. The one
South African National Qualifications Framework NQF Levels
Qualification Types
10
Doctoral Degree Doctoral Degree (Professional)
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9
Master’s Degree Master’s Degree (Professional)
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8
Bachelor’s Honours Degree Postgraduate Diploma Bachelor’s Degree
Occupational Certificate (Level 8)
Bachelor’s Degree Advanced Diploma
Occupational Certificate (Level 7)
Dipoloma Advanced Certificate
Occupational Certificate (Level 6)
5
Higher Certificate
Occupational Certificate (Level 5)
General and Further Education and Training Qualifications Sub-Framework (GFETQSF)
4
National Certificate
Occupational Certificate (Level 4)
3
Intermediate Certificate
Occupational Certificate (Level 3)
2
Elementary Certificate
Occupational Certificate (Level 2)
Quality Council: Umalusi
1
General Certificate
Occupational Certificate (Level 1)
Higher Education Qualifications Sub-Framework (HEQSF) Quality Council: CHE
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Occupational Qualifications SubFramework (OQSF) Quality Council: QCTO
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thing that is as clear however is that professional careers needs to be explained to high school learners differently. Not everyone is able to meet the standards (which must be higher) that is set at university level. Some of us must start out our professional careers with a technical skill acquired at a higher education institution and build our careers from there.
changes to the South African NQF. These changes included replacing the 33 Education and Training Quality Assurance (ETQA) Bodies with three Quality Councils (QCs), allocating the development of qualifications to three Qualifications Sub-Frameworks managed by the QCs and changing from an eightlevel to a ten-level NQF (See Figure 1 opposite).
SAQA’s role in relation to the QCTO According to Joe Samuels, CEO, SAQA, The South African Qualifications Authority (SAQA) is a statutory body established through the SAQA Act of 1995. In 2008, the SAQA Act was replaced by the National Qualifications Framework (NQF) Act in 2008, thereby strengthening SAQA’s role and introducing innovative
SAQA, as custodian of the South African NQF, oversees its further development and implementation, and co-ordinates the three Qualifications Sub-Frameworks. In its co-ordination role, SAQA has developed the following overarching national policies: •L evel Descriptors for the South African National Qualifications Framework; •N ational Policy and Criteria for
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Designing and Implementing Assessment for NQF Qualifications and Part-Qualifications and Professional Designations in South Africa; N ational Policy for the implementation of the Recognition of Prior Learning; P olicy and Criteria for evaluating foreign qualifications within the South African NQF; P olicy and Criteria for Recognising a Professional Body and Registering a Professional Designation for the Purposes of the National Qualifications Framework Act, Act 67 of 2008; P olicy and Criteria for the Registration of Qualifications and Part-Qualifications on the National Qualifications Framework, P olicy for Credit Accumulation and Transfer within the National Qualifications Framework.
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The QCs develop policies for their Sub-Frameworks that are aligned with the above-named national policies and have executive responsibility for quality-assuring their respective Qualifications SubFrameworks which are (See Figure 2, below): •G eneral and Further Education and Training Qualifications SubFramework (GFETQSF)( NQF levels 1 to 4), quality-assured by the Council for Quality Assurance in General and Further Education and Training (Umalusi), •O ccupational Qualifications SubFramework (OQSF) (NQF levels 1 to 8), quality-assured by the Quality Council for Trades and Occupations (QCTO), and •H igher Education Qualifications Sub-Framework (HEQSF) (NQF levels 5 to 10), quality-assured by the Council on Higher Education (CHE). Relationship between the NQF & the framework which is being structured by the QCTO Samuels says, the South African NQF is a comprehensive (covers all three sectors), integrated (allin-one), quality-assured, tenlevel framework comprising three
Qualifications Sub-Frameworks, each managed by a QC. The QCTO has executive responsibility for its own SubFramework namely the OQSF. If you look at the NQF diagram, you will see that the OQSF qualifications range from NQF Level 1 to NQF level 8. In order to be pegged at this NQF Level, the qualification must meet the generic description of a qualification that meets the learning outcomes of that particular NQF Level (Figure 2 opposite shows the learningoutcomes based approach used in South Africa). The QCs and their providers use the Level Descriptors for the South African National Qualifications Framework to ensure that the qualification meets these generic outcomes. SAQA works together with the three QCs to ensure the quality of South African qualifications. The QCs recommend qualifications to SAQA for registration on the NQF, and SAQA, in turn, registers a qualification on the NQF if it meets the relevant quality criteria as encapsulated in the NQF Act and its associated policies.
As can be seen in Figure 2, below, there are two layers to qualification development: •A generic layer that ensures that the qualification is pegged at the correct NQF Level and Level descriptor, and •A specific layer that ensures that the qualification meets the description of the qualification type and qualification specialisation. The learning outcomes-based approach to qualification design is applicable to all South African qualifications registered on the NQF. Since the QCTO recommends OQSF qualifications to SAQA for registration on the NQF, they have the responsibility of ensuring that their qualifications meet all the criteria. In this regard a number of stakeholders operate in the OQSF space to ensure that the qualifications are relevant to the specialisation and qualification type. OQSF qualification specialisation The specialisation in the OQSF qualifications is informed by the NQF Level and its descriptor and is further aligned with the: •N ational Skills Development Strategy (NSDS) levels namely entry, intermediate and high; •S kill levels 1-4; and •T he eight major groups of the Organising Framework for Occupations (OFO) namely: •M anagers; •P rofessionals •T echnicians and Associate Professionals; •C lerical Support Workers; •S ervices and Sales Workers; •S killed Agricultural, Forestry, Fisheries, Craft, and related Trades Workers; •P lant and machine operators and assemblers; and •E lementary Occupations.
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Where do Designations fit in & why are they referred to as Professional Designations? How do they relate to qualifications? Part of SAQA’s responsibility is to recognise professional bodies and register the professional designations applicable to the relevant professional bodies should they meet the criteria as outlined in the Policy and Criteria for Recognising a Professional Body and Registering a Professional Designation for the Purposes of the National Qualifications Framework Act, Act 67 of 2008. A body constituted to represent and/or regulate a recognised community of expert practitioners will be recognised by SAQA as a professional body on fulfilment of the criteria for recognition as a professional body. Once a professional body has been recognised by SAQA, the professional body submits to SAQA the designations relevant to their professions and SAQA records the designations on the National Learners’ Records Database (NLRD). Within the context of the NQF: •A professional body means any body of expert practitioners in an occupational field; this includes an occupational body. SAQA recognises both statutory and non-statutory professional bodies. Statutory professional bodies are established in terms of an Act of Parliament and they regulate the profession in terms of their founding Act. Both statutory and non-statutory professional bodies must co-operate with the relevant QCs in respect of qualifications and
quality assurance in their occupational fields; and •A professional designation means a title or status conferred by a professional body in recognition of a person’s expertise and/or right to practise in an occupational field. Only a professional body can bestow a professional designation and register professionals against these designations. Professional Bodies develop professional designations that are suitable to their professions and regulate the practice of registered persons. They also set registration criteria for persons to obtain a professional designation through demonstrated competence. The criteria includes: •h aving a relevant underlying qualification or partqualification that is registered on the NQF, •C ore experience related to the profession and •m ay include a competency assessment. Professional Bodies are also required to demonstrate how the professional designation can be obtained through Recognition of Prior Learning (RPL) where the applicant does not have the relevant underlying qualification but has comparable prior learning. A professional body can revoke an individual’s designation if it is found that the individual: • i s not abiding by the professional body code of conduct and/or • is not meeting the continuing professional development (CPD) requirements for that designation.
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The difference between a designation and a qualification is that a designation can be revoked if the professional no longer meets the criteria but the (legitimate) qualification obtained by the qualification holder will always be valid. Is SAQA taking responsibility via Professional Bodies for the registration & quality assurance of CPD? SAQA’s responsibility is to recognise professional bodies and register professional designations. Just as the Quality Councils have executive responsibility for their Qualifications Sub-Frameworks, the professional bodies have executive responsibility for what takes place in their professions, including the registration and quality assurance (QA) of CPD.
SAQA’s policy currently only stipulates that there should be CPD. Work is now being done to investigate the various definitions of CPD, the allocation of CPD points as well as the quality assurance thereof. Once all the research has been done SAQA will develop proposals for consistent practice as well as possible future policy in this regard. It is, therefore, the responsibility of the professional body to ensure that it meets the current criteria if it wants to be recognised by SAQA. Professionalising specific industries Dr Michéle Serfontein, CD(SA) Specialist, Institute of Directors in Southern Africa (IoDSA), says that given all the examples of corruption currently making headlines, the
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question that needs asking is, “how do professional bodies equip their members with the skills and abilities required to run businesses with integrity and honesty?”. Serfontein believes that professional bodies do this through their function of professionalising their specific industry. For instance, the professionalisation of directorship is aimed at instilling integrity, competence, responsibility, accountability, fairness and transparency (ICRAFT) into the practice of being a director. Body of knowledge So where does the process start? Probably at the beginning – at the body of knowledge underpinning whichever profession your professional body is looking after. In the case of directors, this would probably be the King IV™
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FEATURE
Code of Corporate Governance. All training, advice, professional development and continuing professional development (CPD) offered by a professional body would then aim to deliver to that body of knowledge. Instilling CPD This cannot only be a once off intervention. It needs to be an ongoing commitment to lifelong learning or continuing professional development and education and training. Instilling CPD as a business practice is key, I believe, to ensuring that practitioners and professionals remain competent to deliver the world-class services offered by industries in South Africa. The question was once asked at one of our forums, “would you board a plane that is flown by
a pilot that is qualified?”. Our answer was (obviously) “no”. Then, the enquirer asked “why would you then allow a business to be directed by unqualified directors?”. As professional bodies, we are part of the answer to eradicating corruption in South Africa. How do we do this? Through professionalisation of our industries. Leaders need sharpened instincts Today’s constantly changing context demands that business leaders make multiple paradigm shifts. Leadership evolution is required - fast! Industrybased expertise, specific business skills and inherent knowledge do not guarantee success. Developing new qualitative skills, on the job, requires an eclectic, competent and responsive approach and there is no
longer a definitive map or method says Lesanne Brooke, Dialogue Communications Training. We need uniquely spirited individuals, able to apply their own brand of personal authority and excellence in new, ever-changing, practical ways. Leaders need sharpened instincts, great performance, the ability to see patterns and apply knowledge in untried ways. Cultivating this effectively is more than a leadership programme or soft-skills coaching. Paradigm shifting requires supported practice, consciousness, questioning and change-agility woven into the day-to-day nitty-gritty of leading. Future-fit leaders But, for leaders, life is already overwhelmingly complex. Systems and practices are entrenched and market success waits for no-one.
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BusinessBrief
FEATURE
Effective learning is a process and habits of ‘real life’ create threats to theoretical intentions. How do leaders best develop in a way that genuinely integrates in individuals and then scales throughout an evolving organisation? How do we upgrade, refine or revitalise essential qualities? How do we draw on innate character to support and cultivate intangibles like curiosity or the ability to unlearn and relearn continuously? The answer lies in encouraging powerful Practitioner Leaders. This means individuals who work themselves to perform ever more effectively from a place of authority and influence; future-fit leaders who practice their own resilience to ensure organisational resilience mastered Influencers.
Strengthen to evolve A commitment to enabling deeppractice in all key people will revolutionise organisations as they negotiate volatility. It’s challenging to innovate within systems designed for a bygone age. Leaders need practice-allies at the coal face of emergent change, offering insightful support, brainstorming and mentoring, with minimal interruption to pace. Clearly such leadership support is an individualised, responsive process. It requires skill and insight embedded with Change, Learning and People knowledge, plus outof-the-box, eclectic methodologies that weave into the existing approaches. It’s not standard HR, it’s a paradigm shift of its own. “We can’t guarantee what leaders will need to do to lead to 2020 and beyond, but they can be strengthened to evolve through
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practice. Practitioner Leaders build essential stamina, enhancing their ability to successfully lead through the unknown to emerge, revitalised, on the other side,” says Brooke. n @bbrief1
CONTRIBUTORS
Dialogue Communications Training +27 (0)11 442 6572 Henley Business School South Africa +27 (0)11 808 0860 Institute of Directors SA +27 (0)11 430 9900 Monash South Africa +27 (0)11 950 4009 SAQA +27 (0)12 431 5000 The Growth Institute Group +27 (0)11 534 8449 Triple E Training (Pty) Ltd +27 (0)11 668 4300 Wits Business School +27 (0)11 717 3544
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VIEWPOINT
DRONES
Dawn of a new wave of disruption? By Hilton Petersen | Partner | Petersen Hertog Attorneys | hilton@petersenhertog.co.za The drone era is upon us. Like so many new technologies of our times, it heralds a myriad of diverse applications and opportunities.
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hese in turn bring a range of new risks and unintended consequences, which require understanding, rules and regulations.
Opportunity Military applications have shown the value that drone technology has brought to the battlefield. This has underpinned the growth for a sector that is, to all intensive purposes, in its infancy. • In Germany, a hybrid helicopter drone has been developed for passenger transport purposes. This could, for example, take Uber to new heights. A helium filled omni-directional ball with 3 electric motors able to rotate at 360° while carrying heavy cargo has been successfully tested. It can also carry advertising banners in and around shopping centres for example. • At the recent drone racing World Drone Prix in Dubai this year a 15-year-old took home $250 000 in prize money. Drone racing will become a professional sport, and soon. • In Japan multi-rotor drones deliver drinks to golfers on the fairways which are ordered by cell phone. • In the US, Walmart and Amazon have asked the Federal Aviation Authority (“FAA”) permission to test drone delivery. Door-to-door delivery reduces waiting time and labour costs. But the economics of last mile delivery present two impediments, namely drop size and route density. Delivery in rural and inaccessible areas such as in Lesotho for example, where blood samples are delivered by drones, have proved to be very economical. It will be more difficult to deliver products in the likes of Manhattan or Johannesburg, but the technology for doing so is present and being refined. Clearly drone deliveries will get their start in niche applications (such as Lesotho – medicine) but it won’t be long before mainstream delivery takes place. • In South Africa, the use of drones to count stock in warehouses is being piloted.
Rules & regulations New rules regulating the use of drones or Remotely Piloted Aircraft Systems (“RPAS”) were signed by the Minister of Transport with effect from 1 July 2015. These rules are amongst the most stringent in the world with safety being a key requirement. The South African Civil Aviation Authority (SACAA) clearly did not wish to compromise South Africa’s (80%) safety rating as determined by the International Civil Aviation Organisation (“ICAO”) when formulating the Regulations. It is nevertheless important that the right balance between regulation and overregulation is achieved, particularly in an industry which is in its infancy but which has enormous upside potential for the South African economy.
The technology is truly disruptive and the law will have to evolve rapidly if it is to keep up...
This is only the beginning. Alert entrepreneurs are seeing the opportunities that are being created and there will no doubt be an avalanche of new commercial applications that will be launched in the near future.
At the heart of the rules governing the use of RPAS is Part 101 of the South African Civil Aviation Regulations, which essentially provide as follows: • other than drone operators operating drones for private or hobby use, operators need to have SACAA approved and valid Remote Pilots License (“RPL”) as well as a letter of approval to operate a drone; • the letter of approval is valid for a 12-month period and is required to fly a drone but not for purposes of purchasing a drone. The seller will have to make the purchaser aware of the SACAA requirements. This has implications under the Consumer Protection Act; • drones generally cannot fly further than 400 feet (120m) above the ground, nor within 10km of an aerodrome. There are exceptions to this; • drones generally cannot be flown within 50m above or close to a person or crowd of people other than in circumstances where prior SACAA approval is obtained, and such persons are part of the operation and under the control of the drone pilot.
This would apply, for example, to persons at a film set. Drones also cannot be flown adjacent to or above: • a nuclear power plant • a prison • a police station • a crime scene
VIEWPOINT
• a court of law • national key points • the rules do not apply to toys or model aircraft, which are limited to use for recreational purpose and do not require registration with SACAA; • one cannot use a public road for the take-off or landing of a drone. • an operator cannot use a drone in adverse weather conditions, where his/her view of the drone is obstructed since visual contact must be maintained with the RPA by the operator – unless in approved conditions, namely beyond visual line of sight or night operations; • drones need to give way to all manned aircraft and should avoid passing over, under or in front of manned aircraft, unless it passes well clear and takes into account the effect of aircraft wake turbulence; • RPA pilots will be required to tune in to the air traffic services for the controlled airspace in which they will be flying the drone, reporting coordinates to the traffic controllers. All flight activity will need to be recorded in a logbook; • drones cannot be used to transport cargo or make deliveries; • drones cannot tow another aircraft, perform aerial or aerobatic displays or be flown in formation or swarm. This is likely to be reviewed given recent developments; • all incidents involving drones must be reported, especially where there is any injury to a person; damage to property, or destruction of the RPA beyond economical repair. Commercial application The use of military and weaponised drones are wellknown and are not dealt with in this article. They have in many instances served as a precursor to the commercial use of drones. It is in the area of commercial application that drones offer enormous potential. Some of the established areas of use currently, with more applications evolving on a virtually daily basis, are: • journalism, filming and photography • real state advertising • shipping and delivery • disaster management
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• geographic mapping • structural safety inspection • precision agriculture • wildlife management and anti-poaching activities • border patrol and law enforcement • crowd surveillance • storm tracking and forecasting • creative industry and theatrical performances Privacy As our law tries to keep pace with the exponential development of drone technology, one glaringly troubling societal aspect is the issue of privacy. Drones can carry facial recognition software and distance tracking capabilities. Instances of privacy violations have taken place worldwide. This will in time contribute to a further refinement of harassment and stalking laws in the various jurisdictions. No doubt it will not be long before the Protection from Harassment Act in South Africa will be tested in this arena. Clearly, drones with cameras will satisfy the “watching” definition contained in the Act and protection orders will follow. The Protection of Personal Information Act (“POPI”) protects an individual from the unlawful processing of their personal information, and collection of such information is included in the definition of “processing”. The provisions of POPI will have to be taken into account as Regulations applicable to drones are further developed and revised. A new era There is no doubt that the drone revolution is upon us and this has begun to have a material impact on society. This gives rise to the legal implications that do not reside in a single area of law. The scope of Drone Law is broad. It extends from safety issues to freedom of speech/privacy, from intellectual property to land use rights, from insurance and liability to venture funding and tax law, to name but a few. The technology is truly disruptive and the law will have to evolve rapidly if it is to keep up with the rapid advances being made in this industry. n
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VIEWPOINT
Sticks, Carrots & Free Speech The right to speak one’s mind is one of the cornerstones of modern democracy, and is one of the most valuable – and valued – Constitutional rights. It is not an ‘absolute’ freedom, as laws do punish limited (and I emphasise ‘limited’) forms of expression: hate speech, incitement to violence, defamation and copyright infringement, to name a few.
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ut it is a requirement of our Constitution that any legal limitation of our basic human rights must be fair and reasonable in the context of an open democratic society, taking into account the importance of the limitation and any other less restrictive means of achieving its purpose. Global approaches to internet regulation As the Internet leaves behind its halcyon infancy and enters petulant adolescence, regulators and policy makers – like any first-time parents of a teenager – are grappling with how best to deal with it. Western democracies (the US, UK, Europe, Australia) have tended to favour more liberal approaches, fostering environments conducive to disruption, discourse and dynamism, and only intervening with legislation – a slow, blunt instrument at the best of times – sparingly. In these territories, the internet is considered “free”. In contrast, the internet in Russia, China, and much of the Middle East and the African continent is not free. Here more oppressive regulatory regimes restrict online access and freedom, often under the paper-thin pretext of protecting citizens from harmful material.
and to lay the foundation for a digitally-powered economy that would materially improve the lives of all South Africans. Recently, however, government took a decidedly anti-carrot position when it stood with Russia, China and Saudia Arabia against a UN resolution to protect human rights online. And this is by no means an isolated signal. Industry has in turn responded with a number of self-regulatory initiatives designed to protect consumers, uphold democratic values, and mitigate Government’s concerns. Digital literacy will save us all There is at least consensus between all participants – government included - that nationwide digital literacy and online citizenship programmes are of critical and immediate need. The Internet certainly possesses dangerous places, but fear of these should not impinge on the near infinite opportunity and good that it facilitates. Educating children, teachers and parents how to navigate it safely, and use it constructively, will yield far greater returns for both our society and our economy than any act of regulation ever will. And, if government is to be believed, will mean less reason for it to intervene. The private sector has a democratic and moral duty to step forward and address this challenge.
These territories are not characteristically synonymous with or reconcilable to our South African Constitutional understanding of democracy. On the parenting spectrum, one could consider them advocates of the stick, whereas Western regulatory frameworks typically prefer to dangle carrots.
It is foolish to expect that government has the capability or the capacity to do so itself, even though its very own National Development Plan 2030 explicitly observes that “South Africa needs to use its knowledge and innovative products to compete...
A digital crossroads South Africa as a case in point, finds itself at a digital crossroads: we are well-positioned to be an (if not the) African technological powerhouse,
Innovation is necessary for a middle-income country to develop”. If we want to ensure a bright future for ourselves, it is up to us to build it and we need to start now. n
By Andrew Allison | Head of Regulatory Affairs | IAB SA | andrew.allison@mirumagency.com | @andyallison
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De-globalisation & the growth of authoritarian government! In a Harvard Business Review article titled ‘The globalisation backlash is reverberating through boardrooms’, economist and writer Dambisa Moyo wrote about the process of de-globalisation: world trade links are shrinking instead of expanding.
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igh regulatory burdens are causing global corporations to scale back their investments and even sell their operations in some markets. International trade is slowing in both large and emerging markets as multinationals find it more and more difficult to obtain licences to trade. They face nationalistic threats of expropriation, inconsistent policymaking and protectionist barriers to trade that are on the increase, which heightens uncertainty and clouds the policy environment. Governments are intervening in private investment and cross-border transactions for purely political reasons. It is therefore not a surprise to find that FDI has declined. Moyo’s article describes the disturbing developments facing international investors and suggests steps that they should take to deal with these changes. As a board member of large companies, the author has had personal experience of the new challenges facing multinationals. Authoritarian behaviour The ranking and rating of economies on various measures as developed by the World Bank, World Economic Forum, International Finance Corporation and other organisations, except where they become notoriously bad, tend to capture only some of the effects of poor government policy decisions. For instance, the decline in South Africa’s Economic Freedom of the World ranking, from 42nd to 96th in little more than a decade, might have made investors sit up and take notice. But, interventions tend to be selective and do not treat all investors equally.
Rule of law In August, the EU competition commission saw fit to impose a back tax of $14.6 billion on Apple in respect of the company’s 2011 profits earned in Ireland. Irish officials are appealing the tax as the amount of tax paid by Apple was done totally legally in line with an agreement between the company and the Irish government. This rule of the bureaucrats is sowing the seeds, not only of EU disintegration, but much worse, of de-globalisation and even future trade wars. World-wide, with the US being a prime example, there is a restiveness among the people. Their economies are struggling and they are unhappy. There is a recognition that there must be a return to the rule of law and somehow the people must reassert themselves. As in Brexit, the people must refuse to be ruled by the bureaucracy. Most importantly, they must ensure that they wrest the discretionary powers from officialdom and ensure that the laws once again become clear and simple, provide equality before the law for everyone, and are equally applicable to all, including government. n
By Eustace Davie | Director | Free Market Foundation eustacedavie@fmfsa.org
The increasing authoritarian behaviour of South Africa’s politicians and government officials has, arguably, in some cases, had an even greater negative impact than the decline in ranking suggests. Brexit is cited by Moyo as an example of deglobalisation but the UK’s main reason for quitting the EU appears to me to have been a reaction against the authoritarianism of Brussels and not a wish to reduce economic ties with Europe. Free trade between the European nations without the bureaucracy would have been a splendid example of globalisation. Instead, the EU is stumbling from one disaster to the next.
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VIEWPOINT
Entrepreneurs drive the ‘buy local’ economy
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By Craig Polkinghorne | Head of Business and Commercial Banking | Standard Bank Craig.Polkinghorne@Standardbank.co.za | @StandardBankZA
ntrepreneurship is the fuel that will drive the development of the “buy local” economy. However, the development of stronger levels of local purchasing activity is not expected to happen immediately, as some time will be needed for the industries to gain critical mass, as will the development of an entrepreneur-driven economy According to Head of Business and Commercial Banking at Standard Bank, Craig Polkinghorne, buying local must begin to form part of general business practice if an industry and a country’s capabilities are to grow. A better understanding of the different phases and life cycles of locally produced products, together with more tailored financial solutions, are needed to move the growth of local industries to the next level. Exploit opportunities The problem, however, is that buying local is not always the cheapest form of procurement due to the higher input costs associated with these products, relatively lower skills, higher labour costs and limited expertise to develop the products. “Buying local should not only be exploited during a particular season or quarter. What is important is that strong local economies can help to drive local jobs and buying local would eventually create critical mass which would then lead to the creation of more jobs,” says Polkinghorne. Even in current volatile conditions, there are a number of opportunities to be exploited by businesses that buy, build and beneficiate locally. For example, while the rand is a perennial bugbear for local businesses, it is giving exporters a potential edge. “Businesses would do well to take note of where their capabilities lie and look to exploit opportunities when market conditions dictate,” says Polkinghorne. Lose a little to gain a lot Businesses need to be constantly aware of market information, while also being intuitive about the next step. The evaluation of risk a business would be willing to take becomes even more important in these conditions. “It does not serve a business to just be aware of something without actively thinking about and planning for the next few steps - foresight is critical in the business environment. The level of reward would depend on the timing of the move and the appropriateness of the decision given the circumstances. One needs to be prepared to lose a little to gain a lot sometimes. Some opportunities may be hidden in negativity,” says Polkinghorne.
The businesses that would be supported by buy local initiatives would most likely be entrepreneur driven and owned, according to Standard Bank. Diversity of goods and services will be crucial to the development of higher levels of local purchasing across Africa too. The African continent, however, has provided numerous examples of the dangers of an undiversified economy. Additional investment in skills “A lot of countries that are commodity driven have seen their fair share of disappointments as the demand for commodities decreased – especially from the Chinese market which has been slowing down. Once thriving economies were now buckling under pressure as commodities aren’t bringing in the expected income,” says Polkinghorne. Countries such as Nigeria, which focused heavily on oil, have seen first-hand the importance of spreading their options for growth. Uganda and Kenya on the other hand offer more diversified industries which can withstand more economic pressures. Kenya and Uganda’s GDP forecast for 2016 is sitting at 5.9% and 5.0% respectively, with these countries being some of the fastest growing on the continent. Strategic trade agreements “It is imperative that foundations are laid for growth in a number of sectors as it prevents an over-dependence on sectors that may experience short-lived booms and crashes. The challenge comes in with the initial stages of developing a previously dormant sector. There needs to be additional investment in skills and infrastructure that will revive the industry,” says Polkinghorne. “It may however, not be wise to be too diverse to the point where resources are spread too thin. The country should have a few key sectors that drive its growth,” cautions Polkinghorne. Organisations could also benefit from strategic trade agreements, which bring about economies of scale in local organisations and protect them from global competition. “This collaboration would help countries within the region to raise funds, develop their industries and increase purchasing power of the countries. Regional integration policies can be very important to promote sustainable development in Africa,” says Polkinghorne. There is little doubt that economies across the continent are crying out for passionate entrepreneurs that bring about new ways of thinking and working. n
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MANAGEMENT
Qualifications of directors! A new research exercise focused on JSE-listed companies reflects an increasing trend towards the appointment of directors who don’t have formal qualifications. Of obvious concern is that the percentage of directors falling into this category has increased to 22,4% from 18,2% just a year ago.
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indie Engelbrecht, Executive Director at SAICA, refers to strong independent evidence that diversity on boards increases their effectiveness and results in higher levels of return. “Also, boards are under increasing pressure to reflect diversity in their makeup, while BBBEE mechanisms increase the pressure to appoint more people of colour, as well as more black females in particular, to big company boards. Some new board members would have been appointed on the strength of their leadership ability, experience and their ability to raise diverse opinions,” says Engelbrecht. In the first study of its kind, in 2007, a new way of measuring the effectiveness of listed companies’ boards, called Board Barometer, postulated and then proved that the more diverse the makeup of a board, the more likely that board was to approve strategies that created wealth. Additionally, a diversified board was more likely to hold executive management to account. Self-evidently, Board Barometer also postulated that this diversity could not compromise the basic ambit of skills that a board would need to come to good value-creating conclusions. Results were conclusive – the Top 40 index reweighted away from market capitalisation and using the quality of makeup of the board as the weighting criteria, significantly outperformed the index. So a move to include board members who are more diverse in age, gender, race and technical experience would be a good thing, concluded Board Barometer. Today, insists Engelbrecht, SAICA has cause to celebrate rather than to be downcast about the findings of the 2016 study of the 413 companies – across all sectors – listed
on the JSE and AltX boards. “While the overall percentage of directorships who hold no qualifications has increased in the past year, the percentage of those who hold CA(SA) qualifications as a percentage of all academically qualified directors has increased from 37% in 2015 to 37,3% in 2016. “CAs(SA) are also 2,5 times more likely to be appointed to South African listed company boards than any other designation or qualification. With the average number of directors per board declining slightly to 8,8, it is heartening to know that on average there are 2,5 CAs(SA) on each board watching over the financial health and governance standards of the underlying companies.” So while there is an increase in the total number of directors who don’t have qualifications, Engelbrecht is convinced that they are suitably qualified from the “school of hard knocks”. “And that, together with the 77,6% of directors who have academic qualifications, I suggest that our boards – given the Board Barometer research – are in safe and possibly better hands than they have ever been.” n
In the first study of its kind, in 2007...postulated and then proved that the more diverse the makeup of a board, the more likely that board was to approve strategies that created wealth.
By Lindie Engelbrecht | Executive Director | SAICA | lindiee@saica.co.za
MANAGEMENT
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The Hard Way is the Easy Way Getting an organisation to change has been compared to “running through fields of molasses”. The going is slow, with progress frustrating, messy and hard to measure. And when it is measured, the results are often confusing or just depressing.
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irstly, and perhaps most importantly, change begins with the leader. Psychology Today points out that “highly mindful” leaders – those who are fully present, not just in the working environment but within themselves – are more productive, more efficient, and make better decisions.
“It’s not that management fails to communicate what the change is or what it should look like, but rather, they fail to communicate why the change is needed. Author Ray Williams writes, “Neuroscience research has shown that we often make decisions unconsciously because the brain’s reactive and protective mechanisms rule us. When leaders believe they don’t have the time to work through all aspects of a problem they are inclined to narrow their perspective and take cognitive shortcuts, becoming more impulsive and reactive. In effect, their actions do become automatic. Hence the term ‘autopilot’.” Tell people why it’s important Secondly, changes must be communicated effectively. This may sound obvious, but more often than not, it doesn’t happen. USA Today business columnist Steven Strauss writes, “It’s not that management fails to communicate what the change is or what it should look like, but rather, they fail to communicate why the change is needed. The number one reason why organisational failure occurs is because the case for making a change is not adequately articulated to the troops, and therefore, is never fully embraced.” Often, senior executives will communicate an insight or a new direction to employees, but without the objective, it
will have little meaning. Telling employees it is necessary to “strive for excellence” means little if they are not aware what “excellence” means for them and their team in practice or just what timelines they need to keep in mind to achieve this “excellence”. Further, it means little to set clear objectives if one does not ask for input from the employees concerned in the creation of those objectives, timelines, and drivers for change. Seeking out and making use of input from multiple stakeholders in a formative way is an essential part of building a path to sustainable change. Work with, rather than against A third major factor is managing resistance. According to Rick Maurer, author of Beyond the Wall of Resistance, 70% of attempts at change in organisations fail because of resistance to change. “Resistance to change occurs at all levels, including among senior executives themselves,” says Dr London. “Change and “unlearning” of old habits is challenging for most people; senior executives often have even more at stake in confronting ideas or behaviours that have enabled them to reach these senior roles. Such paradigm shifts in thinking and action, while often prompting growth, can be unsettling in the short and medium term; this is true for people at all organisational levels, and that period of adjustment should be allowed for and supported.” A key insight that emerges from Dr London’s experience, is that “managing resistance” does not simply mean doing away with it. It means actively engaging with it, both within one’s own transformation and at organisational level. Dr London says that “Resistance, if drawn out and engaged with constructively, is crucial to refining the change process as it develops, making it much more likely to pay dividends.” n
By Kumeshnee West | Director of Executive Education | UCT Graduate School of Business | Kumeshnee.west@gsb.uct.ac.za | @kumeshwest
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EDUCATION MANAGEMENT & TRAINING
The myth of globalisation By Prof Bart Smit | Associate Professor | Unisa’s Graduate School of Business Leadership (SBL) | smitaj@unisa.ac.za
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he widely accepted definition of globalisation has to do with the process of becoming worldwide in scope and the increasing interdependency of nation-states. To judge whether or not globalisation is a myth or fact however, requires a full understanding of what the term means to its critics and advocates.
and capital flow between countries, not because the world is flat, but because countries differ and borders matter”. Commonly used measures for globalisation of markets and production are the following ratios: World Exports/World GDP and World Inward FDI/ World Gross Capital Formation. “Data that has been gathered from various sources, including the World Bank shows that around 80% of all goods and services are still produced and consumed locally.
Professor Smit maintains that, in his view, globalisation of markets and productions is a concept embedded deep in the minds of modern men and women by the definitions of globalisation as opposed to being grounded in the real world. “Many South African business executives have a very loose comprehension of globalisation which is in stark contrast to how this plays out, or doesn’t, in world markets and global firms.
Although exports increased from 18% in the 1980s to 26% in the 2000s, and FDI increased from 3% to 10 % over the same time, 74% of world markets and 90% of all investments remain local. As such, our average of exports as a percentage of GDP has remained at 22% and that of FDI as a percentage of total real investment at 6%,” he explains. “As such, our concept of being ‘global players’, is fundamentally flawed.”
He notes that deeper analysis of the definitions of globalisation have all at least three common elements. These include the notion of shrinking space, shrinking time and the disappearance of borders. According to him, the conundrum of this view is that deregulation and integration of markets became synonymous to globalisation, with regulation and national borders as the opposite on the other side of the scale. However, evidence shows that borders still matter.
No borderless world To see if globalisation perceptions reflects current reality, it is critical to interrogate empirical evidence that goes beyond standard economic data , such as, mail, telephone calls, university students, immigrants, charity, patents, venture capital, internet traffic, equity investments, news media, bank deposits and so on; expressed as a percentage of world totals.
Move away from protectionism “A common understanding of what deregulation means is apparently the conundrum here. According to definitions of globalisation, deregulation implies the disappearance of borders. However, the underlying reason for the deregulation of markets is based on the principle of comparative advantage - that there are gains from trade. This is why GATT was created in 1945, and why the WTO exists, to move away from protectionism towards free and fair trade. The basic principle here is that free and fair trade is a positive sum game. Free trade does not imply the disappearance of borders or the emergence of a single world market. The same argument applies to the free movement of capital. Goods, services,
According to him, research has shown that the average of both economic and other empirical as a percentage of world totals is closer to 10% rather than the 60% to 80% that business executives perceived it to be. In conclusion, Professor Smit notes that while there is certainly a level of globalisation that cannot be ignored, but it is not the dominating factor for the world economy that it is often made out to be. “To this end, the concept that everyone writes about and that many people – particularly those within the realm of business and politics – use as an excuse for their policies or criticism of policies, is in large part based on the myth that we live in a global village were borders do not matter that much anymore.” n
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Programme assurance benchmark Forecasts of cost of planned projects have remained remarkably inaccurate for decades, according to Professor Flyvbjerg, Chair at Oxford University – Megaproject management, phronesis. He writes in the New Yorker that “megaproject planners are often outright dishonest, systematically overestimating benefits and underestimating costs”.
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his ultimately leads to stakeholder disappointment and often to adjudged failure. Besides the considerable financial impact of such failure, is the time lost to competitors that will never be caught up. According to Pieter Roos, a Programme Assurance professional, “as a result of this, organisations that are not able to execute their strategy, run the risk of becoming unsustainable and being replaced by new players or taken over by their competitors.” Bram Meyerson, CEO of Quantimetrics, says that about 50% or projects analysed slip on their original targets and about 60% exceed their budgets. The extent of this overrun is often significant. Measuring project health costs In conversations with project stakeholders about getting large runaway projects back on track Roos is often asked, “Where are we going to find the money to do this?” Roos suggests that this exposes flawed thinking in that project managers only start measuring project health when projects get into trouble. Unless organisations adopt the habit of undertaking health assessments as standard practice and allocating budget from the start, this will always be a problem. Governed to success In many large organisations, programme assurance is regarded as unavoidable, to be performed by internal audit, with an almost exclusive focus on governance. Roos says that in the many years that he has been in the field, he has never witnessed any project being ‘governed to success’. Instead, execution requires strong management discipline, with governance providing the important outer skin that keeps project management processes honed. Extensive reliance on governance shifts focus away from the differentiated activities that lead to value creation.
Internal audit’s role Confusion exists between the role internal audit is supposed to play versus the management requirement to continually assess and respond to blind spots on projects. The two are not opposed, but complementary. Roos says, “Who wants to wait for internal audit to report their shortcomings to the board if they can proactively identify and remediate matters before they develop into real issues?” As much as we are dependent on external views about our project success, the project should look after itself before allowing anybody else to show us our weaknesses. A tailored approach A heath assessment ranges from an exercise that lasts a few hours, to an in-depth periodic assessment, to ad hoc evaluations of problem areas. Meyerson believes that there should not be a one-sizefits-all assurance framework but recommends a tailored approach that objectively identifies the real issues and remediates them systemically. Identify and remove hurdles Project stakeholders should agree on a set of metrics that describe the ongoing health of a project and the likelihood of it achieving its defined outcomes. Value management practices and regular reviews should identify the impact shortcomings and suggest recommendations related to shortcomings identified by the assessment. n
By Bram Meyerson | CEO | Quantimetrics | bram@quantimetrics.net By Pieter Roos | Programme Assurance professional | Quantimetrics | pieter.c.roos@gmail.com
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BusinessBrief
December/January 2016/2017
EDUCATION & TRAINING
The university conundrum? The ‘Fees must Fall’ protests have led to a nationwide discussion about the right to Higher Education.
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he debate boils down to higher education being a catalyst for equality with the underlying assumption being that higher education will lead to better career prospects for those who can achieve it. The extent to which this is true depends on the extend that Higher Education institutions are relevant in providing the market place with capable Professionals and Managers. Better quality better career Universities have historically been focused on being knowledge institutions that focus on subject matter expertise, research and developing responsible citizens and to a lesser extend preparing students for a clearly defined professional field. This outlook has been changing as today’s key question of a sponsoring parents is, “what career path will my son or daughter be able to pursue with this degree and with what earning potential?”. Or, more directly, ‘What will be my return on investment?’. The extent to which this question can be answered is different per institution. Especially Private Higher Education Institutions have had to focus on career prospects from the onset to justify the unsubsidised fees that have to be paid by parents. They have filled gaps left open by the public universities by offering programs that are not offered or are full at public universities, or programs in which better quality will lead to better career prospects. The continued existence of private institutions is determined by their ability to deliver professionals
and managers that are wanted by the industry. If they do not, they will make themselves redundant very quickly. Professional role in mind The approach to curriculum design, learning methodologies, internships, and support in entering the market place is thus different in such institutions. Curricula are constructed from a professional profile whereby the key competencies required by a certain profession are translated into curriculum content and learning methods and assessment are designed with the professional role in mind. Academic advisory boards representing industry professionals and and alumni surveys are used to ensure that the intended career profiles are effectively catered to. This is over and above frequent student satisfaction surveys to continuously satisfy the high expectations of students and parents who, rightfully, expect value for their money. This is costly, yet worth it as most private institutions boast excellent employment rates with salaries that provide a healthy return on the investments made by the parents. The current crisis in public universities increases the gap between public and private higher education institutions. Public universities are likely to see their budgets erode further and will have to make sacrifices at the expense of the quality of their education with quantity taking preference over quality. This will drive more affluent students to private higher education institutions who will maintain their quality due to their higher fees. This scenario does not have any winners; the right to education will be there, but the right to good education will be reserved for the selected few and the industry will suffer a shortage as a consequence. n
By Dr Wouter Hensens | Executive Dean | Stenden South Africa | wouter.hensens@stenden.com
EDUCATION & TRAINING
BusinessBrief
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December/January 2016/2017
Executive skills gap South Africa is a country of both challenge and opportunity. Despite having enjoyed 21 years of democracy and being one of the largest economies in Africa, the richest 20% of the population still accounts for over 60% of consumption, while the bottom 20% less than 4.5%. Balancing the scales sustainably and equitably remains a massive challenge facing both the public and private sectors, especially given the country’s persistent skills deficit. By Amasi Mwela | CEO | Fundi (formerly Eduloan) | amasim@fundi.co.za
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masi Mwela, CEO of Fundi (formerly Eduloan), maintains that education and training, particularly in the executive space, is critical in terms of shifting current middle and upper management demographics – effectively redressing the past and addressing the future. While professional recruitment, development and retention have become priorities for organisations of the future, executive education is now critical in terms of talent strategy. “The growing gap between the skills today’s employees have versus the skills businesses say they require is a critical flag that we need to pay definite attention to, especially when it comes to in-house talent development – specifically of middle to upper management” says Mwela. “Given the changing nature of our global world, the luxury of time for on-the-job training is no longer readily available in most organisations. As such, up and coming executives must be equipped with competencies to drive strategies effectively. Many of these can be enabled through executive education.” Tailoring a way forward Driving the executive education conversation at company level can often be challenging however, especially when organisations seek ‘quick wins’ in terms of their skills development spend. “The latest requirements for BBBEE Skills Development points require companies in virtually all industries to spend 6% of their payroll on skills development. For many, the easiest approach is often to send a large number of employees on a short course or a series of short courses. These can address general skills levels across the board, with reporting numbers ultimately looking very impressive. Tailoring a specific ‘chartered’ way forward for anC individual being groomed as an executive requires far moreM time, effort and planning however. It’s a long-term investment, as Y opposed to a short-term stop gap. This is where executive CM education fits in.” MY CY As the department that typically owns training and development, HR needs to be able to articulate what a junior CMY manager to middle manager, or middle manager to senior K manager growth path looks like.
They should also be able to empower employees to manage their career paths. Mwela says that employees and employers need to start this empowerment as a shared imperative – and responsibility. “Too many employees often wait to ‘be discovered’ by their managers, as opposed to making their growth aspirations and recommendations known. As such, they can become ‘subject to’ a standard skills and training approach instead of actively ‘owning’ their own future journey. Guidance and support “In the same way, managers and executives working under great pressure to deliver often put high level staff development on the back-burner – simply because they don’t have time. This combines to creates a catch-22 situation within the organisation with a critically development opportunity potentially going to waste,” he explains. Finding the middle ground is therefore key – and often made possible through a specialist service provider that can act as an effective bridge between the two parties. “All too often, employees don’t know where to start from a course or institution perspective, and need guidance and support in terms of finding the executive course that is right for them. In a similar way, setting up a skills and development fund and then administering this appropriately is not the core function of HR. They need to monitor progress and report on results but aren’t in a position to manage the day-to-day fund requirements. n
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BusinessBrief
December/January 2016/2017
EDUCATION & TRAINING
Skills feedback loop? By Mark Orpen | Chief Executive Officer and Chairman | The Institute of People Development (IPD) mark.orpen@peopledev.co.za | @ipd_gizellem
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enjamin Franklin is quoted as saying; “An investment in knowledge pays the best interest.” Yet, in an economy where nothing is certain, many companies shy away from real knowledge building, to avoid the perceived cost and the headache they assume determining return on investment (ROI) will be. However, putting the heart-warming stories of the advancement of staff and the improvement of productivity aside, when it comes down to the cold hard cash, there are simple ways to evaluate and analyse the Return on Investment (ROI) on skills development. When approaching the calculations, it is essential to consider the data from a Learning and Development (L&D) perspective, while applying a general understanding of statistics and a model that can easily be taught, implemented and replicated. Measuring ROI In certain cases, the determination of ROI is clear cut. If a sales person isn’t making any sales, goes on a course and then comes back to work and makes sales, the return is clear; more sales. Perceived complications arise, however, when measuring the ROI on soft skills such as conflict management and diversity management. The process is not as complicated as you would think. With the right advice and guidance, an ROI evaluation becomes the simple application of a consistent methodology. Whenever financial outlay is involved, it is important to bring it back down to numbers. In fact, the SA Board for People Practices (SABPP) is campaigning to make mathematics compulsory for Human Resources employees; it recognises that analytics is a part of the job. The fact is that a business runs on numbers, it runs on the bottom line – if your training is part of your business then you have to be able to bring those numbers back down to bottom line, and whether or not the positive effect is worth the spend. Often training departments and HR have gripes about
the fact that they have to justify budgets, but every department has to validate its spend, so why not rather learn the skill? Identifying strengths A good starting point is to determine the objectives of evaluating ROI. While quality control and business value are primary considerations, additional objectives could include: improving the quality of learning programmes; determining whether the training programmes’ objectives have been met; identifying potential strengths and weaknesses in the learning programmes; developing a cost/benefit analysis of training and skills development (SD) investments; supporting marketing of training or SD programmes; determining a programme’s appropriateness for the target audience; and assisting in decision-making about programme investments, to establish funding priorities. The Phillips Model outlines certain levels to get to the final point of ROI evaluation. The first level is reaction, satisfaction and planned action, which measures participant reaction to and satisfaction with the training programme, and participants’ plans for action. The second level looks at the learning, measuring skills and knowledge gains. The third level considers application and implementation, gauging real changes in on-the-job application, behaviour change, and implementation. The fourth level is business impact, determining the effect of the training on the business. The last level is ROI, comparing the monetary value of the business outcomes with the costs of the training programme. If we venture to the softer side, L&D ROI impacts on Retention, Operations and Integration. It does, to a large extent increase engagement, meaning less retention issues and fewer recruitment costs. It increases motivation, giving staff a sense of being acknowledged and important enough be upskilled, which increases operational capacity. These benefits are huge; and aren’t always identified through analytics. The integration of staff through development is essential to their ongoing motivation and efficiency. n
EDUCATION & TRAINING
BusinessBrief
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December/January 2016/2017
Shaping future managers By Peter J. Jansen van Nieuwenhuizen | CFO | Growth Institute | peter@growthinstitute.co.za When Henry Mintzberg said that organisations need managers and not MBA’s he had in mind the freshly ground graduate with little or no practical experience at all.
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intzberg argued that the grizzled veteran, who can show the scars of hard lessons learnt, adds more value to an organisation than the young MBA graduate who is about to enter the workplace for the first time. For the next eighteen to thirty six months, the young graduate has to find his/her feet. For the first time the graduate will be confronted with the sociotechnical system as it appears in all its ugliness in the workplace: •A dapting behaviours to fit into the organisation and to be accepted by others in the organisation •E mbracing the organisation’s goals and values •F inding an understanding of the functions, operations, procedures and activities that make the organisation unique •A ccepting the reasons and history of the organisation’s policies, formal design and procedures •S eeing contexts in the way work is organised, directed, planned and coordinated
Sending the veteran to business school allows the organisation to marry experience and insight with matters theoretical. The veteran has a wide frame of reference in which the MBA theory can be assessed, adjusted if necessary, and then, applied to suit the specific needs of the organisation. In addition, the veteran already understands how to navigate the muddy sociotechnical system so that things can get done. In times of pressure and quick decisions, the veteran can rely on his/ her instinct and innate knowledge to guide a team or an organisation without hesitation. Taking a view that a person should not enroll for an MBA while still young and relatively inexperienced may not be suitable for the South African context. The country has a young population in comparison to other economies. We need the energy, the unbridled courage and the optimism of the youth to kick the economy into a higher orbit. Qualifying the veteran, tutoring the young MBA graduate and putting them
in the same team to solve issues that organisation struggles with, may just be what is lacking in transforming today’s graduate into a competent future leader. South African organisations have a preference to exchange veterans for young blood; often before the veteran’s knowledge has been transferred, shaped and tempered so that the next generation does not have to be confronted with an experiential void. The sluggish economy cannot afford situations where experiential voids hold back the possibilities that are yet to be uncovered. n
...the veteran already understands how to navigate the muddy sociotechnical system so that things can get done.
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BusinessBrief
December/January 2016/2017
LEGAL
Anti-hate speech bill risks! By Robert Davies | Lead Independent Consultant | Corporate Governence Framework Research Institute robertjdavies07@gmail.com
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aying or doing something racist, or performing various deeds which falls within a long list of things the Bill deems to be hate speech or a hate crime, could see you ending up with a criminal record. It could even jeopardise your business, even if you had nothing to do with the original incident. Minister of Justice and Correctional Services, Michael Masutha, has announced that government has published the Prevention and Combating of Hate Crimes and Hate Speech Bill (‘the Bill’) in the Government Gazette for public comment, which was approved for public consultation by the Cabinet on 19 October 2016. An overview of the Bill shows that the proposed legislation intends to: •g ive effect to the country’s obligations in terms of the Constitution and international human rights treaties concerning racism, racial discrimination, xenophobia and related intolerance in accordance with international law obligations; •p rovide for the offence of hate crimes and the offence of hate speech and the prosecution of persons who commit those crimes; •p rovide for appropriate sentences
that may be imposed on persons who commit hate crime and hate speech offences; •p rovide for the prevention of hate crimes and hate speech; •p rovide for the reporting on the implementation, application and administration of the Act; •a mend certain Acts of Parliament relating to the new law.
Risk of reputational damage The Bill proposes hefty fines and a maximum 10-year jail term for anyone convicted of showing prejudice, bias or intolerance on the basis of race, gender or sex as well as ethnic or social origin, colour, sexual orientation, religion, belief, culture, language, birth, disability, HIV status, nationality, gender identity, albinism and occupation or trade.
A very blunt instrument Concerns about the Bill and the effects that it may have when it is passed by Parliament, have been raised by various parties, who say that it has gone too far. There is a fine line between freedom of speech and hate speech and the question is: how onerously will the new law be applied? With the government eager to be seen stamping out hate speech and crimes, the Bill may become a very blunt instrument to do so.
Besides the punishment prescribed by the Bill, there is a very real and considerable risk of reputational damage to the person convicted of - or even just accused of - any of the offences created by the new law and this reputational risk would very easily extend to the companies employing such individuals.
William Saunderson-Meyer, a well-known journalist, says that there is already sufficient legislation in place to deal with hate speech and crimes, including the Constitution and Bill of Rights, and that “robust, or even crude language, satire, mockery and the right to offend are all important aspects of democracy.” (The Citizen, 29 October 2016)
Consider the impact It is clear that it is not just racism that could lead to a breach of the proposed new law. It could introduce a new level of intolerance that requires everyone to be more aware of their speech and activities and ensure that their attitude and behaviour accords with the standards required by it. Companies should consider the impact this may have on their work place environment and review their key documentation and policies to ensure compliance. n
LEGAL
BusinessBrief
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December/January 2016/2017
The ethical role of lawyers! Ethics goes beyond the law - it requires an internalisation of values. Lawyers are more likely than other professionals to experience a conflict between their clients’ interests and the public interest. By Kris Dobie | Manager | Organisational Ethics Development | The Ethics Institute | kris.dobie@tei.org.za | @EthicsInst
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his is due to the fact that they often deal with those who have fallen foul of the law, or with those who want the most beneficial interpretation of the law.
“Dealing with such challenges appropriately requires sound judgement and significant wisdom,” says Kris Dobie, Manager: Organisational Ethics Development, The Ethics Institute. “The question is whether there is sufficient focus on developing character and wisdom in lawyers as part of their studies and professional development.” Relationship between law and ethics Earl Warren once said, “In a civilised life, law floats in a sea of ethics.” This quote points to the close interrelationship between the law and ethics. “Most laws are written to support ethical principles that are widely held by a society. At the same time the law needs to be supported by a basic ethical environment to be able to function effectively,” says Dobie. The legal system is not an island. When there is significant corruption in society, the legal system struggles to give access to justice. It is also important to point out that ethics goes beyond the law. Adv. Thuli Madonsela, made the point that if someone has not been found guilty in a court of law, it is no indication
of them being an ethical person. It just means that they are not a criminal, and the two things are not the same. “In the same way, being legally compliant means doing the right thing when someone is watching, whereas being ethical means doing the right thing when no-one is watching,” Dobie adds. “Ethics also goes beyond the law in that it requires an internalisation of values.” Lawyers operate in highly challenging environments that require judgement and wisdom to navigate. “If we want the law to be an instrument of justice there needs to be more talk of the moral character of ‘good’ lawyers, and not just their intellectual abilities. And the language that we should use should be moral, and not legal language,” says Dobie. Reform of legal institutions and judiciary Aristotle said one of the preconditions for living a virtuous life is living in a just society. If our legal system does not ensure justice, where can people turn to? Our legal system is dependent on an ethical environment, but at the same time the legal system plays a crucial part in creating a just and ethical society. Societies with severe corruption challenges are however likely to experience an onslaught on the integrity of the justice system, as those with vested interests aim to destabilise the system. n
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BusinessBrief
LEGAL
December/January 2016/2017
Beware of excluding LIABILITY Confidentiality or nondisclosure agreements (NDAs) may limit or exclude the parties’ liability for damages in certain circumstances. Clauses such as “in no event shall either party be responsible to the other for indirect, special or consequential losses” are commonplace and are often accepted during contract negotiations, sometimes only subject to them being reciprocal.
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clause such as the one above may appear to be standard and to the benefit of both contracting parties, but in the context of a NDA, this clause can have severe consequences for the business owner disclosing confidential information. In Lavery and Co. Ltd v Jungheinrich, 1931 AD 156, the courts distinguished between: • “general damages” as damages that flow naturally and generally from a breach of contract and which the law presumes that the parties thought would result from such a breach of contract; and • “special damages” as damages that, although caused by the breach of contract, are ordinarily regarded in law as being too remote to be recoverable, unless the parties when entering into the contract, actually contemplated that such damages would likely be caused from a breach of the contract and agreed that the defaulting party will be liable in the event of such breach. May need to disclose trade secrets “Indirect damages” and “consequential damages” refer to indirect or consequential damages that flow from a breach of contract which damages will not constitute “general damages” or “special damages”. When the person who received the confidential information shares or uses it in breach of a NDA, the business owner who disclosed the information may suffer indirect, special or consequential losses. For example, to attract a private equity investor or joint venture partner, the owner of a start-up may need to disclose her trade secrets, ideas, intellectual property and customer information to such investor. They then enter into a “standard NDA” to protect the business owner, stating that “the investor must keep the confidential
information confidential”, but also stating that “neither party will be liable for special, indirect or consequential losses suffered by the other parties”. No remedy for loss of profits If the potential investor or joint venture partner breaches the NDA and divulges the start-up owner’s trade secrets, ideas, intellectual property or customer information to another of its investee companies or sells the confidential information to a third party in breach of the NDA, the investor or third party could potentially use the confidential information to make a huge profit. The courts may find that the only damage suffered by the start-up is a loss of profits that constitutes indirect, special or consequential losses. As the parties expressly excluded liability for such special, indirect or consequential losses in the NDA, the start-up will have lost its trade secrets, ideas, intellectual property and customer information (likely its biggest asset) and will have no remedy for loss of profits against the potential investor or partner. Claiming special damages will be easier if the NDA includes a clause stating that “the business owner will be able to claim special damages if the confidentiality provisions are breached”. Damages for breach of contract aim to put a party in the position such party would have been had the contract been properly performed. The start-up in the example above might be able to prove the benefit to the receiving party or a third party, but it will be difficult for the start-up to prove the actual loss that it suffered. n
By Tessa Brewis | Director, Corporate & Commercial | tessa.brewis@cdhlegal.com By Elnalene Cornelius | Associate, Corporate & Commercial | elnalene.cornelius@cdhlegal.com Cliffe Dekker Hofmeyr
LEGAL
BusinessBrief
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December/January 2016/2017
Is a shareholder a part-owner of assets? By Johan Roodt | CEO | Roodt Inc. | jaroodt@roodtinc.com
Expropriation clauses in shareholders’ agreements: the only defence may be the oppression remedy in the Companies Act of 2008.
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f they are in partnership, then as a matter of law, the partners jointly own the business and all its assets. From this it follows that each of the partners is a co-owner of the assets and of the business as a going concern. Unless the partnership agreement contains some provision that allows a partner to be bought out against his will (and such a provision would be unusual) the only way of getting rid of one of the partners is by terminating the partnership, selling its assets, dividing the proceeds in the manner laid down in the partnership agreement, and starting up a new partnership without the undesirable individual. By contrast, where the entrepreneurs form a company, the business assets will be owned by the company itself, as a legal entity in its own right. All that each of the entrepreneurs will own are shares in the company. In law, a share carries no entitlement to any of the company’s assets; all that the shareholder has are various personal rights – in essence, contractual rights –enforceable against the company. From this it follows that, if an internal feud erupts and some of the shareholders want to expel one of their number, the legal wrangle will centre on whether the unpopular individual’s shares can lawfully be expropriated by the other shareholders. The High Court considers an expropriation clause in a shareholders’ agreement In De Villiers v Kapele J Holdings [2016] ZAGPJHC 21, a judgment of the Johannesburg High Court delivered on 18 February 2016, the dispute involved an agreement entered into between the shareholders of a company which stated that if a shareholder was also an employee of the company and if he was dismissed for whatever reason, that person would automatically be regarded as having offered his shares for sale to the other shareholders at a price determined by a stipulated formula. That, of course, was a dangerous clause. What it meant was that, by the simple expedient of terminating his employment, the company controllers could force an employee/shareholder of the company to sell his shares and exit the company. As matters transpired, that is exactly what happened – an unpopular shareholder was retrenched by the company, thereby triggering this controversial provision in the shareholder’s agreement. Not unnaturally, the expropriated shareholder was
unhappy at this turn of events. She knew that the company was holding accumulated profits from past years, and that it was also going to make a large profit in the future as its investments matured. She believed that that the other shareholders wanted to get her out of the company, not for any bona fide reason, but simply so that they could take those profits for themselves. She believed that, in all the circumstances, this amounted to fraud. The aggrieved shareholder invoked the oppression remedy of the Companies Act The aggrieved shareholder brought an urgent application to the High Court for an interim order to halt the compulsory sale of her shares while she commenced legal proceedings against the company. In that foreshadowed litigation, she intended to invoke her rights as a shareholder in terms of the Companies Act 71 of 2008 which provides in section 163 that the court can make any order it sees fit to bring about an equitable solution in circumstances where there has been – “Any act, or omission of the company, or a related person [and the judge interpolated here that this would include a fellow shareholder] that has had a result that is oppressive or unfairly prejudicial to, or that unfairly disregards the interests of the [the aggrieved person].” In this case, the aggrieved shareholder’s argument would be that the expropriation of her shares in terms of the shareholders’ agreement would infringe this provision of the Act because the consequences would be oppressive or unfairly prejudicial to her. The counter-argument of the other shareholders will no doubt be that it is not unfair to implement the provisions of a shareholders’ agreement that was voluntarily entered into by the complainant. n
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December/January 2016/2017
TAX
Tax ombud complaints The Tax Ombud released its report for the 2015/16 year in early October. Of the 2,133 complaints received, 938 (44%) were rejected. When one is already struggling with a SARS tax matter, facing further obstacles when complaining to the Tax Ombud can worsen the situation. By Patricia Williams | Partner, Tax | Bowmans South Africa | patricia.williams@bowmanslaw.com | @PatriciaTax
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t is worth noting that 354 (37.7%) of the complaints sent to the Tax Ombud were rejected on the basis that the SARS internal resolution process had not been exhausted. It therefore appears that there is significant uncertainty regarding the correct SARS internal dispute resolution process. This is the process that should ordinarily be followed before a complaint can be sent to the Tax Ombud. In addition, 581 (61.9%) of the complaints were rejected because of the limitation of authority of the Tax Ombud.
Compelling circumstances If there are compelling circumstances for not following the complaints resolution mechanisms in SARS, the Tax Ombud may accept the complaint even though the SARS complaints process was not followed. The Tax Ombud must determine whether there are compelling circumstances, considering factors such as whether the request raises systemic issues; exhausting the SARS complaints process would cause undue hardship to the taxpayer; or exhausting the SARS complaints process is unlikely to produce a result within a reasonable period of time. In the complaints form for the Tax Ombud, there is a section which states: “If you have not exhausted the SARS internal complaints process, please motivate why the OTO should handle your complaint i.e explain your compelling circumstance.” Explain your reasons If you have to motivate why the Tax Ombud should handle your complaint, you need to explain the reasons for not following the SARS complaints process. For example, you can say that to the best of your knowledge and belief, your issue is a systemic issue, and explaining what hardship is caused to you by further delaying the matter by going through the SARS complaints process. If there have already been substantial delays on the matter, you would explain these, so that the Tax Ombud could conclude that following the SARS complaints process would in all likelihood not result in an appropriate result
within a reasonable period of time. If you properly explain your reasons in the relevant section of the Tax Ombud complaints form, the Tax Ombud may decide that they can accept your complaint, without you first having to go through the SARS complaints process. Certain types of problems with SARS cannot be dealt with by the Tax Ombud, however, because of limitation of authority. In this respect, the Tax Ombud may not review: • L egislation or tax policy – to address these issues, you can send your tips to the Finance Minister ahead of the National Budget Speech each year, make submissions to National Treasury and SARS in relation to draft legislation each year, and even attend parliamentary hearings on draft legislation and publicly speak up about any proposed changes; • SARS policy or practice generally prevailing (unless it is administrative or service related) – submissions can be made to SARS legal, including requesting interpretation notes on tricky aspects of tax. If more appropriate, submissions could be made to National Treasury for changes to the law (as opposed to only the interpretation thereof by SARS); • matters subject to objection and appeal, or a Tax Court matter – matters subject to objection and appeal must be dealt with by the Tax Board or Tax Court, so you will get to be heard by an independent tribunal that is capable of making a binding decision. That is better than a mere “recommendation” by the Tax Ombud. n
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BusinessBrief
TAX
December/January 2016/2017
Index Tax The VAT Act contains various references to “payment” made or received. However, the term is not specifically defined in the VAT Act except for the provisions contained in section 16 of the Act, which deals with the calculation of VAT payable.
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oes the supply of goods or services on loan account discharge the recipient’s obligations under the purchase price? In a recent Tax Court Case (Case No: VAT 1247), the court had to consider the meaning of “payment” for purposes of section 22(3) of the VAT Act. This section provides that where a vendor has claimed input tax on a taxable supply made to it, and any portion of the consideration payable in respect thereof remains unpaid after a period of 12 months (i.e. only if the contract does not make provision for extended payment terms), the vendor is liable to account for output tax equal to the tax fraction of the amount which remains unpaid. Avoid external finance In this case, the vendor (a property developer) entered into an agreement with its wholly owned subsidiary, which owned undeveloped land, to develop residential property units and commercial property on the land. The parties agreed that the holding company will fund the subsidiary’s cash flow requirements via inter-company loans, in order to avoid external finance being required by the subsidiary. The holding company issued a tax invoice to its subsidiary for the development of the property and accounted for output tax thereon. Long-term liability Equally the subsidiary claimed the VAT incurred as input tax. Once the subsidiary received the refund from SARS, it repaid the VAT amount to its holding company. The net amount due to the holding company was accounted for on intercompany loan account. The subsidiary further accounted for the remaining amount due as a long-term liability and the holding company accounted for the amount as a noncurrent asset. Four years after the invoice was issued, SARS raised an assessment on the subsidiary on the basis that the balance of the amount due has not been paid after 12 months. In this regard, SARS essentially argued that the supply on loan account does not constitute payment, but
SARS essentially argued that the supply on loan account does not constitute payment, but rather recognises the amount owing by the subsidiary to its holding company. rather recognises the amount owing by the subsidiary to its holding company (i.e. the creation of the loan account did not discharge any obligations under the purchase price). The subsidiary effectively argued that its liability under the purchase price for the services has been discharged in full, and that it incurred another liability being the amount owing in terms of the shareholder’s loan. Adjusting the liability The dispute, therefore, turned on whether in adjusting the liability to a long-term liability can be said to be payment of the consideration in respect of the services supplied by the holding company. The subsidiary relied on a decision in SARS versus Scribante Construction (Pty) Ltd, in which a dividend was declared as interest, but which was not paid in cash to the shareholders. Instead, the dividends were credited to the shareholders’ loan accounts with the company. In this case, it was held that where shareholders use the company as a banker, the crediting of the shareholder’s loan accounts constituted actual payment of the dividend as if the dividends were deposited into an account held by the shareholders at a banking institution. However, if sufficient evidence exists that the shareholders of a company intend to fund the operations of the company on shareholders’ loan account, the crediting of the shareholders’ loan account in the books of the company constitutes two distinct actions: the payment of the consideration for the supplies made to the company and the creation of a loan obligation of the company towards its shareholders. n
By Andre Meyburgh | Director: Tax and Legal division | KPMG South Africa | andre.meyburgh@kpmg.co.za | @KPMG_SA
Final Special VDP legislation sweetener By Dan Foster | Director: Tax practice | Webber Wentzel Attorneys | dan.foster@webberwentzel.com
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uring the Parliamentary committee hearings on the draft Special Voluntary Disclosure (SVDP) legislation, two important concessions were approved. “The final Bill recently presented to Parliament also contains an unexpected but very welcome amendment,” says Dan Foster, a director in the Tax practice at Webber Wentzel attorneys. Interest on additional tax bill “The SVDP offers forgiveness of historic tax due, and zero penalties, relating to previously unreported income and donations. In exchange for this relief, the taxpayer must include a fixed percentage of his or her unreported foreign assets, derived from previously untaxed income, in their taxable income. This inclusion rate has been reduced from 50% to 40%,” notes Foster. “The final Bill also extends the SVDP disclosure period from 31 March 2017 to 30 June 2017, giving applicants an extra three months to collect the necessary information and prepare their submissions to SARS and the Reserve Bank,” he adds. The value of the foreign assets used in the 40% inclusion is calculated as the highest amount, converted to Rands, on the last day of each of the tax years ending 2011 to 2015. This amount is included in the taxable income of the applicant for the 2015 tax year, and taxed at their highest marginal rate. For a highest-rate taxpayer, this results in an effective rate of 16% on the value of unreported foreign assets. Interest will also be due on this additional tax bill. An exchange control levy is also calculated on the unreported foreign assets where appropriate. “This levy is 5% if the assets or disposal proceeds are brought back to South Africa, or 10% if the assets are kept abroad. If the levy is paid from local funds, an additional 2% levy is charged i.e. 12% in total. In the case of the exchange control levy,” notes Foster. Potential double tax “One of the main objections that advisors had to the original SVDP legislation was that payment of the additional tax and levy on the foreign assets would not reset the base cost of those assets for the purposes of capital gains tax (CGT). In other words, if the assets on which the SVDP tax was paid were later sold, CGT would be due on the entire capital gain since the asset was acquired (or 2001 value, if later), even though SVDP tax had already been paid on that asset,” Foster explains. n
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Why King IV? The King IV Report on Corporate GovernanceTM (King IV) was launched on 1 November 2016 by the King Committee and the Institute of Directors in Southern Africa (IoDSA). By Parmi Natesan | Executive: Centre for Corporate Governance | Institute of Directors in Southern Africa parmi@iodsa.co.za | @parminatesan
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o what prompted this fourth iteration?
Since the issue of King III in 2009, various emerging issues and corporate governance developments needed to be addressed.
• The notion of integrated reporting was introduced in King III, but the understanding of it has significantly evolved since then, particularly with the subsequent release of the International framework. Integrated reporting is an outcome of integrated thinking and is presented as such in King IV. Reporting, including integrated reporting, is dealt with in King IV, where it is positioned as the culmination of a series of leadership
responsibilities executed by the governing body. In order to clarify the standing of the integrated report in relation to other reports, King IV deals with it as one of the many reports that may be issued by the organisation, as is necessary, to comply with legal requirements, and/or to meet the particular information needs of material stakeholders.
• Regulation 43 of the Companies Act was issued after
King III and did not address the ethics role of the social and ethics committee beyond mentioning ethics in the name of the committee. King IV seeks to expand on this, and the role ascribed to the social and ethics committee is that of oversight and reporting on organisational ethics, responsible corporate citizenship, and sustainable development and stakeholder relationships.
• Along with new thinking around the up-side of risk,
the definition for risk used in King IV consists of three parts, namely uncertainty of events, the likelihood of such events occurring and their effect, both positive and negative. King IV’s understanding of risk thus balances the traditional, negative view of risk with one that recognises the potential opportunities inherent in some risks.
• In King IV, cognisance had to be taken of the advances
in technology that are revolutionising businesses and societies, and transforming products, services and business models. These advances happen quickly and can cause significant disruption, opportunities and risks. Organisations should strengthen the processes that help them to anticipate change and to respond by capturing new opportunities and managing emerging risks. In King IV, it is recognised that information and technology overlap, but are also distinct sources of value creation, which pose individual risks and opportunities. It is to reinforce this distinction that the King IV Code now refers to technology and information instead of information technology.
• Many international regulators and institutional investors
are paying additional attention to disclosure and voting on remuneration. King IV had to consider the appropriate means of dealing with these developments, taking into account that South Africa is a participant in the global investment market but with its own unique set of circumstances. One of the ways that it addresses this is by
FINANCE & EQUITY
Integrated reporting is an outcome of integrated thinking and is presented as such in King IV.
including more definitive disclosure requirements, among which, that remuneration should be disclosed in three parts, namely: a background statement; an overview of the remuneration policy; and an implementation report. It also recommends that shareholders of companies be provided the opportunity to pass separate non-binding advisory votes on the policy and the implementation report. King IV furthermore recommends the use of performance measures that support positive outcomes across the triple context in which the organisation operates, and/or all the capitals that the organisation uses or affects. This is a departure from linking remuneration to financial performance only. Another important introduction in King IV is that the remuneration of executive management should be fair and responsible in the context of overall employee remuneration. It should be disclosed how this has been addressed.
• King III introduced the combined assurance model, but
this concept needed to evolve to become more useful and effective. In King IV, the model assumes an understanding of assurance that goes beyond the technical definitions of assurance. A combined assurance model incorporates and optimises all assurance services and functions so that, taken as a whole, these enable an effective control environment; support the integrity of information used for internal decision-making by management, the governing body and its committees; and support the integrity of the organisation’s external reports.
• Internal audit, as one of the assurance service providers
to the organisation, remains pivotal to corporate governance. Its role has further evolved in recent years. It has become a trusted advisor that adds value by contributing insight into the activities of the organisation and, as a further enhancement, foresight. This is the ideal positioning that is envisaged for internal audit in King IV.
• Mandatory rotation of audit firms and mandatory
tendering have been introduced in some jurisdictions in
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an attempt to reinforce auditor independence and audit quality. King IV leaves the consideration and decision on whether to implement either to the audit committee and governing body, subject to legal requirements. The Code, however, makes certain practice recommendations with regard to auditor independence, amongst them that the tenure of an audit firm needs to be disclosed.
• Tax has become a complex matter with various dimensions. The governing body should be responsible for a tax policy that is compliant with the applicable laws, but that is also congruent with responsible corporate citizenship, and that takes account of reputational repercussions. Hence, responsible and transparent tax policy is put forward as a corporate citizenship considerations in King IV.
• T he rise in shareholder activism - when it comes to
the quality of an organisation’s application of voluntary codes of governance principles and practices, it is said that its stakeholders are the ultimate compliance officers. Shareholders, as a particular sub-set of stakeholders, have certain rights that are enshrined in company legislation and that strengthen their ability to hold boards of companies to account. By virtue of this ability, shareholders also have the power to serve as proxies for wider stakeholder interests. Institutional investors (in turn a sub-set of shareholders), particularly, are extremely influential. The types of investment decisions they make and how they exercise their rights as shareholders, either reinforce or weaken good governance in the companies in which they invest.
• Since alternative dispute resolution mechanisms were
introduced formally in King III, resolving disputes effectively has gained increased importance in light of labour strike action becoming protracted and, in some cases, hostile. Relationships are a form of capital on which all organisations rely. A dispute resolution process should be regarded as an opportunity not only to resolve the dispute at hand, but also to maintain and enhance the social and relationship capital of an organisation. As a result, King IV recommends that dispute-resolution mechanisms and associated processes be adopted and implemented as part of the overall management of stakeholder relationships.
In addition to these corporate governance developments, the King Committee and IoDSA had a number of other aspirations for King IV. These included: • Promote corporate governance • Broaden the acceptance of King IV • Reinforce corporate governance • Encourage transparent and meaningful reporting • Present ethical consciousness and conduct • Co-creation n
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BBBEE vs real transformation The Broad-Based Black Economic Empowerment (BBBEE) policy was developed with the intention to create more businesses, train more people, create more jobs and include previously excluded sections of society into the mainstream economy.
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his development involves a progressive transformation of the economy and society, and it might not be a sustainable development if only a small population of the economy is benefiting. BBBEE is not perfect since it might not solve all our problems, however, it is a model that can work if properly executed. Meaningful and sustainable growth can only be achieved by ensuring that all industries within government and the private sector implement the BBBEE codes correctly, and in good faith. We need to realise that transformation is much wider than just BBBEE codes; and that BBBEE codes form part of the pillars of transformation. BBBEE is also only one aspect of the government’s economic transformation strategy. Adequate diversity awareness The BBBEE process includes elements of human resource development, employment equity, enterprise development, preferential procurement, as well as investment, ownership and control of enterprises and economic assets. However, to attain these elements, organisations need to ensure that there is adequate diversity awareness for staff through their company’s values and culture, and alignment of the communication strategy, change management strategy, procurement processes, and human resource processes (including learning and development programmes and staff personal development plans). The purpose of the BBBEE Codes of Good Practice is to help guide both the public and private sectors in the implementation of the objectives of the BBBEE Act, which contributes to economic transformation and diversity in the workplace. You will find that the discussion on
transformation is often translated to what BBBEE level a company has, which is an indication that there is still a gap in understanding the difference between transformation and BBBEE. In order for companies to view transformation as being more than simply BBBEE compliant, they need to understand the overall objectives of the BBBEE Act as well as the BBBEE Codes and go beyond compliance to embrace the true spirit of the BBBEE Codes. There is no magic wand A survey conducted by the South African Institute of Chartered Accountants (SAICA), in October 2015, reveals that transformation in the CA (SA) profession contributes positively to the transformation of listed company directors under the age of 40. It also indicated that 475 JSE-listed South African company directors, CEOs and CFOs are still predominantly white males – but indicates hopeful signs of transformation within the younger generation. Specifically, this is as a result of young black CAs (SA), below the age of 40, being appointed as directors. Tsakani Ratsela, former chairperson of the CA Charter Council, in a CA-Charter progress report released May 2012 to the Minister of Trade and Industry and the BBBEE Advisory Council, stated that the “CA profession was “out of the starting blocks” and well on its way towards achieving the CA Charter’s long-term objectives”. At the same time, she cautioned that “there is no magic wand”; that “change comes with continuous and consistent effort and never taking one’s eye off the ball.” The old CA Charter was repealed by the dti on the on the 17th of February and is currently under review with the objective to ensure its targets address the areas that requires increased priority in terms of the BBBEE elements. n
By Patricia Stock | Audit Partner & Head of Transformation | BDO | Pstock@bdo.co.za By Gcina Mahlaba | Transformation Manager | BDO | gmahlaba@bdo.co.za
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Transparency on beneficial ownership Corporate vehicles have increasingly been used for illegal purposes and activities such as Money Laundering (ML), Terrorist Financing (TF), tax evasion, large scale corruption, to name but a few.
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By Rieghardt Kapp | Manager, Forensics | KPMG South Africa | Rieghardt.Kapp@kpmg.co.za | @RieghardtKapp
t can obscure the beneficial ownership of companies and assets, making it harder to ascertain whether such companies or assets are linked to criminal activity. Criminals utilise it to disguise and convert illicit proceeds, to proceeds with an apparent legitimate source. The Financial Action Task Force (FATF) has published standards on transparency to prevent the misuse of corporate vehicles for illegal activities. These improved standards have been endorsed by other international bodies including the G8 and G20 countries.
• Identify the natural person/s who (independently or with another person) hold a controlling ownership interest in the legal entity; • If doubt exists about the identity of the abovementioned individual/s or no individual/s has a controlling ownership interest, the obligation is then to identify each natural person/s who exercises control over the legal entity through other means; • Or if such an individual/s cannot be identified, then establish the identity of each individual/s that exercises control over the management of the legal entity.
Identify and verify In May 2016, the Financial Intelligence Centre Amendment Bill (“the Bill”) was published. The Bill Business Brief Advert 3.pdf 1 2016/11/16 02:33:20 PM proposes a cascaded approach in establishing the identity of the beneficial owner:
Incidentally, the Bill does not stipulate the required level of percentage ownership, because of the introduction of a Risk Based Approach that affords each Accountable Institution the discretion to determine its level of comfort pertaining to the percentage ownership of the beneficial owner. n
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ASSETS & INVESTMENTS
Why buy negative yield? We have previously spoken about the new phenomenon of negative interest rate bonds – those which are issued with a negative yield, meaning that the total interest and principle payments received from the issuer are less than the price of the bond at the time it was issued.
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loomberg has reported a surge in demand for such bonds. As at 30 September, the total face value of negativeyielding investmentgrade corporate and sovereign debt in the Bloomberg Barclays Global Aggregate Index jumped to $11.6 trillion, up 6.1% from end August and close to June’s $11.9 trillion peak. But this raises the obvious question – why would anyone, including highly respected investors and investment companies, be lining up to guarantee a loss for their portfolios? Bond purchasing an important element Firstly, some of the primary buyers of negative rate bonds are central banks. Bond purchasing remains an important element of quantitative easing and this is merely an extension of that programme. Buying the fixed interest instruments puts liquidity into markets and keeps interest rates low. And the lower the interest rate, the greater the extent of the expansionary policy – thus, keeping the cost of capital low and removing the incentive to save in the hope that this will increase aggregate demand and stimulate economic growth. Secondly, many investors are forced buyers of bonds due to regulatory requirements and in order to adhere to mandate prescriptions. In some cases, investment in other asset classes is capped (for example Pension Fund Regulation 28 in South Africa limits equity investments to 75% of a fund and equities and property combined to 90%, compelling retirement funds to invest in interestbearing securities). Negative interest rate environment Each fund has a board of trustees which draws up an investment mandate for it and the fund managers are required to adhere to the mandate. In many instances, the portfolio policies (mandates) are based on assetliability matching with bonds having historically been
well suited to meeting retirement fund liabilities. It is, however, possible that these mandates are no longer appropriate, given this new negative interest rate environment. In this case, the funds would need to make a mandate U-turn to suit the upended environment. However, changing a retirement or other fund’s portfolio policy is not something that normally happens overnight and can take months and even years in some circumstances. They are based on long-term studies of which there are none available for the uncharted territory of negative interest rates. Deflation remains a real risk But there is another issue at play which may, in fact, see negative interest rate bonds being suitable for retirement portfolios. Deflation remains a real risk for many parts of the world as aggregate demand remains weak and fundamental structural headwinds, such as aging populations, keep inflation pressures absent. In a deflationary world, a pension fund’s liability as we understood it historically would easily swing 180°. With prices falling, pension pay-outs could decline and a retirement fund could find liabilities falling over time. Buying negative rate bonds would still result in assets matching liabilities and, if this were the case, there would be no need to alter portfolio policies. Bonds are no longer the safe haven risk-free asset of yore. As the 35-year bull market comes to an end the risk-free nature will change swiftly into a return-free one. We would suggest that investors who can should switch out of bonds and into equities, notably high dividend yield companies. For discretionary investors, it is far better to own a company’s stock than to be invested in bonds. Most of these companies are flush with cash and still operate in an environment that can sustain dividend payments. Those investors who cannot stomach the volatility of equity investing could diversify into other alternative investments such as hedge funds and protected equity solutions instead of the traditional cash and bonds. n
By Maarten Ackerman | Advisory Partner and Investment Strategist | Citadel Investment Services maartena@citadel.co.za | @MaartenAckerman
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Post-brexit opportunity uncertainty 46% of finance leaders across Europe are proceeding with investments in spite of referendum shock. By Sarah George | ERP & EPM Business Development and Product Strategy | Oracle South Africa | sarah.george@oracle.com | Oracle_ZA
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lthough finance directors have admitted June’s EU referendum result created an uncertain economic environment, businesses will continue to invest, chase opportunity and growth. Caught by surprise 41% of organisations admit they did not expect the result of the EU referendum and are now playing catch-up. A similar percentage (46%) say their forward planning has since become more complex, with 44% having now developed multiple contingency plans which they update regularly to ensure their business stays on top of change.
Finance leaders expect to see significant changes to their competitive landscape under these conditions. 50% believe more organisations will struggle, while 59% expect more M&A activity and consolidation. Waiting not an option While organisations accept the future is uncertain, they recognize they cannot wait in the face of growing competition and see the need to continue investing strategically. Almost half (46%) say they plan to invest in growth if they see a strong business case, even if they
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are being more cautious. This compared to 32% that are restricting spending to bare essentials. Leaning on the CFO Companies are turning to finance leaders to help them identify and pursue opportunities in a post-Brexit market. 52% of finance leaders say postBrexit uncertainty has put finance in the spotlight and their role now predominantly involves advising their business on achieving its growth goals. Similarly, 53% say their role is more focused on forward planning than ever. n
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ASSETS & INVESTMENTS
Hedge funds vs unit trusts Despite the misconception that hedge funds are risky investments, South African-based funds are in fact relatively conservative. Interestingly, many South African investors still perceive hedge funds as the riskier investment when compared to unit trusts when, in fact, the two vehicles are birds of a feather.
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ccording to the Association for Savings and Investments (ASISA) the unit trust industry managed assets of R2 trillion and offered investors 1403 portfolios at the end of June 2016 – signifying the majority of the savings industry understands and is comfortable with collective investment schemes. But in comparison, the hedge fund industry is much smaller than the local and more traditionally perceived unit trust industry. To place this into perspective - one unit trust fund is almost double the size of the hedge fund industry as a whole. This is a vast difference for two investment vehicles regulated and essentially executed very similarly. Bearing this in
mind, hedge funds were not always available to the public, keeping growth of the industry at bay to a certain extent. Monitoring and measuring of systemic risk In 2015 National Treasury and the Financial Services Board released the final regulation of hedge fund portfolios after an extensive consultative process with the local industry. The new regulations would regulate hedge funds under the existing Collective Investment Schemes Control Act, No. 45 of 2002 (CISCA), which also encompasses the well-known unit trust industry. Because most South African hedge funds operate as pooled investment vehicles, government’s proposal to subject them to the rules that apply to other collective investment schemes made sense. Investing into lower-volatility The regulation has made hedge funds available to retail investors, exposing them to the diversification benefits of these instruments. Hedge funds respond to different market conditions compared to traditional asset classes, hence resulting in low correlation to other asset classes. Therefore, including hedge funds in one’s portfolio results in the lowering of the overall risk profile without compromising any longterm gains. By including a hedge fund allocation in a total portfolio they are investing into lowervolatility asset class diversification, capital preservation, and
stronger risk adjusted returns. All the money invested in a hedge fund goes into a pool, with a fund manager deciding which assets to invest in - just as is the case with the unit trusts that represent the majority of people’s retirement investments, fund managers for the most part invest in stocks or bonds. However, hedge funds have other tools at their disposal that unit trusts do not. Probably the most significant of these is that hedge funds are able to make money on an asset even if it declines in value. Vast experience Hedge funds can no longer be ignored by institutions, individuals or corporates – indeed by all potential investors – and should no longer be seen as the rebel of the unit trust family. Instead, advisors and investors would benefit from a wellequipped understanding of hedge funds and its investment benefits. In an environment where traditional approaches to investments have underperformed, the advantages that hedge funds offer can no longer be ignored in a well-balanced portfolio. The recent flurry of financial market events, and persistently challenging global economic conditions have meant that even large portfolios across various markets and industries have struggled to generate returns in excess of inflation. Adding a portion of one’s assets to hedge fund investments can complement a well-diversified portfolio by lowering the overall volatility, but maintain the return profile. n
By Eugene Visagie | Head of hedge fund investments | Novare eugene@novare.com | @elvisagie
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Accessing Africa market information By David Ansara | Consultant | Afriwise Consult | david.ansara@afriwise.com | @afriwise Access to information is critical for commercial success. Those who do business in Africa will be familiar with the frustrations of sourcing relevant, up-to-date market data. Why is it so difficult to access reliable information in many African countries?
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irst, weak institutional capacity leads to problems with gathering data locally. For analysts or investors trying to understand an economy’s macro fundamentals, national statistics can be hard to rely on, as statistics bureaus are constrained by too few personnel and insufficient resources to conduct research. Infrequent reporting also makes it difficult to track trends over time (e.g. GDP growth or inflation rates), and a lack of standardised information creates problems when comparing data sets across different jurisdictions. Second, foreign investors and multinational corporations find it tough to access the right in-country professionals, such as lawyers, or tax practitioners, who can provide them with the advice they need to operate within the law. Failing to adhere to domestic regulations can lead to large fines or the withdrawal of operating licenses, but international firms struggle to comply when the rules are opaque. Having the wrong advice could kill your business. Third, a lack of market data on private companies. In South Africa, JSE-listed businesses must adhere to mandatory listing requirements, providing financial and other compliance records to shareholders and the public. Shallow equities markets in other African countries means fewer listed companies, and less available data on the private sector. On a consumer level, poor market
research can lead to inaccurate market sizing. According to a 2015 report by consulting firm, McKinsey & Co, available data tends to be biased towards urban areas and many companies make the mistake of extrapolating data from major cities to the national level. However, there are some reasons for optimism. Improved ICT connectivity and demand for greater transparency have led to improvements in the quality of data provision. Governments in East Africa, for instance, have emphasised information transparency as a way of facilitating inward investment. The Tanzania Investment Centre has made significant progress in showcasing company registration requirements, as well as tax and labour regulations. In Rwanda, a searchable online directory of companies is currently under development. Private sector solutions are also emerging, with small and established players driving innovative market intelligence approaches, and investing in improved local research and analysis capabilities. However, more needs to be done to ensure greater market transparency across the continent. If African governments are serious about attracting inward investment they should take the necessary steps to provide accurate, reliable and accessible information. n
Failing to adhere to domestic regulations can lead to large fines or the withdrawal of operating licenses. Having the wrong advice could kill your business.
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BANKING & INSURANCE
Banks can help entrepreneurs? By Dalene Sechele-Manana | Regional Head | Mercantile Private Bank | DSechele@mercantile.co.za | @dalenesech Entrepreneurship is an important aspect of any developing economy. Aside from promoting innovation and stimulating economic growth, successful and established small businesses boost employment and elevate investor confidence.
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owever, even as a developing nation, South Africa has a comparatively low rate of entrepreneurial activity. In fact, at a mere 9.2%, our country has 75% less entrepreneurial activity compared to other Sub-Saharan African nations, according to the Global Entrepreneurship Monitor Report 2015, although this was a 2.2% increase from 7% in 2014. Growing a successful small business takes talent, tenacity and support. Although the entrepreneurial journey is an exhilarating one, owning your own business is by no means an easy ride. South African SMEs face challenges such as tedious labour laws, onerous regulation requirements and shortage of skills. To be successful, entrepreneurs need as much backing as possible, and the banking sector should be an ardent supporter of SMEs.
Financial institutions demand collateral as a prerequisite to providing funding...yet entrepreneurs seldom possess multiple assets of significant value. Access to finance vital for SME growth The greatest obstacle to entrepreneurial success is that entrepreneurs struggle to access funding. This growthinhibiting challenge is not unique to developing countries. The Global Competitiveness Report 2015/2016 states that financing has been ranked the fourth most pressing concern for doing business in advanced economies (up from seventh place in 2007); in developing nations it is the number one worry, whereas in 2007 it only ranked fourth. Turning to South Africa specifically, 27.6% of small businesses closed down in 2015 due to difficulties getting finance – a sobering 8.2% increase from the previous year. Risk metrics should be realistic South Africa’s banking sector is decidedly risk averse, which results in a difficult lending climate for small business owners needing to sustain and grow their ventures. Any benefits entrepreneurs may derive from our otherwise advanced and sophisticated banking
system become irrelevant when financial institutions use unrealistic risk metrics to assess the potential of an SME. For example, SME owners do not always have three months’ worth of salary slips as ‘proof’ of regular income, even though their cash flow may be stable. In addition, financial institutions demand considerable collateral as a prerequisite to providing funding for small businesses, yet entrepreneurs seldom possess multiple assets of significant value. As a result, small business owners often can’t grow beyond self-funding efforts. Shorter loan-approval times and flexible terms are key for small businesses Another barrier to success is the long approval time for loans. The realm of the entrepreneur is a fast-paced one, where opportunities can easily be lost if not capitalised on immediately. Being able to secure loans quickly and simply is vital for SME survival. In addition, entrepreneurs need immediate and easy access to funds, and their cash flow must be constant so that they can sustain and grow their businesses. Flexibility is also key for entrepreneurs. Banks should take into consideration the fact that small businesses operate within a constantly changing environment and therefore a ‘one-size-fits-all’ approach to loan repayment is, quite frankly, unrealistic. Entrepreneurs should see their bank as transparent and approachable and be able to build close relationships with them. Financial institutions that are impersonal entities wielding big sticks will never be partners who understand the nuances of each small business, and this is what entrepreneurs need to thrive. Cultivating a more enabling environment for small businesses If South Africa is to unlock its true monetary potential in the next decade, then banks need to acknowledge that entrepreneurs are a key driver of the economy. It is imperative that banks re-evaluate their approval metrics when assessing small business loan eligibility so that more individuals start to view entrepreneurship as a financially viable economic activity. Environments that favour SMEs have proven to be important mechanisms for sustainable economic growth, as they encourage innovation, create jobs, promote development and stimulate wealth distribution. It is time for banks to step up to the plate and assist in creating a more conducive climate for small business prosperity. n
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Continuing group life insurance benefits By Linda Sherlock | Managing Executive Business & Distribution Enablement | Alexander Forbes | Sherlockl@alexanderforbes.co.za As part of group life insurance benefits, members may have the option to convert their existing group life insurance cover to an insurance policy when leaving their employer.
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inda Sherlock, Managing Executive for Business and Distribution Enablement at Alexander Forbes, said it was very important that members understood what life insurance benefits they gave up when leaving their place of employment, and to what extent they would be able to replace these benefits in their personal capacity. “Not all benefits provided to employees include the option to continue cover after leaving employment.” Benefits available to convert existing group life insurance benefits to an individual policy: • M embers can take out an individual policy without having to go for any medical assessment or testing. This allows exiting members to obtain a policy at a better premium than they would be able to on a like for like basis in the open market. • M ost individuals are underinsured, even taking into account the existing group life insurance benefits that they enjoy, so even if they move to a new employer that provides them with similar
benefits it’s a good idea to improve their financial position by securing cover in their personal capacity and without the need to undergo any medical assessments. “When joining an employer, one of the employer-based benefits which form part of the employment contract may be group life insurance benefits. The benefits covered will be specified in the employment contract. These may include life, disability (income or lump sum) and / or critical illness protection. The amount that you are covered for is directly related to your salary (more specifically, generally your risk salary) and will increase and change as your salary changes. As mentioned above, this may or may not include the option to convert your existing benefits to an individual policy on termination of employment,” Sherlock said. Why is this option important? • When employees retire, the benefits that they enjoyed with a company
will cease. Therefore should they have outstanding liabilities, such as debt or inheritance considerations for their children, these may no longer be covered. By exercising the option to continue cover in their personal capacity, they can ensure they remain protected. • Upon resignation, members have the opportunity to: o Replace the cover that they enjoyed with their employer o Reduce any financial gaps identified by their financial adviser o Take out a new policy to provide protection in the event that they are setting up their own business or partnership and to secure any debt that they may acquire. “Make sure you take the time to speak to both your human resources consultant and to an accredited financial adviser when leaving employment. This will help you understand you’re your options are and how any existing benefits you’ll be able to keep will work to ensure you can stay on track to secure your financial well-being.” n
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December/January 2016/2017
BANKING & INSURANCE
Retirement SAVINGS costs The Association for Savings & Investment South Africa’s (ASISA) decision to implement an industry-agreed standard method for comparing charges on individual investment savings products is to be welcomed, says Dawie de Villiers, CEO at Sanlam Employee Benefits. He believes that introducing a similar model to occupational and umbrella retirement funds would be an excellent step for the industry.
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his would allow members to make better, more informed decisions,” says de Villiers. “It is common knowledge that South Africa is not a nation of savers, nor for that matter are its citizens particularly disciplined when it comes to overall retirement planning. The solution to improving this situation is introducing a similar cost model to the effective annual cost (EAC) which provides a fair measure for transparent disclosure in respect of charges relating to retirement funds. Access to information “As many people struggle to save even for the shortterm - let alone put away money for their distant day of retirement - the retirement fund industry has a duty and a responsibility to ensure that South Africans have access to information and are informed and educated about costs and fees when it comes to both savings and retirement investment products,” said de Villiers. ”We understand that the scenario is more complex in the retirement space, given the differences between the various offerings and the design features of group products, but the establishment of a dedicated expert working group to review and advise on the way forward when it comes to Retirement Fund Costs Disclosure is a step in the right direction,” noted de Villiers, “hopefully the outcomes of these determinations will be applied within the retirement fund space at the earliest opportunity.” Lack of understanding The 2016 Sanlam BENCHMARK Survey which conducted over 500 hours of research and more than 400 interviews with retirement fund members, pensioners, employer representatives and principal officers, served to
highlight some of the challenges that stand between members and their desirable retirement outcomes. According to this research, only 35% of pensioners believe they have saved enough for retirement. This disturbing statistic prompted us to identify six interventions that need to be addressed more vigorously so as to enable all South Africans to retire comfortably: • Close the member communication gap • Make members aware of what their retirement savings target is (and how to reach it) • Highlight the power of preservation • Customise solutions based on the life stage of each member – one size does not fit all • Ensure employers rebroke funds • Make use of technology to drive meaningful engagement with members Disclosure and transparency Of these interventions, the need to close the member communication gap was a significant outlier. The findings clearly showed that there was still a very broad lack of understanding and clarity amongst fund members when addressing the financial implications of their retirement planning decision-making. Bridging the member communication gap calls for increased disclosure and transparency so that trustees, brokers and fund members are in a position to evaluate and compare costs and fund or product offerings on a like for like basis. Such transparency will also promote an environment where members have greater accessibility, choice and flexibility when selecting preferred investment instruments that can offer practical, sustainable and secure retirement options. For the employer, it provides an informed perspective as to the fund options and benefits being offered to them to ensure that their employees’ retirement funding journeys are well optimised. “On both sides of the retirement equation, there is room for debate, but more importantly the time for cohesive and constructive action to improve retirement outcomes must be tackled sooner, rather than later,” concludes de Villiers. n
By Dawie de Villiers | CEO | Sanlam Employee Benefits | Dawie.deVilliers@sanlam.co.za
BANKING & INSURANCE
BusinessBrief
63
December/January 2016/2017
Insurance in the future? The world is constantly changing and this makes it harder to predict the future, particularly in the insurance industry. Change brings disruption and new risks but it also brings innovation.
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ujeeth Bishoon, Executive Head at Acuideas, a division of Indwe Intermediary Support Services, attended the recently held IISA Insurance Forum - The Future Insurance World We Live In – where industry leaders gave their views on how the industry can prepare for change. From changing customer behaviour to new regulations, over the next ten years the industry will face more disruptions than most other industries. There are different drives of this change: economic stagnation and exchange rates; environmental volatility, such as changing weather patterns and global warming; and geopolitical, including BRICS and extremist groups. There are three key drivers that insurers must embrace to manage these changes: product development, integration of data sources, and investment into research and development. Product Development With huge advances in technology and the digitisation of the insurance sector, greater emphasis needs to be placed on product development, in order to adapt to the changing risk environment. There are many factors that guide development, such as societal trends, new legislation, competitors and feedback from customers, however all new products must meet regulatory requirements. One fundamental new development is that clients want the convenience of having one advisory company taking care of all their needs. Data Sources Data runs the insurance sector, so the better a company can gather and analyse data, the better they are positioned to manage risk, understand their clients and then create actionable insights. Through developments in technology, data sources are evolving, this means that insurers must use the multiple, available sources of information to increase their client knowledge. With new entrants to the industry, it’s crucial to thoroughly understand market drivers and remain competitive, by integrating multiple data sources that capture information accurately. Investment into Research and Development Being innovative is essential, particularly when the industry is highly competitive as it is in South Africa.
By Sujeeth Bishoon | Executive Head Acuideas, a division of Indwe Intermediary Support Services SujeethB@indwe.co.za Successful investments assist the insurer by retaining and growing their client base. “Higher consumer expectations in terms of insurance service delivery, and the introduction of legislation to professionalise the industry, are key driving forces to the disruption and innovative changes in terms of product development and the convergence of financial services offerings. Financial services businesses have to adapt to the information age, and utilise customer data insights to create meaningful integrated customer value propositions.” n
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December/January 2016/2017
MARKETING & SELLING
Audience measurement through mobile tracking Media audience measurement in Africa is fragmented and even though a lot of work has been done by big players in the market research fraternity to address this, there is no consistent or consolidated picture across the continent.
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he media consumption landscape is transforming at an exponential rate, yet there is little innovation in media research addressing the impact of technological advances. Harmonising market research across Africa is the key objective of the Pan African Market Research Organisation (PAMRO) and in line with the theme of this year’s conference held in Zimbabwe in August, ‘Africa Media Research in a Globally Connected World’, Dashboard Marketing Intelligence presented a solution for accurate audience measurement in Africa through mobile tracking and the results of a Zambian pilot study. Mobile is often described as the second screen, however, in Africa it is often the first or only screen. We addressed two questions: how to measure mobile media consumption accurately and how this can be used to augment traditional media data. Digital research challenges There is a global shift from traditional media consumption to online and there will inevitably be a critical mass tipping point where online will dominate, it is just a matter of time. Online media consumption in Africa is on the rise, but has not been properly measured. Most audience measurement methodologies still use diaries, which are notoriously problematic. The media industry must keep pace with consumers and so must research methodologies. The current research is not necessarily sufficient to give advertisers a clear, holistic perspective and digital measurements are often not comparable to traditional media currency. Digital space in Africa is not understood properly and researchers need to make sure that they accurately reflect the changing media
consumption landscape for advertisers, media agencies and media owners. Keeping ahead of the curve We set ourselves the challenge at Dashboard to create a research methodology tailor-made for the African market that observes real, rather than reported mobile behaviour. Our aim was to observe and gather data on actual mobile behaviour and then analyse this ‘big data’ using familiar audience measures such as reach and frequency, so that the data could be integrated with traditional media research. . Our data covers all websites and apps (very close to realtime), not just the large ones. It was vital that there were no tags from site owners and that we did not rely on cookies. A Zambian Pilot For our Zambian Pilot Study, Dashboard built an app that our sample downloaded onto their mobile devices. Once activated, it tracked all their mobile behaviour continuously for nine months. We opted for an android mobile app, as iOS is not widely used in Africa. Demographics were established from the sample of 60 respondents, recruited from our existing panel in Zambia. Respondents were incentivised with airtime to download the app and give permission for their device to be tracked. Once activated the app collected data all the time and data was uploaded to our server three times a day in efficient packages. Individuals were not identified to protect privacy and POPI principles were adhered to. The data was then collated, cleaned and analysed. The key metrics collected about device usage included: • Websites visited - including time visited and frequency • Apps - including when used and time in foreground • Wi-Fi versus GSM data usage - uploads and downloads • SMS - sent and received • Calls -made and received • Other phone functions like settings, calendar etc. It was critical to clean and code this very complex data. Analysis requires sophisticated protocols to extract the mass of complex data. During the study there were in total over 242 000 website visits and 402 000 app usage occasions. The results are not market representative due to the sample size, but this is simply a matter of scale. The outputs demonstrate what kind of data is available. n
By Peter Searll | Managing Partner | Dashboard Marketing Intelligence peter@dashboard.co.za
MARKETING & SELLING
BusinessBrief
65
December/January 2016/2017
Enrich YOUR brand process By Tess Sulaman | CEO | Rocketseed South Africa | tess.sulaman@rocketseed.com People are an organisation’s most important asset. This is the mantra that has been preached to us for the last few decades. It is not wrong, it’s just not entirely accurate. Productive employees are a company’s most important asset. What use is a colleague who spends half their working day updating their social media status?
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ore recently, human resource or intellectual capital management experts have made a name for themselves, and respectable fortunes, in developing models on how companies can create a working environment conducive for optimal productivity. Studies are conducted on an annual basis grading the best companies to work for, regionally and globally. Cutting-edge creativity Isn’t it interesting though that the top performers according to these rankings do not always come from one industry? One would have imagined that new economy companies in ICT would top the lists all the time as their offering requires cutting-edge creativity that comes with highly qualified individuals who possess scarce skills because it will become almost mandatory for these companies to obsess about a healthier working environment in order to attract and retain these skills. The results are refreshingly
surprising. An old economy company like Cadbury was ranked quite highly by one such study based on Fortune 100 Companies. Granted, Google came out on top of the list for two consecutive years running. Digitally enhanced induction process We live in a digital world where just about any kind of information can be accessed, consumed and analysed on digital platforms. Face to face interactions are still important, however the new generation of employees would much rather “feel” you than see you! A combination of digital and person-to-person interactions would therefore yield better results. The one thing that people dread is going through volumes of information on arriving at ABC Incorporated. For most large corporations with established processes, their compliance-minded HR specialists will be hard at work introducing you to this policy document followed by that policy document when you arrive on your first day of
work. After a week of information overload, or more accurately - mental torture, only a small percentage of the information shared will be recalled by new employees, mainly information along the lines of when is pay-day, who do I complain to and how can I get a loan from the business when the need arises? Companies need to create more impactful ways of allowing new employees to acquire, assimilate and learn the organisational culture. Digital platforms can be harnessed and implemented without resulting in corporate policy fatigue. You want your new employees to be enthusiastic about the decision they have taken to join your organisation. One of the advantages of a digitally enhanced induction process is that you are able to remotely monitor and measure engagement levels with the information being supplied to new employees, and valuable intelligence can be gathered enabling you to continually enrich the process. n
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December/January 2016/2017
MARKETING & SELLING
Brand activation fosters engagement Brand activation is the physical manifestation of storytelling that combines personal interaction with visual narrative.
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By Miguel Correia | Marketing manager | Zinto Marketing Group | miguel@zinto.co.za | @ZintoMG
nce the context, format and setting is determined focus on the mechanics of bringing the brand to ‘life’ and encouraging the target market to engage and interact with the product or service.
should be tailored to resonate with the audience and marketers need to consider language barriers, cultural nuances, different belief systems, engrained values and entrenched competitor brand loyalty.
To make a meaningful impact, drive affinity and inspire consumers to act, one should consider the following: Why would the audience pay attention to the campaign? Why should they engage? What factors should be considered?
Firm grasp and understanding Activation success occurs when a brand is already known to consumers who use or are open to trying a new product or service. But established brands must tackle market perceptions that are outdated and build on existing relationships, reinforcing important messages that drive consumption, increase sales and lead to brand loyalty.
Find a space you can ‘own’ Experiential events are not as straightforward as placing imagery in a demarcated area and expecting consumers to connect with a brand because it exists in that space. The location must be easily accessible, visible and have a presence where there is a high level of traffic or footfall. The physical space will also determine the scope of the project: an in-store campaign will limit activities to a promotion where brand ambassadors provide product information while handing out samples to passers-by to encourage trial and consumption. On the other hand, an outdoor platform presents an occasion to create hype about the brand and its offerings. Rather than ‘pushing out’ content about the features of a product or service, the activation area can be used to ‘pull audiences’ and immerse themselves in a truly captivating experience. Brand should be relevant Different market segments are made of a population profile that includes race, age, gender and income levels etc. However, there are areas of the same geographic spread where the demographics are highly comparable with other target groups. The communication
For brand activations to resonate with customers and achieve results, strategic planning is required to lay down the groundwork, enhance all touchpoints in the purchasing process and make consumers a central part of the brand journey. Experiential events give shoppers a compelling reason to look at brands in new ways, which motivates them to take desired action – changing their thought processes or buying habits. Truly understanding the market and its challenges will give insight into consumer preferences, how and where to communicate with different audiences, thereby enhancing onshelf presence, brand recall and market share. Brand reputation is a business imperative and providing consumers with the right information empowers them to make purchasing decisions that can impact and change their lives. Being transparent is vital to winning brand trust, and openness and honesty outdoes baseless or misleading communication. Companies need to accept that they can’t ‘win over’ consumers by making false claims that will compromise the brand’s integrity. n
MARKETING & SELLING
BusinessBrief
67
December/January 2016/2017
Ride the digital wave By Craig Munitz | MD | CBR Marketing Solutions | CaigM@cbrmarketing.co.za | @CBRCraig Digital marketing is a strategy. It’s not just simply a website, or social media, or Google; it’s a full platform that allows people to position their businesses within the communities they’re targeting. And it is enabling an unprecedented level of engagement between companies and their customers.
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n fact, the greatest advantage of social media is that it encourages a dialogue. Traditional advertising’s mediums such as billboards and advertisements are a one-way communication – a monologue. Today’s consumers, whether in the B2B or B2C space, are on social media waiting for their brands to engage with them. Almost immediately. Successfully riding the waves The speed of exchanging information has sky-rocketed over the past few years and whereas in the past consumers would wait a day or even two for a response, now they may wait an hour, and if they don’t get one, they’ll move to a competitor. The key to successfully riding the waves of the digital marketing phenomenon is to be flexible and agile. That means that five or 10-year strategies will see companies left behind; this is the age of the two-year strategy, broken down into milestones of two weeks. The way digital marketing is managed within companies has also evolved and today’s successful digital marketers tend to have a chief marketing officer who is in control of digital marketing and IT because the two have merged into one – all to the benefit of the consumer. Must be embraced Successful digital marketing demands that it must be embraced from boardroom level down – throughout the organisation. Too often it is pushed from the bottom up where it flounders and dwindles into an image-damaging half-baked effort. The chances are excellent that competitors are embracing it, and even in some instances global competitors, and maintaining and growing market share means a need for an effective digital marketing strategy. The fact is that a brand is not a logo or a CI. A brand is how a company engages with customers and stakeholders, how it behaves, how it interacts and listens to its customers. It’s not about how much a company invests; it’s about the intrinsic value of what customers perceive they get from a company. Quality outweighs quantity Successful digital marketing also features quality content rather than quantity. There is an endless amount of information and content clamouring for attention all the time. Companies need to be disruptive to stand out. Content is still king, but quality outweighs quantity 100-fold.
Content is about the engagement – it’s not about the likes. Putting a post out on social media means nothing if the consumer isn’t responding and engaging with a brand. The world of digital marketing is about being reciprocal, and talking to consumers the way they want to be talked to, on platforms they choose. It’s advisable for companies embracing digital marketing to use the tools and technology that are available now and that their customers are most comfortable with. As the customers’ preferences change, so too must the company’s digital marketing strategies. Companies that understand their industry and their local and global competitors’ digital marketing strategies can develop a highly effective disruptive path and stand out, above the rest, in the market. n
The speed of exchanging information has sky-rocketed over the past few years and whereas in the past consumers would wait a day or even two for a response, now they may wait an hour, and if they don’t get one, they’ll move to a competitor.
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HUMAN CAPITAL
Economic retrenchment debatable Mirroring the economic strain that many South African households are experiencing, many local businesses too are feeling the economic ‘heat’ as owners grapple to maintain turnover and profitability. During this time, many business owners consider or even implement retrenchments, but there are a number of factors to consider before taking such drastic action.
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his is according to Kgomotso Ramoenyane, Executive General Manager of Human Resources at Business Partners Limited, who says that during financially challenging periods, human resources is one of the departments that often receives the most attention. She points to June 2016 quarterly employment statistics, released by Statistics SA this month, which reported a decrease of 67 000 employees when compared to March 2016. “Times are extremely tough and quarterly employment losses were observed in all industries apart from electricity and construction industries. “When faced with shrinking revenue figures, small business owners should firstly review their cash flow management and explore ways in which to optimise it. All options, such as improving a business’ service offering through implementation of innovative ideas, refining and improving customer service to retain customers, and cutting overhead expenses, should be thoroughly researched before considering the retrenchment option.” 1. Communicate: Business owners need to be transparent and continually keep their staff informed. If a business is not doing well financially, come clean about it. If discussed in the right forum, with proposed solutions, staff may be more inclined to support the business in its turnaround strategy. 2. D iscuss options: Before making any changes to salary packages or fringe benefits, all options must be discussed with staff. If part of the strategy is to contain costs in the form of not giving bonuses or annual increases until the performance of the business turns around, discuss this with staff. Similarly, discuss the possibility of decreasing salaries. During this process, it is vital that staff input be carefully considered and their permission and buy in is obtained.
3. C onsider all options: If reducing salary expenses is a viable option for the business, consider the option of reducing work hours for staff. For example, staff could work a three or four day week instead of a five day week, depending on the nature of the business. 4. Stop all current recruitment: Before employing new staff members, a business must first focus on retaining its current staff and looking after their needs first, especially amid tough financial times. 5. E arly retirement: Finally, consider asking if any employees would willingly opt for early retirement. Regrettably, for some businesses, retrenchments may be the only solution for rescuing a cash-strapped business and could be the difference between a couple of job losses and the closure of the business. If this point is reached, Ramoenyane says that the process should be executed with caution and advises the following: 1. E nsure that the reasons given for retrenchment are compliant with Labour Law for example, the Labour Relations Act makes provision for employers to dismiss employees based on operational requirements of which economic considerations are one of the permissible reasons. However, employers need to note that the onus to prove this lies with them. 2. C onsult with staff members in person, followed by complete, accurate written information detailing the reasons, the process to follow, and how many staff members will be affected. 3. Business owners must ensure they support all staff during the entire retrenchment process, both the staff being retrenched, as well as those remaining. This includes allowing staff time off to attend job interviews, assistance with CV writing and references, and the general care of staff morale in the office throughout the process. 4. D ocument everything: One of the biggest mistakes employers make is to handle retrenchments without accurately documenting communication. All communication involving retrenchment of staff must be well documented at all times. Not always the solution to survive an economic downturn. n
By Kgomotso Ramoenyane | Executive General Manager of Human Resources | Business Partners Limited | kramoenyane@businesspartners.co.za
HUMAN CAPITAL
BusinessBrief
69
December/January 2016/2017
Can a final written warning be substituted? In the case of Opperman v CCMA and Others (C530/2014) [2016] ZALCCT 29 (17 August 2016), the employee, who was employed as a nurse, was asked to undergo a breathalyser test by her employer. She was found to have alcohol in her system which she had apparently consumed the previous night.
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fter a disciplinary hearing the employee was given a ‘severe written warning’ valid for a period of 12 months. She lodged an internal appeal against the sanction only. The appeal chairperson subsequently imposed a sanction of dismissal. Thereafter the employee referred an unfair dismissal dispute to the Commission for Conciliation, Mediation and Arbitration where the Commissioner found the dismissal to be substantively fair but procedurally unfair.
The second argument presented by the employee was that the arbitrator grossly misapplied the law relating to inconsistency. In accordance with the ‘parity principle’, “an employee is entitled to be aware of the standard of conduct expected by the employer, and is entitled to know, in advance, what the consequences of non-compliance will be”. It was common cause that on three previous occasions other employees were found guilty of the same offence, but received less severe sanctions. For this reason the employee alleged that the employer’s inconsistent treatment of her was unfair. The Labour Court held that the arbitrator’s finding that the dismissal was substantively fair was so unreasonable that no reasonable arbitrator could have come to the same conclusion.
This case reiterates the importance of and employer disciplining employees in a consistent and fair manner.
The employee then applied to the Labour Court to have the Commissioner’s award reviewed and set aside. The employee’s grounds of review were firstly, an error of law, and secondly, that the arbitrator grossly misapplied the law relating to inconsistency, which led to an unreasonable result.
The employee argued that the arbitrator committed an error of law by failing to take into account the decision of Rennies Distribution Services (Pty) Ltd v Bierman N.O. which is that “except where a provision is made for such a power, a chairperson on appeal does not have the necessary power to consider imposing a harsher sanction”. The Labour Court also held that even where a chairperson is given such power, he must still adhere to the fundamental principle of audi alteram partem, which in this case required that the employee be allowed to make submissions why a harsher penalty should not be imposed. On these two grounds the Labour Court held that the arbitrator had committed an error of law.
In summary, the Labour Court held that the arbitrator’s award be reviewed and set aside and that the award be substituted with a finding that the dismissal of the employee was procedurally and substantively unfair. Her employer was ordered to reinstate her. Importance of this case Three important points have arisen from this case. Firstly; an appeal chairperson may only impose a harsher sanction where that power is expressly given to him in terms of the employer’s disciplinary code. Secondly; even if the chairperson on appeal has that power he must inform the employee of that risk so that the employee may present submissions to persuade the chairperson on appeal as to why the sanction should not be increased. Lastly, this case reiterates the importance of and employer disciplining employees in a consistent and fair manner. n
By André Van Heerden | Senior Associate | avanheerden@werksmans.com and Jacques van Wyk | Director | jvanwyk@werksmans.com | Werksmans Attorneys
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HUMAN CAPITAL
The agile workforce
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ost organisations are under pressure to evolve their businesses at a faster pace as they try to get in step with rapid changes in the business landscape, technology and customer behaviour. That means HR departments, too, need to become better equipped to lead the organisation’s people through constant and rapid change. They need to build a more agile workforce that is ready to adjust to the evolving needs of the market. This goes beyond offering people flexible working arrangements such as flexible hours or the ability to work from home. It is about helping to shift the organisational culture to one that embraces learning, change and innovation. It is also about recruiting, developing and retaining people who thrive in a changing world – chameleon workers who can adapt to change, learn new skills in a short space of time and seamlessly move from assignment to assignment. The HR department of the future must thus shift its focus from reducing risk and managing red-tape towards a highly strategic role of guiding change, improving agility, and ultimately driving higher performance. Here are a few ideas about how HR must evolve in the years to come: Accommodate a more fluid workforce The way that businesses structure their workforces is changing as they begin to source more of their talent through freelancers, crowdsourcing, and other approaches that give employees and companies more flexibility. What’s more, we can also expect to see a further churn in the workforce as more young professionals join an organisation to take part in a project or achieve a specific career goal – and then leave after two to three years.
Even within the walls of the business, we can expect to see teams become more fluid as people are brought together for specific projects and initiatives, and then disbanded so they can move to other parts of the business. In a sense, many parts of the business will follow the same sort of ‘gig economy’ model as movie studios and agencies, building bespoke and sometimes virtual teams of in-house and external skills for each project. HR teams will need to facilitate this shift, making it easier for managers to source and develop the talent when they need it and where they need it. Create flexible career options In an agile workforce, HR will need to rethink how it develops career paths, salary bands and job descriptions. It will need to support managers and their teams as they organically develop their own roles and tasks, often on a project-by-project basis. This will also mean new ways of measuring performance and rewarding employees that meet the needs of a changing workplace. For example, tech companies like Google allow engineers to spend some of their workday working on passion projects and innovative ideas rather than making them spend all their time on a narrowly defined scope. This has the benefit of creating new ideas for the business and keeping employees engaged – in turn, helping with talent retention. Facilitate a culture of innovation HR departments play an important role in shaping organisational culture – from helping to source talent to supporting change management and designing rewards and incentive programmes. To support a more agile business, they need to look at how and where they source talent; how they reward and incentivise the right behaviour; how they support managers and employees through their tools and processes; and how they measure performance. Develop a learning organisation rather than a ‘training strategy’ One of the major challenges HR face is helping the business and the workforce keep up with the rapid pace of change in today’s digital world. With mobile technology, the cloud, analytics, blockchain and the Internet of Things changing the world so rapidly, companies and their workforces need to learn fast. n
By Anja van Beek | Vice President for People | Sage International (Africa, Australia, Middle East and Asia) Anja.VanBeek@sage.com | @SageGroupZA
HUMAN CAPITAL
BusinessBrief
71
December/January 2016/2017
Workplace rebellions By lvan lsraelstam | Chief Executive | Labour Law Management Consulting | ivan@labourlawadvice.co.za
Most employers will experience some type of rebellion from their workforces at one time or another. Sometimes it is that very rebellion (possibly a strike) that helps bring the organisation’s life to an end.
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ortunately, relatively few cases of rebellion reach such serious levels. However, even smaller workplace storms can result in costly damage including:
warnings and counsellings have not worked or are inappropriate • Dismissing rebellious employees only where this is the only viable option under the specific circumstances.
• Discipline and lost employment for employees • Damaged managementemployee relationships • Trade unions being brought into the workplace • Reduced morale • A strained working atmosphere • Demotivation • Slowed production output • L ack of teamwork and co-operation • Poor work performance • Unhappy clients • Loss of clients and/or loss of orders • Retrenchments • Material wastage • Industrial sabotage • Increased accidents and injuries • Go slows • Outright refusal to obey instructions
However, employers must, before considering dismissal, ensure that they have not done anything unjust to provoke the rebellion. Otherwise the CCMA or bargaining council could reinstate all the dismissed rebels. In the case of Petersen vs Kost Engineering (Pty) Ltd) (2000, 9 BALR 1068) the employee was fired for refusing to work.
There are two basic reasons why employers need to avoid or at least quickly resolve such rebellions: Firstly, the above factors are likely to affect profitability. Secondly, rebellions have the habit of ending up in the CCMA or bargaining council. Neither of these are good places for employer to go. Fighting disputes at such tribunals is time wasting, energy sapping, emotionally draining and financially costly. Employers that believe in preventing the losses that rebellion can bring make a habit of: • r esolving grievances thoroughly and swiftly • C ounselling employees who break the rules and warning them that repeats of broken rules will result in stronger disciplinary action • H olding fair disciplinary hearings in cases where
His reason for this gross insubordination was that he was unhappy with his pay. The CCMA found in the employee’s favour due to mitigating circumstances, one of which was that he had misconducted himself due to the fact that he believed the employer was not paying him a high enough salary. Had it been 50 employees that rebelled this employer would have been in extremely serious trouble. This could mean disaster for the employer especially if the rebels are all reinstated. n
His reason for this gross insubordination was that he was unhappy with his pay. The CCMA found in the employee’s favour due to mitigating circumstances, one of which was that he believed the employer was not paying him a high enough salary.
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INFORMATION TECHNOLOGY
Technology is changing workforce roles By Dr Roze Phillips | Managing Director | Accenture Consulting | rozett.phillips@accenture.com | @AccentureSA Digital technology is continuing to evolve at breakneck speed, affecting nearly every aspect of our working lives.
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rom connected smart devices, sensors, cloud, big data and analytics, these technologies are democratising the workplace through enabling tailored roles and rewards, allowing a flattening of the organisation and putting the “human” back in “human capital.” “By 2025, 75% of the workforce will be made of millennials – 15% of them are already managers,” said Dr Roze Phillips, Managing Director for Accenture Consulting. “These millennials (89%) prefer to choose when and where to work rather than being placed in a nine-to-five position. About 90% of them do not plan to stay with any given employer for more than five years. They prefer on-the-spot recognition over formal reviews and 60% of them prefer a job with social impact – technology is a key influencer of these new ways of working,” said Phillips. Digitisation of everything It is clear that the next major connected ecosystem to emerge beyond our cars and homes is likely to be the workplace – influenced by a number of factors including millennials, where the benefits of Living Services for workers at all levels will be tangible. Living Services, also known as the Internet of Things, are the result of two powerful forces: the digitisation of everything and ‘liquid’ consumer expectation. This is all made possible by a proliferation of cheap sensors in nearables like your smartphone, or wearables like your Fitbit able to detect speed, height, distance, temperature and heart rate and even noxious gases. “Wearable technology for the workplace is now a focal point for technology developers. Dell Research, for example, is working on a headset with NeuroSky that will monitor brain activity to identify an employee’s mood or state of mind. The concept could mean that an employee who is in deep concentration on a piece of work could be protected from interference. Or one who is relatively free, could be open to more communication,” said Phillips. Living services Enabling employees to track their wellbeing at work could boost productivity by linking their physical
wellbeing to their workload, so demanding and stressful tasks can be scheduled for times when they are most alert, for example. “If this sounds far-fetched, London-based predictive analytics firm, The OutsideView, requires all its staff to take part in an experiment that involves them using a variety of apps and wearables such as Sleep Cycle, Moves and Meal Snap to track how much they eat, sleep and how happy and fit they are, in a bid to develop a more productive workforce,” she said. Elsewhere, Living Services could speed up the pace of many different spheres of enterprise or public service delivery by providing very specific data about a work scenario or piece of hardware. This could be very simplistic, such as warning a management team due to travel to a regional office that a flight has been delayed and automatically providing alternative options. “Or very complicated, for example designing a Living Service for an airline fleet maintenance schedule coordinated with aircraft component monitoring and spare part sourcing.” Reimagining your business process Workers out on the road and the equipment and vehicles they use are increasingly being linked in realtime back to headquarters, enabling sales managers, logistics teams and human resources departments to make more informed decisions rapidly. Leading companies have realised the workplace changes in demographics and expectations. As a result, they are applying consumer principles to raise the bar for the employee experience, delighting employees as they would customers. These companies are putting experience at the heart to deliver differentiated employee experiences to attract, develop, engage, and retain top talent in today’s digital economy. Studies have shown that companies who design their business and HR processes around the moments that matter to the employees outperform the S&P500 by 122%. So reimagining your business process, structure and culture is not just a response to the impact of technology or the requirements of the future workforce, it also make very good business sense. n
INFORMATION TECHNOLOGY
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The future of ERP By Viesturs Zalaiskalns | Channel Manager | HansaWorld SAF (Pty) Ltd | zalaiskains@hansaworld.com
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iesturs Zalaiskalns says ERP vendors that fail to offer a user-friendly, mobile interface will run the risk of falling behind.
The generation known as ‘Millennials’ will soon make up half of the global workforce, and as the generation that is the first to be classified as ‘digital natives’, their views on technology are inevitably going to have an impact on the companies they choose to work for. Not only will these businesses need to adapt in order to attract and retain the best talent, but their internal systems will need to change to suit this new generation of workers. For example, since these young professionals most likely had their earliest foray into IT via Facebook and Google Search, enterprise resource planning (ERP) software will need to evolve to have a similar look and feel as the apps and consumer platforms these Millennials are accustomed to using. User-friendly interfaces In today’s world, users want to be able to access ERP systems from anywhere, using any device. This is particularly relevant as employees become more mobile and are increasingly required to work remotely. By providing these mobile workers with systems that offer user-friendly interfaces and platforms that make working easier, the users will be more comfortable and happier to use these applications. This, in turn, will boost overall efficiency and ultimately make their jobs easier. When creating an ERP app of any kind today, it is imperative that the initial design be done with mobile devices in mind. The importance of mobility is increasing exponentially, so delivering an app to meet this demand is the single most important aim – once this is done, the app can be extrapolated to larger devices such as laptops and desktops. App stores have played a growing role in the increasing consumerisation of ERP systems. These stores have changed the perception of software; it has become more accessible, seamless to install and is more intuitive to use. Obviously, the same expectation level exists when it comes to ERP software. As a result, vendors operating in the ERP space need to be able to deliver accessible, easyto-use technology, even though this will mean that large parts of their software code will need to be rewritten.
This consumerised approach to ERP will likely have an additional positive impact on the user experience of such tools. ERP apps - just like any other apps available in the leading app stores – would have to undergo scrutiny levels that would ensure the software package complies with usability and intuitiveness factors. Plug-and-play environment If an ERP app is able to pass the scrutiny of the app store itself, it will already be able to guarantee a certain level of expectation when it comes to the user experience. It must also be understood that a key part of the expectation of the consumerised market is that when it comes to working with an app, users demand a basic plug-and-play operation. The cloud is vital in the effective delivery of such an offering, as it is capable of enabling this ‘plug-and-play’ environment. As a result, selecting an app that is cloudenabled is absolutely critical if an organisation is to ensure that the app is future proof. In the end, vendors that wish to deliver ERP solutions that are consumerised for the Millennial Generation need to understand the nature of the modern, ‘instant gratification’ user. This means providing solutions that are mobile, user friendly and extremely easy to use. If you can deliver on all these points, you will likely see a huge upturn in both productivity and efficiencies. n
Creating the strategy required to effectively operate online Tel: +27 11 782 0045 ✱ www.Strategyworx.co.za
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INFORMATION TECHNOLOGY
Prevent employee IT theft! The vast range and volume of new devices being deployed in the marketplace makes it nearly impossible for companies to safely manage and dispose of excess electronics. Most companies are oblivious to the risks associated with asset disposition and theft, failure to mitigate the risks could have dire consequences.
X
perien CEO Wale Arewa warns that employee theft is the number one risk associated with IT Asset Disposal (ITAD). “Failure to mitigate the risk associated with employee theft will eventually lead to reputational loss, especially if data you are supposed to protect ends up in the wrong hands.” Employees often misappropriate IT assets before securely disposing of any data that is contained on these devices. Their focus is the residual value of the asset, which most likely exceeds the daily wage of the blue-collar workers involved in the disposal process. Tag each asset “Preventing theft should really start within making sure you have developed procedures that remove temptation. An unbroken chain-of-custody is essential to indemnify your organisation from downstream risks associated with IT disposals,” he explains. Typically, chainof-custody is established by manually matching manufacturer serial numbers captured on a vendor inventory. This is not as easy as it sounds, in a recent study
only 47% of serial numbers captured at pickup could be successfully matched with final disposition. “This means that if you rely solely on serial numbers to ensure chainof-custody you have a roughly 50/50 chance of success,” says Arewa. He says the solution is disposal tags. “If you tag each asset you send for disposition with a disposal tag you’ve just increased the odds of successful end-to-end tracking to 99%. This is why airlines tag luggage and furniture movers tag boxes, because it works.” More importantly, disposal tags deter theft. Once employees know that assets are tagged and will be missed, they are less likely to steal them. Chain-ofcustody is not a catchphrase used only in a court of law; chain-of custody evidence is the very foundation for indemnification and transfer of liability. Pilfering and misrouting Arewa says a serial number alone doesn’t ensure chainof-custody. “Adding the disposal tag improves trackability and makes pilfering and misrouting far less likely. Tags are simple, easy and highly effective.” It is easy to add tags to an existing process and tags work with any vendor, any size project, anywhere. Tags are a perfect way to prevent problems, save time, and save money. Nobody cares about ITAD until something goes wrong. But when something does go wrong then everybody cares, the CEO, CTO, legal counsel, the crisis management team and most of all, the customers. “It is a huge problem when an asset disappears or when an asset turns up in the wrong place or when an asset is resold and found to contain company secrets or customer data. We’ve seen this far too often. Suddenly you have a problem and many times that problem is also a public relations nightmare that can also damage your reputation and your brand,” he concludes. n
By Wale Arewa | CEO | Xperien | Wale@xperien.co.za @walearewa
Cyber threats & the CFO Given the connectedness of organisations today, cyber security has become a fundamental part of business. Nathan Desfontaines, KPMG’s Cyber Security Manager in South Africa, believes that this environment is challenging CFOs to look differently at operational requirements.
“O
ne of the biggest mistakes any company can make is to relegate cyber security to the CIO office. With technology permeating every aspect of business, this silo approach no longer holds true. In fact, it can open the organisation to a number of risks, not least of which being having its data compromised.” With the CIO traditionally reporting to the CFO for new technology implementations (considering the cost implication on the business), the finance office is in a unique position to gain an organisational-wide perspective on the IT systems and process in place. This perspective might give way to the temptation of thinking that cyber security is something that can be rolled out annually and be forgotten about. Instead, C-suite executives need to work closer together in order for the business to become more proactive around protecting its most important asset – its data. “While there is no such thing as complete security, there are a number of measures that can be taken to minimise the likelihood of a breach: In the digital world, these breaches result in not only significant financial damage but reputational as well. And if the breach is significant enough, the company risks not being able to recover at all from such an attack.” The top four means of incursion into a network are through exploiting system vulnerabilities, default password
violations, SQL injections and targeted malware attacks. To prevent this, it is necessary to shut down each of these avenues into the information assets of the business. It is important that the company identifies threats by correlating realtime alerts with global intelligence: security information and event management systems can flag suspicious network activity for investigation. The value of such realtime alerts is much greater when the information provided can be correlated in with current research and analysis of the worldwide threat environment. Additionally, companies should automate security through IT compliance controls: by developing and enforcing IT policies across their networks and data protection systems, C-suite executives can help prevent a data breach caused by a hacker or a malicious insider, this mechanism works best for protecting sensitive information. “It is important to remember that cyber security impacts on all parts of the organisation – from human resources and compliance, to business continuity and brand communications. Those organisations who see this as an integrated process are the ones that are best able to differentiate themselves from their competitors. So as much as some CFOs think that security is just a matter of Rands and cents, the impact on the company is much more significant,” concludes Desfontaines. n
By Nathan Desfontaines | Cyber Security Manager | KPMG South Africa Nathan.Desfontaines@kpmg.co.za | @KPMG_SA
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PROCESS & OPERATIONS
The future of road-based transport Transportation remains one of the most important sectors for its potential influence on most other industries and growth in the economy. As much of South Africa’s transportation is still road-based, the country needs to ready itself to take advantage of the Fourth Industrial Revolution – doing so, connectivity, data and analytics, and autonomous vehicles will play a transformative role in future-proofing transportation in the country beyond 2030.
“E
ffective implementation of the National Infrastructure Plan (NIP) should be considered in earnest that will see selected major infrastructure projects fast-tracked to get the backlog moving, which could help with increasing capacity in transport industries and, as a direct result, influence positive growth in the economy,” says Vishaal Lutchman, transport and infrastructure divisional director, WSP/Parsons Brinckerhoff Africa. “Though it shouldn’t be thought of in isolation, but rather viewed as a starting point to get the country’s infrastructure and supporting networks ready for the technological advances we are seeing globally, and better enable the 5.5% GDP growth the country is said to be able to achieve with relative ease.” Adoption of key technologies In reality, 2030 is a medium-term planning timeframe for major infrastructure projects. “While it’s important to have this planning and set targets in place, we also need a long-term vision that encapsulates how people will live, work and play beyond 2030. This will enable us to design what the future demand of transport networks will be. If we look at the pervasiveness of mobile devices and the uptake of the Internet in the country as well, then the adoption of key technologies becomes crucial to this vision and its implementation,” adds Lutchman. “The National Infrastructure Plan (NIP) will see selected major infrastructure projects fast-tracked to get the backlog moving, which could immensely help with increasing capacity in transport industries and, as a direct result, influence positive growth in the economy,” says Lutchman. “Though it shouldn’t be thought of in isolation and it should be viewed as a starting point to get the country’s infrastructure and supporting networks up to scratch – to better enable and facilitate the 5.5% GDP growth the country is said to be able to achieve.” Grant Fraser, Product and Marketing Director at MiX Telematics (Africa) agrees, “Today, we live in a digitally connected society and the expectations of individuals and business, alike, is to remain connected. However, managing this usually requires mobile connectivity in the form of Wi-Fi, GSM, GPS and wireless technologies.”
A moving Wi-Fi hotspot In fact, according to Riaan Graham, sales director at Ruckus Wireless, sub-Saharan Africa; “Mobility goes hand-in-hand with travel and transport and the proliferation of mobile devices is certainly driving the adoption of wireless technologies – particularly Wi-Fi connectivity – in transportation. Whether it’s an individual, or a company transporting people or goods, there is a distinct desire and expectation from consumers, customers and business, alike, to be able to; communicate, do seamless and real-time route checking or planning for improved time management and productivity, manage safety and security from anywhere, as well as access certain application services while on route.” Graham confirms that Wi-Fi is ideal to incorporate in transport planning. “It doesn’t require fixed infrastructure to establish, can handle offloading 3G/4G capacity – particularly in high user density areas – with reliable connections and ubiquitous coverage and, it can differentiate service and access by user and device. For instance, a bus can be transformed into a moving Wi-Fi hotspot, which will create great value for the passengers and become a unique selling point for the bus company. However, the potential of Wi-Fi in transport is not just about passengers – when with the amplification of the Internet of Things (IoT) - it can enable smarter lifestyles for everyone.” Advances in telematics technology “Passengers also need real-time access to schedules, gate and ticket information, maps and/or other guidance as they pass through the bus terminal. Wi-Fi not only provides an ideal method for these activities, it also provides a platform for new revenue generating services such as additional Wi-Fi access or 3G/4G offload, as well as support for bus terminal operational needs such as point-of-sale, digital signage and video security. From a commercial perspective, there is also a global trend for transportation cargo and fleet services to become more involved in value added activities such as cargo processing and logistics, which will require new processes, practices and technological advances around
PROCESS & OPERATIONS
stock control and integration, as well as better wireless connectivity,” adds Graham. Proliferation of Big Data and IoT This is particularly true when we consider the significant advances in telematics technology and the future of smart vehicles. Fraser says, “The combination of connectivity, IoT and on-board technologies continues to drive the use of Big Data, which now lies at the centre of telematics technology. While the on-board computer is still an important component, advances in IoT and analytics provides the opportunity to access much richer data about the vehicle, its movements, the driver, etc. and being able to effectively utilise this data to provide added value.” The proliferation of Big Data and IoT are certainly two of the most significant change agents that continue to shape the future of telematics, however, when converged with leading-edge thinking into connected and autonomous vehicles (AVs) we can recognise the potential to truly transform transportation in the country. Connected network of vehicles Lutchman adds, “Autonomous vehicles or AVs are coming. A number of countries are already investing in supporting infrastructure and undertaking successful case studies. South Africa has the most sophisticated networks of transport infrastructure on the continent, and with the right planning and investment into required supporting infrastructure for connectivity, we could be ready for AVs post 2030.” Global research* undertaken by WSP ∣ Parsons Brinckerhoff in the UK, in association with Farrells, found that AVs have the potential to support a better quality of life, economic growth, health, safety and social connections. They offer convenient and safer mobility, regardless of
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the driver’s capabilities, and could also help to improve the way that existing spaces and route networks work. “Imagine a connected network of vehicles on our major highway, freeway and city centre routes. Because the vehicles will be pre-programmed to abide by the laws of the road, and able to connect to and access the latest in GPS mapping and data from other sources, these vehicles will be safer, more sustainable and more efficient than the vehicles of today,” adds Lutchman. The ‘robo driver’ The company’s research also shows that in time AVs will be able to move around without direct driver input to transport people and goods, on demand, from doorto-door using the most efficient routes. Added to this, road transport systems of the future will interact seamlessly with other transport systems, offering end-toend journey connectivity and resilience. “Having networks of automated vehicles capable of completing journeys safely and efficiently - in normally encountered traffic, road and weather conditions - could significantly reduce collisions caused by driver error on our roads. Sophisticated telematics will still have a key role to play in ensuring visibility and, in the future, to monitor what will be known as the ‘robo driver’ (which too can come with its own set of challenges). If we consider that road fatalities cost the country billions of Rands every year - with the majority being caused by irresponsible driver behaviour – this should certainly be motivation for the country to adapt to these sophisticated transport modes in the future. Telematics data will remain an invaluable source of real-time insights when automation is present,” concludes Fraser. n
By Vishaal Lutchman | Transport and infrastructure divisional director | WSP & Parsons Brinckerhoff Africa Vishaal.Lutchman@WSPGroup.co.za By Riaan Graham | Sales director | Ruckus Wireless, sub-Saharan Africa | riaan.graham@ruckuswireless.com By Grant Fraser | Product and marketing director | MiX Telematics (Africa) | fleetsa@mixtelematics.com
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PROCESS & OPERATIONS
Go PAPERLESS! The average office worker uses close to 10,000 sheets of copy paper per year, according to the Go Green initiative, Paperless Project. This is why an increasing number of South African businesses have started converting physical documents into electronic records.
G
oing paperless holds many benefits for companies, from saving on the physical space required to store original documents to having the security of digital ‘back ups’. However, if this process is not done properly and the original documents are discarded, the electronic documents may not be able to be used in the court of law if required. This is according to Wayne Clarke, Managing Director of Metrofile Records Management, who says that company information and records must be considered a business asset and it is imperative that companies organise their records and information to enhance operational efficiency, improve customer relationship management and support business development. “Implementing an electronic document management (EDM) system and digitising existing physical documents is becoming increasingly important in reaching these goals.” Legal and risk implications In an increasingly digitised and mobile world, paperbased processes are also becoming less and less acceptable to customers, who expect real-time responses at all points of contact, he adds. “Going digital is therefore both a practical and strategic necessity for businesses.” However, Clarke cautions that converting company records to digital format and implementing a new EDM system has a number of legal and risk implications that one needs to take note of. “Utilising a reputable records management service to control the migration process is paramount, if not, the company could be exposed to serious risks such as data breaches, information loss and legal action.” Consolidate existing records He says businesses in the process of data migration need to take the Protection of Personal Information (POPI) act into account. “The first step of going paperless is to consolidate existing records and eliminate unnecessary or redundant files. However, this is where companies could find themselves in legal trouble should the business fail to implement effective information destruction practices in line with POPI
requirements.” He says most businesses will still need access to original documentation for a certain period of time, depending on the type of document, in the event of legal action. Digital conversion process If a business doesn’t need to access archived physical documents immediately, offsite records management would be the safest option, says Clarke. “The location of storage facilities should be situated in low-risk areas where exposure to flooding, fires, earthquakes, flight paths or other natural disasters are least probable.” Following the sorting of documents, the digital conversion process needs to be thoroughly managed to prevent data loss, he says. “The accurate scanning rganisations must, therefore, and conversion of the company’s physical files in a stop talking about security and fully tracked andrather tracedfocus archive audit on with the risk tologging highalso needs to take in accordance POPI value dataplace assets. It is about to time the requirements. industry focused more on risk rather
O
than the traditional security measures This process can become quiteis, lengthy, of the past. The fact you areespecially always for under threat and,risk therefore, your security older companies, and the of documents going strategy needs for to be designed in such a missing or unaccounted is significant.”
Data verification and encryption Finally, the completion of the conversion process does not mark the end of a company’s risk management obligations, according to Clarke. “Businesses should make sure that the software used to create the backup copies allows for data verification and encryption thus ensuring data integrity by restricting access to data and maintaining rigorous authentication practices.” “In addition, the inclusion of compression technology, which reduces the size of the backup file by storing a single version of data files and then only the changes made to the files, can speed up the backup process and reduce required storage space by up to half,” he states. “Given the various technological developments in records management, if ever there was a time to go digital, it is now. For a business that effectively manages the risks of converting its data, a paperless office can boost productivity exponentially,” concludes Clarke. n
By Wayne Clarke | Managing Director | Metrofile Records Management
PROCESS & OPERATIONS
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Inventory disruption with drones By Craig Leppan | Co-founder | DroneScan | Craig@dronescan.co | @dronescan Warehouses and the Supply Chain Industry are a key part of the value chain of industry, making sure product can reach consumers from the manufacturing and import sectors. Inventory accuracy is key to being able to know what you can ship, and what needs to be replenished.
T
oday in many of the millions of fast moving consumer good warehouses, products are stacked up to 12m high and there may be more than 50 000 pallets of product in a single site. Audit, Regulatory and Stock control operations dictate frequent scanning of all of these products, and today most of that is still done with the humble hand held bar-code scanner. Cycle counting is a popular inventory technique based on a sample of key products or areas, to derive a view of the overall inventory position. Both cycle count and full inventory count typically rely on bar code scanning of products by a manual operator. For high locations, or anything above head height, the current technology deployed to move a man and his scanner is surprisingly slow, inherently unsafe and expensive in terms of equipment and manpower. Enter the Drone or Quad-Copter, the combination of the rapid advance of battery technology and on board processing power
to keep an exceptionally unaerodynamic structure in the air. Technologists, 3PLs and end customers are looking at the slow-moving forklift and man cage moving a scanner around their warehouse operations and are proposing that the Drone will do this job for them in the coming years. Drones have the capability to automate the tasks and reduce the time taken to scan inventory in a large warehouse space. While the outdoor and inspection / photography area is growing fast using Drones, the indoor space has some more challenges with GPS being unavailable for fine-grained navigation. Walmart came out in 2016 with the announcement that they were close to solving the inventory problem with Drones. Since then several start-ups and end customers are examining the space and the options for changing the industry. DroneScan is a South African based startup that has been working to provide end customers with a starting
point for this incremental evolution. Today the combination of a barcode scanner onto a commercial drone is able to provide aerial scanning in a fraction of the time taken by the manual alternative. With the practical approach of so many South African entrepreneurs, DroneScan is starting with the current reality of millions of bar codes that can be scanned in flight, and will use projects with global customers to deliver on the customer’s end vision for Drone based inventory. n
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CONTRIBUTORS
As a service to our readers, we have listed this issue’s contributors, together with their contact details. Should you require more information or consultation on these topics, please contact the company or firm concerned.
VIEWPOINT
Petersen Hertog Attorneys Standard Bank IAB SA Free Market Foundation
+27 +27 +27 +27
MANAGEMENT
SAICA UCT Graduate School of Business Unisa’s Graduate School of Business Leadership Quantimetrics
+27 (0)11 621 6600 +27 (0)21 406 1911
saica.co.za gsb.uct.ac.za
+27 (0)11 652 0000 +27 (0)83 655 2408
unisa.ac.za quantimetrics.net
EDUCATION & TRAINING
LEGAL
TAX
FINANCE & EQUITY
(0)11 (0)10 (0)11 (0)11
784 249 475 884
1085 0035 4258 0270
peterson-hertog.co.za standardbank.co.za iabsa.net freemarketfoundation.com
Fundi +27 (0)86 055 5544 fundi.co.za Stenden University +27 (0)46 604 2200 stenden.ac.za The Institute of People Development +27 (0)11 315 2913 peopledevelopment.co.za Growth Institute +27 (0)11 534 8449 growthinstitute.co.za
Roodt Inc The Ethics Institute Cliffe Dekker Hofmeyr CGF - Corporate Governance Framework
+27 +27 +27 +27
(0)11 (0)12 (0)11 (0)11
685 342 562 476
0000 2799 1000 8264
roodtinc.com tei.org.za cliffedekkerhofmeyr.com cgfresearchinstitute.com
Bowmans South Africa +27 (0)11 669 9000 bowmanslaw.com KPMG South Africa +27 (0)11 647 7111 kpmg.com/za/en Webber Wentzel Attorneys +27 (0)11 530 5000 webberwentzel.com
BDO South Africa +27 (0)10 060 7000 bdo.co.za/en-za IOD- The Institute of Directors in Southern Africa +27 (0)11 035 3000 iodsa.co.za
ASSETS & INVESTMENTS
Citadel investment services Oracle South Africa Novare Afriwise
+27 +27 +27 +27
(0)11 (0)11 (0)11 (0)10
722 319 447 596
7600 4000 9605 8518
citadel.co.za oracle.com/za novare.com afriwise.com
BANKING & INSURANCE
Mercantile Private Bank Alexander Forbes Sanlam Employee Benefits Acuideas
+27 +27 +27 +27
(0)87 (0)11 (0)21 (0)11
354 269 947 912
3354 0000 9111 7300
privatebank.mercantile.co.za alexanderforbes.co.za sanlam.co.za acuideas.co.za
MARKETING & SELLING
Dashboard Marketing Intelligence Rocketseed South Africa Zinto Marketing Group CBR Marketing Solutions
+27 +27 +27 +27
(0)21 (0)11 (0)11 (0)11
790 691 553 219
1801 7740 1000 5960
dashboard.co.za rocketseed.com zinto.co.za cbrmarketing.co.za
HUMAN CAPITAL
Werksmans Attorneys +27 (0)11 535 8000 werksmans.com Business Partners Limited +27 (0)11 713 6600 businesspartners.co.za Sage International +27 (0)11 304 1000 sage.com/za Labour Law Consulting +27 (0)11 888 7944 labourlawadvice.co.za
IT
Accenture Consulting +27 (0)11 208 3000 accenture.com/za-en HansaWorld +27 (0)21 833 1700 hansaworld.com Xperien +27 (0)11 462 8806 xperien.com
PROCESS & OPERATIONS
Metrofile records management DroneScan WSP/ Parsons Brinckerhoff Africa Ruckus Wireless MiX Telematics
+27 +27 +27 +27 +27
(0)11 (0)31 (0)11 (0)11 (0)11
677 563 361 848 654
3000 0389 1300 9012 8000
metrofile.com dronescan.co wsp-pb.com/en/WSP-Africa ruckuswireless.com mixtelematics.co.za
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